TEPCO's business plan

April 28, 2012

TEPCO submits 10-year restructuring plan to gov't

http://mainichi.jp/english/english/newsselect/news/20120428p2g00m0dm030000c.html

TOKYO (Kyodo) -- Tokyo Electric Power Co. and a state-backed bailout fund submitted to the government Friday a restructuring plan to help the company overcome its financial plight following the Fukushima Daiichi nuclear power plant disaster, such as through the injection of 1 trillion yen in public funds and electricity rate hikes.

The so-called comprehensive special business plan will become official once Economy, Trade and Industry Minister Yukio Edano gives his approval, possibly in early May, paving the way for the de facto nationalization of Japan's largest utility known as TEPCO.

The content of the document will be announced after gaining approval, TEPCO and the Nuclear Damage Liability Facilitation Fund said.

In addition to promising to cut more than 3 trillion yen in costs through fiscal 2020 to finance compensation payments related to the nuclear accident, TEPCO will seek to increase profits by raising household electricity rates by about 10 percent for three years from July and restarting its idled nuclear reactors in Niigata Prefecture from fiscal 2013.

The utility is seeking to swing into the black in the business year through March 2014, but it is uncertain whether controversial measures such as rate hikes and restarting reactors can be carried out as planned.

TEPCO President Toshio Nishizawa, speaking to reporters after holding talks with the fund to finalize the plan, said, "I'm aware that the hurdle (we have to overcome) is extremely high...and the company will work as one toward that end."

In a symbolic move to mark a fresh start for the company, TEPCO Chairman Tsunehisa Katsumata and Nishizawa are likely to step down at the company's annual shareholders' meeting in late June. More than half of the board of directors will be invited from outside the company to enhance management oversight.

The government has already decided to appoint Kazuhiko Shimokobe, a lawyer and head of the bailout fund's decision-making board, as the next TEPCO chairman, and the focus of attention is now shifting to who will be promoted from inside the company to succeed Nishizawa.

The new management lineup will be unveiled when the company announces its financial results for fiscal 2011 likely in May, according to Nishizawa.

Shimokobe separately told reporters he plans to set up a management reform task force that he and the new president will directly take control of. He wants it to be joined by reform-minded mid-level and younger employees and, if necessary, seek cooperation from experts outside.

"This is effectively the last chance to renew TEPCO. We're going to do this work with speed," Shimokobe said.

TEPCO and the fund had initially expected to finalize the restructuring plan by the end of March, but the move was delayed because the government had difficulty in choosing the next chairman to lead the company's reform process.

In addition to trillions of yen in compensation payments, the once blue-chip company faces a heavy financial burden amid increasing fuel costs for thermal power generation to make up for halted nuclear power generation following the Fukushima accident.

It is also looking at massive costs for the decades-long process of scrapping the Fukushima Daiichi plant's four reactors, three of which suffered meltdowns following the huge earthquake and tsunami on March 11, 2011.

In late March, TEPCO made a request for the capital injection to the fund, saying the company might fall into negative net worth without the 1 trillion yen of taxpayers' money.

In return for the aid, the government is expected to acquire a majority stake in the company, which would enable the state to choose board members, and make sure it can boost the stake to more than two-thirds for stronger control if necessary, according to sources close to the matter.

TEPCO has so far won approval to get 1.58 trillion yen of financial assistance from the fund, but the aid is limited to the use of paying ballooning compensation, and TEPCO remains in a tough business situation due to such challenges as growing fuel costs.