Government's responsibility - but to what extent ?

February 14, 2012

Editorial: Govt' must be aware of responsibilities if it takes over TEPCO

http://mdn.mainichi.jp/perspectives/news/20120214p2a00m0na005000c.html

Economy, Trade and Industry Minister Yukio Edano has approved additional financial assistance of some 690 billion yen for the troubled Tokyo Electric Power Co. (TEPCO), the operator of the Fukushima No. 1 Nuclear Power Plant, to provide funds for the massive compensations for nuclear disaster-induced damage. Apart from this, the government is poised to inject public funds into the utility to place it under virtual state control and prevent the firm from becoming insolvent. The minister's approval had been delayed due to rows between the utility and the government over the latter's demand to share TEPCO's management rights.

If the unproductive conflict between the government and the utility lingers on and results in a delay in compensating the victims of the nuclear catastrophe, however, the situation will turn into a case of the tail wagging the dog. If the government is to share TEPCO's management rights by injecting public funds, the government needs to be aware of its responsibility to take on the task of bringing the nuclear crisis under control at an early date, rescuing nuclear disaster victims and maintaining a stable energy supply.

Following the government's approval of the additional financial assistance, TEPCO released its settlement for April-December 2011, in which the utility incurred some 620 billion yen in net losses -- due mainly to increased fuel costs following the suspension of nuclear power plants. If it were not for the injection of public funds, the utility would likely turn insolvent in the business year ending March 2013. That is why a capital injection at the 1-trillion-yen level has been under consideration.

Because TEPCO's total market value currently stands at some 320 billion yen, the government would be able to acquire up to three-fourths of its management rights by investing 1 trillion yen into the flagging company. If the government acquires more than two-thirds of TEPCO's management rights, the government would be entitled to making such key managerial decisions as restructuring. Industry Minister Edano demanded of TEPCO President Toshio Nishizawa that the utility hand over "sufficient voting rights" to the government as a precondition for the additional financial support. It appears that the government is aiming to take over a certain managerial control of the utility by acquiring a majority of its voting rights, after which it would push through a reform of the entire energy system, including separating electricity generation and transmission.

TEPCO, meanwhile, has been opposing the handing over of its management rights to the government. President Nishizawa stated as he released the utility's settlement, "We will discuss the issue by taking the industry minister's ideas into full consideration."

What significance, however, does this tug-of-war between the government and the utility have? They need to be reminded that the aim of providing financial support for TEPCO is to bring the nuclear crisis under control at an early date, compensating the nuclear disaster victims swiftly and maintaining a stable energy supply.

TEPCO is poised to draw up a comprehensive special business plan incorporating the injection of public funds by the end of March, in conjunction with the Nuclear Damage Liability Facilitation Fund. While it goes without saying that TEPCO is required to do its utmost to streamline its management, the government also needs to bear due responsibility as an investor in the utility.

However, there are also discrepancies within the government over its attempt to acquire a majority of TEPCO's voting rights, with the Finance Ministry opposed to the move on the grounds that it could increase the government's financial burden for decommissioning nuclear reactors and compensating nuclear disaster victims. As long as there is a conflict of opinions within the government over taking over the responsibility for the nuclear disaster and its aftermath, we can't be sure if the government can be tasked with TEPCO's management.

Unless TEPCO reactivates idled nuclear reactors and raises utility bills, the company is estimated to take only a year to use up the one trillion yen to be injected by the government, because of increased fuel costs. There is also a limit to the effectiveness of the government entirely taking over the utility and downsizing it. The government is urged to exercise its responsibility in settling the structural problems if taxpayers' money is to be injected to bring the utility under state control.

Click here for the original Japanese story

Govt and TEPCO play tug-of-war over voting rights

http://www3.nhk.or.jp/daily/english/20120214_17.html

Difficult negotiations between the Japanese government and the operator of the tsunami-hit nuclear plant over voting rights of the company will soon begin in earnest.

Tokyo Electric Power Company wants the government to have less say over the funds it provides the firm.

Industry minister Yukio Edano told TEPCO President Toshio Nishizawa on Monday the government would not accept the company's business revival plan unless it gets adequate voting rights. The plan includes an injection of public funds to boost the firm's finances.

Some government officials think it should have majority voting rights over the company if it is to receive public funds.

Others say over two-thirds voting rights is necessary, to allow the government to veto all proposals at a general shareholders meeting.

TEPCO seeks to minimize state control, saying it wants to maintain autonomy as a private firm.

Some inside the government support TEPCO's stance. They worry about the huge responsibility the government may bear in compensating victims and decommissioning the plant.

Agreement on funding and voting rights is urgent for TEPCO as it forecasts a net loss of nearly 9 billion dollars for the business year through March. It could also affect financing from banks.