Tokyo Electric Power warned on Wednesday that a $24 billion bank loan was not enough to keep it afloat and pay for Japan's worst nuclear disaster, adding to expectations the government will step in to bail out the stricken company. Asia's largest utility, whose share price has crashed nearly 80 percent since the March 11 earthquake and tsunami that sparked the crisis, said its president had been hospitalised and Chairman Tsunehisa Katsumata will take over his responsibilities.
The prime minister and other lawmakers have lambasted Tokyo Electric, known as TEPCO, for its handling of the disaster. The utility has sown anxiety among the public by giving confusing radiation readings as it raced against time to prevent reactors from overheating and many Japanese say they don't trust what its officials say. Katsumata told a news conference that TEPCO had not had time to estimate the financial impact of the disaster at its Fukushima nuclear plant but expected it to be "very severe".
The company had secured 2 trillion yen ($24 billion) in loans from lenders led by Sumitomo Mitsui Financial Group , but that was not enough given fuel and other costs. TEPCO would discuss with the government how to ensure it had adequate funding, he said, to get through a disaster that has caused radiation leaks, rolling power blackouts and the evacuation of tens of thousands of people.
"There are lots of discussion about nationalisation, but I will do my best to ensure TEPCO remains as a private company," Katsumata said. Analysts see scant chance the company, which provides electricity to a third of the Japanese population, can survive in its current form.
"TEPCO will have to pay enormous reparations, counted in trillions of yen, so the government obviously has to do something about the firm," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "But people wouldn't let the government keep pouring tax money into this company when it's like a bucket with holes in it."
Although likened by some to the Gulf of Mexico oil spill that hammered oil company BP, TEPCO's financial standing and rapid deterioration in its share price may present Japan's government with a systemic problem more similar to the collapse of Lehman Brothers in 2008 and force it to act sooner to bolster the company than anticipated.
"It's not just about the nationalisation of TEPCO. You have to look at all the banks that are lending to the company, it's obvious that investors are going to look at their situation with a huge dose of scepticism," Fujito said. Shares in TEPCO, which closed at their lowest level in nearly five decades on Tuesday, dropped another 17.7 percent to 466 yen on Wednesday and were later untraded after the company said President Masataka Shimizu had been taken to hospital for high blood pressure and dizziness.
Shimizu has not been seen in public since a March 13 press briefing, and speculation had swirled about his leadership. His chairman said he had shown no intention to resign and was expected to be back at work soon. TEPCO has been roundly criticised for its preparedness and response to the disaster.
As the company struggled to communicate what was happening at the site, Prime Minister Naoto Kan reportedly demanded at one stage that company executives tell him: "What the hell is going on?" Experts have also questioned why so much spent fuel was kept at the plant and whether officials ignored concerns raised about its vulnerability to such a natural disaster.
The president of the company and four other senior officials were forced to resign in 2002 to take responsibility for suspected falsification of safety records. Some investors see worse to come for the company. "We believe the stock could go to zero," an executive at a hedge fund with $1 billion invested in Asia told Reuters on condition he wasn't identified. His fund he said has been buying TEPCO debt because "we think the Japanese government will guarantee or nationalise it".
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