TEPCO to be more firmly under government control

The Japanese government might end up owning 76% of Tokyo Electric Power Company after a share conversion.

It intends to convert all its US$12.6 billion bailout funds poured into TEPCO, operator of the infamous Fukushima nuclear plant, into shares of stock in the company. Japan has been providing financial support for TEPCO following the devastating earthquake and tsunami of March 2011.

The bailout is Japan’s largest since the rescue of Japan’s banking industry in the 1990s.

TEPCO said it will issue 1.6 billion convertible preferred shares with voting rights and 340 million of the same type of equity without voting rights. The plan will need approval by TEPCO shareholders in June.

It will initially give a state-backed compensation fund a 50.1percent stake in TEPCO. That ownership may rise to 75.8 percent, however, once the non-voting stock is converted to preferred shares with voting rights.

Voting shares will be valued at US$4 billion and the non-voting convertible stock at US$8.6 billion.

Under a 10-year business plan approved this month by the Ministry of Trade and Industry, the government stake may rise to more than two-thirds if TEPCO fails to meet goals that include cost cuts and compensation payments.

If the restructuring of TEPCO goes according to plan, the compensation fund may convert all preferred shares to common stock and sell them in the market at an appropriate time. The bailout fund’s voting rights may reach as high as 95.4 percent if all the preferred shares are converted to common stock.

The government has earmarked US$113 billion for its bailout of TEPCO and to pay compensation and cleanup costs related to radiation leaks from TEPCO’s Fukushima plant.