Tepco compensation scheme approved by Japanese govt

Japan approved a plan to help TEPCO compensate victims of the crisis at its tsunami-crippled nuclear plant. It will also save TEPCO from financial collapse.

The government will issue special-purpose bonds to help fund the scheme, which will allow Tokyo Electric to handle compensation payouts that are expected to run into the tens of billions of dollars. There will be no ceiling set on Tokyo Electric’s liabilities.

Other utilities will also be asked to pay annual premiums into the fund. The plan is designed in principle to protect bondholders and will keep TEPCO shares listed, although the utility is expected to forgo dividend payments for several years as it pays back the fund for compensation.

“This scheme will help alleviate concerns of financial market turmoil because holders of Tokyo Electric shares and bonds are protected. I think we can avoid market turmoil because that’s essentially the whole point of this scheme,” said Yasuhide Yajima, senior economist at NLI Research Institute.

“But there is so much uncertainty over how this scheme will actually work because we don’t know exactly how much the total costs for compensation will be.” Government officials, bankers and Tokyo Electric executives have been wrangling for weeks over who should foot the bill for the crisis at the Fukushima Daiichi plant, which was crippled by the March 11 earthquake and tsunami. Two months after the disaster, Tokyo Electric is still struggling to get reactors at the plant under control.