Tokyo Electric bailout plan approved by cabinet

radiation refugees, kicking off lawmaker wrangling that may take weeks to decide the fate of Asia’s largest utility.
The approval is a step forward in a slow process that has frustrated the victims of radiation leaks at Tokyo Electric’s nuclear plant in Fukushima, and drove up shares in the company by 25 percent yesterday.
However, opponents of the Bill from both sides of a divided parliament may now trip up the proposed law or demand amendments in return for support, leaving Tokyo Electric’s fate uncertain.
Holders and analysts of the company’s US$110 billion in debt remain wary.
“It has not been made into a law yet. So, it is too early to take a sigh of relief,” said Akihito Murata, credit analyst at Deutsche Securities.
Tokyo Electric’s five-year CDS spreads were bid at 1 000 basis points Tuesday, unchanged from Monday, meaning it costs US$1 million to insure US$10 million of Tokyo Electric’s debt. Tokyo Electric’s shares, which have fallen 88 percent since the March 11 quake, have been volatile as investors jumped in and out of the stock. On June 7, the shares dropped 28 percent before rebounding.
Tokyo Electric, also known as Tepco, said: “We hope that the proposed Bill will be enacted in parliament as soon as possible.”
The company said it was ready to make fair and speedy compensation payouts once lawmakers gave the green light.
However, Prime Minister Naoto Kan’s track record in winning lawmaker approval for his post-quake policies suggest a bitter parliamentary battle will ensue.
Facing mounting pressure to step down, he has already failed to get several other disaster-related bills passed.
The latest move comes three months after a massive earthquake and tsunami triggered radiation leaks at the plant, triggering the worst nuclear crisis since Chernobyl, and a month since the government first presented its bailout plan. Trade Minister Banri Kaieda, whose ministry regulates Tepco and other power utilities, told a briefing the government aimed to submit the compensation Bill to parliament as soon as possible.
Asked about a newspaper report that Tepco could raise its electricity tariffs to funds part of the compensation, Kaieda said: “We have to watch so that (Tepco) will not shift it (compensation fee) on to utility fees so easily.”
The Mainichi newspaper reported yesterday that Tepco will face a total of 10 trillion yen (US$124 billion) in compensation claims and will have to raise its electricity charges by 16 percent from next year to cover the costs. The paper cited documents it had obtained.
Under the plan, a fund will be set up to help Tepco compensate people and businesses affected by radiation leaks from the plant so that the regional power monopoly in Tokyo and surrounding areas can keep supplying electricity. – AFP.