Japanese government to inject public funds into TEPCO

The Mainichi newspaper has reported that the Japanese government is looking to inject public funds into Tokyo Electric Power Co, which is struggling financially due to lost revenue from reduced power generation as a consequence of damage to its asset base resulting from the March 11 earthquake, the cost of decommissioning four nuclear reactors at Fukushima and the heavy cost of compensating those forced to evacuate from the area around the plant due to radiation leakage.

“It will be a type of injection that will allow the government to have a certain level of (management) involvement,” a government official told the paper.

“If the stake goes over 50 per cent, it will be nationalised. But that’s not what we are considering.”

Meanwhile Prime Minister Naoto Kan said at a news conference that TEPCO should remain under private ownership.

“TEPCO has been operating as a private company. As I said, now we would need to support them, but I would basically like for TEPCO to work hard as a private company.”

Share in the company have fallen by 80%, hitting an intraday low of JPY399 today, close to an all-time low of JPY393 set in 1951, before rising to close down 3.7% at JPY449. News of government support caused the cost of TEPCO’s five-year credit default swap spread to narrow to 335/375 basis points from a record of 475 basis points set earlier in the week.

The evacuation of residents from the 20km exclusion zone around the Fukushima power plant is expected to be long term, according to officials. Over 70,000 people have been moved to temporary shelters, with another 136,000 encouraged to leave or stay indoors. Worryingly, radiation has been found for the first time within groundwater 15 metres below reactor 1, raising concerns that eventually radiation leakage could contaminate water supplies.