Fukushima pay-outs could pull plug on TEPCO

The clean-up process after the nuclear crisis has contributed directly to the losses incurred by TEPCO [EPA]

Tokyo Electric Power Co, the operator of Fukushima nuclear plant, has announced a $7.4bn quarterly loss mostly due to a massive provision to compensate victims of this year’s meltdown.

The March disaster at the Fukushima complex in northeast Japan spawned the world’s worst nuclear crisis since Chernobyl and has put the existence of Asia’s largest utility, known as TEPCO, in doubt.

Tepco said it has earmarked $5.1bn to compensate the victims of the crisis, who include about 80,000 people
evacuated from areas surrounding the Fukushima plant, 240km north of Tokyo.

Even before the pay-out began, Tepco posted a $15 billion net loss for the year to March 31, Japan’s biggest non-financial loss, according to Reuters news agency.

Toshio Nishizawa, who recently took over as TEPCO president when his predecessor quit over the nuclear disaster, said on Tuesday he still did not know how much the total compensation would be in the end, as the crippled nuclear reactors continued to spew radioactive material.

He also said he did not know how much government bailout may be needed to ride out the disaster, but promised that his company was trying to take care of problems by selling assets and cutting costs.

“We will put in our best effort,” he told reporters at TEPCO’s Tokyo headquarters. “We have not been able to make an assessment at this time.”

Low electricity demand

TEPCO’s chances of survival improved after parliament last week passed a bailout backed by taxpayer funds and contributions from other utilities to help shoulder a compensation bill that analysts estimate could climb as high as $130bn.

“It’s hard to define how much TEPCO will have to write off in losses, but the worst is yet to come,” said Yuuki Sakurai, CEO and president of Fukoku Capital Management. 

The company, which aims to start paying compensation in October, said its extraordinary loss for the April-June quarter also reflected rising fuel costs and and repairs totalling $1.4bn from the three damaged reactors at Fukushima.

Another factor crimping TEPCO’s bottom-line is a new trend with Japanese companies of cutting back on electricity consumption by 15 per cent because of possible power shortages caused by the Fukushima problems.

TEPCO said electricity sales in the fiscal first quarter slid 12 per cent from the same period the previous year and quarterly sales dropped 7 per cent to $14.7bn.