Tepco needs to stay afloat to avoid financial chaos

Creative Commons/Parag.naik

Tokyo Electric Power Co was embroiled in a battle where it owed around $13 million as compensation for the disaster that occurred at the Fukushima Daiichi nuclear plant on March 11, 2011. The Japanese government will provide all possible financial assistance to Tepco. The mere possibility of Tepco going bankrupt with a debt of $13 million could lead to a major financial crisis.

Public assistance can make Tepco stay afloat even with some major financial losses. However, if it continues losing, it would result in the loss of most of it’s capital.

Tepco us badly affected by the tsunami followed by earthquakes. 17 power plants were closed down due to the earthqauke while yet others had to be shutdown due to maintenance or strong public opposition. It has had to rely on expensive thermal power at higher costs.

Tepco will have to hike its electricity rates or start the idle reactors early in order to get back on it’s feet. Tepco initially sought bank loans for a tenure of 10 years. However, banks were wary of accepting the terms in view of the uncertainty of restarting reactors as well as the business market.

Tepco has already made some plans to speed up compensation and provide cost cuttings. Salary pay cuts will be made to executives and employees for a period of 10 years. Compensation can be given to victims in an out of court settlement.  The Nuclear Damage Liability Facilitation Fund governed jointly by the power companies and the government will provide funds to insure against nuclear disasters.

Tepco is expected to come up with a more concrete plan in March that will portray a clear picture of the hiked rates and the restart date of the nuclear reactors.

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