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Tokyo - The Japanese government could discuss a possible nationalisation of Tokyo Electric Power among other options to deal with the operator of the plant at the centre of the country's nuclear disaster, a senior cabinet minister said on Tuesday.
The future of Asia's largest utility has been questioned since the March 11 earthquake and tsunami struck its Fukushima Daiichi nuclear complex, causing it to leak radiation. Its shares have fallen 70% and the cost of insuring its debt against default has risen 10-fold.
National Strategy Minister Koichiro Gemba said a discussion about bailing out Tokyo Electric was possible in response to a Yomiuri newspaper report that a plan to temporarily nationalise the company has been floated by some members of the Japanese government.
"Naturally it is possible that there will be various debates about the state of Tokyo Electric," Gemba was quoted by Kyodo news agency as saying when asked about the possibility of nationalisation.
The Yomiuri had reported that some members of the government had proposed a plan for the state to take a majority stake in Tokyo Electric, also known as Tepco, and help it pay for damages stemming from the nuclear accident.
The crisis appeared to escalate in the past few days with plutonium found in soil on Tuesday, rattling already shaky financial markets.
Heavy debt load
Chief Cabinet Secretary Yukio Edano had said earlier on Tuesday that the government was not currently considering nationalising the utility.
"At this point, it is my understanding that government institutions are not considering such a move. The government will be directing Tepco to do this everything possible, to resolve this situation and those who are affected," he said.
Tokyo Electric spokesperson Hajime Motojuku said he was unaware of any plan for nationalisation: "Our first and biggest priority at this moment is to prevent the nuclear power plant accident from worsening further," he said.
Tokyo Electric shares were untraded due to a glut of sell orders at ¥566, down 19% from Monday's close. The company has lost about $30bn in market value since the March 11 disaster.
The spread on Tokyo Electric's 5-year credit default swaps widened to a record high of 475 basis points on Monday on Marki, against just 40 points before the crisis.
Hajime Nakajima, a trader at Cosmo Securities, said that investors were spooked by the nationalisation talk.
"Although details cannot be seen such as how exactly the government is going to nationalise the company, as long as there are concerns that Tepco may be nationalised, investors don't want to hold the stock. Passive funds are selling too."
In a step to shore up its finances, Tokyo Electric Power has started talks with Japan's largest banks for emergency loans of up to $25bn, sources told Reuters last week.
The utility, which provides power to about one-third of the Japanese population, had ¥432bn in cash and equivalents at the end of December and ¥7.5 trillion in outstanding debt, according to its financial statements.
Of its rougly $64bn in outstanding bonds, the company is due to repay $4.8bn this year, and another $5.6bn in 2012, underscoring the importance of refinancing to meet its funding needs.
