Tough restructuring for Japan's Tepco

2011-06-16 12:27

Tokyo - An independent panel on Thursday pledged to oversee a tough restructuring of Japan's Tokyo Electric Power Co. to ensure the utility will raise what funds it can to pay huge compensation claims.

The five-member panel, led by lawyer Kazuhiko Shimokobe, former deputy chief of the Japan Federation of Bar Associations, will report to industry minister Banri Kaieda and submit its final report in September.

Japan's government on Tuesday put forward a bill to ensure that the utility can pay compensation to tens of thousands affected by the nuclear accident at the Fukushima Daiichi plant crippled in the March 11 earthquake and tsunami.

Tens of thousands of people remain evacuated from homes, farms and businesses in a 20-kilometre (12-mile) zone around and also beyond the radiation-spewing plant.

The bill calls for the creation of a body to handle claims made against Tepco and will be funded by public money as well as contributions from power companies.

Analysts say its passage in parliament is likely to partly depend on whether the government can win over those opposed to it by enforcing tough restructuring on Tepco.

"All items are subject to review by the panel, including personnel expenses and pension benefits," Shimokobe said in a news briefing, Dow Jones Newswires reported.

Tepco's finances will be scrutinised to ensure it will do what it can to meet compensation estimated at several trillions of yen (billions of dollars) and avoid passing the cost on to the public in the form of a rise in electricity rates.

Under Tepco's current restructuring programme, executives have to forego their annual remuneration, while ordinary workers have a 20 percent pay cut.

Other restructuring steps may include the separation of Tepco's power generation and distribution functions.

In May Tepco said it would sell assets not essential to power generation to raise more than 600 billion yen ($7.4bn), after it reported a $15bn annual net loss, the biggest ever for a non-financial Japanese firm.

The government-devised aid plan for Tepco will include the purchase of its corporate bonds, stocks and assets but its passage through parliament is expected to be difficult amid opposition to it and after Prime Minister Naoto Kan announced he will resign in the near future.