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Edition: U.S. Article Comments (4) Video Follow Reuters Facebook Twitter RSS YouTube Read Actress Marlee Matlin hit with tax bill, sells home 12 May 2011 Special report: The bin Laden kill plan | 12 May 2011 Special report: The bin Laden kill plan | 12 May 2011 Cisco braces for biggest layoffs in its history 12 May 2011 German court convicts then frees Nazi guard Demjanjuk | 12 May 2011 Discussed 148 Obama at U.S. base to pay tribute to bin Laden mission 115 Son says bin Laden sea burial demeans family: report 59 Muslim scholars pulled from Delta plane in Memphis Watched Russia 'shot down Georgia' drone Mon, Apr 21 2008 Progress made on debt ceiling: WH 3:23am EDT Hunt for bin Laden; in 60 seconds Thu, May 12 2011 Japan approves Tepco nuclear claims plan Tweet Share this By Kiyoshi Takenaka and Yoko Kubota TOKYO (Reuters) - Japan's government agreed on Friday to set up a fund with taxpayer money to help Tokyo Electric Power compensate victims of the crisis at its tsunami-crippled nuclear plant and avoid financial... Email Print Factbox Plan for Tepco nuclear compensation Thu, May 12 2011 Related News Analyst view: Japan approves nuclear crisis compensation scheme Thu, May 12 2011 TEPCO to restart thermal power plants in summer 12:28am EDT Related Topics World Home » Japan » Natural Disasters » Nuclear Power » Green Business » Stocks Related Video Japan agrees nuclear payout deal Thu, May 12 2011 Japan's Prime Minister Naoto Kan (C) speaks during a cabinet ministers' meeting to discuss crippled nuclear power plant operator Tokyo Electric Power Company's (TEPCO) compensation plan in Tokyo May 12, 2011. Credit: Reuters/Kim Kyung-Hoon By Kiyoshi Takenaka and Yoko Kubota TOKYO | Fri May 13, 2011 1:25am EDT TOKYO (Reuters) - Japan's government agreed on Friday to set up a fund with taxpayer money to help Tokyo Electric Power compensate victims of the crisis at its tsunami-crippled nuclear plant and avoid financial collapse. The government will issue special-purpose bonds to help finance the scheme, which will allow Asia's largest utility to make compensation payouts expected to run into the tens of billions of dollars. There will be no ceiling set on Tokyo Electric's liabilities. In return for public backing, the government will exert control "for a certain period of time" over management of Tokyo Electric (Tepco) and other power utilities, which will also be asked to pay annual premiums into the fund. The government did not provide details, but lawmakers told reporters earlier this week that the government plans to inject about 5 trillion yen ($62 billion) worth of special-purpose bonds into the compensation fund. The plan, agreed after weeks of wrangling among government officials, bankers and Tepco executives over who should pay for the crisis, staves off investors' worst-case fears of a Tokyo Electric financial crisis roiling financial markets. "This scheme will help alleviate concerns of financial market turmoil because holders of Tokyo Electric shares and bonds are protected," said Yasuhide Yajima, senior economist at NLI Research Institute. But bank shares slid after Japan's top government spokesman said a distinction should be made between loans made before the March 11 earthquake and tsunami and those extended after the disaster and that banks should be asked to cooperate in easing Tokyo Electric's financial burden. The market interpreted the comments from Chief Cabinet Secretary Yukio Edano as an indication banks may be asked to forgive some loans. Shares of Sumitomo Mitsui Financial Group, the utility's main creditor bank, dropped 4 percent. Investors said there was also still much uncertainty over how much the scheme would cost, how the burden would be shared and how the government would exercise its control over power utilities. "From the perspective of shareholders of utilities' stocks, more unclear factors have emerged after the announcement," said Yuuki Sakurai, head of Fukoku Capital Management. "It's difficult to gauge the fair value of their shares because we don't know that the government won't intervene in their nuclear power plants." PROTECTING SHAREHOLDERS Last week Prime Minister Naoto Kan asked another power utility to shut down a nuclear plant in an earthquake-prone area out of safety concerns, drawing both applause for bold action and fire for what critics said was a rash and poorly planned policy move. The plan for Tokyo Electric is designed in principle to protect its bondholders and keep its shares listed, although the utility is expected to forgo dividend payments for several years as it pays back the fund for compensation. Government officials were at pains to present the scheme as geared toward the victims of the nuclear disaster and not another corporate bailout of a powerful utility with a history of safety lapses and cozy ties with regulators. "This framework is not meant as a bailout of Tepco. We made this framework so that compensation can take place swiftly for the victims ... and so that Tepco can supply electricity in a stable way," Trade Minister Banri Kaieda told reporters. He also said the government would seek to minimize any rise in electricity costs. One public concern is that the financial burden of payouts for those affected by radioactive leaks from Tepco's Fukushima Daiichi plant, disabled by the March 11 earthquake and tsunami, would lead to higher electricity prices. Two months after the disaster, Tokyo Electric is still struggling to get reactors at the plant under control. Tokyo Electric and creditor banks have pushed for hefty state aid, warning that problems at the utility, Japan's largest corporate bond issuer whose shares are widely held by financial institutions, could roil financial markets. The special purpose bonds due to be issued for the scheme can be turned into cash to handle the initial burst of payouts to residents who evacuated the plant's vicinity and others who are due compensation, allowing Tokyo Electric and other utilities to spread their burden over several years. The special-purpose bonds do not count as issuance to the market and so are unlikely to have much impact on debt prices. In one government simulation, if compensation totals 5 trillion yen, Tokyo Electric would be asked to pay back 200 billion yen to the fund annually over 13 years, with the rest to be shouldered by the other utilities. (Additional reporting by Yoshifumi Takemoto, Leika Kihara, Yoko Kubota and Chikako Mogi; Writing by Nathan Layne and Tomasz Janowski; Editing by Edmund Klamann) World Home Japan Natural Disasters Nuclear Power Green Business Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story directly or with relevant tangential information. We try to block comments that use offensive language, all capital letters or appear to be spam, and we review comments frequently to ensure they meet our standards. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. Comments (4) upstater wrote: This is fantastic news! Bondholders are protected! Shareholders are not wiped out! Ratepayers and taxpayers pick up the tab! I am glad Japan embraces corporate welfare with the same enthusiasm as Bush and Obama! May 12, 2011 9:10pm EDT -- Report as abuse robert1234 wrote: Once again, a corrupt government bails out a profit making bribe giving corporation at the cost of public tax money. Instead, TEPCO officials should be in jail for faking records, bad maintenance and manslaughter by negligence and the regulators should all be fired or jailed for their part in this disaster. The Japanese officials who dreamed up this financial crime should be removed from office. TEPCO should be nationalized and its parts sold off to the public in auctions. As long as there are no real consequences to such disasters, they will continue to happen. May 13, 2011 2:09am EDT -- Report as abuse robert1234 wrote: Once again, a corrupt government bails out a profit making bribe giving corporation at the cost of public tax money. Instead, TEPCO officials should be in jail for faking records, bad maintenance and manslaughter by negligence and the regulators should all be fired or jailed for their part in this disaster. The Japanese officials who dreamed up this financial crime should be removed from office. TEPCO should be nationalized and its parts sold off to the public in auctions. As long as there are no real consequences to such disasters, they will continue to happen. May 13, 2011 2:09am EDT -- Report as abuse See All Comments » Add Your Comment Social Stream (What's this?) © Copyright 2011 Thomson Reuters Editorial Editions: Africa Arabic Argentina Brazil Canada China France Germany India Italy Japan Latin America Mexico Russia Spain United Kingdom United States Reuters Contact Us Advertise With Us Help Journalism Handbook Archive Site Index Video Index Reader Feedback Mobile Newsletters RSS Podcasts Widgets Your View Analyst Research Thomson Reuters Copyright Disclaimer Privacy Professional Products Professional Products Support Financial Products About Thomson Reuters Careers Online Products Acquisitions Monthly Buyouts Venture Capital Journal International Financing Review Project Finance International PEhub.com PE Week FindLaw Super Lawyers Attorney Rating Service Reuters on Facebook Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. 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