Experts believe Tepco’s compensation bill will reach upwards of €17bn

Reuters reports that Japan’s government plans to hold Tokyo Electric Power (Tepco) liable for unlimited damages resulting from its crippled nuclear power plant.

Government officials, Tepco and creditor banks have been attempting to design a scheme to enable the company to cope with the massive bill for compensating displaced residents and still remain in business.

Japanese law allows nuclear plant operators exemption from paying damages if an accident was caused by “a grave natural disaster of an exceptional character”. But chief cabinet secretary Yukio Edano does not believe that Tepco’s plant qualifies for that exemption since the earthquake, although large, was not on a previously unexperienced scale.

On 10 May, Tepco’s president Masataka Shimizu met with cabinet ministers to ask for financial help from the government. He said that Tepco will try to finance compensation for victims of the accident by selling its stockholdings and property, as well as by streamlining its operations.

Tepco has started making compensation payments to residents and local governments near the plant who were forced to evacuate. But it has yet to determine how much it will have to pay in total. J.P. Morgan has estimated that Tepco could face Y2,000bn (€17bn) in compensation claims, but some reports suggest that the figure could be double this.

According to the Financial Times, Tepco raised Y2,000bn from its banks in March, but much of that is needed to decommission Fukushima’s damaged reactors and to buy natural gas, oil and coal to make up for lost nuclear capacity. The government rescue plan would keep Tepco out of bankruptcy and prevent shareholders from being wiped out.

But the value of Tepco’s stock – already down by three-quarters since the crisis started – would likely remain depressed as operational profits would be diverted for years. SR