Japanese government to take over Tepco

Tepco will be taken over by the Japanese government after its trade minister approved a $12.5 billion capital injection.

Trade and Industry Minister Yukio Edano explained that without the state funds, Tokyo Electric Power Co cannot provide a stable supply of electricity and pay for compensation and decommissioning costs.

"Even though the firm will be under so-called state control, I want the company to do your best to step out of this situation soon," Edano told Tepco President Toshio Nishizawa, referring to the government's intention to own Tepco only until it recovers.

The injection of 1 trillion yen or $12.5 billion brings total government support for the company to at least 3.5 trillion yen since the Fukushima incident in March last year.

The eventual cost of the nuclear disaster, including compensation and clean-up costs, has been estimated at more than $100 billion.

The government will get more than half of Tepco's voting rights, allowing it to choose board members, according to the  the utility's 10-year turnaround plan.

It will also take convertible stock that, when converted, will increase its control to more than two-thirds, enabling it to make unilteral decisions on major management issues including mergers. The takeover must first be approved by a general shareholders' meeting in June.

In addition to taxpayers' money, major creditors will provide the firm with an additional 1 trillion yen in credit, and a government-backed bailout body will aid Tepco with an additional 850 billion yen for compensation, the plan said.

Tepco also said it plans to hike electricity rates for three years for households by 10 percent and for corporate customers by about 17 percent.

Tepco will sell or lease some of its thermal power plants, a move Edano suggested could be an initial step towards loosening the grip of Japan's 10 regional monopoly utilities including Tepco by opening markets to some competition.

Chairman Tsunehisa Katsumata will be replaced by a member of the bailout body, and a new president was chosen this week from within Tepco to replace Nishizawa in June.

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