Japan’s government approves Tepco compensation scheme

Japan’s government has approved a plan to help Tokyo Electric Power (Tepco) compensate victims of the crisis at its tsunami-crippled nuclear plant.Payouts are expected to run into the tens of billions of dollars over the Fukushima nuclear plant breakdown.Government assistance could help Tepco, Asia’s largest power utility, avoid bankruptcy.But Trade Minister Banri Kaieda said the government’s plan to help Tepco was not meant as a rescue of the utility.He said the government would seek to minimise any increase in electricity costs and avoid rolling power blackouts this summer.A plan had been expected to be announced on Thursday, but was delayed due to disagreements.Tepco had earlier agreed to drastic restructuring in return for government help.The conditions agreed by the company include massive cost-cutting, no upper limit for compensation payouts and accepting an investigation of its management.

The Fukushima plant was left severely damaged by the 11 March earthquake and subsequent tsunami, which left nearly 15,000 people dead and almost 9,800 missing.According to news reports, other utilities will also contribute to Tepco’s compensation fund.The government is expected to provide as much support as needed to prevent companies from going into the red, and is expected to fund the scheme by issuing special-purpose bonds.”This scheme will help alleviate concerns of financial market turmoil because holders of Tokyo Electric shares and bonds are protected,” said Yasuhide Yajima, a senior economist at NLI Research Institute in Tokyo.”I think we can avoid market turmoil because that’s essentially the whole point of this scheme.”But there is so much uncertainty over how this scheme will actually work because we don’t know exactly how much the total costs for compensation will be.”Tepco serves an area that accounts for 33% of Japan’s economy.Japanese media have reported that Tepco may have to raise electricity prices in order to help pay for payments.Tepco’s shares dropped on Friday and were trading about 6% lower at 452 yen.Banking stocks also fell, on fears they may have to rework their loan agreements with Tepco.On Thursday, the utility provider said that damage to a reactor at the Fukushima plant was worse than originally thought.

Water is leaking from the pressure vessel surrounding reactor 1 – probably because of damage caused by exposed fuel rods melting, according to a spokesman.Contaminated water had also entered the sea from a pit near reactor 3 but this had now been stopped, he said.Cooling systems to the reactors were knocked out, causing fuel rods to overheat. There were subsequently explosions in the buildings housing four reactors, three of which had been operating at the time of the earthquake.Engineers are pumping water into the reactors to cool them as they work to restore the damaged cooling systems.Tepco has said that it may take up to nine months to achieve a cold shut-down at the plant.More than 80,000 local residents living within a 20km (12 mile) radius of the plant have been evacuated from their homes.Agriculture and businesses have been hit and there is no timescale yet for allowing residents to return. – BBC