Japan may ask domestic utilities to share the compensation costs stemming from the crippled Fukushima nuclear plant and cap the burden on plant operator Tokyo Electric Power <9501.T> to $24-45 billion to save the company from financial ruin, a newspaper reported.
Tokyo Electric, Asia's largest utility also known as TEPCO, is yet to determine the costs following the March 11 earthquake and tsunami, but Bank of America-Merrill Lynch late last month estimated the company could face compensation claims of more than $130 billion.
TEPCO's beaten down shares jumped 12 percent, while Kansai Electric <9503.T> and other utilities fell following the report in the Yomiuri newspaper citing a draft plan being considered by the company and the government.
The scheme is designed to ease worries in the financial market over the fate of Tokyo Electric, the country's largest corporate bond issuer whose shares are widely held by financial institutions, the newspaper reported.
It's too early to tell the fate of TEPCO at this moment, buying or even selling could be very speculative, said Yuuki Sakurai, CEO of Fukoku Capital Management.
It's still very uncertain in terms of how far the government will go in supporting TEPCO. I think the general feeling is that might be a natural disaster, but some part of it is human error. And most people want to see TEPCO punished for the human error, he said.
Japan has said TEPCO should be primarily responsible for compensation, but the government would ensure it met its obligations.
In a statement, Tokyo Electric said what was reported by Yomiuri was not something disclosed by the company and nothing has been decided.
Separately, the company said its President Masataka Shimizu would hold a news conference at 0600 GMT on Wednesday.
Under the plan, Tokyo Electric's liability would be capped at 2-3.8 trillion yen ($24-45 billion) and the company would pay 100-200 billion yen annually for 15 years from its profits, the newspaper said.
The plan calls for other power firms to contribute to a fund that would shoulder up to 2.7 trillion yen of compensation payouts, with the remaining damages to be handled by the government, the Yomiuri said.
The utilities, including Tokyo Electric, would contribute to the fund in proportion to the number of reactors they own. This could come to about 30-50 billion yen for each reactor, the newspaper said.
The draft plan will likely face hurdles including opposition from shareholders of other utilities such as Kansai Electric, which has 11 reactors and could be asked to contribute as much as 550 billion yen under the scheme, the paper said.
Shares of the regional power monopoly have lost roughly three-quarters of their value since the disaster amid growing uncertainty over its viability given the prospect of staggering amount of compensation.
Media have reported a variety of ideas floated by government officials, including outright nationalization of Tokyo Electric and a spin-off of the Fukushima nuclear plant into an entity to handle the accident and compensation.
We think extraordinary losses will total 554 billion yen (in the year ended in March), for the costs of scrapping the Fukushima Daiichi plant and bringing thermal power plants back on line and 2 trillion yen in (the current financial year) for the costs of damage compensation to the local community, Tomohiro Jikihara, an analyst at JP Morgan, said in a note.
Shares of Kansai Electric, which provides power to Osaka and its neighboring areas, fell 4.5 percent to 1,772 yen, while Chubu Electric <9502.T>, which serves Nagoya and its surrounding areas, declined 3.4 percent to 1,854 yen.
On March 11, a magnitude 9 earthquake and a massive tsunami tore through Tokyo Electric's Fukushima Daiichi facility, 240 km (150 miles) north of Tokyo, causing radiation leaks in the world's worst nuclear disaster in 25 years.
(Additional reporting by Tim Kelly, David Dolan and Yoko Nishikawa; Editing by Nathan Layne and Vinu Pilakkott)