JAPAN'S LARGEST banks are in talks to provide up to $25 billion (€17.7 billion) in emergency loans to Tokyo Electric Power to shore up its finances and rebuild its power network following the disaster at one of its nuclear plants.

Tokyo Electric, Asia's largest utility company, is waging a desperate battle to cool reactors at its Fukushima-Daiichi plant that were crippled by the earthquake and tsunami on March 11th and have since been leaking radiation.

The disaster knocked out about 20 per cent of Tokyo Electric's operating thermal and nuclear power generation, forcing it to implement rolling blackouts which will remain until it can secure alternative sources of power. This could take months.

Highlighting the uncertainty over its financial prospects, the company - known for its rich and steady dividends - said yesterday it was now unsure what its annual dividend would be, erasing its prior forecast for a payout of 60 yen per share.

Sumitomo Mitsui Financial Group, the utility's main lender, is expected to provide more than 500 billion yen (€4.38 billion) in loans out of an emergency package that could total 2 trillion yen, sources with direct knowledge of the matter said.

Mitsubishi UFJ Financial Group and Mizuho Financial Group are considering loans of 200-500 billion yen each. Sumitomo Trust and Banking and other major trust banks are also expected to offer funds, the sources said.

The loans would be used to repair damaged plants and for other reconstruction efforts and may be extended to the utility as early as this month, according to the sources, who were not authorised to speak of the matter. "Interesting, as one suspects that the government has implicitly guaranteed the survival of Tepco as a regulated entity if all these institutions are willing to accept the risk," said Penn Bowers, an analyst at CLSA Asia-Pacific Markets in Tokyo.

"Given the amount of cash on the balance sheet, I am surprised at the urgency of talks but certainly the need to prevent a crisis of confidence could be seen as necessary to keep recovery efforts stable," he said.

Tokyo Electric, which provides power to about one-third of Japanese, had 432 billion yen in cash and equivalents at the end of December 2010 and 7.5 trillion yen in outstanding debt, according to its financial statements.

Of its $64 billion in outstanding bonds, the company is due to repay $4.8 billion this year, and another $5.6 billion in 2012, underscoring the importance of refinancing to meet its funding needs. - (Reuters)