The Japanese government may inject between $13 billion and $19 billion into Tokyo Electric Power Co (Tepco) in a de facto nationalisation of the operator of the crippled Fukushima nuclear power plant, domestic media reported today.
Tepco's future as an independent firm has been in doubt since an earthquake and tsunami wrecked the plant in March, triggering the world's worst nuclear crisis in 25 years and leaving it with huge compensation payments and clean-up costs.
The full scale of any Tepco bailout remains unclear, with media carrying differing accounts of what is being considered.
Kyodo news agency said today the total bailout could reach 3 trillion yen ($38.5 billion) over four years, with half coming from private borrowings, while the Mainichi newspaper said the government planned to inject at least $13 billion and perhaps as much as $27 billion but did not mention other fund-raising.
Some analysts expressed doubt that the government would take the drastic step of taking control of the giant monopoly, which has political clout despite the damage to its image from its handling of the Fukushima crisis.
"Nationalisation would be a surprising development, politically very difficult and with the potential for serious aftershocks," said Jeffrey Kingston, director of Asian studies at Temple University's Japan campus.
That said, the possibility of the government taking control has proponents in some sections of Japan's ruling party.
Tepco has made progress in bringing the Fukushima plant under control and is on track to declare a "cold shutdown" - when water used to cool the reactors is stable below boiling point - before the end of the year.
But decommissioning four reactors at the plant is set to come to at least 1.2 trillion yen, a cost that would render Tepco insolvent if drastic measures to shore up its financial base were not taken, the media reports said.
The Mainichi said a government-run bailout fund would buy preferred shares to be issued by the utility.
Shares in Tepco slid as much as 17 per cent before regaining some ground to end down 11 per cent at 244 yen.
Tepco would need to get shareholder approval to raise the ceiling on the number of shares it can issue at its next annual meeting in June.
To cover costs, Asia's biggest utility is pushing for hikes in electricity charges. It also wants permission to restart nuclear reactors, particularly those that have been idled at its biggest plant, Kashiwazaki-Kariwa.
Five of the seven reactors at that plant are off-line for checks or repairs and two more are scheduled for planned shutdowns before May 2012.
But the ruling party has concluded that the public would be unwilling to accept higher electricity fees, particularly at a time when it is being asked to accept a hike in the sales tax to cover social security costs, the Mainichi said, while restarting idled reactors is difficult due to public fears about safety.
Pushing Tepco to accept capital would also allow the government to pursue drastic reform of energy policy, including separating power generation from distribution, the paper said.
But experts questioned whether the two would necessarily go hand in hand. The government aims to finish a review of national energy policy, including nuclear power, by next summer.
The Mainichi newspaper added that a government panel led by chief cabinet secretary Osamu Fujimura could, in the new year, announce plans to inject public funds, although Mr Fujimura told reporters the issue of public funds was not now on the table.
"The government hasn't been debating this matter recently and at this point we are not scheduled to do so in the future," he said.
Tepco is due to announce new steps in the coming days, in which include an increase its planned cost cuts over 10 years by 100 billion yen to 2.64 trillion yen as well as the sale of a thermal power plant, a source has said.