Japan's government agreed on Friday to set up a fund with taxpayer money to help Tokyo Electric Power compensate victims of the crisis at its tsunami-crippled nuclear plant and avoid financial collapse.
The government will issue special-purpose bonds to help finance the scheme, which will allow Asia's largest utility to make compensation payouts expected to run into the tens of billions of dollars. There will be no ceiling set on Tokyo Electric's liabilities.
In return for public backing, the government will exert control "for a certain period of time" over management of Tokyo Electric (Tepco) and other power utilities, which will also be asked to pay annual premiums into the fund.
The government did not provide details, but lawmakers told reporters earlier this week that the government plans to inject about 5 trillion yen ($62 billion) worth of special-purpose bonds into the compensation fund.
The plan, agreed after weeks of wrangling among government officials, bankers and Tepco executives over who should pay for the crisis, staves off investors' worst-case fears of a Tokyo Electric financial crisis roiling financial markets.
"This scheme will help alleviate concerns of financial market turmoil because holders of Tokyo Electric shares and bonds are protected," said Yasuhide Yajima, senior economist at NLI Research Institute.
But investors said there was still much uncertainty over how much the scheme would cost, how the burden would be shared and how the government would exercise its control over power utilities.
"From the perspective of shareholders of utilities' stocks, more unclear factors have emerged after the announcement," said Yuuki Sakurai, head of Fukoku Capital Management.
"It's difficult to gauge the fair value of their shares because we don't know that the government won't intervene in their nuclear power plants."
Last week Prime Minister Naoto Kan asked another power utility to shut down a nuclear plant in an earthquake-prone area out of safety concerns, drawing both applause for bold action and fire for what critics said was a rash and poorly planned policy move.
The plan for Tokyo Electric is designed in principle to protect its bondholders and keep its shares listed, although the utility is expected to forgo dividend payments for several years as it pays back the fund for compensation.
Government officials were at pains to present the scheme as geared towards the victims of the nuclear disaster and not another corporate bailout of a powerful utility with a history of safety lapses and cosy ties with regulators.
"This framework is not meant as a bailout of Tepco. We made this framework so that compensation can take place swiftly for the victims ... and so that Tepco can supply electricity in a stable way," Trade Minister Banri Kaieda told reporters.
He also said the government would seek to minimise any rise in electricity costs.
One public concern is that the financial burden of payouts for those affected by radioactive leaks from Tepco's Fukushima Daiichi plant, disabled by the March 11 earthquake and tsunami, would lead to higher electricity prices.
Two months after the disaster, Tokyo Electric is still struggling to get reactors at the plant under control.
Tokyo Electric and creditor banks have pushed for hefty state aid, warning that problems at the utility, Japan's largest corporate bond issuer whose shares are widely held by financial institutions, could roil financial markets.
The special purpose bonds due to be issued for the scheme can be turned into cash to handle the initial burst of payouts to residents who evacuated the plant's vicinity and others who are due compensation, allowing Tokyo Electric and other utilities to spread their burden over several years.
The special-purpose bonds do not count as issuance to the market and so are unlikely to have much impact on debt prices.
In one government simulation, if compensation totals 5 trillion yen, Tokyo Electric would be asked to pay back 200 billion yen to the fund annually over 13 years, with the rest to be shouldered by the other utilities.