Japan's government approves Tepco compensation scheme

Aerial view of No.1 reactor building at Fukushima (27 April 2011) Fukushima's nuclear reactor sparked fears of a meltdown

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.

The assistance could help Tepco avoid bankruptcy, but the government insisted it was not meant as a bail-out.

Meanwhile, this summer the firm also plans to restart thermal power plants shut since the March earthquake.

Oil-powered

The move is to help it avoid possible power shortages during the peak season for demand.

Tepco plans to restart the 600 megawatt No 2 unit and 1,000 megawatt No 4 unit, both oil-fired, at its Hirono thermal plant, about 20 km (12 miles) south of the Fukushima plant.

A 1,000 MW coal-fired unit at Hitachinaka in Ibaraki, north of Tokyo, will also come into operation.

The crisis has brought Tepco, Asia's biggest power firm, to the brink of ruin and there has been concern about how the company would pay a massive compensation bill.

Now Japan's government has agreed to use taxpayer's money to help - reports say more than $60bn.

Strict conditions

Under the plan a state-backed institution will be created from which Tepco can draw money to pay out claims.

In return the company will fall under close government supervision. It will remain listed on the stock exchange but will use profits to pay back the money over a period of years.

Tepco - which serves an area that accounts for 33% of Japan's economy - had earlier agreed to drastic restructuring in return for government help.

Items are screened for radiation exposure Items from houses located near the Fukushima plant are having to be screened for radiation exposure

The conditions agreed by the company include massive cost-cutting, no upper limit for compensation payouts and accepting an investigation of its management.

Other electricity companies with nuclear power stations will also be expected to contribute, says the BBC's Roland Buerk in Tokyo.

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.

The scheme eases fears that Tepco's problems could destabilise Japan's financial markets.

But it may face opposition in parliament if it is seen as too lenient on shareholders and management, our correspondent says.

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.

Plant shutdown

Meanwhile, the operators of Japan's ageing Hamaoka nuclear plant south-west of Tokyo say they have begun shutting down one of its last two functioning reactors.

The plant is located in the Tokai region near a tectonic faultline just 200km from Tokyo.

Seismologists have long warned that a major earthquake is overdue in the region.

Last week Prime Minister Naoto Kan called for the plant's closure in the light of the catastrophic events at the Fukushima plant.

On Thursday, Tepco 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.

Cooling systems to the reactors were knocked out by the tsunami, 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.

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