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Tepco faces billions of dollars in compensation claims

22 April 11 04:08
A protester in front of a Tepco showroom
By Mariko Oi
Asia Business Report, BBC World News

It has been 40 days since the earthquake hit Japan. More than 130,000 people still live in evacuation centres.

Many of them were not directly affected by the quake and tsunami. Their homes, however, were located near the Fukushima power plant.

The government has ordered Tokyo Electric to pay one million yen ($12,198; £7,365) to every family within 30km of the plant.

There are 12 towns and cities within the radius, where 50,000 households will receive the payments by the end of next week.

The town of Hirono in Fukushima is one of them.

"I don't understand how they decided on one million yen," said a municipal government staff who asked not to be identified.

"In my view, this is nowhere near enough, so I truly hope this is just provisional," he added.

Compensation entitlement

But it is not just displaced people and firms who have been affected. So who can claim for compensation?

To determine the scope of it, the government has set up a special panel of 10 members including medical, legal and nuclear experts.

Their first meeting was held on 15 April and they meet again on Friday.

They aim to set up guidelines by July, based on the Japan Act on Compensation for Nuclear Damage.

They have already agreed that evacuees who suffer mental trauma should be compensated, too.

Farmers and fishermen also incurred losses due to the radioactive leak from the plant.

Shipments of some vegetables were halted from Fukushima and surrounding prefectures.

This has caused some consumers to stop buying other, unaffected products from there as well.

Many of Japan's trading partners, including the US, Australia, China, Hong Kong and Singapore, have also banned or restricted food imports from the country.

The contaminated water from the plant has been released to the sea, further affecting the livelihoods of fishermen in the region.

"We expect Tokyo Electric and the government to compensate all the fishermen who are affected by the crisis," said Hiromi Yoshida of Japan's federation of fisheries co-operatives.

The view is echoed by the central union of agricultural co-operatives.

"We have asked our members to closely monitor their sales and prices of their products since the crisis," said a spokesman.

"If they have fallen since last year or before the quake, they should be entitled to compensation," he added.

Compensation claims

The Japan Agricultural unions in the prefectures of Ibarakii, Tochigi, Fukushima, Chiba and Gumma have already announced their plans to claim for compensation. Others are likely to follow.

According to Bank of America Merrill Lynch, total compensation claims could reach as much as 11 trillion yen ($134bn).

But can Tepco afford to pay all these claims?

The firm already faces huge costs, including the decommissioning of all six reactors at Fukushima No 1 nuclear plant.

"We believe Tepco has adequate liquidity and refinancing for the next 12 months, given its strong relationships with its main banks, at present," wrote Standard and Poor's analysts in their recent report.

Tokyo Electric has so far secured additional loans for immediate financial support of $23bn from three domestic major banks and four domestic trust banks.

The company has also announced plans to cut executives' salaries and to lay off staff.

Another way for Tokyo Electric to raise money is to increase electricity prices, in accordance with the Electricity Business Act.

The move, however, is likely to be met with opposition from the public.

Back in 1960, it was the governor of Fukushima, Zenichiro Sato, who approached Tokyo Electric to build the nuclear power plants there.

It was, of course, based on the promise that this kind of crisis would be avoided even if an earthquake or tsunami hit the plant.

Payments were made to local residents. It was a relatively smooth and successful process, according to Tepco's book, A 30-Year History, published in 1983.

But sentiment today is quite different.

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