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Tokyo Electric Power Co (TEPCO) could face compensation claims of up to 11 trillion yen (USD 133 billion) -- nearly four times its equity -- if Japan's worst nuclear crisis drags on for two years, an analyst at Bank of America Merrill Lynch wrote in a report.
But claims could be limited to less than 1 trillion yen if the crisis at the Fukushima Daichi nuclear complex, triggered by the March 11 earthquake and tsunami, was resolved in around two months, or up to 3 trillion yen if it took around six months, research analyst Yusuke Ueda wrote.
Compensation and rebuilding claims are expected to be substantial following the evacuation of 70,000 people and government bans on sales of vegetables and milk from areas around the plant, hitting shareholders in Asia's largest utility and prompting the government to consider nationalising it.
"Shareholders are very likely to be held liable, through capital reductions of a certain amount, so as to clarify responsibility for damage compensation, but given the principle of maintaining stable supplies of electric power, a scheme involving a default on the company's bonds is very unlikely to be adopted," Ueda wrote.
TEPCO has around USD 91 billion in debt, which excludes two trillion yen recently secured in loans from domestic lenders, but includes some USD 64 billion in bonds. At the end of December, TEPCO had equity of 2.94 trillion yen, its accounts show.
Adding to its woes, the utility's cash flow is under pressure as it has to pay more for costly crude and fuel oil and struggles to rebuild generation capacity.
"In any event, we think it is very unlikely that TEPCO will end up in legal bankruptcy, considering its importance as a provider of a key part of the infrastructure, electricity," Ueda wrote.
TEPCO Chairman Tsunehisa Katsumata said on Wednesday the company will discuss with the government how to ensure the adequate funding to get through a disaster that has caused radiation leaks, rolling power blackouts and the evacuations.
Shares of the power company jumped about 12% on Thursday as the market detected huge buy orders after shares plunged 18% the previous day. But they gave up some of their gains to be up 6.4% at 496 yen.
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