Tokyo Electric claims could top $130b on Japan

TOKYO, Mar 31 (Reuters): Tokyo Electric Power Co (TEPCO) could face compensation claims topping $130 billion if Japan's worst nuclear crisis drags on, Bank of America-Merrill Lynch estimated, fuelling expectations Japan's government will step in to save Asia's largest utility. Investor concern about the future of Tokyo Electric has been mounting after its president, Masataka Shimizu, was admitted to hospital and the company said Wednesday that 2 trillion yen ($24 billion) in emergency loans from Japan's major banks would not cover its mounting costs. Liabilities for compensation claims alone could be up to 11 trillion yen ($133 billion) -- nearly four times TEPCO's equity -- if the nuclear crisis drags on for two years, an analyst at Bank of America Merrill Lynch wrote in a report. The company, also known as TEPCO, has come under fire for its handling of the emergency at its Fukushima Daichi nuclear complex, triggered by the March 11 earthquake and tsunami that left more than 27,500 people dead or missing. A series of missteps and mistakes, combined with scant signs of leadership, have further undermined confidence in the company. Poor communication has led to some heated exchanges in media conferences as journalists demanded information. The government and TEPCO conceded Wednesday that there was no end in sight to the crisis. "I think in the current situation the government has very few options left," said Ravi Krishnaswamy, Asia-Pacific vice president of Frost & Sullivan's Energy and Power Systems Practice in Singapore. "Nationalisation isn't a good move for the stakeholders but at the end of the day if the government steps in then at least creditors know their liabilities will be met," he added. Shares in TEPCO jumped as much as 12 per cent in intraday trade Thursday, rebounding from three straight sessions when the stock has hit its limit-lows. Traders said a buy order around 40 million shares, or about 2.5 per cent of all outstanding TEPCO shares, was detected at the end of Wednesday's session, but they were unable to confirm who placed it. The stock ended the day unchanged from Wednesday and down almost 80 per cent since the disaster. Bank of America-Merrill Lynch said shareholders were very likely to take a big hit and a rapid resolution of the crisis was the only way to keep costs down. If the situation can be turned around within the next two months, compensation costs may be less than 1 trillion yen. Costs will rise to 3 trillion yen if it drags on for six months, analyst Yusuke Ueda wrote. Experts, however, say a final resolution of the nuclear disaster is likely to take decades and there could be many further setbacks. TEPCO could burn through 2 trillion yen in about a year, said CLSA equity analyst Penn Bowers, as it pays extra for fuel to run its thermal plants, among other costs. The UN nuclear watchdog, the International Atomic Energy Agency, suggested Thursday that Japan consider widening an evacuation zone around the Fukushima plant, which would force more people and businesses to move and potentially increase compensation claims.