By Yoshifumi Takemoto
TOKYO (Reuters) - Japan's government approved on Friday a plan to help Tokyo Electric Power compensate victims of the crisis at its tsunami-crippled nuclear plant and save Asia's largest utility from financial collapse.
The government will issue special-purpose bonds to help fund the scheme, which will allow Tokyo Electric to handle compensation payouts that are expected to run into the tens of billions of dollars. There will be no ceiling set on Tokyo Electric's liabilities.
Other utilities will also be asked to pay annual premiums into the fund.
The scheme had been expected to be approved by Prime Minister Naoto Kan's cabinet Thursday but was delayed for one day due to disagreement among ruling party members over details of the plan.
The plan is designed in principle to protect bondholders and will keep Tokyo Electric (Tepco) shares listed, although the utility is expected to forgo dividend payments for several years as it pays back the fund for compensation.
"This scheme will help alleviate concerns of financial market turmoil because holders of Tokyo Electric shares and bonds are protected. I think we can avoid market turmoil because that's essentially the whole point of this scheme," said Yasuhide Yajima, senior economist at NLI Research Institute.
"But there is so much uncertainty over how this scheme will actually work because we don't know exactly how much the total costs for compensation will be."
Government officials, bankers and Tokyo Electric executives have been wrangling for weeks over who should foot the bill for the crisis at the Fukushima Daiichi plant, which was crippled by the March 11 earthquake and tsunami.
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 destabilize financial markets.
The government plans to inject about 5 trillion yen ($62 billion) worth of special-purpose bonds into the compensation fund, lawmakers told reporters earlier this week.
The bonds 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.
(Additional reporting by Leika Kihara, Yoko Kubota and Chikako Mogi; Editing by Nathan Layne and Edmund Klamann)
