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True costs of Fukushima clean-up emerge for Tepco
- 13 years ago (2011-04-03)
- Junior Isles
Tokyo Electric Power Co.'s (Tepco) decision to scrap reactors 1-4 at the crippled nuclear power station in Fukushima Prefecture means the power utility will possibly have to shoulder a colossal 400 billion yen ($4.76 billion) to decommission the reactors, and several trillion yen in compensation.
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Chubu Electric Power Co.'s plan to scrap two outdated reactors at its Hamaoka nuclear power plant in Shizuoka Prefecture may be illuminating in this respect. The utility estimates the cost of scrapping each reactor at about 100 billion yen. If this figure is used to calculate the costs of decommissioning the four reactors at the Fukushima facility, the project will cost Tepco about 400 billion yen. Though it may cost far more in practice.
Tepco's financial burden will include reparations for various forms of damage and losses suffered by residents in the vicinity of the Fukushima No. 1 nuclear power plant.
This will be compounded by the further burden of redeeming Tepco-issued bonds and increasing power generation at its thermal power plants to make up for the reduced generation caused by the crisis.
Therefore, the government will have to continue financially supporting the beleaguered power utility to ensure victims of the disaster near the ill-fated nuclear plant receive due compensation, according to observers.
If the amount of compensation to be paid by Tepco is beyond its means, the government may have to consider draconian measures to rehabilitate the utility, including a plan to place it under state control.
"The accidents at the Fukushima No. 1 plant have led to a leak of radioactive substances. Scrapping the four reactors could cost much more than originally estimated," an analyst said.
If the project costs TEPCOTepco more than 500 billion yen, this would mean that the undertaking would exceed the 432 billion yen accumulated in utility's reserve funds at the end of Dec 2010.
TEPCOTepco also will have to cover expenses for activities related to suspended operations at the crippled compound, including restarting suspended thermal power stations.
This would mean the firm would have to secure oil and liquefied natural gas supplies, raising the annual operating expenses by between 400 billion yen to 1 trillion yen, according to analysts. In fiscal 2011 alone, Tepco will need about 700 billion yen to cover such expenditures as those for redeeming debentures it has issued and repaying debts.
Tepco, though, should experience no difficulty in covering necessary expenses for the time being, considering the 1.85 trillion yen in emergency loans from seven major banks, including three megabanks.
"We'll try not to run short of funds by cooperating with the government," Tepco Chairman Tsunehisa Katsumata said.
The greatest worry for Tepco is how much it must pay in compensation. Take the example of JCO Co., a nuclear fuel processing firm in Tokaimura, Ibaraki Prefecture, that caused a criticality accident at its facilities in the village in September 1999. The company paid a total of about 15 billion yen in compensation for damage suffered by local residents, though in the JCO accident only locals living within 350 meters of the facilities in question had to evacuate. This contrasts with the massive evacuation in the 20km vicinity of the Fukushima nuclear power plant.
"The amount of compensation may reach several trillions of yen," an official from a government office said. At a press conference last Friday afternoon, Chief Cabinet Secretary Yukio Edano said, "It's impossible [Tepco] will be exempted [from compensation payments]."
The Atomic Energy Damage Compensation Law requires the government to pay up to 120 billion yen for each entity operating nuclear power facilities if an accident occurs. The law also states the government must pay all necessary compensation for damage resulting from social unrest and extraordinarily massive natural calamities.
Undoubtedly, the crisis at the Fukushima plant is a consequence of the earthquake-tsunami disaster, the impact of which is beyond imagination. However, some critics have pointed a finger at apparent mistakes committed by Tepco in handling the situation. Given this, it is unlikely the utility will be released from its compensatory obligations.