Wednesday, March 23, 2011

Japanese Fukushima Nuclear Plant Owner Appears to be Considered TBTF by Japanese Government

Government protection of the corporate elite has reached a new level of absurdity in Japan.

Japan's top lenders including Sumitomo Mitsui Financial Group , are in talks to provide up to 2 trillion yen ($24.7 billion) in emergency loans to Tokyo Electric Power to help the operator of the damaged Fukushima nuclear power plant.

One has to think that the Japanese central bank and the Japanese government are behind this, by letting the bankers know they are protected against down side risk.

SMFG, the utility's main lender, is expected to provide more than 500 billion yen in loans, said sources, who were not authorised to speak publicly about the matter, according to Reuters.

Mitsubishi UFJ Financial Group and Mizuho Financial Group are considering loans of 200-500 billion yen each, the Reuters source said .

Sumitomo Trust and Banking and other major trust banks are also expected to offer funds. It's one thing to bail out a bunch of bumbling banksters, but bailing out an organization that came within a breath of radiating Tokyo is over the top.

According to the latest financial data from Tepco, before this crisis, the electric power operator had net equity of 2.5 trillion yen and debt of somewhere around 11 trillion yen.  Thus, a loan to Tepco would mean it would equal Tepco's net equity before the firm pays out any damages for the nuclear disaster. The company had negative cash flow last year. No one at this point has any idea of how large a bill Tepco is going to face from damages and clean up operations. Further, the lost revenue from the reactors that are down will be another blow to the company. To put it accurately, it is a financial nuclear disaster.

No way this loan gets done, unless BOJ and the government of Japan are letting Japanese bankers know that Tepco is TBTF.

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