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Tokyo Electric Power Co reported a $15 billion US net loss on Friday to account for the disaster at its Fukushima nuclear plant, marking the biggest loss in Japan by a non-financial company and prompting the firm to warn its future was uncertain.
Much-criticized president, Masataka Shimizu, 66, resigned to take responsibility for the worst nuclear crisis since Chernobyl in 1986, making way for an insider, managing director Toshio Nishizawa, 60.
Engineers are battling to plug radiation leaks and bring the plant northeast of Tokyo under control more than two months after a 9.0 magnitude earthquake and deadly tsunami that devastated a swathe of Japan's coastline and tipped the economy into recession.
The disaster has triggered a drop of more than 80 percent in Tokyo Electric's share price and forced the company to seek government aid as it faces compensation liabilities that some analysts say could top $100 billion.
Before speaking, Shimizu bowed before a packed press conference at the company's headquarters in the capital. Nishizawa, who has worked at the utility since 1975, stood to his left.
"We feel sorry for the victims of the earthquake and tsunami. At the same time we want to sincerely apologize for our nuclear reactors in Fukushima causing so much anxiety, worry and trouble to society," the outgoing president said.
For the business year that ended March 31, the company, commonly known as Tepco, posted a 1.25 trillion yen ($15 billion US) net loss after accounting for 1 trillion yen to scrap reactors at the Fukushima complex and write off tax assets.
The earnings figures were released after the close of Tokyo stock market trading and represent a landmark in the company's 60-year history.
Japan Prime Minister Naoto Kan and other lawmakers have lambasted Tepco for its handling of the disaster. At one stage, Kan reportedly demanded company executives tell him: "What the hell is going on?"
Shimizu did not make any public appearances in the two weeks that followed the March 11 disaster, sparking criticism Tepco lacked leadership as it fought to bring the plant under control.
Shortly after, he was hospitalized with dizzy spells as Tepco's share price plummeted and the company lurched close to collapse.
UNCERTAINTY AND RISK
Nishizawa takes over at a time when even the company admits there is major uncertainty over whether it can continue as a going concern.
Apart from compensation claims and quake tsunami damage, TEPCO expects other costs to include 700 billion yen this business year to buy more gas and coal to replace lost nuclear power capacity.
Since the crisis, Tepco has been supported by banks that offered emergency loans. The government has promised to help Tepco handle compensate claims by thousands of households and businesses forced to evacuate from around the Fukushima plant because of radiation risks, although the issue is far from settled.
"I feel a massive weight of responsibility to assume the post when we are in an unprecedented crisis never experienced in the history of the company," said Nishizawa.
"But I decided to take it because I believe it is my mission to challenge head-on this difficult situation."
Tepco's five-year credit default swaps reached a record 762 basis points late on Thursday, or the equivalent of $762,000 to insure $10 million of debt against default.
The spreads have more than tripled since the government's chief spokesman Yukio Edano last week suggested banks waive some of Tepco's debt, raising concern the government may not support the company. Economics minister Kaoru Yosano said banks should not be liable.
"There are conflicting comments coming out of the government now," said Takashi Hiroki, chief strategist at Monex Inc.
Tepco though is the only power supplier to Tokyo and some surrounding areas that account for 40 percent of Japan's economy, so the government will be under pressure to keep the company afloat, analysts say.
The stricken Fukushima Daiichi makes up less than 5,000 megawatts (MW) of Tepco's overall generation capacity of 65,000 MW.
"You might as well recapitalize the thing that's there at the moment," said Ben Wedmore, director of equity research at MF Global FXA Securities. "I would think that by the end of June the debt-equity ratio would be such that there has to be some plan to recapitalize. Otherwise the debt would be junk level and the banks would be unable to lend."
Parliament is discussing the plan to help the utility handle compensation. Kan is battling low support ratings and a feisty opposition that has the power to block some legislation.
The compensation scheme would be funded with taxpayers' money and contributions from other nuclear plant operators, but it places no limit on Tepco's liabilities for compensation, a factor likely to hobble its finances for years and weigh on its credit rating.
"While a reconsideration of their corporate structure is important, the bigger pressure is how the government will structure their compensation scheme," said Hiroki Shibata, an analyst at Standard & Poor's Ratings. "I don't see any immediate impact from the change in presidents."
The 1.25 trillion-yen loss revealed Friday exceeds the 812 billion yen deficit booked by Japan's biggest telephone utility, Nippon Telegraph and Telephone, in the year to March 31, 2002, and the 795 billion yen loss by industrial conglomerate Hitachi Ltd. two years ago.
Only banks have had bigger losses, with Mizuho Financial Group holding the record with a shortfall of 2.4 trillion yen eight years ago.
Faced with so much uncertainty, Tepco did not offer earnings guidance for the current year to March 2012.
Tepco has not made an estimate for the likely cost of compensating all victims. Analyst forecasts have ranged from around $25 billion up to $130 billion if the crisis at the nuclear complex drags on.
On Tuesday, TEPCO said it aimed to complete initial steps to limit the release of further radiation from the plant and to shut down its three unstable reactors by January 2012.
In a bid to raise cash, TEPCO said it planned to sell assets worth 600 billion yen.
The biggest gem in its asset portfolio is a 7.9 percent stake in KDDI, a telecommunications company that owns Japan's No. 2 mobile phone network. The stake is worth 201 billion yen based on Thursday's closing price.
Other stock holdings in companies not directly involved in its generating business amount to little more. Tepco values all the stocks on its books at 310 billion yen.
Most of its investments however are locked up in its generating and transmission infrastructure, with 60 percent of 13 trillion yen in assets on its balance sheet accounted for by nuclear plants and other fixed assets.