Standard & Poor's Downgrades Tokyo Electric Power Co. on Uncertainty Over Government Support

Tokyo Electric Power Co. (Tepco), the operator of the damaged Fukushima Daiichi nuclear plant, has seen its ratings downgraded by Standard & Poor's due to concerns over the timeliness of government support. The US-based ratings agency has lowered Tepco's debt ratings to speculative for the first time, citing uncertainty over the company's ability to receive aid from the government. The government's framework for providing compensation to Fukushima victims has not addressed the critical issue of extraordinary support for Tepco, which has led to the downgrading of the company's ratings.

Key Takeaways:

• Standard & Poor's has lowered Tokyo Electric Power Co.'s debt ratings to speculative for the first time, indicating high credit risk.
• The ratings agency downgraded Tepco's secured bonds by two notches from BBB to BB-plus and its long-term corporate credit rating by five notches to B-plus.
• The government's decision on a framework for helping Tepco pay compensation to Fukushima victims has not alleviated S&P's concerns over the timeliness of any extraordinary government support.
• Chief Cabinet Secretary Yukio Edano has proposed that banks forgive Tepco debt, which S&P sees as a growing possibility, potentially triggering a further downgrade of the company's ratings.
• The ratings agency noted the "possibility of both downward and upward rating transitions" depending on the final terms and conditions of the government's support.

Statistics:

• Tepco's secured bonds were downgraded by two notches from BBB to BB-plus.
• The company's long-term corporate credit rating was slashed five notches to B-plus.
• The US-based ratings agency has lowered Tepco's debt ratings to speculative for the first time.
• The government's framework for providing compensation to Fukushima victims has not addressed extraordinary support for Tepco.
• Standard & Poor's downgraded Japans utility, Tepco, the operator of damaged Fukushima Daiichi in the past.

Sources:

• Asia Pulse, "Standard & Poor's lowers Tepco's ratings to speculative", May 31
• Nikkei, "Standard & Poor's Downgrades Tepco, Cites Uncertainty Over Government Aid", May 31