Japan will take control of Tokyo Electric Power Co <9501.T>, the operator of a stricken nuclear plant, in the face of mounting public concerns over the crisis and a huge potential compensation bill, a local newspaper reported on Friday.

Shares of the company, also known as TEPCO, were down 10 percent after the Mainichi newspaper said the government plans to inject public funds into the firm, although it is unlikely to take more than a 50 percent stake.

If the stake goes over 50 percent, it will be nationalized. But that's not what we are considering, an unnamed government official was quoted by the daily as saying.

TEPCO has come under fire for its handling of the emergency at its Fukushima Daiichi nuclear complex, triggered by a March 11 earthquake and tsunami that left more than 27,500 people dead or missing.

The Mainichi quoted a government official as saying: It will be a type of injection that will allow the government to have a certain level of (management) involvement.

A series of missteps and mistakes, combined with scant signs of leadership, have undermined confidence in the company. Shares in TEPCO are down 80 percent since the disaster.

Japan's Chief Cabinet Secretary Yukio Edano told a news conference on Friday it had yet to be determined how the government would support the nuclear plant operator.

TEPCO said it was unaware of any government plan to inject public funds into it and that now was not the time to discuss the future structure of the company.

Putting TEPCO under government control is not necessarily good for the company's shareholders because TEPCO would probably be overwhelmed to repay the public money for a long time and won't be able to return anything to investors, said Fujio Ando, an adviser at Chibagin Asset Management.

In any case, they will have to make clear who will be taking responsibility. They can't keep their current management, that's something people would not want to see.

BIG BILL

The company could face compensation claims topping $130 billion if the nuclear crisis drags on, Bank of America-Merrill Lynch estimated this week, further fuelling expectations the government would step in to save Asia's largest utility.

More than 70,000 people have been evacuated from a 20-km (12 mile) exclusion zone and another 130,000, who live in a 10 km (6 miles) band beyond the exclusion zone, have been advised to leave, or to stay indoors.

Under law, TEPCO could be exempt from compensation for nuclear accidents caused by natural disasters. But Mainichi quoted the official as saying it would not be possible to apply the legislation given strong public sentiment.

Anger against the company has seen protests outside its Tokyo headquarters, with people demanding an end to nuclear power and calling the company criminal.

Investor concern about TEPCO mounted after its president, Masataka Shimizu, was admitted to hospital this week and the company said 2 trillion yen ($24 billion) in emergency loans from Japan's major banks would not cover its rising costs.

Liabilities for compensation claims alone could be up to 11 trillion yen ($133 billion) -- nearly four times TEPCO's equity -- if the nuclear crisis drags on for two years, an analyst at Bank of America Merrill Lynch wrote in a report.

Including the latest loans from lenders and some $64 billion in bonds, TEPCO now has around $115 billion in debt.

At the end of December, TEPCO had equity of about $35 billion, its accounts show.

Bank of America-Merrill Lynch said shareholders were very likely to take a big hit and a rapid resolution of the crisis was the only way to keep costs down.

If the situation can be turned around within the next two months, compensation costs may be less than 1 trillion yen. Costs will rise to 3 trillion yen if it drags on for six months, analyst Yusuke Ueda wrote.

Experts, however, say a final resolution of the nuclear disaster is likely to take decades and there could be many further setbacks.

TEPCO could burn through 2 trillion yen in about a year, said CLSA equity analyst Penn Bowers, as it pays extra for fuel to run its thermal plants, among other costs.

(Additional reporting by Taiga Uranaka and Mariko Katsumura; Editing by Lincoln Feast and Dean Yates)

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