Tokyo Electric Power Co <9501.T>, troubled operator of the tsunami-hit Fukushima nuclear power plant, formally decided on Thursday to ask the government to inject 1 trillion yen ($12.06 billion) in tax money to stay afloat, Kyodo news agency said.

The move by the company, known as Tepco, coincides with doubts about the future of Japan's atomic energy policy. Only one of 54 reactors is on stream as the government seeks backing from local authorities to restart units shut for maintenance.

The government is expected to obtain an initial majority stake in Tepco in return for the fund injection. It will have an option to boost the stake to two-thirds if the firm drags its feet on corporate reforms, a source with knowledge of contentious talks on the matter said.

Trade Minister Yukio Edano, who is responsible for approving a public fund injection, has said he wants the government to have a significant say in managing Tepco, but the two sides have been squabbling over how big the government stake should be.

Tepco, which provides electricity to 45 million people in the Tokyo area, is saddled with trillions of yen in compensation and clean-up costs after a huge tsunami in March 2011 triggered a radiation disaster at its Fukushima nuclear plant.

The utility also decided to seek another 850 billion yen from a government-backed bailout body, Kyodo said, to help compensate victims of the nuclear accident, the world's worst in 25 years.

The request paves the way for Tepco and the bailout body to finalize a business plan to be submitted to Edano soon. Submission has been delayed by the search for a new chairman, who will face huge hurdles to restore Tepco's profitability, including doubts over whether it can restart off-line reactors.

Last year's earthquake and tsunami caused reactor meltdowns at Fukushima, triggering a radiation crisis and widespread contamination that prompted mass evacuations.

A Tepco spokesman said there had been a board meeting but could not confirm a decision had been made.

Tepco is likely to include in the business scheme plans to restart reactors at its Kashiwazaki Kariwa plant in the business year ending March 2014 and to hike electricity rates, according to sources.

But whether these factors, essential to improve profitability, can be implemented smoothly is unclear. Local governments are voicing concerns over reactor restarts, companies are furious about the fee increase and Tepco needs to win government approval to raise household rates.

($1 = 82.8900 Japanese yen)

(Reporting by Nobuhiro Kubo and Kentaro Hamada; Writing by Yoko Kubota and Linda Sieg; Editing by Ron Popeski)

Japan Energy