Tokyo Electric Power Co likely made a net loss of more than 1 trillion yen ($12.4 billion) in the year that ended on March 31, the biggest ever for a non-financial Japanese firm, after booking costs to scrap nuclear reactors and writing off tax assets, the Nikkei newspaper said.

Tokyo Electric <9501.T> will sell assets worth about 500 billion yen, the paper said, to help cover costs from the crisis at its Fukushima Daiichi nuclear plant, which was crippled by a massive earthquake and tsunami two months ago and is still leaking radiation.

The government is close to finalising a scheme to help Asia's biggest power firm meet compensation claims from those who were forced to evacuate their homes or businesses near the plant, or whose livelihoods have been harmed by radiation fears.

Under the scheme, a government-backed fund would be set up to meet the initial flood of compensation claims, funded in part by contributions from other nuclear plant operators but with no preset limit on Tokyo Electric's burden.

Tokyo Electric said on Wednesday that it accepted conditions for government assistance proposed by Trade Minister Banri Kaieda the previous day, including no ceiling on the utility's liability, further cost cuts and restructuring, and prompt compensation payment.

The government will also set up an independent committee of legal and accounting experts and business managers to oversee Tokyo Electric's business.

The scheme is likely to be what the market has expected, with bond holders to be protected and no cap on Tokyo Electric's liabilities, said Kazuya Nakamura, deputy general manager at Norinchukin Zenkyoren Asset Management.

Now, the market's attention will shift to how much Tokyo Electric's actual liabilities will be, he said.

Tokyo Electric is expected to finalize its accounts for the year ended in March once the scheme is officially approved, and announce its earnings later this month. The earnings announcement has been delayed due to uncertainty over its liabilities and how it will finance compensation.

JP Morgan has estimated the company will incur losses of 2 trillion yen ($24.7 billion) in the financial year that began on April 1 due to the compensation burden, while Bank of America-Merrill Lynch said the bill could reach $130 billion if the crisis drags on.

BURDEN SHARING

Tokyo Electric has estimated the cost of scrapping four damaged reactors at the Fukushima plant at 600 billion yen and it plans to book the amount as an extraordinary loss for the financial year that just ended, the Nikkei said.

It also plans to book a one-time charge to write off deferred tax assets of about 480 billion yen, the paper said.

The scheme under consideration by the government would require Tokyo Electric to reimburse the compensation fund over several years or even decades from its annual profits, while the government would shore up the company by buying preferred shares if necessary, sources familiar with the matter have said.

Tokyo Electric and its creditor banks have been pushing for a compensation plan that would include substantial government help, capping the utility's liabilities and protecting its shareholders and bond owners.

They argue that, given the sheer volume of Tokyo Electric bonds, it is essential to prevent a cut in its credit rating to junk status, which could wreak havoc not only with other utilities' bond issues but with the entire bond market.

Tokyo Electric is the biggest corporate bond issuer in Japan, representing about 8 percent, or about 5 trillion yen, of the 70 trillion yen Japanese corporate bond market.

Trade Minister Kaieda also on Tuesday called for cooperation from the utility's creditor banks, without giving details, but an executive at one top bank said it would not accept a reduction in interest payments or a partial debt waiver.

If Tokyo Electric makes such a request, it would trigger a credit event and the company would be seen as going into default. Neither the company nor the government would want that to happen, the executive told reporters late on Tuesday, speaking on condition of anonymity due to the sensitivity of the matter.

What Tokyo Electric needs most from the banks now is to keep its loan balance maintained, the executive added.

The utility's main creditor bank Sumitomo Mitsui Banking Corp <8316.T> and other lenders provided 1.9 trillion yen in emergency loans to the company in the immediate aftermath of the nuclear crisis.

(Additional reporting by Krishna N Das in Bangalore; Editing by Edmund Klamann)

Japan