Visitors look at the logo of Tokyo Electric Power Co (TEPCO) at the Energy Market Liberalisation Expo in Tokyo, Japan March 2, 2016
Tokyo Electric Power Co (Tepco) submitted plans on Wednesday to sell a total of 70 billion yen ($612 million) of bonds, its first sale since the 2011 Fukushima nuclear disaster.
Tepco unit, Tepco Power Grid Inc, which is in charge of power transmission and distribution, said in a filing with the Kanto Local Finance Bureau it will sell a 30 billion yen three-year bond and a 40 billion yen five-year bond. The coupon will be set between March 3 and 17.
The sale will mark the return of the company to Japan’s corporate bond market, which it dominated before the 2011 earthquake and tsunami triggered the world’s worst nuclear crisis since Chernobyl in 1986, bringing Tepco to its knees.
The utility, once Asia’s largest, was essentially nationalized after Fukushima. It currently faces billions of dollars in costs to dismantle the crippled Fukushima-Daiichi nuclear power plant, decontaminate the area and compensate victims after the meltdown of three reactors.
Tepco, which has 650 billion yen worth of bonds maturing in the year ending March 2018, wants to restart regular bond issuance to ensure stable refinancing. It said the planned issue was to pay for “equipment, pay back debt and bond redemption.”
Investors, who were initially skeptical about the bond issuance plan, have become more comfortable with the utility’s outlook after the government last year provided more details on decommissioning and compensation costs.
Six firms have been hired to manage the sale: SMBC Nikko Securities, a unit of Sumitomo Mitsui Financial Group; Nomura Securities; Mitsubishi UFJ Morgan Stanley Securities, a unit of Mitsubishi UFJ Financial Group Inc; Mizuho Securities, a unit of Mizuho Financial Group Inc; Daiwa Securities; and Shinkin Securities, a unit of Shinkin Central Bank.
Tokyo Electric Power Co (9501.T) will select underwriters this month for its first bond sale since the 2011 Fukushima nuclear reactor disaster, people close to the deal told Thomson Reuters DealWatch.
The deal is being closely watched by Japan’s corporate bond market, which Tepco dominated before the March 2011 earthquake and tsunami triggered the world’s worst nuclear accident since Chernobyl in 1986, bringing the company to its knees.
Tepco has been gauging demand for the landmark bond offering, as once-skeptical investors become more comfortable with the utility’s outlook after the government provided more details on decommissioning and compensation costs, sources said last week.
Tepco, which is looking to sell the bond by the end of March, will hold meetings next week with several brokerages, who will make pitches to the company for a mandate to sell the bonds, said the people close to the deal, who asked not to be identified because the discussions are private.
A Tepco spokesman on Friday said there was no change to the utility company’s previously announced plans to sell the bond by the end of March but that he was unaware of any plans to meet brokers next week.
The utility, once Asia’s largest, was essentially nationalized after Fukushima. It has struggled to contain radiation at the site and compensate victims of the accident while preparing to decommission the crippled power station.
The meeting will discuss investor demand, the likely size of the issue, the premium over government-bond yields Tepco will need to pay and the feasibility of selling the bond by Tepco’s target date, they said.
Sources have said Tepco will likely need to pay investors about 1 percentage point above the corresponding Japanese government bonds yields. This would be a rich premium considering other electric utilities pay about a third of that spread for their debt funding.
There are, however, some potential snags to Tepco’s plans to issue by the end of March. According to one person familiar with the government’s thinking, the government wants Tepco to delay the bond sale until after April, when legal changes allowing more financial support to the utility are enacted.
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