Time for a cool change: TEPCO undergoes four-way company split

There'll be TEPCO Holdings and 3 subsidiaries.

Moody's Japan K.K. says that the corporate restructuring now taking place at Tokyo Electric Power Company, Incorporated (TEPCO) will have no impact on its associated ratings.

On April 1, 2016, TEPCO splits itself as planned into Tokyo Electric Power Company Holdings, Inc. -- by which TEPCO is renamed as a holding company -- and three subsidiaries: TEPCO Fuel & Power, Incorporated (F&P), focused on fuel and thermal power generation; TEPCO Power Grid, Incorporated (PG), focused on transmission and distribution; and Tokyo Energy Partner, Incorporated (Retail), focused on retail sales.

"Under the four-way split, TEPCO HD will house the assets associated with the nuclear, hydro, and renewable power generation businesses, as well as the obligations related to the accident with Fukushima Daiichi Nuclear Power Plant," says Motoki Yanase, Moody's Vice President - Senior Analyst.

"Moreover, these obligations will continue to weigh on TEPCO HD's overall long-term credit profile," says Yanase.

The existing public bonds at TEPCO HD will be backed by intercompany bonds issued by the financially stronger PG, with general security over PG's own assets. PG operates in a regulated environment and benefits from a credit-supportive cost recovery system.

The intercompany bonds will be held by a trust, an arrangement which is designed to prevent commingling risk in the event of a TEPCO HD's default.

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