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Financing reactors and the Fukushima disaster

Nuclear Monitor Issue: 
Greenpeace International & Banktrack

Investors in nuclear power are being sold precarious and potentially damaging investments because the industry's risks are regularly being overlooked or underestimated. Using the enormous economic losses surrounding the triple meltdown at Tepco’s Fukushima Daiichi nuclear plant as an example, a new Greenpeace/BankTrack report shows how financial valuations and investment decisions had not taken well-known and systemic problems into account.

The report ‘Toxic Assets: nuclear reactors in the 21st century’, looks at the March 2011 Fukushima nuclear disaster from an investors’ point of view. It identifies the long-known technological, management, governance and other institutional deficiencies that were instrumental in turning a predicted natural misfortune into a nuclear nightmare. The owner of the Fukushima Daiichi plant, Tokyo Electric Power Company (TEPCO), lost 90% of its market capitalization, had its bonds rated as junk and is currently in the process of being at least partly nationalized. Investors and financiers of nuclear utilities all over the world saw their investments eroded.

Had analysts and credit-rating agencies looked beyond short-term cash flows and paid attention to the many early warnings, they would have been able to save investors from major losses. These red flags included warnings about:

* Crucial vulnerabilities in the Fukushima reactor design;
* Substantial governance issues and weak management characterized by major frauds and cover-ups;
* Collusion and loose regulatory supervision; and
* Well-understood and ignored earthquake and tsunami warnings.

All of these warnings had been publically highlighted years, often decades, before the nuclear disaster, and should have been taken seriously not only by nuclear authorities but by analysts and investors as well. Still, Tepco continued to benefit from high credit ratings, supportive analyst recommendations and cheap financing right until the Fukushima nuclear accident. Like Japanese nuclear authorities, financial ʻauthoritiesʼ also missed the many opportunities to force changes on the company. It seems regular dividends were enough to relax the vigilance of analysts who simply ignored major ʻfundamentalʼ risks and their fiduciary duty towards their investor clients.

Investors and financiers kept throwing good money after Tepco. Dozens of banks provided Tepco with at least €54bn of low-cost capital through bond issues, corporate loans and a share issuance between 2000 and 2011. The potential for similar catastrophic nuclear disasters and disastrous investment decisions is not limited to Tepco or Japan. Existing and planned new reactors all over the world are inherently at risk from any combination of:

* Similar mistakes in technology design that proved devastating at Fukushima;
* Substantial governance and management issues, and human error;
* The lack of effective independent supervision; and
* The threat of earthquakes, tsunami, floods and other natural disaster risks.

Nuclear power plants are potentially toxic assets for their investors and financiers. Quite uniquely, they can give rise to liabilities that can exceed their ownerʼs equity a hundred-fold or more. The probability of a devastating accident is around one major disaster in a decade based on the five core meltdowns since the 1950s, and this number does not even take into consideration the growing risks of ageing reactors.

Nuclear assets are also dangerous for investors even in the absence of a nuclear disaster. New reactor builds have been a clear investor ʻno-goʼ for at least a decade. Recently, even existing plants have come under increasing pressure from phase-out decisions, early retirements, large-scale regulatory and liability changes, and shrinking taxpayer and government support. The future of nuclear energy will be highly influenced by three tectonic changes:

* Post-Fukushima regulations that will require additional safety investments, shorter lifespans, higher operating and decommissioning costs, and stricter liability systems;
* Renewable energy, with falling costs and more installed capacity than nuclear plants1, is pushing nuclear out from the merit order and leading to lower plant utilization; and
* A strong reduction in subsidies, credit guarantees and other state supports to nuclear of earlier generous, but now highly indebted governments.

The report ‘Toxic Assets: nuclear reactors in the 21st century’ is written by Gyorgy Dallos & Lauri Myllyvirta and available at:

Contact: Greg McNevin, Greenpeace International Communications,
Tel: +81 80 5416 6507
Email: greg.mcnevin[at],