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UPDATE 1-Japan ruling-party panel to propose break-of Fukushima operator - media

Tuesday, 29 Oct 2013 | 9:44 PM ET

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TOKYO, Oct 30 (Reuters) - A Japanese ruling-party panel will recommend the break-up of Tokyo Electric Power Co (Tepco) after shortcomings in the firm's handling of clean-up operations at the crippled Fukushima nuclear plant, Japanese media said on Wednesday.

The Liberal Democratic Party (LDP) panel is proposing that Tepco's divisions in charge of decommissioning four damaged reactors and treating contaminated water at the plant should be spun off, the Nikkei and Yomiuri newspapers reported.

Tepco has floundered for more than two and a half years in attempting to clear up the site of the worst nuclear disaster since Chernobyl in 1986.

An earthquake and tsunami knocked out power and cooling at the plant in March 2011, leading to three reactor meltdowns and explosions that sent a huge plume of radiation into the air and sea, forcing 160,000 people to evacuate nearly townships.

Tepco has lost $27 billion since the disaster at the plant north of Tokyo and faces massive liabilities as it decommissions the facility, compensates evacuees and pays for decontamination of an area nearly the size of Connecticut.

Proposals endorsed by senior LDP members this week include complete financial separation of the Fukushima operations from the utility, or transforming them into an independent administrative agency, the Nikkei and Yomiuri said.

Prime Minister Shinzo Abe has promised that the government will take primary responsibility for containing contaminated water at Fukushima, saying the situation is under control.

The clean-up process is expected to take at least 30 years and cost more than $100 billion.

After months of denials, Tepco confirmed in July that contaminated water from the coastal plant was flowing into the Pacific Ocean. It has also found that 300 tonnes of highly radioactive water leaked from one of hundreds of quickly built storage tanks and reported numerous other problems.

The government effectively nationalised Tepco last year with a taxpayer-funded rescue. But there has been heated debate over direct government involvement in the company and over whether to spin off the Fukushima clean-up and let the remainder of Tepco focus on generating electricity for the Tokyo area.

Tepco has said that it is not in a position to comment on its future structure. It is revising a business turnaround plan after falling behind on its financial targets. The company reports financial first-half earnings on Thursday.