J-Power to buy back entire stake from TCI

TOKYO, Oct. 31 Kyodo -
Electric Power Development Co. said Friday it will buy back the entire stake of 9.9 percent held in the company by The Children's Investment Fund for about 63 billion yen.

The purchase, expected to take place in early November, will likely bring an
end to years of difficult relations between the British hedge fund and the
country's biggest power wholesaler over how to run the company, better known as
J-Power.
Earlier this year, the Japanese government blocked a bid by the fund, also
known as TCI, to acquire a larger stake in the power wholesaler, citing energy
security concerns. It was the first order of its kind against a foreign
investor and sparked a hot debate on the openness of Japanese capital markets.
The purchase announcement comes as many hedge funds are struggling with the
fallout from the global financial meltdown.
''Simply put, I was surprised,'' J-Power President Yoshihiko Nakagaki said at a
news conference in Tokyo, explaining that the fund requested on Sept. 29 that
J-Power buy back TCI's entire stake.
Nakagaki said he had expected TCI to hold on to its stake for a long period, as
the fund had claimed it would, in an attempt to raise J-Power's corporate
value.
The request was made only three months after the hedge fund clashed head-on
with the management of J-Power at its annual shareholders meeting.
Asked about the reason behind the sudden agreement with the fund, Nakagaki
said, ''That is their issue, so I'd like to refrain from giving my personal
views. But there is a possibility that the (financial) turmoil has had an
influence.''
TCI, which started investing in J-Power in 2005, was not immediately available
for comment.
J-Power said it has decided to purchase each share held by the hedge fund for
3,830 yen.
The price, much higher than Friday's closing quote of 2,895 yen, was decided
after holding ''sincere discussions'' with TCI, Nakagaki said.
He said the purchase price represents the three-month average share price prior
to the request.
TCI is said to have spent an average of about 4,500 yen per share on its
investment in J-Power.
J-Power said it is planning to finance the purchase with its own funds.
TCI launched a proxy fight against the utility, but all of its proposals,
including a dividend hike and a scale-down in cross-shareholdings, failed to
win enough support from other shareholders at the general meeting in June.
TCI had also sought approval from the government for raising its stake in
J-Power to a maximum of 20 percent.
But the government in May ordered TCI to drop its plan to double its stake.
Japanese law requires overseas investors seeking to acquire a stake of 10
percent or more in firms deemed critical to national security and the
maintenance of public order, including utilities and arms makers, to secure
government approval in advance.
J-Power, established as a national strategic entity in 1952 and fully
privatized in 2004, supplies electricity to major domestic utilities through
its nationwide transmission networks.
==Kyodo