TCI sets up rebellion at Japanese nuclear group's AGM

Nick Clark
Thursday 22 May 2008 00:00

The British hedge fund The Children's Investment Fund (TCI) has intensified its battle with the Japanese nuclear energy group Electric Power Development, saying it intends to gather shareholder support to push through a series of rebel proposals at next month's annual general meeting.

TCI said yesterday it was soliciting proxies from fellow shareholders in the group, known locally as J-Power, to support seven items it had proposed for the agenda of the AGM held at the end of June.

The activist investor, run by Christopher Hohn, said in a statement released in Tokyo: "Management's lack of respect for genuine shareholders has left TCI with no alternative but to solicit proxies from shareholders."

This is the latest step in an increasingly fractious relationship between J-Power and its largest shareholder. The hedge fund has pushed for a series of changes at the group. The dispute has spilt over into the political arena, as TCI called on the UK Government to impose trade sanctions on Japan, which had blocked it from increasing its stake in the nuclear group. Five of the seven AGM proposals were made on 17 April and "aimed at improving the broken corporate governance of the company", TCI said. It has made a further two yesterday.

TCI wants the company's cross-shareholdings to be capped at ¥5bn (£24m), saying a "serious conflict of interest arises" with any contested vote as these shareholders automatically support management. Cross-shareholders in J-Power include Nippon Life Insurance and Mizuho Group, which hold over 10 per cent of the shares between them.

Other proposals for the agenda include urging the management to raise its dividend, slamming the current ¥40 offered as too low; the appointment of three independent directors; and a vote over whether to re-elect president, Yoshihiko Nakagaki, to the board.

It said: "Many of J-Power's large shareholders have privately acknowledged to TCI that our proposals are reasonable and in the best interests of J-Power. To date, however, management has made no compromises and continues to reject all reasonable shareholder requests."

TCI first bought into the power company in 2003 and now owns 9.9 per cent. It was blocked from doubling its stake by the Japanese government last month, which citied national security issues and added it could hit investment in power generation and adversely effect electricity supplies.

In response, a furious TCI wrote to three British ministers requesting "that the UK Government formally intervene and impose reciprocal trade and investment sanctions". The letter was signed by Mr Hohn. This followed a complaint to the European Commission, which prompted the Trade commissioner, Peter Mandelson, to criticise Japan for remaining a "closed market".

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