By Yoshifumi Takemoto and Kentaro Hamada
TOKYO, Nov 4 (Reuters) - The operator of Japan's wrecked Fukushima nuclear plant is working on a reorganization plan to fend off more drastic proposals, including possibly dragging the company through bankruptcy in return for a publicly funded clean-up and shutdown of the reactors.
Two people close to Tokyo Electric Power Co, or Tepco, and the government department that oversees it told Reuters that the giant utility may reorganise itself as a holding company, and separate its electricity generation and transmission businesses from the handling of Fukushima, the worst nuclear disaster since Chernobyl in 1986.
Tepco's internal deliberations, which have just begun, are meant to stake out the position of Asia's biggest utility and the Ministry of Trade and Industry (METI) against other plans circulating in the government and ruling coalition of Prime Minister Shinzo Abe.
Abe has vowed the government will take a more prominent role in addressing the Fukushima clean-up. His government aims to compile new policy measures by the middle of this month.
Japan effectively nationalized 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 millions of homes and businesses in the Tokyo area.
For now, Tepco's own planning does not specify whether the Fukushima operations would remain within the proposed holding company, the sources said.
A Tepco spokesman said, "Nothing has been decided on the matter so we have no comment to make at this stage."
A March 2011 earthquake and tsunami knocked out power and cooling at the Fukushima Daiichi plant, leading to three reactor meltdowns and explosions that sent a huge plume of radiation into the air and sea, forcing some 150,000 people to evacuate.
Tepco, before returning to profit in the most recent quarter through cost cuts, has lost $27 billion at the plant north of Tokyo and faces massive liabilities for the decades-long tasks of decommissioning the facility, compensating evacuees and paying for decontamination of an area nearly the size of Connecticut.
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Outside ideas range from spinning off the Fukushima project as a new unit within Tepco to breaking up the company and - in a view held by only a small minority in the ruling party - putting the company through a U.S. Chapter 11-style bankruptcy proceeding, as happened three years ago with Japan Airlines Co . The debate is heating up just as Tepco prepares to begin, as soon as Friday, removing spent fuel rods from one of the crippled Fukushima reactors.