Japan's J-Power goes on offensive in TCI fight

TOKYO (Reuters) - Japan's J-Power (9513.T) has gone on the offensive against The Children's Investment Fund, accusing the British investor of misleading shareholders with ill-advised proposals to squeeze greater returns out of the electricity wholesaler.

J-Power sent a letter to its shareholders countering arguments made by TCI, which last week launched a proxy fight aimed at getting management to boost dividends, appoint outside directors and limit cross-shareholding with business partners.

The letter, a copy of which was obtained by Reuters, is the latest salvo in a battle between TCI and J-Power that has sparked public debates in Japan over the quality of corporate governance and how open the country is to foreign investment.

Earlier this month the government prevented TCI from raising its stake in J-Power to 20 percent from just under 10 percent, citing a potential threat to national security and disruption to the power supply.

TCI has criticised the government's opposition as harmful to the country's reputation as an open capital market. It has also been openly critical of J-Power management for actions it argues are not in the best interest of shareholders.

J-Power, whose official name is Electric Power Development Co, argued in the letter that TCI's dividend hike proposal would strip it of cash needed for vital investments and said the fund was only interested in its own short-term gains.

"These unfounded and unwarranted attacks have provided a smokescreen for the demands that one investor, TCI, is making to extract maximum short-term value from the company at the expense of committed investment which will deliver improved returns over the long term," J-Power President Yoshihiko Nakagaki wrote.

J-Power, which was privatised in 2004, last month raised its annual dividend forecast for the year ended March 31 by 10 yen to 70 yen per share, though it still falls far short of TCI's request for 120 yen.

The power company said it is already the second most highly leveraged energy company in Japan and that increasing its dividend above 70 yen could trigger a ratings downgrade that would boost its borrowing costs.