UPDATE 4-Japan banks may lend $25 bln to nuclear operator -sources

TEPCO needs funds after tsunami damaged nuclear plant

* TEPCO: no problem with cash now but sees big funds need
next FY

* Says not sure about annual dividend now vs 60 yen/shr pvs
f'cast

* TEPCO shares end down 4.5 pct, have halved since disaster

(Adds comments by analysts, bankers; updates share price)

By Taiga Uranaka

TOKYO, March 23 (Reuters) - Japan's largest banks are in
talks to provide up to $25 billion in emergency loans to Tokyo
Electric Power to shore up its finances and rebuild its
power network following a disaster at one of its nuclear plants.

Tokyo Electric, Asia's largest utility, is waging a
desperate battle to cool reactors at its Fukushima-Daiichi power
plant which were crippled by the powerful earthquake and tsunami
on March 11 and have leaked radiation.

The disaster knocked out about 20 percent of Tokyo
Electric's operating thermal and nuclear generation, forcing it
to implement rolling blackouts set to last months until it can
secure alternative sources of power.

Highlighting the uncertainty over its financial prospects,
the company -- known for its rich and steady dividends -- said
on Wednesday that it was now not sure what its annual dividend
would be, erasing its prior forecast for a payout of 60 yen per
share.

Sumitomo Mitsui Financial Group , the utility's main
lender, is expected to provide more than 500 billion yen in
loans out of an emergency package that could total 2 trillion
yen ($25 billion), sources with direct knowledge of the matter
said.

Mitsubishi UFJ Financial Group and Mizuho Financial
Group are considering loans of 200-500 billion yen
each. Sumitomo Trust and Banking and other major trust
banks are also expected to offer funds, the sources said.

The loans would be used to fix damaged plants and for other
reconstruction efforts and may be extended to the utility as
early as this month, according to the sources, who were not
authorised to speak publicly about the matter.

"Interesting, as one suspects that the government has
implicitly guaranteed the survival of TEPCO as a regulated
entity if all these institutions are willing to accept the
risk," said Penn Bowers, an analyst at CLSA Asia-Pacific Markets
in Tokyo.

"Given the amount of cash on the balance sheet, I am
surprised at the urgency of talks but certainly the need to
prevent a crisis of confidence could be seen as necessary to
keep recovery efforts stable," he said.



Tokyo Electric, which provides power to about one-third of
the Japanese population, had 432 billion yen in cash and
equivalents at the end December 2010 and 7.5 trillion yen in
outstanding debt, according to its financial statements.

Of its $64 billion in outstanding bonds, the company is due
to repay $4.8 billion this year, and another $5.6 billion in
2012, underscoring the importance of refinancing to meet its
funding needs.

Last week, credit ratings agency Standard & Poor's cut its
long-term and short-term ratings on TEPCO by one notch to "A+"
and "A-1" respectively. Moody's also cut the firm's long-term
rating by two notches to "A1."



RISING FUEL COSTS

At the six-reactor Fukushima-Daiichi plant, engineers are
battling to cool the reactors to contain further contamination
and avert a meltdown.

But even if TEPCO is able to regain control of
Fukushima-Daiichi, it faces lengthy repairs and inspections at
other nuclear facilities and will have to burn more oil and gas
to make up for the nuclear shortfall, eating away at its
finances.

In addition to the destroyed Fukushima-Daiichi plant, Tokyo
Electric's Fukushima-Daini plant is also out of action, along
with some 18 percent of the company's thermal power capacity.


Damage to plants, lines and networks in the most affected
northeast of the country is expected to linger, raising the
prospect of blackouts during the peak summer demand season.


Tokyo Electric has said it would likely be able to secure
54 gigawatts of supply by summer, up from around 35 gigawatts
now, as it restores some of the damaged thermal plants and
brings on other plants that were mothballed or down for
maintenance.

CLSA's Bowers says its fuel costs could rise by 700 billion
yen in the financial year to March 2012 "given the change in
fuel mix - the ability to pass this through will be the key
long-term factor for funding."

Five-year credit default swaps for insuring against a Tokyo
Electric default hit a record high of 373 basis point on March
17. The spread has since tightened to close at 245 on Monday,
reflecting some progress in containing the crisis.

"We don't have a problem with cash at hand, but as we see a
need for large funds in next financial year (beginning on April
1), we are procuring funds as needed," said Hajime Motojuku, a
TEPCO spokesman, declining to elaborate.

A spokeswoman for Sumitomo Mitsui Banking Corp, the core
commercial banking unit of SMFG, declined to comment on
transactions with a specific client but said the bank would like
to give "maximum support for TEPCO as its main lender".

A spokesman for MUFG said the bank has been approached by
TEPCO for loans but details have not been decided yet. A Mizuho
spokesman said he could not comment on individual transactions.

Shares of TEPCO ended down 4.5 percent at 1,049
yen, underperforming a 1.7 percent fall in the benchmark Nikkei
average . The stock has fallen by about half since the
disaster on March 11, cutting its market value to less than $22
billion.
($1 = 81.065 Japanese Yen)

(Additional reporting by Taro Fuse, Junko Fujita and James
Topham; Editing by Lincoln Feast and Muralikumar Anantharaman)