Equis, Partners Group bet on Japanese solar

Nevertheless, the solar space is seen as underpenetrated by foreign PE investors given the scale of the expected build-out and the reliability of the regulatory regime. David Russell, CEO and partner of Equis Funds Group, puts this down to a failure to address the peculiarities of the Japanese market, such as the challenges involved in securing land leases and local project financing.

"You must have local management teams on the ground," he says. "There are so many day-to-day issues you need to address with the development of solar generation facilities. There are stakeholders such as the government and regulators and to interface efficiently with them you need a team that can talk to them. An active management team is also important in making banks confident in you."

This week energy and infrastructure specialist Equis teamed up with Partners Group to lead a $250 million equity investment in a Japanese solar platform. Babson Capital, LGsuper and Qantas Superannuation are among the co-investors.

The platform, which is operated by Nippon Renewable Energy (NRE), has four projects totaling 47.5 MW ready to begin construction, with 300 MW in its development pipeline for the next two years. "This far outweighs anything the other independents are doing in Japan," Russell adds.

In 2011, nuclear accounted for 8% of Japan's energy consumption, with hydro on 4% and other renewables on 2%. The government wants solar capacity to reach 28 gigawatts by 2020 and 53 GW by 2030, and then meet 10% of total domestic energy needs by 2050.

Feed-in tariffs and 20-year power purchase agreements were introduced in 2012 to encourage the development of renewables, prompting a host of independent power producers to enter the space, albeit to mixed effect. Of the 22,068 MW of capacity approved since then, only 3,916 MW was operational as of November 2013, with many smaller players struggling to get operations online.

In NRE, however, Equis and Partners Group believe they have a management team capable of leveraging the development opportunity, while the clarity of Japan's regulatory structure offers investors a level of certainty not necessarily available in less developed markets in the region.

"On the infrastructure side, Australia is where we have invested most over the last few years," says Benjamin Haan, Partners Group's head of private infrastructure in Asia Pacific. "We've had an office in Tokyo for five years and this is a good opportunity to start investing in Japanese infrastructure."

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• Topics
• Cleantech
• North Asia
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• Partners Group
• Equis Funds Group
• Japan
• Cleantech
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