Tokyo Stock Exchange hopes new entrants can revive stagnant solar trust markets

Itochu Enex Co

18/08/2017 07:40

* TSE struggles to attract investors to solar power trusts 
    * Two of the three trusts trade below IPO price 
    * Institutional investors prefer private funds 
 
    By Junko Fujita 
    TOKYO, Aug 18 (Reuters) - The Tokyo Stock Exchange's (TSE) 
two-year old infrastructure market hopes to get a badly needed 
boost for its listed solar power trusts as two new entrants plan 
to start up as early as this year. 
    The Tokyo Stock Exchange's (TSE) solar power trust market 
has so far drawn little interest as investors prefer private 
funds because the public trusts' tax benefits are limited. 
    Since the TSE created its infrastructure market in 2015, 
only three solar power trusts have listed with a combined value 
of $180 million. 
    "We don't have a wider range of investors in the market," 
said Takumi Hayase, vice president of the TSE's new listings. 
"The market needs to be much bigger for institutional 
investors." 
    Now, TSE is hoping that two new trusts will bring fresh 
capital. 
    The Japanese unit of Canadian Solar Inc  CSIQ.O  and 
electricity wholesaler Itochu Enex Co  8133.T , have set up 
asset management firms in preparation to list investment trusts 
packaging their assets, according to a document from Japan's 
land ministry. 
    Officials from both Canadian Solar and Itochu Enex declined 
to comment on their listing plans. 
    The lack of interest in the solar trusts is at odds with  
Japan's soaring solar power capacity, which has soared from 
virtually zero at the start of the decade to over 40,000 
gigawatt-hours. 
    The country plans to generate 24 percent of its power from 
renewables by 2030, up from 14.6 percent in 2015, according to 
the Ministry of Economy, Trade and Industry. 
    
    TAX RULES 
    The sluggish interest in its solar trusts are linked to its 
tax rules, investors said. 
    The trusts are exempt from corporate taxes for 20 years. In 
return, they are required to pay 90 percent of their profits to 
investors, resulting in higher dividends than ordinary stocks.  
    However, a Tokyo-based fund manager, who did not want to be 
named because he was not authorized to speak to the media, said 
it was risky to invest in solar trusts because profits could 
drop significantly after the tax perk expires. 
    "Various restrictions on the tax system is one of the 
factors that is limiting the growth of infrastructure trusts," 
said Masanori Sato, head of the banking and structured finance 
group at law firm Mori Hamada & Matsumoto. 
    So far, the three solar trusts that have listed on the TSE 
market - Takara Leben Infrastructure Fund Inc  9281.T , Ichigo 
Green Infrastructure Investment Corp  9282.T , and Renewable 
Japan Energy Infrastructure Fund Inc  9283.T  - have mainly 
drawn interest from individual investors. 
    Two of the trusts are trading below their initial public 
offering prices, while Ichigo Green is trading 0.5 percent above 
the IPO price as of Friday.  
    Many investors like solar projects because they offer stable 
long-term returns and benefit from government subsidies, 
so-called feed-in tariffs that guarantee revenues. 
    "Pension fund managers want to secure stable returns, so we 
hold assets long-term and we do not need to seek a liquid 
market," said Takeshi Ito, a senior portfolio manager for Aisin 
Employees' Pension Funds. 
    Yet so far, investors like Nippon Life Insurance have 
preferred buying into private funds that not only offer annual 
dividends but will also typically repay the initial investment 
once the fund matures. 
    Nippon Life in June pledged 10 billion yen ($91.50 million) 
to a fund that General Electric  GE.N  is raising to invest in 
solar power plants in Japan. 
    Akitoshi Yamada, deputy general manager for Nippon Life's 
alternative investment department, said that GE's fund would 
deliver 5.5 percent annual returns over the next 25 years. 
    "We have not considered investing in public trusts trading 
on the TSE yet because for now we seek lower correlations with 
the stock and bond market when we invest in infrastructure," 
said Yamada. 
 
 
($1 = 109.2900 yen) 
 
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
GRAPHIC: Japan Solar Power    http://reut.rs/2i8Qa1c 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
 (Reporting by Junko Fujita; Editing by Henning Gloystein and 
Christian Schmollinger) 
 ((813-6441-1840, junko.fujita@thomsonreuters.com, Reuters 
Messaging:junko.fujita.reuters.com@reuters.net;)) 
 
Keywords: JAPAN SOLAR/