Japan's first solar trusts set to list on new infrastructure market

Mirarth Holdings

18/03/2016 02:10

* Trusts to be first listings on infrastructure market 
    * Exchange wants to repeat success of REIT market 
    * More state support needed to grow renewable trusts 
 
    By Junko Fujita 
    TOKYO, March 18 (Reuters) - Four solar power plant operators 
are poised to sell the first shares on the Tokyo Stock 
Exchange's nascent infrastructure market, opening an avenue of 
funding for the renewable energy industry and bringing green 
assets to individual investors. 
    Asset managers Sparx Group Co Ltd  8739.T  and Ichigo Inc 
 2337.T , condominium developer Takara Leben Co Ltd  8897.T  and 
Renewable Japan Co said they aim to list their plants as 
investment trusts, paying dividends from electricity sales. 
    Shares in the trusts will be sold on a market that will turn 
a year old in April, when a tax perk that attracted the first 
listings takes effect. The trusts are therefore widely seen as 
test cases for a market the exchange created to capitalise on 
the eventual privatisation of swathes of public infrastructure. 
    The exchange aims to replicate the success of its market for 
real estate investment trusts (REITs) which opened in 2001 with 
two office space trusts. It now has 54 REITs involving various 
property, such as hotels and hospitals, worth 11.6 trillion yen 
($96.78 billion) and paying an average yield of over 3 percent. 
    "Unlike real estate, cash flows from solar power plants are 
stable over the long term and that will meet investor demand for 
balance in their portfolio," said Hidehiro Ishii, head of rules 
planning at the exchange's new listings department. 
    Observers say the listings could each raise up to 10 billion 
yen, and are likely to come some time this year after April when 
renewable energy trusts become exempt from corporation tax for 
20 years, provided they have operational plants by March 2017. 
    However, the market for such trusts needs further support if 
it is to grow, said a lawyer involved in planning renewable 
subsidies. Already, the government is lowering the subsidy for 
solar which has attracted about $270 billion in investment. 
    "The debut of renewable-energy funds on the public market is 
potentially a game-changing event in the sense that it offers 
retail investors the opportunity to directly invest in 
renewables for the first time," said Yoichi Katayama, 
Tokyo-based partner at law firm Orrick, Herrington & Sutcliffe. 
    "But unless we see more deregulation or incentives, there 
are questions over whether such funds will become sought after 
by investors." 
    Lowering the subsidy is likely to squeeze profitability at 
plants which could deter investment and limit the number of 
listed trusts, observers said. The government said reductions 
were in line with a decline in start-up costs. 
    Sparx owns 18 solar plants but the subsidy is now so low - 
having almost halved since introduced in 2012 - that the firm is 
shifting focus to wind and biomass, said Hayato Shimura, head of 
business development at Sparx Green Energy & Technology Co Ltd. 
     
($1 = 113.6600 yen) 
 
 (Reporting by Junko Fujita; Editing by Aaron Sheldrick and 
Christopher Cushing) 
 ((813-6441-1840; junko.fujita@thomsonreuters.com; Reuters 
Messaging:junko.fujita.reuters.com@reuters.net)) 
 
Keywords: JAPAN SOLAR/