Bloomberg
Tokyo

Barclays plans to follow Goldman Sachs Group in arranging bonds that finance solar power in Japan as early as next year, with the government forecasting incentives will double clean energy output in 15 years.
“Renewable energy is a sector that has a great potential,” said Morifumi Yotsumoto, the head of debt capital markets at the banking section of Barclays in Tokyo. Project bonds are attractive for investors “as an alternative that offers a long- term and relatively high spread,” he said in an interview.
Goldman Sachs has been arranging solar bonds since 2013, a year after the government introduced incentives it says will help push renewable energy to as much as 24% of total power supply by 2030. Barclays expects the notes to have higher yield premiums than regular corporate debt, which has an average spread of 26 basis points, according to Bank of America Merrill Lynch data.
“There are major investors looking to diversify their investments, including project finance,” said Akihiko Inoue, the chief structured finance analyst at Mizuho Securities Co, a unit of Japan’s third-biggest bank. “It is possible they will buy up those project bonds given the current state of interest rates.”
Barclays is considering arranging as much as ¥50bn ($418mn) of notes that will finance a maximum of 300 megawatts of solar projects, Yotsumoto at the UK bank said. “It may be slow at the start but it is the kind of market that quickly expands once investors get the hang of it,” he said.
Goldman Sachs has arranged ¥17.3bn of bonds for 16 solar projects with a combined capacity of 58 megawatts, according to the US lender.
The bond offerings come as Japanese companies decrease debt sales because they hold record cash while banks are boosting lending. Corporate note issuance since April 1 has dropped 36% to ¥4.324tn compared with a year earlier, according to data compiled by Bloomberg.
The Japanese government has been encouraging the use of clean energy via a policy tool called feed-in tariffs, which guarantee that producers will receive a set price for power.
As of the end of June, the government has approved 82 gigawatts of solar projects, about a quarter of which has gone online. One gigawatt is 1,000 megawatts.
Japan added 9.7 gigawatts of solar power in 2014, the largest increase after China’s 10.6 gigawatts in terms of installed capacity, according to the International Energy Agency. Germany has the world’s biggest cumulative capacity at 38.2 gigawatts and Japan is ranked third with 23.3 gigawatts, according to a report by the organisation.
Canadian Solar, the third-biggest solar-panel producer, agreed to build its largest power plant in Japan, it said in a statement this month. The 47-megawatt Mashiki project has a 20-year contract to supply power to Kyushu Electric Power Co for 36 yen a kilowatt-hour, the Guelph, Ontario-based company said.
Among companies that Barclays is considering financing through project bonds is Renewable Japan Co, according to Yotsumoto.
Renewable Japan plans to sell about ¥20bn of such notes via Barclays next year to diversify ways to raise cash, said president Katsuhito Manabe, who has worked for Lehman Brothers Holdings and Barclays in Japan.
“Our focus has been indirect financing - borrowing from financial institutions and non-banks,” said Manabe. “We will continue doing that but also want to enter the capital markets. Since we have a fair number of projects, it is possible that we won’t get enough from bank loans alone.”