Financial firms turn to solar power to generate earnings

JIJI

Financial institutions are turning to solar power generation as a new earnings source amid an economic slump that is putting off borrowers.

“We’re now in a position to promote the (photovoltaic generation) projects aggressively,” said a Tokio Marine Asset Management Co. official, referring to an agreement with major trading house Mitsui & Co. forged in autumn 2010. Power generation is one of Mitsui’s key areas of interest.

After establishing a fund of ¥9 billion last August, Tokio Marine Asset invested in some 10 solar power generation projects capable of generating a total of 28,000 kw. Mitsui has since been operating facilities on behalf of the firm.

Tokio Marine Asset plans to set up another fund of around ¥10 billion by the end of fiscal 2012 in March for investment in 10 or so more projects.

The aggressive investment push is a direct result of the launch last summer of a feed-in tariff system that has eliminated ups and downs in sales, the official said. The tariff system is a mechanism of purchasing electricity generated from renewable energy sources at fixed rates.

The investment is expected to yield more than 3 percent per year at a time when long-term interest rates remain below 1 percent, according to sources.

Big banks are also plunging into the market. Mizuho Corporate Bank will establish a ¥5 billion fund by the end of fiscal 2012 to put up between 5 percent and 15 percent of operating capital for megasolar projects capable of generating at least 1,000 kw of electricity each.

Bank of Mitsubishi-Tokyo UFJ has created a system with Mitsubishi UFJ Lease & Finance Co. to provide solar power generators, with support ranging from construction of facilities to procurement of funds.

But there are uncertainties about financing services for solar power generation.

While investment funds seek quick returns, photovoltaic generation projects last 10 to 20 years. Long-term projects are often accompanied by large risks, although investment in them is expected to bring in stable dividends and other returns.

It is also uncertain if investment funds, which eventually sell facilities to lock in profits, can easily find buyers.