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Nippon Paper mulls power plant amid Abe energy push

Bloomberg

Nippon Paper Industries Co. Is Considering A Project To Build A Large Power Plant In Ishinomaki, Miyagi Prefecture, Which Was Battered By The Tsunami Generated By The 2011 Great East Japan Earthquake.
The project, an example of Nippon Paper’s drive to expand outside its mainstay paper products, represents the kind of investment Prime Minister Shinzo Abe endorsed this week as part of efforts to deregulate the electricity industry.

Nippon Paper, Japan’s second-biggest paper producer, may eventually sell some of the power generated there to customers.

“The energy business presents an opportunity to grow,” Haruhi Nomura, general manager in charge of energy at Nippon Paper, said Wednesday. “Our current focus is on creating more power to sell to customers.”

The company is studying whether to add a ¥30 billion plant fueled by coal and wood at the site of its Ishinomaki paper factory with output capacity of about 110 megawatt-hours, Nomura said. The plan is among many unannounced projects under consideration to produce power fueled by biomass, solar and wind, he said.

The facility is the latest example of the shift occurring at Japanese paper companies, including Nippon Paper and Oji Holdings Corp., as they compensate for flagging paper sales. Japan’s paper consumption has fallen 16 percent over the past five years to 16.2 million metric tons, according to data compiled by the Japan Paper Association in 2012.

Tokyo-based Nippon Paper, which lags behind only Oji Holdings in sales, plans to start operating a biomass plant in March 2015 at its Yatsushiro factory in Kyushu.

Abe gave his approval of the trend this week when he pledged to spur investment in the nation’s electricity industry to about ¥30 trillion in the next decade.

Nippon Paper is targeting annual sales from energy at more than ¥50 billion in about five years, according to Nomura. An energy business division will be set up as of June 27 in an organizational reform, according to a May 28 company statement.

The company, which uses energy in paper manufacturing, says it has power generation capacity of about 1,700 megawatt-hours, among the biggest in Japan outside traditional utilities.

Oji Holdings said in February that it will add a wood-fueled power plant in Miyazaki Prefecture by March 2015. The company is also considering a similar power plant in Hokkaido, part of its ¥60 billion investment in renewable energy, Shoji Fujiwara, chairman of Oji Green Resources Co., said last year.

Government incentives known as feed-in tariffs are proving one of the main drivers of clean energy in Japan. The program, introduced last July, requires utilities to pay above-market rates to companies producing power from renewable energy, with the added cost passed on to consumers as surcharges.

Nippon Paper hopes to make a decision on whether to build the Ishinomaki facility by the end of the year, Nomura said. Sales from the plant would be about ¥8.5 billion a year should all its electricity be sold to outside customers. Nippon Paper generated about ¥18 billion in total from electricity sales in the year that ended in March 2012, according to Nomura.