IPO eyed for Showa Shell solar-panel unit

by Shigeru Sato and Yuji Okada


Showa Shell Sekiyu K.K. is considering selling shares in a solar-panel unit to fund an expansion of its renewable energy business and cut reliance on fuel sales.

Shares in Showa Shell Solar K.K. may be sold either in Japan or overseas, Chairman Shigeya Kato said in an interview in Tokyo on Monday. The funds may be used to build a fourth factory, probably in the Middle East, to make panels that convert sunlight into electricity, he said. Kato didn’t say how much money may be raised or when the proposed initial public offering may be held.

The unit of Royal Dutch Shell PLC aims to enlarge its share of the global solar-panel market to at least 10 percent by March 2015 from the current 1 percent, and diversify from refining as Japan’s petroleum demand declines because of its shrinking population and increased energy conservation.

Showa Shell said it will build a ¥100 billion factory in Miyazaki Prefecture to boost its solar-panel capacity tenfold.

“In a head-to-head race in the global solar market, Showa Shell can’t let up in efforts to invest, expand and make theirs the top-of-the-line product,” Hirofumi Kawachi, an analyst at Mizuho Investors Securities Co., said. “Fundraising through an IPO probably wouldn’t be a good idea this year or next given the state of the global market, but the door may be open from 2011 onward.”

Showa Shell is competing with market leaders such as Germany’s Q-Cells SE, which produced 574 megawatts of solar cells in 2008, or 8.5 percent of global sales, making it the world’s biggest supplier, according to U.S. researcher iSuppli Corp. Showa Shell’s new factory in Miyazaki will add 900 megawatts of capacity.

“We must prove to potential investors that our solar business model is globally competitive and provides a decent rate of returns on investment if we go ahead with an IPO,” Kato said. “We may further expand capacity as soon as we see sales growth and establish ourselves as leading competitors.”

JPMorgan Chase & Co. analyst Masayuki Nagano called the plan to build the new plant “positive” in a report released Tuesday in which he maintained his “overweight” rating on the shares.

Showa Shell began making photovoltaic, or solar, panels in 2007, commissioning its first plant, also in Miyazaki, with initial capacity of 20 megawatts a year. The company in June started a second factory in the prefecture and expanded capacity to 80 megawatts.

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