GE EFS’ Japan solar fund to hit final close by June – exclusive

The $710m vehicle will be the largest of its type in the country, according to the US energy investor, which says it has a ‘significant’ project pipeline ready for deployment.

GE Energy Financial Services expects to close its Japanese solar fund in June, on 75 billion yen ($710 million; €570 million), making it the largest vehicle dedicated to the country’s sector, a senior executive from the firm told Infrastructure Investor.

To date, GE EFS has secured commitments from roughly a dozen Japanese institutional investors for the EFS Energy Japan Investment Limited Partnership, Sushil Verma, GE EFS’ head of Asia-Pacific, told us. He declined to name the investors aside from the fund’s anchor, the Development Bank of Japan, which committed 25 billion yen.

The vehicle already has a significant project pipeline ready for deployment, Verma added.

The fund is expected to back a 500MW to 600MW portfolio of utility-scale operating solar projects in Japan and has a 20-year fund life. It is targeting returns in the mid-single-digit range. Last June, it reached a first close on 46.3 billion yen and was seeded with a 32MW capacity operating solar plant at that time.

“Since Japan’s feed-in tariff for renewable energy projects has come down and updated in April 2017, as expected, the development of the solar sector has slowed down a bit,” Verma observed.

He expected the primary solar market to remain active, compared with other renewables sectors, in the next three to four years, as many project developers would be focusing on the current project pipeline, which has secured FiT approval at the previous years’ rates.

Last year, Japan’s Ministry of Economy, Trade and Industry revised the FiT programme and decided to cancel several unbuilt solar projects with a combined capacity of around 27.7GW, which had failed to move towards development. The remaining pipeline of FiT-qualified projects, which have secured a higher FiT rate in previous years, was given a three-year window for development; otherwise they will also be cancelled.

As for the secondary market, Verma noted it is still a new market for Japanese institutional investors but the pace should pick up over the next couple of years.

Japan’s renewables market, particularly the solar sector, took off in 2012 when the Japanese government, following the previous year’s Fukushima nuclear disaster, introduced a FiT scheme to increase their use. The cumulative installed solar capacity was ramped up from 4.9GW in 2011 to 41GW in 2016, according to the International Renewable Energy Agency.

The country aims to generate between 22 percent and 24 percent of its energy from renewable energy sources by 2030, from 15.3 percent in 2016.