JBIC Plans to Help Fund Inpex, Toshiba Energy Projects Worth $40 Billion
The Japan Bank for International Cooperation is considering helping fund overseas projects worth $40 billion led by Inpex Corp. (1605) and Toshiba Corp. (6502), as Japan’s government aims to boost exports of equipment and technology.
JBIC may offer loans to Toshiba, which has exclusive rights to negotiate to build a nuclear power station in Turkey, and plans to provide a preliminary loan commitment to Inpex for its Ichthys liquefied natural gas project in Australia, said Tadashi Maeda, head of corporate planning at the state-owned bank.
Japan is pushing companies such as Toshiba and Hitachi Ltd. to compete with rivals including Korea Electric Power Corp. (KEP) and Areva SA (CEI) for overseas nuclear projects to aid the nation’s economic recovery. Ichthys, due to start in 2016, would be the largest energy project operated by a Japanese company.
“JBIC’s assistance is part of a long-term government plan to boost the success rate for Japanese firms,” said Daniel Aldrich, a political science professor at Purdue University in Indiana. “France and South Korea certainly want to continue their penetration of foreign markets in nuclear technology.”
Toshiba, the biggest Japanese maker of power generation machinery, and the country’s trade ministry last year won the right to negotiate exclusively with Turkey until March 31 to build the power plant on the Black Sea coast, which may cost as much as $20 billion.
The talks commenced after Turkey failed to conclude negotiations with a group led by Korea Electric because of differences over ownership structure and power pricing.
Failure to reach an agreement with Toshiba this month may allow Electricite de France SA to enter the fray. Turkey’s Energy Ministry said Jan. 4 it had blocked a bid by Europe’s biggest power producer to build the plant and would only consider it if talks with Japan collapse.
JBIC expects to provide financing should Tokyo-based Toshiba get the contract to build as many as four reactors with capacity of as much as 5,400 megawatts, said Maeda, 53, who is an adviser to Prime Minister Naoto Kan’s Cabinet.
Itochu Corp. (8001), Japan’s fourth-largest trading company, is also involved in the bidding, while the government has asked Tokyo Electric Power Co. to join the group, Maeda said in an interview at the bank’s headquarters in central Tokyo on Feb. 28.
Tokyo Electric received a request for technical assistance for the Turkish plant in November from the Japanese government, spokesman Daisuke Hirose said. Yuko Takeuchi, a spokeswoman for Itochu, declined to comment, saying the negotiations are being led by Toshiba and the government. Toshiba spokesman Hiroki Yamazaki declined to comment.
Toshiba shares rose 0.2 percent to 523 yen at 10:05 a.m. on the Tokyo Stock Exchange. Inpex rose 0.7 percent to 577,000. The Nikkei 225 Stock Average rose 0.4 percent.
The government wants to promote Toshiba’s reactors “because if we only use them in Japan, the technology will suffer from the Galapagos Syndrome,” Maeda said, referring to a phenomenon where product development takes place in isolation from other countries.
JBIC is also considering lending as much as $4 billion for a nuclear plant project in Texas that would be the country’s first state financing for an atomic power station abroad, Maeda said in September.
Japan, the world’s third-largest nuclear power producer, wants its reactor makers to take advantage of a global expansion in atomic generation to spur exports and economic growth. More than 470 nuclear reactors are planned or under consideration, the World Nuclear Association said on Feb. 6. The U.S. is the biggest followed by France.
While the world’s third-largest economy contracted last quarter, Japan’s gross domestic product will probably expand 1.47 percent in the year starting April, according to the average forecast of 43 economists in a survey by the government- affiliated Economic Planning Association released on Feb. 10.
JBIC had loans, investments and loan guarantees of almost 11 trillion yen ($134 billion) in the year ended March 31, 2010, according to its latest financial statement.
JBIC rules allow funding of as much as 60 percent debt in overseas projects that use Japanese equipment and technology, according to the bank’s website. The bank charges interest rates on yen loans ranging from 1.27 percent to 1.78 percent.
For natural resource developments, JBIC may fund as much as 70 percent of the debt, with rates as low as 0.9 percent and no set limit on the repayment period. JBIC said in June 2008 it agreed to lend $3.7 billion to the Sakhalin-2 gas project in Russia, in which Mitsui & Co. and Mitsubishi Corp. have stakes.
Japanese government support for Inpex, which is 19 percent owned by the trade ministry and is the country’s biggest energy explorer, is vital to obtaining supplies of cleaner-burning natural gas, as shipments from Indonesia are declining, Maeda said in the interview this week.
The $20 billion Ichthys project, a joint venture with French energy company Total SA (FP), is part of Japan’s target to source more than 40 percent of its oil and gas imports from assets it controls by 2030, from 20 percent at presently.
Inpex is preparing to finance the project and will make a final investment decision by the end of this year, spokesman Keisuke Yano said. He declined to comment on JBIC’s involvement.
Japan relies on imports for almost all of its energy needs. The country imported 12.8 million metric tons of liquefied natural gas from Indonesia, or 18.3 percent of its gas imports last year, according to data compiled by Japan’s finance ministry. The country imported 14 million tons from Malaysia and 13.3 million tons from Australia.
“LNG supplies from Indonesia will further fall this year,” Maeda said. “The most important alternative LNG source is Western Australia.”
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