Sparx Enters Renewable Business Building Mega-Solar Power Plant

Sparx Group Co. (8739) will build a mega- solar power plant in southern Japan as it expands beyond fund management to meet rising demand for renewable energy after the March 2011 nuclear disaster.

Sparx, with 449 billion yen ($5.7 billion) of assets, signed an agreement with a town in Kumamoto prefecture, in the southern Kyushu island, and Coretech Co., a Tokyo-based company providing alternative energy consulting business, today to build the plant, said Sparx Chief Executive Officer Shuhei Abe. The cost to build the plant, expected to start operating in October 2013, will be about 2.8 billion yen, Abe said.

Sparx is expanding into the alternative energy business as Abe tries to bring his company back to profitability by widening offerings beyond equity-related products. The Tokyo-based asset manager in June won a contract from the Tokyo Metropolitan Government to start an infrastructure fund that will invest in the nation’s renewable energy industry.

“This marks our first real investment into the renewable business and that is a significant step for us,” Abe said in an interview. “It is part of our overall effort to expand into the industry following the mandate from the Tokyo government.”

Japan introduced a so-called feed-in-tariff on July 1 under which solar power providers earn 42 yen a kilowatt-hour for the electricity they produce, three times the 13.65 yen charged to industrial and commercial users. The preferential rate for commercial and utility-scale solar power lasts for 20 years.

Tokyo Mandate

The plant, on about 9.5 hectares (23.5 acres) and generating 8,000 kilowatts, will be managed by a unit of Sparx dedicated to renewable businesses and will target about 8 percent to 10 percent return for investors, Abe said. Japanese households use an average 3 kilowatts of electricity, according to Tokyo Electric Power Co.

The fund run under Tokyo government’s mandate may eventually invest in the plant if the investment is deemed justifiable, he said. The Tokyo government’s infrastructure fund is currently preparing to raise money and is planning to start in late November, Abe said.

The Tokyo city government sought companies able to manage a public-private infrastructure fund dedicated to investing in the country’s power-supply business amid Japan’s efforts to cut dependence on atomic energy that provided about 30 percent of the nation’s power before the Fukushima nuclear meltdown in March 2011 following a tsunami triggered by an earthquake.

To contact the reporters on this story: Tomoko Yamazaki in Singapore at tyamazaki@bloomberg.net; Komaki Ito in Tokyo at kito@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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