A Japanese clean energy shopping spree

A leading Japanese trading house is spending plenty on renewables in Europe, while utilities in the EU suffer from weak power demand. Elsewhere, nuclear is on the outer and EU carbon prices edge higher.

Japanese trading house, Marubeni Corporation, is having a busy summer: on August 5, it announced it had agreed to buy at least a 25 per cent stake in Ireland's Mainstream Renewable Power. The $US133 million ($A145 million) Mainstream deal will make Marubeni the second-biggest shareholder in the company, which has developed over 19GW of solar and wind projects in seven countries. Yesterday, The Irish Times reported that the Japanese conglomerate could receive additional shares if Mainstream does not sell its North American business before March 31.

The purchase will be the largest single equity investment in Marubeni's history but will not be its first foray into Europe: it already has business interests in the offshore wind industry and the electricity supply business.

On July 18, Marubeni chairman Teruo Asada told Bloomberg News: “Our target is Europe and a big increase in the US and entry into South America for the IPP business,” referring to the independent power producer model. European energy firms are under pressure from lenders to sell part of their assets and have made offers to Marubeni, he said.

On the same day, GDF Suez announced it would sell a 50 per cent stake in a 3.3GW package of fossil-fuelled and renewable power generation assets in Portugal to Marubeni. The sale will reduce the French utility's net debt by €900 million after the venture is consolidated into its account on an equity basis. GDF Suez is cutting capacity to cut costs, having been hit by lower demand for gas-fired power in Europe. The issue is not confined to this utility: power companies across the region have announced plans to divest or mothball underperforming plants.

In July, E.ON announced it would mothball a gas-fired plant in Slovakia – just two years after it started operating. Nonetheless, investors still appear to be interested in buying up power assets in Europe, in particular for reduced prices from cash-strapped utilities. On July 23, trading house Vitol concluded the purchase of Britain's largest CHP plant from Phillips 66 Power Operations. In late 2012, EDF Energy sold its 819MW Sutton Bridge gas power station in the UK to a group of investors led by Australian bank Macquarie.

The Mainstream acquisition was not the only renewable energy deal this week: on Thursday, Brazil's second-biggest power utility – Cemig – announced it had agreed to invest 1.4 billion reals ($US621 million) in renewable energy developer Renova Energia to boost its exposure to wind power. Other Brazilian utilities such as CPFL Energia and Tractebel Energia are also seeking to focus more on wind power, as this technology complements Brazil's reliance on hydropower: during the dry season, when water levels are low, winds in the region are at their strongest. Hydro accounts for some 70 per cent of power generation in the Latin American country.

Cemig will be part of a controlling group, along with Light Energia and RR Participacoes, which will own at least 51 per cent of Renova Energia once the deal is complete. The purchase price – at 50.71 reals ($US22.32) a unit – represents an "unjustified" premium of 25.6 per cent over the preceding day's closing price, according to a Citigroup report published on August 9. The premium is 60 per cent over what Citibank values the company.

In solar, Ireland's BNRG Renewables sold a 20MW project in southeast England to Lightsource Renewable Energy after it won planning permission. The UK's biggest developer and operator of solar parks said the project will be built in Kent for €35 million ($US46.7 million) and will be one of the largest in the country.

This is not the first acquisition for Lightsource this summer: in July, it bought the 12.5MW England PV portfolio from Germany's Juwi and in May, it purchased the 6.3MW Southampton PV plant from Solar Century Holdings. Lightsource is implementing its self-titled "very aggressive" strategy even after subsidies were cut in April: "we aim to develop well over 200MW more and reach about 500MW by this time next year," the CEO told Bloomberg News on April 16.

In Germany, Wattner acquired 10 PV plants in the east of the country for some €60 million ($US80 million). The completed installations have some 48MW in combined capacity. The asset solar manager has bought more than 60 solar plants in the largest EU member state since 2004, according to its website.

Across the Atlantic, Colorado-based Real Goods Solar has agreed to buy New York-based Mercury Energy to pursue East Coast customers. Real Goods has seen its shares more than triple this year. They surged another 15 per cent to $US2.39 on the day of the purchase announcement. Mercury generated $US35 million in sales last year, has some $US10 million in cash and no debt.

Unlike renewables, the nuclear power industry has not enjoyed a sunny week, in particular in Asia: on August 5, the Tokyo Electric Power Company (TEPCO) released estimates on how much radiation-contaminated water has leaked from the nuclear plant in Fukushima. The first such data the operator has released since March 2011 indicated that 20-40 trillion bequerels of radioactive water seeped into the Pacific Ocean between May 2011 and July 2013. According to TEPCO, the leaked volume was comparable to the maximum level allowed under safety regulations, of 22 trillion bequerels a year.

TEPCO's reputation has taken a battering, however, as workers at the plant told ABC Online at the weekend that the plant operator has always known about the leaks and they do not trust it to handle the situation. Japan's nuclear watchdog has described the leaks as a "state of emergency," having previously said that it had doubted TEPCO’s continued claims that the toxic water was contained safely in the facility. Last Thursday, Japanese Prime Minister Shinzo Abe said the government would take "firm measures" to contain the leak.

In Taiwan, authorities said on August 9 that a water leak that began three-and-a-half years ago inside a state-owned nuclear power plant is yet to be halted. The water may have been radioactive, according to the watchdog called Control Yuan, though the plant operator said the water did not come from storage pools.

Nuclear power is controversial in Taiwan – so controversial that a fight broke out in the parliament on August 2 ahead of a vote on whether to hold a referendum on completing the construction of the island's controversial fourth nuclear plant. Nuclear currently accounts for a fifth of power supply on Taiwan.

Meanwhile, in South Korea, the government is urging efforts to save electricity as the country faces shortages after nuclear shutdowns earlier this year. Power demand over August 11-13 is expected to peak at 80GW between 10am and 6pm, exceeding the nation's 77GW of generating capacity. Two of South Korea's 23 nuclear reactors were halted in late May and the restart of another was delayed after authorities found that safety certificates had been faked.

EU carbon

European Union allowances (EUAs) rose last week on light trading and low auction volumes. European Union allowances for December 2013 gained 1.4 per cent over the week to close at Friday’s session at €4.46/tonne on the ICE Futures Europe exchange in London, compared with €4.40/t at the close of the previous week.

Last Monday, only 4.8Mt of front-year contracts exchanged hands, more than 50 per cent below the 15-day moving average. Wednesday was the busiest day for traders, as 11Mt of front-year EUAs were exchanged on ICE. Prices climbed back on Thursday and Friday, while trading volumes remained low.

UN Certified Emission Reduction credits (CERs) for December 2013 gained 5.1 per cent last week to close at €0.62/t.

This article was originally published by Bloomberg New Energy Finance.