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Japan’s largest power company is holding early talks with outside investors over a capital injection to boost its investment in renewables.
Jera’s global chief executive Yukio Kani, who took on the role in April, said that though discussions were at a very early stage, the company was “of course tapping” potential investors to inject equity.
He added that Jera requires “huge investment” to expand in renewables and hydrogen, which are expected to become two important business lines in future, and that the company cannot manage that with its existing balance sheet.
“We need to ask a third party to inject equity to strengthen our balance sheet,” he said. Kani did not disclose how much Jera was looking to raise, or how much it wanted to invest in renewables.
The company is already expanding in this part of the market. Earlier this year, it agreed to buy Belgian offshore wind developer Parkwind for €1.55bn and it is jointly acquiring Tokyo-based Green Power Investment, one of Japan’s leading renewable energy groups, with Japanese telecoms business NTT, in a deal worth $2bn. It has a target of 5GW of renewable energy output by 2025 and a target to achieve net zero CO₂ emissions by 2050.
Jera also recently said it would provide venture capital to the industry and is looking to invest $300mn in energy-related start-ups.
Kani said that, compared with an initial public offering, “it’s much easier to ask a third party to [inject] equity”, adding: “We really need to move quickly to invest into renewables and hydrogen . . . so agility is very important.”
Like other big power companies, Jera is under pressure to reduce carbon emissions, amid increasing extreme weather caused by climate change, including in Japan. The company accounts for a third of power generation in the country — from burning LNG and to a lesser extent coal — and its CO₂ emissions make up some 10 per cent of the Japanese total.
It was set up in 2015 as a fuel-buying joint venture between two large Japanese utility companies, Tokyo Electric Power and Chubu Electric Power. In 2019, it took over its parent companies’ thermal power generation business. Its boss at the time said an IPO was an option as part of Jera becoming “an autonomous company”.
Kani said an IPO remained an option, particularly if Jera received outside equity investment. “The investors will ask for an exit plan. That’s a very normal conversation”, he said.
“Nothing has been decided yet, but an IPO could be kind of a package [for investing].” If there were to be an IPO, it would be in the second half of the decade, he added.
Jera is one of the world’s largest buyers of LNG and still views it as a vital business, Kani said, because returns on renewables and hydrogen are still low.
The company handles around 40mn tons of LNG a year, equivalent to about 40 per cent of Japan’s annual imports. Some is for its power plants, but it also has a trading business.
LNG is still a vital source of power for Japan, which lacks domestic energy sources. The country was the largest importer of LNG last year, accounting for nearly 20 per cent of the global total.
“We still don’t know when renewables will start making sizeable profits. We also don’t know if there will be a big boom in hydrogen,” Kani said. “All the uncertainty means we may end up using gas for longer, and we need to be prepared for that.”
