The Utility Behind Fukushima Disaster Is Mulling Green Debt

(Bloomberg) -- A new subsidiary of the Japanese power company behind the worst nuclear disaster since Chernobyl is considering funding hydro and wind energy projects with green or sustainable bonds.

Almost nine years since a major earthquake and tsunami crippled Tokyo Electric Power Co. Holdings Inc.'s Fukushima plant, Japan's biggest utility is shifting its renewable energy business to the unit, which will start operations in April.

Tepco Renewable Power Inc. will consider raising money to finance projects including hydro electricity in Southeast Asian countries such as Laos, and offshore wind power in Japan and overseas, according to Toru Fujishiro, executive general manager of business strategy for renewable power at the parent company.

“The purpose of separating the renewable business into a separate company was to make fundraising more flexible,” Fujishiro said in an interview. Global interest in green, social and sustainable bonds has prompted it to explore such issuance, although the timing and size are still being discussed, and it may also get green loans or project finance, he said.

Green Bond Debut of Japanese Utilities Depends on Renewables Push

Utilities have been left behind in the stampede toward feel-good investments in Japan, where green and sustainable yen-denominated bond sales have almost tripled to 1 trillion yen ($9.2 billion) this year. Issuance is still limited to a few sectors such as finance, construction and leasing, and Tokyo Electric, known as Tepco, may be the first energy-sector issuer.

“With the nuclear disaster in the past, the company faced a backlash from investors against the idea of issuing green bonds,” said Takahiro Oashi, a senior fund manager at Asahi Life Asset Management Co., who's attended Tepco's investor relations meetings. The shift to the new alternative-energy company should “pave the way for issuing green bonds to finance environmentally friendly projects, which should be positive.”

Tepco was shut out of the Japanese bond market after the 2011 nuclear disaster triggered by the earthquake and tsunami, but returned in 2017. It still has to pay relatively higher yields compared with other local corporate issuers, but has been able to increase the size of its note sales.

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Projects to develop replenishable energy sources could prompt more green bond issuance in Japan.

Tepco's Renewable Power plans to develop 2-3 gigawatts of overseas hydro energy projects, primarily in Southeast Asia, 2-3 gigawatts each of offshore wind power generation in Japan and abroad, Fujishiro said.

While this would help Tokyo Electric meet its target of developing 6-7 gigawatts of renewable power in Japan and overseas within the next 10 years, it's just a small part of overall capacity. The country had about 267.6 gigawatts of power generation capacity as of August, including renewable capacity that isn't always generating, according the Ministry of Economy, Trade and Industry.

--With assistance from Issei Hazama and Rie Morita.

To contact the reporter on this story: Ayai Tomisawa in Tokyo at atomisawa@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Beth Thomas, Aaron Clark

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