Interest from one of Japan’s largest corporates in India’s renewable energy play comes in the backdrop of India courting investments for its clean energy sector.
India has witnessed record low solar and wind tariffs due to falling equipment prices and the lower cost of raising finances. This in turn has put the focus on so-called patient capital, which seeks modest yields over time.
Experts say the Japanese investments fit the bill and are natural to follow given the relationship between the two countries. They add that Japanese companies can play an important role given their access to the best technology, cheaper and soft loans.
“Japanese investors such as Mitsui Group want to follow JERA into India," said a person familiar with the matter on condition of anonymity.
“They are showing interest in investing in the existing players. This also complements the sector given that there is a requirement for Japanese growth capital."
JERA Co. Inc., an equal joint venture between Japan’s largest utility Tokyo Electric Power Co. and Chubu Electric Power Co. last month bought a 10% stake in ReNew Power Ventures Pvt. Ltd for $200 million.
Mizuho Financial Group, which has been tasked by the Japanese government to find investment opportunities in India, has identified sectors such as electronics, automobiles, energy, transportation and social infrastructure for a focused investing approach as reported by Mint. bit.ly/2mfjjWE
A second person familiar with the matter, who also asked not to be identified, confirmed Mitsui Group’s interest in the clean energy industry in India.
A Mitsui & Co. spokesperson declined comment; a spokesperson at the Japanese embassy in New Delhi did not respond to an e-mail seeking comment.
Mitsui has been present in India in sectors such as steel, agri-processing and pharma.
Clean energy tariffs have nose dived in India.
Wind and solar power tariffs have hit an all time low of Rs3.46 per kilowatt hour (kWh) and Rs2.97 per kWh respectively.
The government plans to achieve 175 GW of renewable energy capacity by 2022 as part of its commitments to the Paris climate change agreement.
“Mitsui’s 2020 management vision sees India as a priority country for investments along with other emerging economies such as China, India, Indonesia, Russia, Mexico, Myanmar, Mozambique, Chile and Turkey," said Kannan Sivasubramanian, executive vice president at Aranca, a research and advisory firm.
Japan has pledged around $33 billion in investments to be made between 2014 and 2019 to boost India’s manufacturing and infrastructure sectors.
In December 2015, Japanese Prime Minister Shinzo Abe said his government has made available a special financial package of over $12 billion for Japanese companies that want to invest in India.
“As growth in most other emerging economies slows down, and given the close Indo-Japanese governmental ties that have solidified over some time now, it’s only natural for Mitsui Group to pursue a more aggressive investment strategy with respect to India, especially in sectors outside the bell curve of its traditional ‘resources’ stronghold’, a sector that’s been subject to significant pressure globally," Sivasubramanian explained.
Japan is among the top five sources of foreign direct investment in India, with the automobile and pharmaceutical sectors being among the biggest beneficiaries of Japanese investments over the past few decades.
According to the Indian government, Japanese investment into India between April 2000 and September 2016 was to the tune of $23.8 billion.
Prominent investors include Suzuki Motor Corp., Mitsubishi Motors, Toyota Motor Corp., Nissan Motor Co. Ltd, Daiichi Sankyo Co., JFE Steel Corp. and Nippon Life Insurance Co.