Japan Asia Group to Securitize Solar Projects, Raise 1.5bn Yen

2013/12/03 18:00
Kenji Kaneko, Nikkei BP CleanTech Institute

JAG Energy Co Ltd announced Nov 29, 2013, that it will securitize the project finance parts of its mega-solar (large-scale solar) projects at three sites to raise about ¥1.5 billion (approx US$14.5 million).

JAG Energy (Chiyoda Ward, Tokyo) develops and manages solar power generation projects. It is affiliated with Japan Asia Group Ltd.

The mega-solar plants built for the three projects are "Saikachi-yama Solarway" (about 1.6MW, Nakagawa-machi, Tochigi Prefecture), "Kitsuki Solarway" (about 2MW, Kitsuki City, Oita Prefecture) and "Usa Solarway" (about 0.9MW, Usa City, Oita Prefecture). The three mega-solar projects were rated BBB by Japan Credit Rating Agency Ltd (JCR). And Shinsei Trust & Banking Co Ltd will issue rated securities (project bonds) to raise capital.

There are other mega-solar projects that were rated for securitization. For example, a mega-solar project sponsored by Japan Renewable Energy (JRE) Co Ltd was rated A by JCR in August 2013 (plant location: Kurokawa-gun, Miyagi Prefecture). And another project sponsored by JRE was rated A- by JCR (plant location: Osaki City, Miyagi Prefecture).

JCR evaluates the creditworthiness of mega-solar projects by using rating methods for project finance and rates them based on criteria such as project IRR (internal rate of return) and DSCR (debt service coverage ratio). For creditworthiness, the following conditions have to be made.

First, bankruptcy remoteness of the mega-solar project is ensured. Second, the solar panel and PV inverter of the plant are provided by major manufacturers that show good financial performances and have high technical capabilities. Third, a reliable O&M (operation and management) contractor is selected, and an appropriate O&M plan is made.

The ratings of the three mega-solar projects of Japan Asia Group are BBB, which is lower than those of other rated mega-solar projects.

"Compared with projects dealing with a single large-scale plant, their project IRRs are slightly lower," JCR said.