Goldman Sachs backs solar PPA in Japan with $63 million bond

A unit of Japan’s Itochu will sell power from 700 solar facilities to a subsidiary of telecoms giant NTT under a 30-year power purchase agreement. Goldman Sachs is supporting the deal with a first-of-its-kind green bond.

Image: Quantumquark, Wikimedia Commons

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Goldman Sachs is arranging a JPY 8.7 billion (63.5 million) green bond to support the construction of around 700 solar plants on disused farmland across Japan by Clean Energy Connect (CEC), the renewable energy unit of Japanese trading company Itochu.

The solar facilities will sell power to NTT Anode Energy, a unit of Nippon Telegraph and Telephone Corp. (NTT), under a 30-year PPA.

“While 30 years is a long horizon, the vast majority of investors said they felt comfortable because of the issuer’s exceptionally strong credit ratings, ” a Goldman Sachs spokesperson told pv magazine.

This is the first time that a green bond linked to a solar PPA has been issued in Japan.

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“In September 2013, GS structured the first rated securitization of solar energy globally, through our JRE Mega Solar Project Bond Trust 1,” the spokesperson said. “This first-of-kind green project bond transaction led the way to the development of a pipeline of similar project bonds to more efficiently fund renewable energy throughout Japan. To date the firm has arranged more than JPY 100 billion in green project bond financing in Japan.”

Under current Japanese regulations, corporate PPAs must involve electric utilities, except for on-site PPAs. Both physical and virtual PPAs are allowed. Under physical PPAs, electricity buyers pay fixed fees to generators through retailers, including “sleeving” and management fees.

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