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Business deals

Mitsubishi hones renewable skills with $4.5bn Dutch buyout

Trading house teams with Japan utility Chubu to purchase Eneco for distribution expertise

Wind turbines in France: Europe is a world leader in adopting renewable energy.   © Reuters

TOKYO -- Japan's Mitsubishi Corp. and Chubu Electric Power were selected as preferred buyers for Dutch energy company Eneco, as the partners seek know-how on downstream distribution of renewable power in Europe -- expertise that also could be applied in the U.S. or Asia.

The Mitsubishi-led group outbid Royal Dutch Shell and others in a deal estimated to be worth $4.5 billion. The parties announced the selection on Monday.

This will be the first time that Japanese companies take on the entire electricity delivery process abroad from generation to retail. Europe is one of the world's leading markets for renewable power.

Trading house Mitsubishi and utility Chubu Electric intend to form an 80-20 joint venture that acquires all shares in Eneco from 44 Dutch municipalities by June 2020 as part of the company's privatization. The buyers will fund the deal through cash already on hand.

Eneco boasts about 6 million retail customers across the Netherlands, Belgium and Germany. It is the second-largest player in the Netherlands and ranks third in Belgium. The company also engages in energy and gas trading. Net profit totaled 136 million euros ($150 million) in fiscal 2018.

The Dutch company was an early adopter of renewable energy, entering the space in 2007. Eneco has amassed 1,200 megawatts of renewable capacity, mainly in land-based wind energy, and aims to reach 2,600 MW within five years.

The deal would increase Mitsubishi's renewables capacity by about 150% to 3,000 MW. Renewables will form about 20% of the trading house's energy mix by the early 2020s, up from the current 10%.

Eneco also is a pioneer on digitally adjusting the power supply in response to changing demand. It has a stake of over 30% in Next Kraftwerke, a German virtual power plant, which combines the output of various power sources into one package.

The European power market is more deregulated than Japan's. The Japanese companies hope to make inroads in fields like decentralized power, storage batteries and virtual power plants through the deal.

Mitsubishi is already active with independent power producers and natural gas interests. The Eneco deal will help it strengthen customer-oriented operations as well.

Chubu Electric, which distributes power to central Japan, looks to bolster its overseas operations. Power-saving measures and a shrinking population hinder Japan's energy market, and Chubu Electric aims to make half its revenue from overseas and through new business areas like renewables.

But the renewables market has reached a crossroads. Many countries are reevaluating feed-in tariff schemes, and power producers and equipment makers are consolidating to reduce costs. With Europe starting to run out of suitable sites for wind farms, Mitsubishi and Chubu Electric need to bring the know-how they gain to other markets like the U.S., Japan and the rest of Asia.

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