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Japan-Update

Obayashi, Maeda power up renewables operations

Japanese builders seek stable earnings to counter construction cycle

TOKYO -- Two of Japan's leading construction groups seek to grow their renewable energy business significantly in the next few years to create a stable revenue source apart from their cycle-prone core business.

Obayashi aims for a consolidated operating profit of about 2.3 billion yen ($20.4 million) from solar farms and other renewable energy projects in the year ending March 2019 -- 10 times last fiscal year's result. Maeda projects a 150% gain to roughly 1 billion yen.

Last month, Obayashi began operating 40 solar power facilities totaling 129 megawatts in generating capacity. The company plans to switch on a wind farm in northern Japan's Akita Prefecture in November and a biomass power plant in Yamanashi Prefecture, near Mt. Fuji, next year. Obayashi's switch from a declining-balance to a straight-line depreciation method should also give a boost to the renewables segment's profits by easing initial expenses.

Maeda will activate a solar power facility in western Japan's Yamaguchi Prefecture this winter, bringing the group's total solar capacity to 27MW including two existing facilities. The company intends to keep these assets as revenue earners, unlike the operational solar and wind farms it sold off in 2016. It starts work on a new onshore wind farm this month and is considering moves into offshore wind power and biomass as well.

Obayashi forecasts group operating profit to grow 0.6% this fiscal year to 134.5 billion yen, while Maeda projects a 16.9% gain to 27 billion yen -- record highs for both companies. But the builders see the current surge in domestic construction, fueled by redevelopment projects in Tokyo, as subsiding eventually, and they seek to diversify their earnings sources.

(Nikkei)

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