August 27, 2016 3:00 am JST

Japanese trading houses promise to quench Africa's energy thirst

TOKYO -- Japan's trading houses have lined up African power projects worth hundreds of billions of yen, aiming to set up key infrastructure that could help them branch out into other businesses on the continent.

Power surge

General trader Marubeni will build a 1.8 million kW fossil-fuel plant in Nigeria's Lagos state under a deal with local energy companies and the national government. The plant, estimated to cost around 190 billion yen ($1.89 billion), will be Nigeria's largest when fully built, with a capacity equal to 15% of the national total. Construction will begin in 2018, with power production to start in 2021. Mitsubishi Hitachi Power Systems will provide such key components as turbines and boilers.

Japan's Ministry of Economy, Trade and Industry provided aid for preliminary studies for the project. The Japan Bank for International Cooperation may also provide financing for the parties ordering the plant.

Marubeni has built power plants in Nigeria before, though never on the scale of the current project. A memorandum of understanding enlisting the trading house for construction will be signed at the Tokyo International Conference on African Development running Saturday and Sunday in Nairobi, Kenya.

Sumitomo Corp. will ink its own memorandum with the Mozambique government at TICAD to build a 1.2 million kW facility -- a capacity double the country's current total. A timeline for construction and production is yet to be set. Costs will total around 200 billion yen, according to a source close to the matter. The Japanese company will also sign up for other fossil-fuel power projects in Mozambique and Angola at the conference.

Mitsubishi Corp. is set to build and run a large-scale solar power plant in Kenya with partners such as France's Total. This is the Japanese trading house's first African solar project. Mitsui & Co. will form strategic partnerships with state energy companies and banks in Mozambique, where the general trader is involved in major coal mining and liquefied natural gas projects. Memorandums of understanding for both projects will be signed at TICAD. 

Getting in position

African power demand is rising rapidly as populations expand and economies develop. The International Energy Agency projects total electricity demand on the continent will climb to roughly triple the 2012 level by 2040.

Japan is eager to help meet this demand with economic aid. The government and the African Development Bank said Friday that they aim to provide $3 billion in financing for infrastructure development and efforts in the health and education fields from 2017 to 2019. Each side looks to fund governments and private companies with $1.5 billion or so. Japan will also create a $300 million credit line targeting efficient coal-fired power plants.

Japan's trading houses have been involved in the African power sector since the 1970s, mostly through the sale of plants and equipment. Lately, that business has expanded to include general contracting work and plant operations, thanks in part to government assistance.

Building a strong presence in the critical power sector will help them deepen ties to governments and powerful local companies, in addition to growing earnings. This is seen bringing benefits across general traders' operations, from resource production to foods, letting companies widen their reach on the continent beyond power infrastructure.

(Nikkei) 

Marubeni Corp.

Japan

Market(Ticker): TKS(8002)
Sector:
Industry:
Distribution Services
Wholesale Distributors
Market cap(USD): 11,878.7M
Shares: 1,737.94M

Sumitomo Corp.

Japan

Market(Ticker): TKS(8053)
Sector:
Industry:
Distribution Services
Wholesale Distributors
Market cap(USD): 18,263.2M
Shares: 1,250.6M

Mitsubishi Corp.

Japan

Market(Ticker): TKS(8058)
Sector:
Industry:
Distribution Services
Wholesale Distributors
Market cap(USD): 36,788.1M
Shares: 1,590.08M

Mitsui & Co., Ltd.

Japan

Market(Ticker): TKS(8031)
Sector:
Industry:
Distribution Services
Wholesale Distributors
Market cap(USD): 27,118.3M
Shares: 1,796.51M

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