Solar Fund Launched to Raise Short-term Capital Through Social Lending

2013/11/06 14:57
Kenji Kaneko, Nikkei BP CleanTech Institute

"Social lending" business, which raises funds from private investors through the Internet and lends them to companies, etc, began to tie up with companies that handle mega-solar (large-scale solar) power plant projects in Japan.

Exchange Corporation K.K. (Chiyoda Ward, Tokyo), which runs a social lending business, started to raise funds for "Aqush eco Energy Fund," which is for investing in a firm dealing with mega-solar projects, Oct 1, 2013. Its planned interest rate is 5% (before deduction of the payment to the fund manager, including tax).

The fund is aimed at raising ¥22 million (approx US$223,396). The money will be lent to Kankyo Hatsuden, a firm based in Hiroshima City, Hiroshima Prefecture. A special purpose company (SPC) funded by Kankyo Hatsuden is planning to build "Tottori Houki-chou Mega-solar Power Plant," a power plant with an output power of about 3.4MW, in Houki-chou, Tottori Prefecture, and start to sell electricity generated by the plant in the fall of 2014.

The lending period is 18 months, and investors in the fund can reap profits in a relatively short period of time.

The lending periods of many of the funds targeted at mega-solar projects are long (e.g. 20 years). On the other hand, Aqush eco Energy Fund allows to invest only for 18 months, which is a relatively short period of time. The short lending period was realized because the invested money will be used as a rent for the site on which the mega-solar plant will be built until the construction of the plant is completed.

The total cost of Tottori Houki-chou Mega-solar Power Plant will be about ¥900 million, most of which will be raised from financial institutions through project finance. However, the money will be transferred only after the construction of the power generation facilities is completed and the plant starts to sell electricity.

Aqush eco Energy Fund will provide capital that is needed until the project starts to be financed through project finance. And the money raised for the fund (¥22 million) will be paid back by financial institutions through project finance.

Social lending is a scheme that raises relatively short-term funds from various private investors through the Internet and lends them to companies, etc. It is widely adopted in the UK and US. In Japan, several companies are tapping the social lending market as pioneers, including Exchange Corporation.

Kankyo Hatsuden, in which the money will be invested, is a venture firm established in March 2012. It develops and runs solar power plants, sells electricity and provides consulting services to other companies. Thus far, the company has handled six mega-solar projects (on six sites) whose power generation capacities amount to 7.6MW. And it is now planning to develop mega-solar plants whose power generation capacities will add up to 17MW or higher.