Baker & McKenzie (Gaikokuho Joint Enterprise) advised Shinsei Bank on its JPY 1.6 billion loan to JAG Energy Co.,Ltd. (“JAG”), a group company of Japan Asia Group Limited. JAG is constructing five mega solar power facilities in Hokkaido which can generate a total output of approximately 5.5 MW.
Till now, most renewable energy projects were financed through corporate loans and the financing was generally dependent on the creditworthiness of the sponsors, even when the source of repayment was limited to the project cash flow. The financing method in this deal garnered attention because it moved the primary concept of project finance closer to non-recourse loans. This limits the source of repayment to the project cash flow, and affords more independence away from the sponsor by setting up a limited liability company to act as the borrower (via a special purpose company).
Baker & McKenzie’s team was led by Naoaki Eguchi, head of the Tokyo office’s Banking & Finance Practice Group with the strong support of senior associate, Tsutomu Kobayashi.
Commenting on the deal, Eguchi said, “We are honored to be part of this landmark transaction. The project finance conditions of this agreement are innovative because it limits the source of repayment to the project cash flow. Triggered by the introduction of the feed-in-tarrif scheme for renewable energy and the Law on Special Measures Concerning the Providers of Renewable Energy which came in to effect in July 2012, the number of companies entering the renewables market in Japan is increasing. This transaction sets precedent for other businesses looking for options to secure funds and will subsequently encourage the growth of the mega solar market.”
