Japanese trading house Marubeni has been aggressively expanding infrastructure PPP business from 2000s. As an IPP (Independent Power Producer), Marubeni already has 26 GW gross generation capacity with 7.7 GW net capacity (owned share) mainly in Asia and Middle East. Since world’s infrastructure investors are quoted to evaluate an IPP with more than 6 GW net capacity as “qualified”, Marubeni has become the one.
Regarding water PPP business, Marubeni has six special purpose companies in Mexico, Chile, Peru and China, and two O&M projects in Qatar. Served population in total is 4.3 million. The trading house vigorously vowed that the target of population served was 10 million and it aimed to be ranked within the 10th largest water company.
Trading house is a unique industry category seen in Japan which is buying and selling various items from aircraft to daily foods indispensable for life in Japan. But in recent years, most profits of major trading houses are earned from upstream business of energy and mining whose trading counterpart isn’t necessarily a Japanese company. That is partly because most products bought in foreign market will soon become commodities in today’s networked economy. To earn a thick profit, trading house should enter into the area that is hard to be commoditized such seen in upstream business of mining. The key is “the exclusive right to sell” or dominance given by governments. Characteristics of IPP and water business are very similar with upstream business of mining, so that not only Marubeni but also other major trading houses are eagerly expanding the ownership and the share of these businesses in foreign countries.
Of all major trading houses in Japan, Marbeni is the fastest runner so far. In 2005, the company won $3 billion project of Abu Dhabi’s power and water providing, Taweelah B, with domestic and international partners. The total amount of the money, $2 billion, project-financed by international bank syndication was said to be the largest then. After that, Marubeni inked agreements on several large projects of power and desalination with emirates of UAE and Saudi Arabia.
As to water and waste water field, the latest news told that the company bought 100% stake of Aguas Nuevas, the third largest water and sewage utility in Chile with Japan’s national strategic investment fund Innovation Network Corporation of Japan. Along with previous acquisition of Chilean and Peruvian water assets, Marubeni is rapidly accumulating water business know-how for further expansion.
Basically, business model of IPP or IWPP (Independent Water and Power Producer, “Water” stands for desalination especially in Middle East oil producing country) is the same with that of water/waste water. The awarded special purpose company handles all or some of “build” “own” “operate” and “transfer” after closing of finance. Off-taker (buyer) buys the service of the SPC based on a long term contract. So, trading house accustomed to this business model naturally enter into water/waste water businesses. At present, Marubeni is outstanding in terms of proactive investment. Trading houses of Mitsubishi, Mitsui, Sumitomo and Itochu are following Marubeni.
In Japan, water/wastewater business is the hot theme among relevant industries. Japanese government are also advocating the potentials of this business and conducting promoting policies. There are numerous vendors which can supply necessary equipments and technologies for water or wastewater, however, they are relatively new to PPP based business abroad. Lessons and learned of trading houses have significant values for them.
Originally posted on Infrastructure Investment Journal authored by Daisuke Imaizumi, CEO of InfraCommons.