SFTBY Softbank Group Corporation (PK)

Following its announcement to invest about ¥50.0 billion ($487.0 million) in solar power generation in Japan over the next 5 years, The Goldman Sachs Group, Inc. (GS) now plans to invest in offshore wind power. This move is part of the NY-based bank’s target to invest about ¥300 billion ($3.19 billion) in renewable energy investments in Japan.

In keeping with its intention to effectively exploit the demand for electricity generated from solar and wind power, Goldman established The Japan Renewable Energy Co. unit in Aug 2012. The latter was created to plan, design and operate power plants run on energy from the sun, wind, fuel cells, geothermal energy and biomass fuels.

Development of wind power is more challenging when compared to solar as it requires prior investments and expertise, such as an environmental impact study. Notably, it can take approximately 3–4 years to conduct such a study for offshore projects. Further, offshore wind projects usually require approval from local fishermen, which can be quite tedious. Moreover, expenses related to the installation and maintenance of these projects is steep.

The investment in green energy evinces Goldman’s awareness of environment sustainability and its aim to support the development and promotion of renewable energy as well as clean technology. GS Infrastructure Partners – a unit of Goldman – will provide capital to Japan Renewable Energy Co. to initiate projects in clean energy. The company also intends to take bank loans and project financing worth ¥250 billion over a 5-year period.

There is an extensive awareness of the benefits of green energy in Japan, as exemplified in the rising number of solar energy projects in recent times. Consequently, financial markets have identified renewable energy as an immensely valuable asset.

Further, since Jul 2012, the Japanese government has been striving to promote clean energy by offering incentives through renewable tariffs. This has led to a spate of investments and Japan is now poised to overtake Germany as the world’s principal solar market in annual installations.

Other financial organizations keen to invest in renewable energy in Japan include SoftBank Corp. (SFTBY), ORIX Corporation (IX) and Mizuho Financial Group, Inc. (MFG).

Through these initiatives, Goldman is likely to alter the dynamics of distributed solar generation and wind power, in addition to producing a significant source of clean energy.

Goldman currently carries a Zacks Rank #3 (Hold).

 
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