TOKYO Feb 26 Goldman Sachs Group Inc is
considering putting money into a major Japanese airport, the
latest foreign investor to eye infrastructure projects as Prime
Minister Shinzo Abe seeks to open up the market.
The U.S. bank may invest in New Kansai International
Airport, a regional hub in Osaka bay and the country's
fifth-largest airport by passenger traffic, once operating
rights are put up for sale, said Ankur Sahu, co-head of
Goldman's Asia-Pacific merchant banking division.
The deal is expected to be Japan's biggest private
infrastructure project - the rights could fetch up to 600
billion yen ($5.86 billion) - and Tokyo is keen for investors to
help trim state-owned New Kansai International Airport Co's 1.2
trillion yen debt.
Other foreign names such as U.S. property investor Fortress
Investment Group LLC and Australian investment bank
Macquarie Group Ltd are taking stakes in Japan's
infrastructure sector - marking a vote of confidence in
"Abenomics", which has recently been struggling.
Abe's policies to revive the world's third-biggest economy
from 15 years of deflation and unsteady growth have hit
headwinds as the recovery has slowed sharply and investors fret
that a burst of monetary easing and fiscal stimulus are not
being followed by structural reforms to make growth sustainable.
For now, foreign investors are focusing on airports and
solar power, but the field could widen as more areas come open -
Abe's government is considering selling operational rights at
other airports, highways and sewage systems. In June, Abe
targeted tripling Japan's private infrastructure investment to
12 trillion yen ($120 billion) over the following decade.
"The government has the highest incentive ever to attract
private money to invest in public infrastructure because there
is a huge list of projects that need to be done, and the
government can't afford to finance them all," said Daiju Aoki, a
senior economist at UBS Securities Japan.
LOOKING FOR OPPORTUNITIES
Infrastructure generates lower returns than investments that
Goldman and Fortress have previously sought in Japan, but as the
number of potential deals dwindles, they have started scouting
for lower but stable long-term returns.
An official at Aichi Prefecture Road Public Corp, owned by
the prefecture, said it has been sounding out potential bidders
for rights to operate local highways.
Macquarie, a renowned infrastructure investor, abandoned a
stake in a Japanese airport terminal building five years ago
after a national controversy over whether foreigners should be
allowed to own public infrastructure in Japan. Now, though,
Japan appears more ready to let private investors make profits
on infrastructure. Even before Abe took office, the government
in 2011 revised laws on private finance initiatives, allowing
private investors to control management of airports and a
broader variety of public facilities.
The same year, Japan passed a law allowing private investors
to buy rights to operate commercial facilities and runways at
Goldman was once an aggressive corporate investor in Japan,
ploughing into cash-strapped companies and turning them around
for re-sale. The bank and other investors sold appliance maker
Sanyo Electric Co to Panasonic Corp in 2008 and, in
2012, Goldman sold contractor Fujita Corp to homebuilder Daiwa
House Industry Co.
Now, the bank has set up a firm called Japan Renewable
Energy, which builds and operates solar energy platforms, its
most significant investment in Japan in a decade.
"In the past 10 years we were active in making equity
investments in Japan. We are still looking for all possible
opportunities, but we have made few investments," said Sahu, who
led Goldman's investments in Sanyo and Fujita.
If Goldman invests in Kansai Airport, it would be part of a
consortium as the deal would be so big, he said. The bank would
use money from the $3.1 billion GS Infrastructure Partners II
fund it launched in 2010, he said.
Fortress, which has invested mainly in distressed loans and
properties in Japan, is raising 200 billion yen from Japanese
investors to set up a fund for infrastructure investments in
Japan's rapidly growing alternative energy market is
attracting investors as the government encourages reliance on
solar energy after shutting all the nation's 48 nuclear power
plants in the wake of the Fukushima disaster in 2011. Tokyo
introduced generous subsidies to encourage solar investment,
sparking a development rush. For example, Equis Funds Group, a
Singapore-based alternative energy investment firm, plans to
raise $500 million over the next year to fund solar-energy
projects in Japan.
Macquarie, which in 2009 sold a 20 percent stake in Japan
Airport Terminal Co, the operator of terminal buildings
at Tokyo's Haneda Airport, back to the company after its
ownership triggered a national backlash over foreign ownership,
last year agreed to form an infrastructure joint venture with
Japanese general contractor Maeda Corp.
Other airports in Japan could go on the block after the
government last year revised laws to allow the sale of rights to
operate airports in other cities. Sendai Airport in northern
Japan is expected to go up for sale this year.
Several domestic firms, such as a financial services company
Orix Corp and mobile operator SoftBank Corp
are also investing in renewable energy projects.