A third way

Europe–Japan collaborations in third markets

Text by Gavin Blair

The impetus for Japanese companies to expand operations overseas continues to strengthen in light of the grim long-term prospects for domestic growth — despite the current relative boom times. And while projects abroad are nothing new for Japan’s firms, there is a growing trend of joint ventures with European companies in third markets. Such collaborations often rely on a combination of complementary technologies with local knowhow or connections.

For many European firms, working with a Japanese company on a project in a third country can be a more enticing prospect than investing directly in Japan’s (very) mature economy.

Spanish Ambassador to Japan Gonzalo de Benito says he would like there to be more bilateral investment between the two nations, but that joint ventures elsewhere are “the opportunity that we see as more promising.”

“Spanish companies are working together with Japanese companies and developing very important projects in third countries, like Qatar and Chile,” notes Ambassador de Benito. “An example is the cooperation between Mitsubishi and Acciona in the electricity, desalination and water-treatment sectors in both of these countries, with projects worth billions of dollars.”

Japan’s big trading houses, including Mitsubishi Corporation, have long been active overseas in a range of industries.

“In the infrastructure sector, we again have Mitsubishi, cooperating with the Spanish company CAF to supply train units to the new Manila metro,” the ambassador adds.

Mitsubishi is providing 30 trains, to be constructed by CAF, worth around ¥30 billion ($265 million), for the Manila Light Rail Transit project. The new transport system is being built with help from loans guaranteed by the Japanese government.

Many third-country ventures are in the renewable energy sector. Mitsubishi is also working on a large-scale solar plant in Kenya with France’s Total. In fact, the French energy giant collaborates in numerous ways with Japanese firms.

“We cooperate in joint investment, such as the Ichthys liquefied natural gas project in Australia with Japanese oil company INPEX; in EPC [engineering, procurement and construction] contracts or equipment supply, for example, of pipes, power plants, and vessels; and often project financing with Japanese banks,” says Daniel Lauré, country chair for Total and president of Total International Japan.

“One advantage in a European–Japanese partnership is the benefit of cultural diversity, even if it is, at the same time, challenging,” he adds. “Another advantage is the attractiveness for the third-party countries to have the support of both Europe and Japan behind their industrial champions.”

Earlier this year, Japan’s JERA (a joint venture between Tokyo Electric Power Company and Chubu Electric Power) announced it was linking with Fluence Energy (a collaboration between Germany’s Siemens and the US’s AES Corporation) and Australian renewable-energy developer Lyon Group on three solar power plants that will generate 550MW. The $1.1 billion project in Australia is due to come online next year and will have storage batteries with 100MW output — some of the strongest in the world.

“Fluence has a wealth of experience using grid-connected energy storage and a track record of improving quality over time,” explains Hajime Hiyoshi, general manager of JERA’s globalisation section. “We expect Fluence to further improve the quality of its batteries as it adds Siemens technology.”

According to Hiyoshi, JERA is aiming to broaden its operations from thermal power, “which has been our primary source of generation until now … to renewable energy sources as we build an optimal power-generation portfolio.”

Elsewhere in the Asia–Pacific region, major offshore wind-generation projects are being realised by multiple partnerships between Japanese and European firms. Copenhagen Infrastructure Partners (CIP), a fund which invests in renewable energy globally, is currently involved in two major offshore wind projects in Taiwan.

“One is set to generate 600MW, the other 300MW, with local partner China Steel Corporation and DGA, a Mitsubishi Corporation subsidiary,” explains Mads Skovgaard-Andersen, associate partner at CIP.

CIP is in the process of finalising agreements with MHI Vestas Offshore Wind to supply turbines for the projects, according to Skovgaard-Andersen. MHI Vestas was formed in 2014 as a joint venture between Mitsubishi Heavy Industries and Vestas, a Danish global leader in wind-power technology.

MHI Vestas combines decades of experience in wind power from Vestas with MHI’s “world-class manufacturing expertise and knowhow,” says Masato Yamada, the joint venture’s chief strategy officer. “[This has been] developed [as we have] delivered innovative and integrated solutions across a wide range of industries: commercial aviation, transportation, power plants, gas turbines, machinery, infrastructure, integrated defence and space systems.”

The difficulty in repairing turbines, which can be between 15km and 100km from shore to catch the best winds, is fairly self-evident.

“To put it very simply: we want them to produce maximum output and not break down,” explains Skovgaard-Andersen, who adds that the involvement of Mitsubishi is also an advantage due to its track record in Taiwan.

Offshore wind turbines are one of the fastest growing technologies in energy generation, according to Skovgaard-Andersen, who says CIP is also currently developing the first offshore wind project in the US.

As the dangers of climate change caused by the burning of fossil fuels become ever more apparent, the importance of renewable energy grows.

Danish Ambassador to Japan Freddy Svane sees the combination of Japan’s “strong tradition of engineering and high-quality manufacturing” and Denmark’s “creativity and innovation” as one way to create solutions for “major global challenges”.

The ambassador points to MHI Vestas as a prime example of such cooperation: “Danish and Japanese companies can jointly bring us into the future by combining all their talent, money and technologies.”

On 22 October, Japan and the EU will hold the first round of industrial, trade and economic talks, to be attended by Japanese ministers Taro Kono and Hiroshige Seko, along with the European Commission’s vice president for investment Jyrki Katainen. The aim is to foster cooperation on funding infrastructure projects in the Middle East and Africa.  •