Capital Dynamics Ltd., a Swiss private equity firm with more than $20 billion in assets, expects demand for alternative energy investments to grow after Japan’s earthquake led to the worst nuclear disaster since 1986.
Demand for renewable energy sources may increase in Japan, where the industry has been dominated by Tokyo Electric Power Co., providing opportunities for independent power producers, said Capital Dynamics Chief Executive Officer Thomas Kubr. The accident may also lead to a regulatory system that would give “sufficient support” for alternative energies, he said.
Policymakers worldwide are reevaluating their commitment to nuclear power, a carbon-free generation source, after the magnitude-9 temblor and tsunami on March 11 crippled Tokyo Electric’s nuclear plant in Fukushima. Investment in so-called clean energy, including wind, solar and biofuels, totaled $243 billion last year, according to Bloomberg New Energy Finance.
“Very clearly, the Fukushima issue will cause a major shift in thinking about nuclear power all over the world,” Kubr said last week in an interview in Tokyo where he was on a business trip. “What that really means is that for clean energy infrastructure, there will be bigger demand and will require more focus on that type of investing.”
Capital Dynamics runs clean energy funds that focus on infrastructure projects with expected cash returns of 15 percent to 20 percent, managing director Karl Olsoni said in an interview in December, declining to provide details of existing funds including assets managed and investments.
Less polluting
The company, which hasn’t yet invested in clean energy projects in Japan, may start allocating money earlier than it planned because of the disaster, Kazushige Kobayashi, managing director of the firm’s Tokyo office, said in the same interview.
More than 27,000 people are dead or missing after the quake and tsunami. The nuclear disaster is rated 5, the same degree of severity assigned to the Three Mile Island accident near Harrisburg, Pennsylvania, in 1979. The world’s worst nuclear accident was the level 7 disaster at Chernobyl, Ukraine, in 1986.
China, India and Britain are among countries that have said they would review what happened in Japan before moving forward with new nuclear power stations favored over traditional coal power because they pollute less.
In the U.S., nuclear power, together with solar and wind, is among the energy options in President Barack Obama’s plan to require that 80 percent of U.S. electricity comes from low- polluting sources by 2035.
Asia expansion
Capital Dynamics has hired a compliance and regulatory officer since opening its Tokyo office in November, bringing the number of employees to three. The firm plans to open an office in Beijing in the next few months and another one elsewhere in China by the end of the year as part of an expansion in Asia, said Kubr, who is based in Zug, Switzerland.
During his visit to Japan, Kubr met with institutional investors including banks and insurers that are saying that “business is stable and they have not stopped investment after the earthquake,” Kobayashi said. The only exception was the casualty insurers that are assessing the damage, though the impact would be a temporary one, he said.
“In a sense, it’s not big damage as far as investments are concerned,” Kobayashi said. “They are cautious, but they have not changed their plans.”
Capital Dynamics, which has been doing business in Japan for five years, won its first mandates from local institutional investors this year, according to Kubr. To meet demand, the firm is exploring a Japan-focused fund of funds and raising dedicated funds from local investors, he added.
“Japan is a long-term journey, but if you’re committed to the country the reward will be there,” Kubr said. “In a time like this, we don’t change our plans. We are committed to Japan and the operation here.”
