Pattern Energy Enters Asia with 206MW Japan Acquisition

By Christopher Hopson in London & Karl-Erik Stromsta in New York
Recharge
February 27, 2018

US-based yieldco makes first foray into Japanese market and operating solar with purchase of wind and PV portfolio

Pattern Energy, the US-based wind yieldco, will make its first investments into Japan and for the first time take ownership of operating solar assets, in a 206MW deal with one of its privately held development companies.

More than three years have passed since Pattern’s development arm bought a majority stake in Japanese renewables developer Green Power Investment (GPI), but the latest round of deals formally opens a new chapter for publicly listed Pattern Energy – bringing it for the first time into Asia and into solar energy, two markets in which it is likely to expand in the years ahead.

Pattern will buy five projects in total, including one operating wind farm (12MW Otsuki), two wind projects under construction (33MW Ohorayama and 122MW Tsugaru), and two operating solar plants (29MW Futtsu and 10MW Kanagi).

The 12-year-old Otsuki wind farm uses Mitsubishi turbines, while the two wind projects under construction will use GE machines. Both solar farms use Kyocera modules.

The acquisitions don’t come as a surprise, as the projects had been on Pattern Energy’s identified “right of first offer” (ROFO) list of projects it planned to buy from its development companies.

Pattern chief executive Mike Garland has said the company was attracted to Japan by its generous feed-in tariffs and relatively limited competition in the onshore wind market. Japan ended 2017 with just 3.4GW of installed wind capacity, according to the Global Wind Energy Council, compared to nearly 90GW in Pattern’s home US market.

Pattern’s initial Japanese projects carry an average feed-in tariff of ¥25,340 ($236) per MWh. By comparison, average wind PPA prices in the US are around $20/MWh with the production tax credit in place – and NextEra, the largest US wind operator, recently said it can sell wind power from the best PTC-qualified projects for $12-$18/MWh.

“Japan is one of the largest electrical grids in the world and has one of the most robust renewable energy markets,” Garland says. “GPI’s development pipeline consists of 2.4GW of projects, including 600MW of wind capacity which have qualified for feed-in tariff contracts.”

“Additionally, we believe that as we grow our portfolio, we will be able to enhance our economics over time with the use of local, low cost capital.”

The Japanese projects lift Pattern Energy’s total owned capacity – including projects under construction – to 2.9GW. The yieldco has a 5GW target for 2020.

Garland has previously compared the Japanese renewables market to Canada, where Pattern’s early entrance allowed it to secure a number of big and generous feed-in tariffs in the province of Ontario.

Pattern Energy also said it will make a follow-on $27m investment into Pattern Development 2.0, allowing the developer to assume control of Tokyo-based GPI – in a move consistent with the publicly listed yieldco’s recent investments into the development side of the business.

Pattern last year added its first offshore project to its ROFO list: the 100MW Ishikari nearshore development in Japan. The project is set to enter construction next year and due for completion in 2022.