Japan Bank for International Cooperation, backing up Japanese infrastructure investment

In Japanese infrastructure investment scene, role of Japan Bank for International Cooperation (JBIC) seems to become more important than ever. Though major infrastructure investment fund such as Global Infrastructure Partners doesn’t exist in Japan so far, considering huge amount of pooled money of public and private pension systems ($3 trillion in total), government funded JBIC may initiate associating Japan made infrastructure investment fund in the near future.

JBIC was originally an export-import bank established by Japanese government. It had a glorious history of Japanese government’s ODA (Official Development Assistance) corresponding loans and financial supports of overseas natural resource project conducted by Japanese companies. Due to resizing policy of public financial institutions, two years ago, JBIC became a unit of international finance at Japan Finance Corporation, a government funded financial company covering several fields. However, its name very familiar to global project finance community didn’t change. At that time, business coverage of JBIC was limited mostly to emerging country’s projects in terms of infrastructure investment. But recently, its coverage has changed to handle advanced country’s projects such as high speed rail and renewable power plant.

JBIC’s web site tells their mission as follows.

• Promoting overseas development and acquisition of strategically important natural resources to Japan
• Maintaining and improving the international competitiveness of Japanese Industries
• Promoting the overseas business having the purpose of preserving the global environment, such as preventing global warming
• Responding to disruptions in financial order in the international economy

Since JBIC is a public lending arm, it can’t compete with private banks, for example, with MUFG, SMBC and Mizuho in global project finance arena. Following project financing tells its position very clearly.

At the end of 2009, one of Japanese leading “sogo shosha” Mitsui & Co. and largest gas company Tokyo Gas decided to buy five fire power plants and one pipeline in Mexico that were owned by Spanish energy company Gas Natural at $1.2 billion.

For reference of foreign readers, “sogo shosha” (general trade company, literally) is unique industrial category in Japan. Historically, “sogo shosha” traded anything necessary for Japanese consumers and corporations, since Japan is an island country that should import numerous goods from abroad.
But things changed a lot. Current strong profit source of “sogo shosha” is upstream business of energy and mining. It is very near to infrastructure investment arena. They keep buying power plants and ownership of mines abroad. Also water industry of foreign country is a hot target of them. As most of them have group companies that lead various industries including financial sector and heavy industry, they might have capability of becoming infrastructure investor for overseas mega projects like Global Infrastructure Partners. In a narrow sense, “sogo shosha” includes Mitsubishi Corporation, Mitsui & Co, ITOCHU Corporation, Sumitomo Corporation, Marubeni Corporation, Toyota Tsusho Corporation and Sojitz Corporation.

Nine months after the press release of Mexican fire power plants and pipeline buying, Mitsui & Co. and Tokyo Gas revealed $750 million project financing agreement for the purchase with Japan Bank for International Cooperation and other Japanese large banks, namely Bank of Tokyo-Mitsubishi UFJ (MUFJ), Mizuho Corporate Bank (Mizuho) and Sumitomo Mitsui Banking Corporation (SMBC). As JBIC can’t compete with private banks, it seemed to call for these three banks which arrange global project finance loans frequently. Remarkable point is that JBIC insures political risk of this finance that cannot be covered by these mega banks realistically. Insuring political risks of large overseas project finance is a regular business of JBIC. By participation of JBIC, Japanese banks and companies can easily embark on infrastructure business abroad.

Regarding to high speed rail export to Florida, which was reported before here, JBIC backs up financing of Japanese concessionaire.

According to its website, JBIC’s business scope includes association of investment fund. There is some possibility that JBIC initiates an infrastructure investment fund with "sogo shosha" using huge money pool of Japanese pension systems.