By Megumi Yamanaka
June 24 (Bloomberg) — Showa Shell Sekiyu KK, a Japanese refiner and solar-equipment maker, rose to the highest in nine months after saying it will build solar plants in Saudi Arabia to expand its alternative energy business.
The shares rose as much as 9.6 percent to 1,077 yen, the highest since Sept. 29, and traded at 1,063 yen at 10:48 a.m. in Tokyo trading. It was the sixth-biggest gainer on the benchmark Topix index.
Showa Shell will build small-scale solar power plants in areas not connected to the electricity grid as part of a solar venture with Saudi Arabian Oil Co. targeting expansion in the Middle East and Southeast Asia, spokesman Kenichi Morishita said by phone from Tokyo. The Japanese refiner plans to spend as much as 160 billion yen ($1.7 billion) over five years to expand its solar business as domestic demand for oil products wanes.
The Saudi project is the first step in its solar expansion, and investors are bidding up the shares on todays news, Hidetoshi Shioda, a senior analyst at Mizuho Securities Co., said by phone from Tokyo. Showa Shells shares havent reflected the impact of its solar expansion as the business hasnt yielded a profit yet.
Showa Shells President Jun Arai targets profit of 50 billion yen from the solar business by the end of 2014 from the current break-even returns, he said in May. He aims to boost output from 80 megawatts now to 1 gigawatt a year in the same period.
Saudi Aramco, as the state-owned oil company is known, is Showa Shells second-biggest shareholder, with a 15 percent stake. Royal Dutch Shell Plc owns 33 percent, according to data compiled by Bloomberg.
To contact the reporters on this story: Megumi Yamanaka in Tokyo at[email protected].
Last Updated: June 23, 2009 22:10 EDT
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It is often the case that Joint Ventures like Showa Shell are far more innovative than 100% Shell owned and managed operations. Whilst Shell globally is largely turning its back on Renewables how interesting that a company in which Shell has a minority share is pressing ahead.