Showa Shell to Spend $1.1 Billion, Boost Solar Output

Bloomberg.com

By Shigeru Sato and Yuji Okada

Sept. 7 (Bloomberg) — Showa Shell Sekiyu K.K., a Japanese refiner and solar-equipment maker, plans to build a 100 billion- yen ($1.1 billion) photovoltaic-panel factory to expand solar capacity about 10-fold and offset waning demand for oil products.

The unit of Royal Dutch Shell Plc will buy a disused plasma-television factory in Miyazaki, southern Japan, from Hitachi Ltd., Showa Shell and Hitachi said in separate statements released in Tokyo. The plant will have a capacity of 900 megawatts a year, Showa Shell said.

Showa Shell plans to spend as much as 160 billion yen over five years to expand its solar business as domestic sales of oil products wane and renewable energy demand is poised to rise under environment policies proposed by Japan’s newly elected Democratic Party of Japan.

Prime minister-designate Yukio Hatoyama today renewed his party’s pledge to reduce Japan’s emissions of greenhouse gases by 25 percent by 2020 from 1990 levels, a goal that’s more ambitious than outgoing premier Taro Aso’s target of an 8 percent reduction. Incentives for the industry may result in a 20-fold surge in solar sales by 2020, Goldman Sachs Group Inc. analysts Hiroyuki Sakaida and Ikuo Matsuhashi said in an Aug. 17 report.

Shares in Showa Shell have gained 21 percent in six months, beating the 16 percent increase in the 11-member Topix Oil and Coal Product Index. They closed at 973 yen, up 2 percent, at the close of trading in Tokyo today.

The plant will be Showa Shell’s third solar factory in Japan, and expand total photovoltaic-panel capacity to 1 gigawatt a year, according to the statement. Commercial production is slated to begin in late 2011.

Saudi Tie-Up

Showa Shell began making solar panels in 2007, commissioning its first plant, also in Miyazaki, with initial capacity of 20 megawatts a year. The company in June started a second factory in the prefecture and expanded capacity to 80 megawatts, according to the statement.

The company will ally with state-owned Saudi Arabian Oil Co., known as Saudi Aramco, to build small solar power plants to supply schools, hospitals and households in the Middle Eastern country, Showa Shell said in June.

Japan’s oil consumption has slumped since touching a peak of 247 million kiloliters in 1996, damped by a shrinking population and a switch to cleaner alternatives. Demand is forecast to continue to decline by an average of 3.5 percent a year to March 2014, according to the trade ministry.

To contact the reporters on this story: Shigeru Sato in Tokyo at [email protected]; Yuji Okada in Tokyo at [email protected].

Last Updated: September 7, 2009 04:29 EDT

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