Mitsubishi UFJ & Hitachi team up for Japan overseas infra push

02 December 2016 - 12:00 am UTC

Hitachi Capital and a Mitsubishi UFJ subsidiary have agreed to set up a company that will provide early-stage mezzanine debt and equity funding for overseas infrastructure projects.

The Japan Infrastructure Initiative Co (JICC) aims to provide JPY 100bn (USD 874.8m) of finance to Japanese companies that are involved in developing or supplying overseas infrastructure. 

Mitsubishi UFJ Lease & Finance and Hitachi Capital signed an agreement on 1 December (Thursday) to establish JIIC, which will invest much of its capital in Asia but also seek opportunities globally, including North America.

Hitachi Capital Corp and Mitsubishi UFJ Lease & Finance will each contribute 47.5% to JICC’s capital requirements, while MUFJ itself will provide almost 5% of the new company’s funding. 

Structured finance specialist Naoki Nishida has been appointed as JIIC’s chief executive and the company is expected to begin operations from early next year.

Nishida was formerly chief executive of Bank of Tokyo-Mitsubishi’s (BTMU) Malaysia unit, from which he stepped down earlier this year.

JIIC will have JPY 20bn of paid-in equity capital with BTMU potentially providing additional debt funding for projects on a case-by-case basis.

MUFG and its Mitsubishi UFJ Lease & Finance subsidiary will also have exposure to JIIC through their respective stakes of 23% and 4% in Hitachi Capital that were taken in October.

In May, Hitachi Capital and Mitsubishi UFJ Lease & Finance agreed to co-operate on investments in environment and energy, urban infrastructure and public facilities in Japan, China, ASEAN countries and other overseas markets.

That agreement came ahead of Japanese Prime Minister Shinzo Abe’s announcement in May that Japan would expand its Partnership for Quality Infrastructure introduced last year.

The six countries in the ASEAN economic bloc will need USD 2.1trn of spending on new infrastructure by 2030, according to a HSBC report published earlier this year. 

JIIC’s moves to carve out new opportunities for Japanese companies overseas come amid expectations of massive increases in infrastructure spending in many global regions.

China estimates that its sprawling Belt and Road initiative to build networks of new infrastructure across central and southeast Asia, and into Europe and Africa, could generate USD 2.5trn of opportunities for China’s firms and banks. 

However, a perceived lack of private-sector foreign investment expertise at some state-owned Chinese banks may present opportunities for Japanese companies to reap some of the benefits of the China-led infrastructure splurge, said some commentators interviewed by InfraAsia.  

Chinese companies are still adapting to the pressures of financing overseas as they “no longer enjoy sovereign immunity that they have in China,” said one financier. He added: “They are dealing with risks now they are entering the private sector”.

China and Japan target infrastructure exports to many of the same countries.

Meanwhile, the US is expected to see an upsurge in spending on infrastructure if president-elect Donald Trump delivers on an election promise to spend USD 1trn on new highways, bridges, tunnels and airports.

Mitsubishi UFJ, Hitachi Capital