Analysis - Marubeni buys into Mainstream

WORLDWIDE: Japanese trading company Marubeni has bought a 25% stake in Irish developer Mainstream Renewable Power for EUR 100 million as part of a move into emerging markets.

This is Mainstream's second major deal with a financial house in the past three months and will allow the company to invest more into its pipeline.

The deal, the largest equity investment since Mainstream was formed more than five years ago, will give Marubeni representation on Mainstream's board, assuming it gets shareholder approval. It also extends Marubeni's involvement in the wind sector — the company already owns significant shares in the Gunfleet Sands offshore project in the UK and the Raleigh wind farm in Ontario, Canada.

Mainstream CEO Eddie O'Connor described the deal as a "game changer" — this could apply to Marubeni as well as to Mainstream. From Mainstream's point of view, it appears to signify another inflow of cash to fuel its investments. For Marubeni, it signifies a further deepening of its involvement in wind power as has been happening steadily over the past two years.

Marubeni entered the wind sector in the late 1990s when it began installing onshore projects in Japan. But in late-2011 the company acquired 49% of the Gunfleet Sands offshore wind farm. This was followed by a flurry of deals in 2012, including the acquisition of marine company SeaJacks and heading up a consortium planning to install a floating wind turbine off of the Japanese coast at Fukushima.

However, although Mainstream is a member of the Smart Wind consortium at the 4GW UK Hornsea site, it is not the company's offshore experience that was most attractive to Marubeni. According to the Japanese company, Mainstream's involvement in emerging markets such as Chile and South Africa helped seal the deal. It added it was particularly looking at pre-consent projects with the aim of understanding the industry.

Marubeni is not the first financial house to be tempted by Mainstream's involvement in emerging markets. In June, the developer signed a $1.4 billion joint venture deal with private equity company Actis to develop 600MW of renewables projects in Chile.

The tie-up was to purchase projects from Mainstream's Chilean pipeline, which the developer has continued to manage. It is largely understandable. Projects in emerging market tend to be easier to set up as there are no local sourcing rules to contend with and, in the case of South America, there is a lot of wind, meaning high capacity factors.