Sparx Aims to Raise as Much as 20 Billion Yen for Ecology Fund

Date: Friday, November 27, 2009
Author: Komaki Ito and Tomoko Yamazaki, Bloomberg

Sparx Group Co., Asia’s biggest hedge-fund company, plans to raise 20 billion yen ($230 million) for a fund aimed at investing in Japanese environmental technology firms as mandates to cut carbon emissions spur demand.

The fund will invest in 20 to 30 companies with so-called smart grid technologies and aims to raise capital from global investors as early as January, Chief Executive Officer Shuhei Abe said in an interview in Tokyo yesterday. As part of the plan, Tokyo-based Sparx will set up an investment partnership with funding of about 1 billion yen including its own money by the end of the year, he said.

Abe, who is reorganizing Sparx after the first annual loss in its 20-year history, seeks to capitalize on companies benefiting from global initiatives encouraging use of renewable energy to reduce greenhouse gases that are blamed for global warming. Sparx posted a 23.3 billion yen loss last year after the 2008 equities rout and total assets have fallen about 68 percent from an August 2006 peak of 2 trillion yen.

“Our biggest challenge going forward is how we rebuild our investment strategy on Japan; it’s the key to our revival,” Abe said at an investor meeting in Tokyo yesterday. “And we have embarked on an investment plan for a future green energy society -- those with the technology will survive.”

Japan, a signatory to the Kyoto Protocol, has pledged to cut emissions of gases blamed for global warming by 6 percent from the 1990 level by 2012. The government’s pledge will help Japanese companies gain a leading position on environmental technology development, according to Abe.

Smart Grid

Smart-grid technologies help utilities improve the flow of power by carrying both electricity and data. The technology also allows consumers to feed excess power back to the grid and makes utilities manage swings in power generation associated with renewable energy sources.

Sparx has agreed to join a group led by Japan Wind Development Co. to set up a “Smart Grid Beta Model” in Aomori Prefecture, about 700 kilometers (435 miles) north of Tokyo, to gain more investment intelligence on the technologies. Toyota Motor Corp., Hitachi Ltd. and Panasonic Electric Works Co. are also working on the project.

Sales of solar cells, fuel cells, energy-saving lighting and energy-efficient heating systems in Japan will more than double to 1.4 trillion yen in the nine years to 2017, according to Tokyo-based research firm Fuji Keizai Co.

Abe’s effort to turn its business around by cutting costs and attracting more investors comes after total assets managed by Sparx fell to 631 billion yen in October.

Sparx posted 119 million yen profit for the six months ended Sept. 30 helped by lower tax payments, compared with a loss of 1.15 billion yen a year earlier. Revenue fell 37 percent to 4.2 billion yen while taxes paid declined by 1.16 billion yen, the firm said.

Fees from assets managed by Sparx fell 46 percent from a year ago to 3.3 billion yen, while performance-based fees dropped 73 percent to 3.21 million yen, the company said.

Sparx shares have lost 40 percent this year, touching a record low in March.

To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Komaki Ito in Tokyo at kito@bloomberg.net