Bond spotlight

Funding opportunities post ippan tanpo: Kansai Electric

Written by Rose Choy

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Kansai Electric’s recent $500 million bond issuance made waves in February, with an overwhelming 11.5x book cover — a clear sign of investor appetite. But this could be one of the last US$ bonds issued under Japan’s “ippan tanpo” regime before regulatory changes take effect at the end of March.

For decades, Japan’s electric utilities have relied on these bonds, collateralised by all assets and granted preferential rights under the Electricity Business Act, for their financing. With the grace period ending, companies like Kansai Electric have to adapt their funding strategies. The elimination of these statutory privileges means that new senior unsecured debt could face lower credit ratings and higher financing costs.

Kansai Electric and its peers could expand their investor bases by issuing into the green, transition, and subordinated bond markets domestically and overseas. Electric utilities may also take the opportunity posed by the regulatory change to term out their debt to longer maturities.

With Japan’s energy transition accelerating and the capex needs of the energy sector soaring, much depends on companies finely balancing their funding strategies going forward.

About the author

Rose Choy

Rose Choy

Research Director, APAC

Based in Singapore, Rose has over 20 years’ experience in capital markets, most recently as a Senior PM at Conning Asia, and her research focuses on credit research and analysis on the energy transition in the Asia-Pacific region.

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