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SoftBank Shaking Up the Energy World?

Over the past few years, Tesla has grabbed western headlines for leading the global energy revolution. But while its CEO Elon Musk has hogged the spotlight, for good or for ill, another company, in the East, has been quietly changing the world.

SoftBank is a Japan-based Internet, technology and communications giant. Like Musk, SoftBank’s founder and chief executive officer, Masayoshi Son, is a maverick tycoon with a multibillion-dollar fortune.

SoftBank was a founding cornerstone investor in China’s Alibaba Group and has subsequently expanded into the US mobile-phone market with the acquisition of Sprint, which has in turn led to a 2018 merger proposal with Deutsche Telekom AG’s T-Mobile, with a combined enterprise value of US$146 billion and 70 million wireless subscribers. If consummated, this would create the third-largest mobile-phone company in the US.

With a market equity capitalization of $73 billion, SoftBank’s mission is to “shake up the world.”

When it comes to energy, it is succeeding.

SoftBank became one of the key advocates for renewable energy in Japan after the 2011 Fukushima nuclear disaster, and the group has since become a leading investor in solar-power infrastructure across Japan, with 650 megawatts of solar capacity in operation across 42 sites as of February.

But it’s the global stage on which the real mark is being made. In the past 12 months alone SoftBank has announced grand plans to invest $60 billion to $100 billion in Indian solar and $200 billion in Saudi Arabian solar.

In a world of big promises, numbers of this scale are likely to be the cause of a skeptical raised eyebrow or two.

To quote Bloomberg New Energy Finance, the Saudi proposal would be “about 100 times larger than the next-biggest proposed development and more than double what the global photovoltaic industry supplied last year.”

It would turn the country from the kingdom of oil to the solar sheikh.

And SoftBank has form. In 2015 it formed Gobi Green Energy with Newcom in Mongolia, with an again ambitious target to develop up to 13 gigawatts of wind power in the country. About 326,000 hectares of land in the Gobi Desert has been secured and the first 50MW of wind-power capacity was completed at Tsetsii last October.

India is perhaps the biggest and most consequential of all, especially since until recently, it was viewed by the coal industry as an engine for growth.

But with coal debts rising almost as fast as the price of renewables is falling, times have changed. With solar now cheaper than coal, India’s coal-plant pipeline has tumbled by a staggering 547GW since 2010, enough to power Germany three times over.

SoftBank is seizing the opportunity, and there is tangible evidence its transformative investment plans are starting to take shape. This month, for example, the company committed $1.1 billion to win a third of the largest solar tender to date in India.

This was no opening gambit. In 2015 SoftBank announced a plan to invest $20 billion to build and finance 20GW of new Indian solar infrastructure, partnering with Foxconn of Taiwan and Bharti Airtel of India via the vehicle SB Energy.

In March 2017, SB Energy’s first 350MW of solar was commissioned, with another 650MW of solar tenders won at prices below those of existing domestic coal-fired power generation. The list of genuine projects is large and growing.

In fact, in 2017, SB Energy was rated the second-largest solar developer in India, according to a joint analysis by the International Energy Agency and the Delhi-based Council on Energy, Environment and Water (CEEW) released last month.

SB Energy’s positioning as a serious operator is not coincidental, since it comes at a time when the Indian government is planning a 40GW annual renewable investment program in the coming decade, with a staggering target for renewables to reach 55% of total installed capacity by 2030.

SoftBank’s role is critical because it has helped open up global capital-market interest in Indian renewables, beating a path for other major players to follow.

Indeed, one of the hallmarks of SoftBank is its aggressive and unorthodox capital management. In May 2017 it successfully closed its raising of $92 billion in a new private equity fund, the SoftBank Vision Fund (SVF), and another $6 billion for the new Delta Fund, for investment in the global “information revolution.”

Investments by partners include $45 billion from the Saudi government’s Public Investment Fund (PIF), as well as from Abu Dhabi-based Mubadala Investment Company, Apple, Foxconn Technology Group, Qualcomm and Sharp Corp, plus $28 billion from SoftBank itself.

This was four times the world’s largest private equity raising ever, with the aim to back promising technologies.

By March this year, $30 billion had been invested.

SoftBank is a key energy-market disruptor, bringing potentially enormous global capital to help resolve energy security and energy poverty through long-term investments in low-cost, zero-emissions solar infrastructure.

Global pension and utility investors are starting to replicate SoftBank’s lead in India, and at the same time could transform Saudi Arabia’s energy economy over the coming decade.

The runs on the board are accumulating, and with $100 billion of capital on hand, this is a visionary enterprise worth watching carefully.

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