An Activist Investor Could Green Japan for $700 Million

Billionaires with an eye on their legacy rarely do things on a small scale.
Take Australia’s fifth-richest person, Mike Cannon-Brookes. The Atlassian Corp. co-founder wants to spend A$30 billion building the world’s largest renewable energy export project, SunCable. Those plans moved a step closer to realization last week, when Canberra gave environmental approvals for the 4 gigawatt solar farm in the remote Northern Territory.
You can’t fault the scale of Cannon-Brookes’s ambitions. SunCable could generate about four times more electricity than the Northern Territory currently consumes. Excess power would flow 4,300 kilometers through the world’s longest and deepest undersea power cable, to provide about 15% of Singapore’s electricity.
Still, there are better ways to tackle the problems of Asia’s fossil-fuel dependency — and $700 million spent in the right place could achieve far more. Here’s how.
As we’ve written, the engineering challenges involved in laying SunCable’s undersea cable will likely mean it never gets built. What’s more, in the time it has been in development, Singapore has switched from being a laggard on renewables to a serious mover, with ambitions to import its own 4.2GW from Cambodia, Indonesia and Vietnam, significantly more than the 1.75GW SunCable is offering.
At the same time, the biggest energy export project underway in Australia’s far north right now doesn’t involve solar power, but liquefied natural gas: Woodside Energy Group Ltd.’s $12.5 billion offshore Scarborough project, 2,000 kilometers to the west. It’s unlikely that would be going ahead without demand from Japan, which buys about a third of Australia’s gas exports.
Billionaires with a taste for green-tinged investments should be spying an opportunity. One reason for Japan’s ongoing fossil fuel demand is that its monopolistic regional power companies are institutionally hostile to renewables. 
State and utility cash is being wasted on ammonia co-firing, a boondoggle that will prolong the lives of coal plants at considerable expense and little environmental benefit. Most hopes for Japan’s decarbonization hinge on population decline and crossing fingers that 13 years of institutional roadblocks to restarting nuclear power will suddenly disappear. The energy security risks of being dependent on daily fuel shipments through a potential flashpoint for a great power naval war are forgotten. At a time when installations are booming almost everywhere else, clean power developments are grinding to a halt.
One way to break this hidebound status quo would be for activist shareholders to change the market from the inside. Cannon-Brookes has form here: In 2022, he took a 10% stake in Australia’s biggest polluter, utility AGL Energy Ltd., and pushed it toward a more rapid decarbonization plan. That shake-up succeeded, and his investment is now worth about 29% more than he paid for it. 
Such campaigns, once a rarity in Japan, have boomed in recent years, with investors demanding change at such storied names as Sumitomo Corp., SoftBank Group Corp., Sony Corp., and Seven & i Holdings Ltd.
What could such a bid look like? For $703 million — only a little more than the roughly $600 million value of Cannon-Brookes’s dividends from AGL, plus the stake itself — he could buy 5% each of Electric Power Development Co., or J-Power; Kyushu Electric Power Co.; Hokkaido Electric Power Co.; and Tohoku Electric Power Co. That would give him a say in the utilities that cover Japan’s renewables-rich, low-population density north and south, plus J-Power’s transmissions infrastructure, which can deliver electricity to the urbanized center of the country.
The biggest risk of such a campaign is getting stymied by the institutional inertia it is meant to shake up. The government, plus the larger utilities in the Tokyo, Chubu and Kansai regions, might quite reasonably see it as an attempt to force a change in their policies.
A law passed in 2020 tightened oversight of foreign investment in key infrastructure. Though it appears to have mainly been targeted at Chinese state-owned companies, its scope is broad enough that it could be used as a poison pill. The law wasn’t invoked, however, to block Palliser Capital’s recent attempt to make the owner of the Narita airport express reduce its indirect stake in Tokyo Disneyland. Cannon-Brookes might hope for a similarly laissez-faire attitude.
Even a failed activist campaign might make sense as a financial investment. All four companies can be bought at a discount to book value, have ample interest coverage, and boast free cashflow yields and returns on equity sufficient to make any shareholder salivate. Cannon-Brookes could cash out 12 months hence, and plow the money back into other decarbonization projects, glad to have at least stirred up Japan’s energy debate in the meantime.
That would make far more sense than dropping more money on SunCable’s undersea transmission line. Because of its far greater size, reducing Japan’s carbon footprint by 10% would have a similar effect, in climate terms, to cutting Singapore’s carbon pollution in half. For a billionaire with a mission to prevent climate change, “Greened the energy policy of the world’s fourth-biggest economy” would make a hell of an epitaph.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist covering climate change and energy. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.
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