Kansai Electric Power Plans Second Nuclear Transition Bond Worth $191M

Kansai Electric Power Co. is set to issue Japan’s second transition bond to fund nuclear power projects.

What Happened: The Osaka-based utility aims to raise approximately ¥30 billion ($191 million) through the sale of transition notes in two tranches in July, according to SMBC Nikko Securities Inc., one of the underwriters, Bloomberg reported on Monday. The proceeds will be directed towards the company’s carbon-neutral initiatives, including nuclear power and zero-carbon thermal power projects.

Japan has seen a rise in transition bond sales following the government’s issuance of such debt earlier this year, which has provided implicit support. The government argues that these securities facilitate a more gradual achievement of climate goals for an industrialized nation like Japan. However, the debt has faced skepticism internationally because, unlike green bonds, they typically do not finance specific environmental projects.

Last month, Kyushu Electric Power Co. also issued similar bonds, indicating a trend in Japan’s approach to financing its energy transition.

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Why It Matters: The issuance of transition bonds by Kansai Electric Power Co. follows a significant milestone set by Kyushu Electric Power Co. in May. Kyushu Electric raised ¥30 billion ($191 million) from Japan's first nuclear-focused environmental bond, marking a pivotal moment for the nuclear energy sector in Japan. The funds were intended to refinance investments in nuclear-related projects, including emergency response centers for potential incidents.

Japan’s commitment to achieving carbon neutrality by 2050 has increased the attractiveness of nuclear energy, despite challenges such as identifying new radioactive waste disposal sites.

Additionally, Japan’s digital bond market has also seen significant activity. In December, Hitachi Ltd. HTHIY issued the largest digital green bonds sale, amounting to $68 million. This issuance, driven by high demand, highlights the broader trend of innovative financing methods in Japan’s corporate sector.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari