In this section we move away from MC's IPP businesses,
and focus on our plant and equipment transactions,both in Japan and around the world.
These operations form the backbone of MC's overall electric power business.
We will examine two areas in particular.
The first is MC's on-site power generation initiatives in Japan,
where we are meeting the diversifying needs of
both communities and enterprises (environmental considerations,
energy conservation and efficiency, and so on).
The other area we will look at is MC's overseas development of
power stations that incorporate new technologies.
Since the 1960s – a span of more than four decades – MC has been involved in transactions of power plant, transmission and distribution equipment, both in Japan and around the world. We have steadily continued our quest to meet new challenges, and by doing so hope to provide society and our customers with the very best solutions. In recent years, we have also delved into some new areas where needs are on the rise, namely to help realize low-carbon societies. These include nuclear power facilities, nuclear fuel, and eco-conscious power plants that make use of green technologies. Through our power plant and equipment transactions, we have forged strong corporate networks and trust-based relationships not only in Japan, but in many other countries and regions as well. All of this has come to form the bedrock of MC’s electric power business.
MC's plays a fairly comprehensive role in power plant businesses. We are involved at every stage, from securing the orders and signing contracts, to negotiating prices, making on-site adjustments, and handing over the operations. In this fashion, we are working hard to provide value-added power plants and equipment to regions all over the world.
The construction of a power plant has many phases, from planning the design to launching operations. It is a long-term commitment, often taking five to ten years. To ensure its projects progress smoothly, MC applies all of its strengths as a global integrated business enterprise, including an enviable track record, expertise, and unrivaled networking skills. We are also involved in the negotiations, consultations, and fine-tuning that takes place at virtually every stage of the process.
In Japan, MC acts as a sole agent for Mitsubishi Heavy Industries for the sale of power generation infrastructure (primarily thermal and nuclear power equipment) to both utilities companies and general industry. We currently have a 30% to 40% share of this market. In recent years though, MC has been concentrating on a wholly new endeavor: on-site power generation. This business involves working with companies that have unique power demands at their factories. MC assesses the needs of these customers, and then designs and builds power generation equipment that can be installed on their factory premises. MC also handles the subsequent operation and maintenance of the equipment.
In recent years, the electric power needs of societies and companies alike have become increasingly diverse. More attention is being paid to environmental issues, as well as energy conservation and efficiency. These days, companies are particularly wary of their obligations to help meet government-stipulated CO2 reduction targets, and they are also becoming more and more conscious of the need to cut costs after the Lehman Shock. The question then, is how can the unique energy needs of different companies be addressed? Luckily, MC had the foresight to consider this many years ago, and we were a step ahead of the competition when we launched our on-site power generation business in 2002.
At the time we were developing some overseas IPP businesses in North America and Southeast Asia, and these operations gave us a hint. The business of on-site power generation involves installing tailor-made equipment at customer factories, and based on long-term supply contracts with these customers, providing a comprehensive array of services, from financing and designing the equipment, to procuring the fuel and carrying out the inspections. In addition, the electricity and steam generated by the equipment is also sold or supplied to the customer. In other words, in on-site power generation, customers do not operate the equipment themselves, but rather outsource its operation to an energy service provider. At MC, we believe this is a fitting business to be involved in; it lets us take advantage of our comprehensive expertise to raise the energy efficiency at our customers' factories, reduce their carbon footprints, and lower their manufacturing costs all at the same time.
To ensure MC's customers are provided with the equipment and systems that best meet their needs, our experts in the on-site power business consult closely with customer representatives. Each situation is discussed and analyzed down to the last detail. Once both sides agree that on-site power generation is the logical solution, the specifics of the project are discussed. These endeavors require a significant investment in infrastructure and are all about designing energy systems for customer factories, operations that are essential for manufacturing their products. Accordingly, on-site power projects can only go smoothly if both sides commit to a close, long-term partnership.
Because these alliances are often for 15 years or longer, MC must be certain to maintain the strongest possible bonds of trust, and consider what its partner's situation is likely to be ten or 15 years down the road; these are partnerships, and as such demand a unified approach. Our partners have high expectations of MC's functions. They look to us to arrange any project-related contracts, select the equipment, negotiate with manufacturers, and so on. Our capacity to handle so many responsibilities stems from our comprehensive expertise as a global integrated business enterprise – namely, the knowledge about power infrastructure and relationships with utilities and gas companies that we have accumulated through our power plant businesses, our proficiency in procuring fuel and funding, and so forth.
In 2003, Kirin Brewery Company Limited was considering switching from oil-fired to natural gas-fired power generation at its 11 factories throughout Japan, with an aim to reduce its CO2 emissions. An agreement with MC was reached after a year of negotiations, and in 2004 we established a wholly-owned special purpose company (SPC) called MCKB Energy Service Co., Ltd. to handle all of Kirin's on-site power operations, including equipment installation and maintenance, fuel procurement, and so on. Starting with Kirin's Kyushu factory, MCKB has since been developing the Brewery's on-site power generation business nationwide.
Once pipes were fitted to supply Kirin's factories throughout Japan with natural gas, negotiations had to be made with utilities and gas companies to use the equipment for electricity and steam production. There are more than 200 of these companies in Japan, and our experts met with representatives from all of them to come to terms on fuel prices for each region. We also needed to gain the understanding of the local authorities and communities with respect to setting up the equipment.
The result of this massive undertaking was a 30% reduction in CO2 emissions compared to those produced by Kirin's previous, oil-fired power equipment. The folks at Kirin were so impressed, in fact, that they have since begun introducing on-site power generation at their group company operations as well. At present, new equipment is being developed and installed at 16 factories nationwide, a total infrastructure investment of more than ten billion JPY.
Together with Chugoku Lumber Co., Ltd., a major Japanese materials manufacturer, MC is also involved in the operation of Japan's largest biomass energy power plant. The plant is actually fueled by sawdust and tree bark, by-products of the manufacturing process. Its power generation system runs completely on re-used or recycled materials, which is unprecedented even in the business of on-site power generation.
Global integrated business enterprises operate in a wide range of industries, from living essentials to energy, upstream to downstream. By getting involved in so many facets of these businesses, MC has forged strong relationships and solid, information-based systems and networks. Our customers depend on us to leverage these assets and come up with unique concepts, and they expect us to play a leading role in many of our joint projects.
Contents Produced in Cooperation with Nikkei Business Online Special / Cross Architects, Inc.