Case Study: Fukuoka Clean Energy Corporation
When rebuilding its east-side sanitation plant, the city of Fukuoka sought to create a waste-processing facility that addressed the waste-related issues the city faced, and took its financial condition into consideration, while at the same being environmentally friendly in its use of materials and energy.
For this project, the city of Fukuoka and Kyushu Electric Power Co., Inc., formed Fukuoka Clean Energy Corporation as a jointly financed special-purpose company. The SPC was tasked with the construction and operation of the New Eastern Plant, a waste-processing facility in Fukuoka, employing private finance initiative methods. Under the agreement reached between the SPC's originators, over a 25-year period from August 2005, the facility will incinerate general waste generated in the city of Fukuoka, generate electricity from the heat energy of incineration and sell any surplus energy to Kyushu Electric.
The DBJ Initiative
Stable operation extending over its long term presented a major issue for this project. DBJ addressed this situation by structuring an arrangement involving a direct agreement between the city of Fukuoka and Kyushu Electric and a banking syndicate, providing financing to be repaid through fees received from the city of Fukuoka for processing waste and through income from the sale of electricity to Kyushu Electric. This scheme clearly outlined the division of risks, enabling long-term financing from other financial institutions.
This scheme promotes the appropriate processing of general waste and the employment of thermal processing. At the same time, it employs PFI methods to promote the use of private-sector financing and equalize the financing burden. By applying PFI methods to benefit from private-sector financing and technical and operational expertise, DBJ expects the project to operate efficiently and effectively.