Information on the Target

The energy storage platform, a collaboration between Stonepeak and CHC, has recently secured 20-year fixed revenue capacity market contracts for five battery energy storage system (BESS) projects in Japan. These projects boast a combined gross capacity of 348MW and were awarded in the latest round of Japan's Long-term Decarbonization Auction. This achievement marks the Platform's second consecutive win in this government-led tender, building on a previous successful auction in 2024 where it secured contracts for four BESS projects totaling 131MW.

With these new capacity market contracts, the Platform will enter formal agreements with the Organization for Cross-regional Coordination of Transmission Operators, Japan (OCCTO). This crucial step solidifies the long-term offtake agreements with the government and allows the Platform to advance towards the construction and operational readiness of these vital energy storage projects.

Industry Overview in Japan

Japan's energy sector is undergoing significant transformation as the nation strives to achieve carbon neutrality by 2050. The government is actively promoting renewable energy sources and enhances infrastructure to support innovative energy storage solutions. Battery energy storage systems are becoming increasingly essential in facilitating the integration of renewable energy sources and improving grid stability.

The Long-term Decarbonization Auction is a pivotal initiative introduced by the Japanese government to encourage investments in renewable energy and energy storage. This auction platform is designed to attract projects that will not only contribute to the local economy but also bolster Japan's efforts toward energy transition and climate change mitigation.

Consequently, the demand for BESS technology is on the rise in Japan. As the country increases its reliance on intermittent renewable sources such as solar and wind, the necessity for efficient storage solutions becomes paramount. Energy storage systems provide essential services, including grid balance and backup power, ensuring reliability as the energy landscape evolves.

This strategic shift within the Japanese energy sector presents substantial opportunities for domestic and international investors. With the government firmly backing renewable initiatives and energy technology advancements, the market for energy storage and related technologies in Japan is poised for robust growth.

The Rationale Behind the Deal

The rationale for securing these contracts is centered on the dual objectives of supporting grid reliability and contributing to Japan's ambitious carbon neutrality goals. By establishing a foothold in the energy storage market, the Platform can effectively address the challenges posed by the increasing penetration of renewable energy sources.

Additionally, the long-term nature of the contracts provides predictable revenue streams, which offer stability and financial security for the stakeholders involved in these projects. This strategic alignment with government priorities enhances the potential for growth and success in the evolving energy landscape of Japan.

Information about the Investor

Stonepeak is a prominent alternative investment firm specializing in infrastructure and real assets, managing approximately $73 billion in assets. With a focus on defensive hard-asset businesses worldwide, Stonepeak aims to generate value through calculated investments, prioritizing downside protection and strong risk-adjusted returns.

The firm is committed to forming strategic partnerships across various sectors, including digital infrastructure, energy transition, transport, logistics, and real estate. With a global presence, including offices in major cities such as New York, Tokyo, and London, Stonepeak is well-positioned to leverage market opportunities in the energy sector.

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The successful acquisition of long-term fixed revenue contracts for the energy storage projects in Japan is a strategic and prudent investment for the Platform, especially given the national focus on achieving carbon neutrality. The established contracts not only assure stable cash flows but also position the Platform as a significant player in the rapidly growing BESS market in Japan.

Furthermore, the continuous government support for renewable energy and energy storage projects enhances the investment's attractiveness. As Japan aims to phase out dependency on nuclear energy and reduce carbon emissions, initiatives such as these will contribute to meeting energy demands while ensuring grid stability.

Additionally, partnering with CHC—a reputable project development firm specializing in BESS—boosts the capacity and expertise required for successful execution and operation of these projects. This collaboration reinforces the Platform's ability to navigate the regulatory landscape and deliver desired outcomes effectively.

Overall, this investment exemplifies a well-timed commitment to the energy transition in Japan and reflects an understanding of the critical role energy storage will play in the future of energy management. The Platform’s proactive stance in securing these contracts accentuates its readiness to meet the evolving demands of the energy market.

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