In the post-war era, integrated trading companies led Japan's economic growth and played an important role as a bridge between Japan and the rest of the world. Today, people, goods, and money move freely across national borders as economies and societies undergo dramatic change. What roles are required of integrated trading companies? This content, in an eight-installment series, attempts to redefine the roles of present and future integrated trading companies, while showcasing the wide range of business activities of Sumitomo Corporation.
Connecting skills. Asked what the quintessential strengths of integrated trading companies are, many Sumitomo Corporation employees cite these skills as their answer. Skills to connect different countries and different companies together, and connect products with users, as well as the ability to exert such skills under any circumstances, are the defining characteristics of integrated trading companies, they say. At Sumitomo Corporation, our connecting skills are demonstrated in an array of projects, represented by renewable energy-based power generation projects, including those using solar power and wind power. This report explores what is connected by Sumitomo Corporation to create what kind of value.
Ever since joining Sumitomo Corporation in 1988, Tatsuo Izuka has been engaged in the power generation business. "I like the moment when I can enjoy drinking a good beer with the people who I worked with after completing a big project." His treasure is his three family members.
In 2010, Sumitomo Corporation and Sumitomo Mitsui Finance and Leasing Co.,Ltd. obtained the rights to use Yumeshima, a coastal landfill site in Osaka City. The relatively new landfill created by burying ash from waste incineration plants was considered useless because gases were still being emitted from the ground, which was unstable and sinking. On a piece of land such as this, Sumitomo Corporation intended to build what was at the time Japan's largest photovoltaic power plant and thereby convert a useless strip of land into a symbol of environmental contribution to the local community.
"While this project is expected to generate some revenue from the sales of power generated to electric companies, its primary objective is to fulfill the corporate social responsibility (CSR) of the participating companies. This concept has been unchanged from the beginning," says Tatsuo Izuka, Renewable Energy Business Dept. No.1, who led the Osaka-Hikari-no-Mori Project. What is unique about the project is the split ownership of the photovoltaic panels by several companies. Izuka explains, "The mega-solar facility has a capacity to generate 10 megawatts of electricity. By dividing the ownership of the photovoltaic panels into 500-kilowatt units, we aimed to invite many companies to join the project."
Agreeing with the concept, i.e., aiming to connect multiple companies together and building the framework for a joint CSR initiative project rather than implementing it as a single company's independent CSR program, Sumitomo Electric Industries Ltd., Rengo Co.,Ltd., Hitachi Zosen Corporation, DAIHEN Corporation, NTT Facilities,Inc., The Sumitomo Warehouse Co.,Ltd., Osaka Shinkin Bank, and Jupiter Telecommunications Co.,Ltd. have joined Sumitomo Corporation in the project. It is easily noticeable that these eight project partners are different from each other in terms of size and sector and this diversity eloquently represents the nature of this project. "Due to the unfavorable site conditions, this project involves greater risks than a usual mega-solar power project. However, the risks can be diversified by having multiple project member companies. In addition, member companies design and implement their respective related solar power generation activities as part of their CSR efforts. These individual activities will add up and eventually lead to the overall growth of the project. This is what makes the project innovative and different," says Izuka.
Takayuki Hirano leads the domestic photovoltaic power business. He joined the company in 1994. After an assignment in Germany, Hirano is now in charge of Osaka Hikari-no-Mori Project and other photovoltaic power projects in Tomakomai, Saijo, Kitakyushu, and other locations. "One of the great things about Sumitomo Corporation is that the company highly values tenacity and perseverance."
"When installing the mega-solar plant, Sumitomo Corporation's experience in solar power projects in Spain, France, Italy and other countries really came into play," says Takayuki Hirano, another project member from Renewable Energy Business Dept. No.1. Hirano was engaged in the sales and business development of photovoltaic panels in Germany, a renewable energy leader, in the mid-2000s, when the German solar power generation market was launched.
With Sumitomo Corporation's connecting skills, overseas operational experiences were drawn upon for the domestic project and different companies from different sectors were brought together. But what was connected in the project was more than just that. Part of the project's power generation revenue is pledged to be used for local environmental education programs and grassroots environmental activities in the Konohana-ku district of Osaka City. This means that the connecting skills of Sumitomo Corporation have now linked in the project with the local community and citizens.
Renewable energy-based electricity generation projects are considered as a positive contribution to the environment, because this type of power generation entails no depletion of natural resources and minimal emissions of CO2 and other greenhouse gases. In this particular project, such an environmental contribution project is operated as a joint CSR initiative of multiple companies, sharing the fruit of its activities with the local community and citizens. It was the connecting skills of Sumitomo Corporation which made the project model a reality, and it is scheduled to continue for the next 20 years.
When looking for job opportunities as a stuedent, Miyuki Wakabayashi wanted three things from her future employer: fulfilling jobs, jobs that she can involve others in, and opportunities for overseas assignments. She found the employer who could meet those three: Sumitomo Corporation. Now she is playing the leadership role in the wind farm project in South Africa.
"This is the first large-scale wind power generation project in the country. It also presented a significant challenge for Sumitomo Corporation and for partner companies," says Miyuki Wakabayashi, Renewable Energy Business Dept. No.2. In South Africa, a country facing serious power shortages due to rapid economic development and population growth, the government announced in August 2011 that it would invite bidders for a series of Renewable Energy Independent Power Producer Procurement Programme. In the following November, Sumitomo Corporation, together with local partners, were selected as a successful bidder who would construct and operate a 100-megawatt wind farm in Eastern Cape.
The winning bidder was a consortium of a number of parties led by Sumitomo Corporation, who owns a 60-percent stake in the project. The other members were a local developer, Rainmaker Energy Projects (Pty) Ltd and the Black Economic Empowerment (BEE) companies. The BEE companies are the entities formed based on the government's BEE policy to promote the empowerment of black people. In addition to these consortium members, German-based wind turbine manufacturer Nordex was also an important business partner for the project. The role of Sumitomo Corporation was to connect those partners together, but there was a problem: all of those companies involved were "entry-level players" in the South African wind power market.
"Sumitomo Corporation had previous experience in the wind power generation business in Japan, the US and China, but not in South Africa. Therefore, we had to carefully identify the existing and potential risks and find ways to mitigate them. The other partners were in the same situation, because the project was the very first wind power project in the country," explains Wakabayashi.
Sumitomo Corporation's wind power plant in South Africa is called Doper Wind Farm. Dopers are a breed of sheep shown with black head in the photo. The installation of wind turbines is underway toward the launch of commercial operation in July 2014.
This was where connecting skills of Sumitomo Corporation played an important role. This time, the company's various internal functions were connected together. Wakabayashi says, "Finance, legal, risk management, and other departments brought their expertise and experience to analyze the situation of South Africa. The company's almost 20-year-old mineral resources including the iron ore trading business in the country also provided useful insight."
In such a situation, integrated trading companies can demonstrate their integrated corporate strengths to the fullest extent. To develop and operate new projects, they can draw upon a reservoir of experience and expertise in a wide range of business areas. This is a unique strength of integrated trading companies.
The wind farm project in South Africa in question has required the management of two major risks: one associated with the emerging South African market and the other associated with the construction and operation of the first large-scale wind power project in the country. To keep those risks under control and succeed in this project, Sumitomo Corporation has demonstrated its strength in optimally connecting related parties together, whether internal or external, domestic or international partners. "Building the first wind farm in this country - this common vision has put our project partners together and made us as a team," says Wakabayashi, who is still playing the leading role in the project.
Osaka Hikari-no-Mori Project is a solar power project with an unprecedented concept. The wind power project in South Africa is also an unprecedented project in that country. Izuka emphasizes, "I believe Sumitomo Corporation's strength can be demonstrated most effectively in business areas with little established know-how and in those involving high risks."
Going forward, Sumitomo Corporation's connecting skills are expected to continue to demonstrate their strengths in untapped business areas and untapped markets.
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