Contributed By Nagashima Ohno & Tsunematsu
The Electricity Business Act (as of 1 October 2017 and further amendments are not reflected) does not provide any nationality requirement on a licence of electricity business or any restriction with respect to foreigners holding a share in an operator of an electricity business.
Under the Foreign Exchange and Foreign Trade Act (Act No 228 of 1949, as amended), however, a foreign investor may not invest in an unlisted power company or own 10% or more of the shares of a listed power company unless he makes an ex ante notification and the required waiting period elapses. In principle, the length of the waiting period is 30 days, but it may be shortened to two weeks or extended up to five months, at the discretion of the government.
In the meantime, the waiting period is shortened to five business days if an investment falls within one of the following categories:
In reality, approximately 90% of ex ante notifications made in 2015 with respect to investments over which the Ministry of Economy, Trade and Industry (METI) holds jurisdiction (including investments in the energy sector) fell into one of those three categories and thus were cleared within five business days.
If, during the waiting period, the Ministry of Finance (MOF) or METI has decided that the investment may undermine national security, public order, or public safety, or adversely affect the national economy, MOF and METI may issue a warning to change the terms of, or surrender, the investment, and if the investor does not respond to the warning or expresses his intention to disobey the warning, MOF and METI may issue an order to change the terms of, or surrender, the investment.
At the time of writing, the only precedents are the warning to surrender investment and the order to surrender investment, each of which was issued in 2008 against the Children’s Investment Fund, which intended to increase its shareholding in J-Power from 9.9% to 20% by acquiring additional shares.