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SoftBank was set to earn ¥1tn ($6.3bn) in fees from a flagship US-Japan project before panicking officials in Tokyo intervened, as anxiety grows over the rollout of a $550bn joint investment plan with Donald Trump.
The fee would have been paid to billionaire Masayoshi Son’s company to build and operate a $33bn gas-fired power station in Ohio, according to multiple people familiar with the matter.
The power station is the first fruit of a trade deal that won Japan tariff relief from Washington in exchange for $550bn of investment in the US. Son has been central to the trade agreement since its conception, in part because of his closeness to Trump.
SoftBank’s final fee was cut by more than 90 per cent from the original proposal, according to several people familiar with the negotiations. It will earn the payments over 15 to 20 years if it can reach the target capacity of 9.2 gigawatts.
The idea of a fee arose because SoftBank would otherwise earn nothing for its role as developer of the project. It has no equity in the power station, which will be financed entirely by Japan and owned 50/50 by the US and Japan via a special-purpose vehicle, set up as part of the trade deal.
But the dispute over the amount reflects a fractious atmosphere in Tokyo, where officials fear Japan is getting edged out of selecting projects for the trade agreement and railroaded into backing companies that lack the necessary experience.
“Why do we have to pay a fee?” said one senior official in Tokyo. “They don’t have to put up any of the money.”
Under the trade deal, profits from the investments made are supposed to be split 50/50 between Japan and the US until Tokyo has recouped its money. After that, the US gets 90 per cent.
Alarm in Tokyo about the use of its money has deepened ahead of Sanae Takaichi’s summit with Trump in Washington on March 19, which senior officials describe as a “make or break” moment for the new Japanese prime minister.
Takaichi is set to unveil in her summit with Trump a second round of at least three investments, to include copper smelting, display manufacturing and a nuclear power project with Westinghouse.
The terms of the deal grant Trump ultimate decision-making power and oblige Japan to provide funding for a project within 45 business days of its being announced. This means the clock started ticking for the power plant last month.
Japanese officials are still pushing for the plant’s operation to be put out to tender given SoftBank’s limited experience in the sector, say people familiar with the matter.
Son’s ability to speak directly with Trump is viewed within the Japanese government as a huge asset, but also a potential liability.
Son originally floated the idea of a joint US-Japan sovereign wealth fund to commerce secretary Howard Lutnick, before the creation of the $550bn investment pot, and he remains one of the few people in Japan who can credibly propose deals large enough to use it.
SoftBank has already placed large-scale orders to begin construction of the power plant in Portsmouth, Ohio, including $10bn for close to 170 turbines from GE Vernova.
As developer, SoftBank plans to sell the electricity to data centres it will also operate, say people familiar with the matter. The data centres will serve customers such as OpenAI, in which the Japanese group is a significant shareholder.
Japan’s funding comes from both the Japan Bank for International Cooperation and commercial lenders. Nexi, Japan’s export credit agency, will guarantee 90 per cent or more of the commercial portion.
The ratio of funding between the two sources has not yet been decided. People familiar with the discussions say that commercial banks remain nervous despite the generous guarantees.
SoftBank, JBIC and the US commerce department declined to comment. Nexi said it was in discussions and no decisions had been made yet on the level of its coverage.
Additional reporting by Aime Williams in Washington