If there is one business in ORIX Group’s wide portfolio that appears designed to match the group’s new Purpose statement of “Finding Paths. Making Impact.” it is the Environment and Energy segment, which spans renewables, electric power retail, energy saving services, sale of solar panels, and recycling and waste management.
“ORIX Group’s new Purpose statement fits our business perfectly,” says Hidetake Takahashi, Senior Managing Executive Officer, Head of Energy and Eco Services Headquarters, and the executive responsible for ORIX Group’s Global Investment Strategy. “Our mission is to contribute to a sustainable society via two pillars: decarbonization and creating a circular economy.”
It was with the latter that ORIX began in this area more than 25 years ago, as it tried to figure out what to do with leased equipment – from computers to vending machines – that was returned at the end of the contract term. These items had to be dealt with in a responsible manner, so ORIX built up a nationwide network in Japan to handle them, either reusing them, selecting the right method of waste disposal, or breaking them down into their individual material components for sale and repurposing.
What started as solving a problem for the group’s original leasing business has turned into a big business in its own right. Reducing waste and finding further use for materials, especially those that are rare or do not break down naturally has become a pressing social issue – this is what the ‘circular economy’ is all about. Think of all the steel, copper, aluminum, plastic and fiberglass in a typical piece of equipment; or, indeed, in a solar panel.
While disposal is sometimes unavoidable, “the best, first step is always to extend the life of the asset,” notes Mr. Takahashi, “and that requires proper operation and maintenance.” This understanding was the genesis of ORIX Renewable Energy Management (OREM), formed in 2018, which provides operation and maintenance services for renewable energy facilities to third-party customers as well as other Group businesses. One of its biggest clients, in fact, is the Environment and Energy segment itself: with proper care, modern photovoltaic (PV) solar farms can remain operational for 40 years, twice as long as the first generation.
Separately, in the early 2000s, ORIX started offering new services that helped increase energy efficiency for customers. Via its Energy Service Company (ESCO) business, it provides everything from longer-lasting LED lights and modern heating and air conditioning, more efficient boilers, fuel conversion systems for office buildings, warehouses, factories and shopping malls.
ESCO not only leases the equipment. It helps customers select the best items, without being limited to a particular manufacturer and it handles all the administration: applying for permits (and government subsidies where available), providing maintenance, energy conservation monitoring, verification and reporting (to justify the subsidies received). “Helping customers to help themselves by reducing their energy costs is one of the ways we make an impact every day”, explains Mr. Takahashi.
From saving energy to selling it
Quite naturally, this purpose-driven approach led ORIX to start selling low-carbon energy directly to customers. What started with minority investments in early Japanese wind farms has grown into a global renewables portfolio. Today, the group has a net 4.3 Gigawatts of capacity in operation worldwide. The two core pillars are over 900 Megawatts of solar power in Japan (making it the country’s leading solar developer and operator), and its – now 100% – ownership of Elawan, a European wind and solar developer and operator that is based in Spain but is investing across the globe.
In addition, ORIX has a significant stake in Greenko, one of India’s largest renewables companies; as well as smaller holdings in Ormat Technologies, which focuses on geothermal energy worldwide and storage batteries in the US and China’s Beijing Energy, which develops solar and hydro facilities.
In Japan, the Environment and Energy segment also runs several biomass and waste treatment plants but the focus of ongoing and future investment is the renewables portfolio, particularly internationally. “We accelerated our investment into renewables from 2011”, says Mr. Takahashi, “and we see huge scope to continue to do so, while the assets we have built up are already producing good returns.”
Success was not automatic, however. In order to identify the right companies and projects to be acquired, particularly outside Japan, ORIX understood that it would first have to build up in-house expertise. That, in turn, required bringing in new talent with different experience and points of view and doing a lot of learning and research.
Consequently, Mr. Takahashi moved to London in 2018 and recruited a team that included people with investment banking, project finance and utility industry experience. Two years later, the team succeeded in the deal for Elawan in the midst of the COVID-19 crisis with the management teams from both companies agreeing they would be ideal partners to support the future growth of both companies.
ORIX first took an 80% stake in Elawan in July 2021, and on the occasion of ORIX making Elawan a wholly-owned subsidiary in February 2023, Dionisio Fernandez, CEO of Elawan, explained why the two companies have enjoyed a strong partnership: “ORIX has supported Elawan since 2021 in executing its ambitious growth and investment program, and I believe ORIX’s shared vision and expertise in renewable energy will continue to enhance Elawan’s business into the future.”
By combining innovative thinking and diverse expertise to first find and then win over high-quality companies such as Elawan and Greenko to drive forward mutual growth, ORIX demonstrates how a consciously Purpose-led approach can help it expand into new and important business areas like decarbonization. And in so doing, we see how ORIX’s Purpose of “Finding Paths. Making Impact.” is good for the planet as well as business.