Japan’s Orix is poised to push ahead with its renewable energy hunt in the US, in what may turn out to be yet another mega M&A deal potentially exceeding USD 1bn.

“We have our strategy to build our [new] renewable business platform in the US through a buyout sized similar to or bigger than what we spent on Elawan Energy,” Hidetake Takahashi, Orix’s senior managing executive officer told Infralogic.

“We are now in talks on some deals,” said Takahashi, without elaborating further.

Orix bought an 80% stake in Spain’s Elawan Energy for around USD 908m in July 2021 and then made it a 100%-owned unit in February last year. The amount paid for the remaining 20% stake was not disclosed.

Takahashi recalled that after buying the majority stake, Orix concluded that the U.S. should be its next offshore target. But for the past one to two years, the business environment has discouraged M&A activities in the US and Europe, amid higher interest rates aimed at curbing accelerating inflation.

“After scrutinizing M&A opportunities [in the US], we have not put our investment plan into action for now,” he said.

But with market valuations of infrastructure and renewables falling considerably and the Federal Reserve Board unlikely to tighten its credit grip at a rapid pace, “we hope to make a good investment at some point when things turnaround for the better,” he added, explaining there is still a gap between buyers and sellers on valuations.

Even after laying the groundwork for its business activities in Europe through the purchase of Elawan Energy, Orix will still consider acquisitions in the region. But that may occur only when such buyouts would complement Elawan’s existing business activities, Takahashi said.

“In one way, our strategic options have increased after buying Elawan Energy,” he said, adding that Orix has found ways to continue its growth strategy without big acquisitions.

For instance, Elawan successfully gained access to such countries as Greece, Italy, the U.K. and Germany where the company did not have a presence through business partnership arrangements.

Elawan is also seeking organic growth through development of its own projects in the U.S. Its newly-built solar power generating facilities in Texas with a combined 150 MW capacity began operating from the northern autumn of last year.

At the same time, Orix is looking to sell Elawan’s assets in Spain as part of its capital recycling, as reported. Takahashi would not comment further.

On a global basis, Orix group currently operates renewable energy generators with a combined capacity of 4.3 GW, including Elawan’s 1.77 GW capacity from solar and wind farms globally and Orix’s 920 MW solar farms in Japan.

Orix also owns a 20.2% stake in India’s Greenko Energy, which is currently running renewable power facilities such as wind, solar and hydroelectric plants in India with a combined capacity of 7.23 GW.

Looking ahead, the asset value of Orix’s environment and energy business segment could nearly double to JPY 1.5trn from the current JPY 846bn, said Takahashi. “It is not too much to say that the segment asset is set to double,” he said, noting that the amount is reasonable when compared with Orix’s entire assets, which currently stand at around JPY 15trn.

Takahashi’s environment and energy division is among 10 business segments of Orix along with corporate financial services and maintenance leasing; PE investment and concession; banking and credit among others.

“That could happen within five years,” he said.