Q) How has been your experience working specially in India? Have you enjoyed Indian hospitality?   

Yes, I am absolutely overwhelmed by Indian hospitality and it makes my stay here in India very comfortable and enjoyable.
India is perceived as one of the fast growing markets and, in fact, in terms of GDP growth rate, India is now running way ahead of the other countries.

Q) We understand ORIX has large plans to expand in the energy‐related business in Asia. How is India positioned in your future business plans?

In Japan, ORIX is engaged in renewable power generation such as mega-solar, electric power retailing, Energy-saving services, and storage battery system rental service in the energy field. In addition, we have extended our business span to waste processing, recycling and metal resources businesses in the peripheral environment field.

In Asia, ORIX is engaged in power generation business and provides energy-saving services. We would like to replicate this business model employed in the domestic markets wherever possible.

India, coupled with two to three countries in Southeast Asia region, would certainly remain our focus in the coming years. India is placed at a high level under our future business plan. It has a very unique positioning due to its favourable demographic pattern, ample workforce, developing phase of industrialisation and availability of vast land space, where we strongly believe that there are excellent business opportunities for us.

Q) We understand ORIX is a major player in the renewable energy business in Japan. What kind of investments and expertise ORIX is expected to bring into India going forward? 

That’s true; ORIX is a major player in the environment and renewable energy related businesses in Japan.

In May 2009, ORIX started supplying power to corporate customers as a Power Producer and Supplier (PPS) and currently supplies electricity in the Tokyo, Kansai, Chubu, Tohoku and Chugoku areas. Leveraging ORIX’s domestic sales network and expertise of managing electric power demand and supply cycles which we have developed to date, ORIX will expand the scale of electric power retailing operation, and meet customers’ demand for stable and affordable electric power supply.

In our effort to secure stable power supply, in addition to the Agatsuma Biomass Power Plant (output: 13.6 MW) which is already in operation, we plan to construct two coal-biomass co-firing power stations (total output: 224 MW, operation start scheduled in FY 2019.3) in Kitakyushu City, Fukuoka Prefecture and in Soma City, Fukushima Prefecture.

ORIX will continue to expand its investments and aims to become one of the largest solar power business operators in Japan.

ORIX has been aggressively expanding its business outside of Japan. Examples of such initiatives include investments in Enovity, Inc., an energy-service provider in the United States. We provide services to reduce and optimise energy consumption. Our customers include advanced facilities of federal and state governments, power and gas utilities, and global corporations.

Global Business Power Corporation, a power generation business operator in the Philippines, Visayas, total installed capacity: 708.7 MW.

In South Korea-GS E&R (former STX Energy), coal-fired thermal power cogeneration A 1,190-MW Ultra Super-Critical Coal-Fired Thermal Power Plant is under construction.

In Hong Kong-Asia Climate Partners, PE fund investing in environment-related businesses, such as the energy-saving business and infrastructure (e.g. water business).

In the year 2014, ORIX, Asian Development Bank and Robeco jointly established a private equity fund, Asia Climate Partners, to invest in environmentally supportive low carbon transactions in Asia, thereby promoting the environment and energy-related business in Asia.

ORIX actively participated in business development under the full deregulation of electric power retailing markets in 2016.

Perhaps, ORIX would look at an alternative investment opportunity which is peripheral to renewable power generation such as maintenance service provider, energy service provider and an asset management company for those who wish to make investment in the renewable energy space.

In my view, there is a huge growth potential available for roof-top solar power generation in India, likewise in the Japanese markets. Since we have good access to the global capital markets and have been catering to various risk preference of investors through JVs, it would be possible to bring the so called risk money to India to revamp the infrastructure here and help infra companies to recycle the capital for further growth.

Q) Tell us about the recent financial performance of ORIX and where do you see its business focus in the years to come

Key Financial Indices for FY2016.3 are as under:


Total Revenue*

2,369.2

ROE

11.7%

PBT*

391.3

ROA

2.32%

Net Income*

260.2

Capital Ratio

21.0%

Total Assets*

10,996.9

D to E Ratio

1.7 times

Interest bearing debt*

5,689

Net income @share

198.73


*Unit/JP Yen Billion, all figures are on the consolidated basis

Net income for FY2016.3 increased 10.8% year-on-year to JP Yen 260.2 billion. This was the second consecutive year of record net income, and the seventh consecutive year of net income growth. Return on equity (ROE) was 11.7%, higher than the previous fiscal year and above 11% for the second consecutive year. FY 2016.3 was therefore a solid start toward our FY 2018.3 target for net income of JP Yen 300.0 billion. As for our other FY 2018.3 targets, we have already achieved ROE between 11% and 12% and have maintained our single A credit rating (Long Term Debt/Moody’s: Baa1, S&P: A-, Fitch: A-). It is notable that PBT from non-finance businesses surpass that from traditional finance businesses.

Adequate returns on loans and finance leases are difficult to obtain in the current low interest rate environment, and excessive interest rate competition is not in our interest. We therefore intend to grow by investing greater financial and human capital in Operation and Investment, which already support earnings.

We successfully implemented our medium-term strategy of expanding the non-finance businesses by investing in growth, turning over assets through divestitures that were well-timed with market conditions, entering new businesses such as the concession business, and generating organic growth.

The highlight of the year would be: A consortium anchored by ORIX and VINCI Airports of France established Kansai Airports to assume the operation of Kansai International Airport and Osaka International Airport from New Kansai International Airport Company. Kansai Airports became the operating company for both airports in April 2016. This concession business will operate both airports for 44 years, and is a first in Japan in terms of the operation period and total investment involved.

Our medium-term strategic direction through FY 2018.3 remains unchanged. We will concentrate on expanding non-finance businesses by generating organic growth and investing in key areas.

Q) ORIX has been a major partner of IL&FS since 1993. How has been the experience of doing business together in India? 

Yes, ORIX’s first investment in India was in IL&FS, in the year 1993. Over the years, ORIX has increased its shareholding in the Company to become one of the major shareholders of IL&FS. ORIX made a number of investments in IL&FS and Group companies. We jointly made investments and developed few new businesses. We set up a vehicle-leasing company, ORIX Auto and Infrastructure Services Limited; formed PE fund and also participated in the equity of IL&FS Group companies like, IL&FS Securities Services Limited, IL&FS Investsmart Limited, IL&FS Education and Technology Services Limited. In the recent years, the businesses of ORIX and IL&FS have synchronised better and it became more evident when ORIX decided to increase its presence in renewable energy space overseas and invested in IL&FS Wind Energy Cos, in March 2016.
In a country like India where the market is large-scale and fragmented, ORIX would not have done this brilliantly without a strong local pilot like IL&FS.
Going forward, I am expecting more opportunities for both companies to work closely and jointly in infrastructure space.

Q) ORIX has entered into joint venture with IL&FS for wind energy projects, and also has plans to expand to solar power generation. Can you please share your future diversification plans for a fast growing country like India?

In our environment and energy-related business, we have been expanding business areas both in the energy and the environment business fields since the 1990s. In the energy business field, ORIX provides affordable energy for customers by electric power retailing and is proposing cost reduction by providing energy-saving services, while also expanding business in the renewable energy field, including solar power. In electric power sales, ORIX will expand sales of high voltage power towards corporate users, and also advance into the market of low voltage power market following the full deregulation of power retailing market in April 2016. In addition, utilising the experience in the energy field nurtured in Japan, ORIX is planning to aggressively develop its overseas energy business from now on.

In the environment business field, in order to properly process lease assets when lease contracts end, ORIX has been engaged in efficient asset collection, reuse and recycling. ORIX also operates waste processing and other facilities on its own. Utilising the know-how in this field and making use of our network through such operations, we offer one-stop service for all our clients’ 3R (reduce, reuse and recycling) and proper waste processing needs.

In my opinion, retail utility market, renewable energy based power generation, coupled with advanced battery technologies and waste management may be of interest when business diversification is considered, but having said that, these are largely affected by the Government policies, including the deregulation progress in the country.

 


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