Renewables push drives M&A in Japan’s energy sector

Ambitious decarbonization targets and high investment returns are drawing interest from both local and international buyers

M&A in Japan’s energy and utilities sectors has reached a new peak in recent years, with 24 deals changing hands in 2021 representing a new high on Mergermarket (since 2006). Deal values are also on the rise, with a total of US$2.62 billion in deals announced in 2021—the highest annual deal value in five years.

This positive momentum has continued into 2022: A total of US$1.2 billion in deals changed hands in the first quarter, more than doubling Q1 2021’s total of US$500 million. Deal volume, meanwhile, remained relatively stable.

Oil firms join the decarbonization push 

Dealmaking targeting Japan’s alternative energy sector has been a major driver of activity. In October, Japanese oil firm ENEOS struck a US$1.7 billion deal to acquire local renewable project developer Japan Renewable Energy from Goldman Sachs and Singaporean sovereign wealth fund GIC.

The deal, which was the largest Japanese energy deal announced throughout 2021 and Q1 2022, will help the country’s largest oil firm reach its renewable energy target: to expand its renewable power generation capacity to more than 1GW by the end of fiscal 2022, earlier than scheduled.

Oil companies’ interest in alternative energy assets is driven by two leading trends: falling domestic oil demand and governmental pressure to reduce carbon emissions. According to the US Energy Information Administration, there is a long-term trend of Japan’s domestic oil demand decreasing due to structural factors such as a declining and aging population, high energy efficiency measures, and an expanding fleet of hybrid and electric vehicles. Daily oil consumption dropped by an estimated 1 million barrels in the period from 2012 to 2019. As a result, oil firms are motivated to seek alternative avenues to boost profits.

The Japanese government is also encouraging a transition away from fossil fuels, having recently set the target of reaching carbon neutrality by 2050. As part of this goal, Japan wants renewable energy to account for 36-38% of Japan’s electricity mix in 2030. As of March 2020, the renewables rate stood at 18%. Clearly, the oil sector has a major part to play in reaching this target.

US and European buyers swoop in 

Japan’s growing renewables market is also attracting interest from global players looking to gain a foothold in the space.

One example is the acquisition of a 250GW solar power portfolio by Enfinity, a US-based renewable energy and sustainability services company, valued at US$1 billion. The deal, announced in February, is the largest renewable energy acquisition in Japan more than five years, based on transaction value and power capacity, according to research firm Enerdatics.

European buyers are also increasingly eyeing Japanese renewables assets. Last August, SSE Renewables entered the Japanese offshore wind market through its acquisition of Pacifico Energy’s offshore energy platform. The deal, valued at US$208 million, will create a joint ownership company that will pursue offshore wind energy development projects throughout Japan.

A further example is Copenhagen Infrastructure Partners’ formation of a 50/50 joint venture with Mitsubishi Heavy Industries regarding the development of offshore wind projects in Hokkaido.

In an aim to not only reach decarbonization goals but also achieve greater energy independence, the Japanese government has set a clear target of producing 30-45GW of installed offshore wind capacity by 2040.

Infrastructure funds bet on solar 

Investment in domestic solar assets by local firms has been a key feature of Japanese energy dealmaking in 2021 and the first quarter of 2022. Infrastructure funds have been particularly active, as seen in Enex Infrastructure Investment Corporation’s purchase of the Monbetsu solar power plant, valued at US$58 million.

In another deal highlighting the growing potential of Japan’s solar assets, Tokyo Infrastructure Asset Management acquired 100% stakes in two solar power plant operators in Japan—Eco Solar Aizu (ESA) and Ibaraki Ushiku 1 (IU1)—from Thai solar power plant operator Thai Solar Energy in September for US$31 million.

The interest from local infrastructure funds reflects the attractive returns solar energy is set to offer over the long-term. These funds will likely face increasing competition from corporations and private equity firms as the market heats up.


Japan’s aim for 36-38% of its energy production to come from renewable energy by 2030 is clearly ambitious. The target holds the potential to spark a buying spree among dealmakers over the coming months and years.

International buyers will be looking to gain a slice, as seen in Enfinity and SSE Renewables’ recent purchases. This trend of cross-border dealmaking looks set to continue, as overseas firms look to gain a foothold in this growing market.

Local firms will also play their part in investing in the capabilities of local assets, with infrastructure funds already active in this area, particularly in early-stage investments. In time, larger international funds and private equity firms could make their presence felt.

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