The ¥200 billion acquisition of Japan Renewable Energy (2021)

The weight of an acquisition that bought time

The core of this acquisition is a hard-headed acceptance that time can be bought with money. Renewables take long years to move from securing land through grid connection to the start of operation, and building them up by in-house development alone would meet neither the capacity target the company had set nor the deadline it had accepted for decarbonization — and on that recognition, the path of taking in a leading specialist whole was chosen. Goodwill amounting to more than 80% of the price can be read as the fee paid for time, to make up for having started late. Behind it lies a judgement to direct the money earned from oil not into the shrinking core business but into the next pillar.

Adding capacity by purchase and growing renewables into a pillar of earnings are, however, two different things. After the acquisition the group’s profits went on resting on oil refining and marketing and on functional materials, and the profitability of the renewables business is still developing. Whether ¥200 billion was worth an investment intended to rebuild the structure of the business depends on how much fruit the development projects, offshore wind above all, come to bear. As one answer to the question of what kind of company an oil refiner turns into in the age of decarbonization, the outcome of this acquisition is something to be watched.