Since the establishment of the Equity Finance Group in October 2016, JBIC has been working to strengthen its equity financing operations. One of the growth strategies of the government of Japan aims to benefit from overseas growth markets. To achieve the government's growth strategy, it is becoming increasingly significant to supply funding through strengthening risk-taking capability. In light of this, JBIC has enhanced its capability in the area of equity financing, such as by establishing JBIC IG Partners (JBIC IG) to provide advisory services regarding overseas investment funds. JBIC has also financed overseas M&A transactions by Japanese companies in the form of equity participation.
Under its Fourth Medium-term Business Plan (FY2021–FY2023) announced in 2021, JBIC sets the goals of supporting innovation for realizing the SDGs and a decarbonized society, green finance with a view toward irreversible advancements in energy transformation and digital transformation, and M&A and the acquisition of technologies. In making these efforts, the supply of funding through our equity financing capacity will be essential.
Under our new medium-term business plan, we will continue to actively support the overseas expansion of Japanese companies through our equity financing capacity.
Managing Executive Officer
Global Head of Equity Finance Group
Business Environment and Key Challenges
Maintaining and Improving the International Competitiveness of Japanese Industry
The Action Plan of the Growth Strategy formulated by the government of Japan in June 2021 and the Green Growth Strategy Through Achieving Carbon Neutrality in 2050 call for multiple actions including promoting ambitious growth strategies in fields with strong future growth potential such as digital and carbon neutrality-related sectors that are driving the economy even during the COVID-19 pandemic. The actions also include the government's support for efforts to spur innovation, incorporate technologies from overseas through direct investments and M&As, and promote individual projects, including those involving cooperation with the United States and Europe and those that support third countries.
M&A activities by Japanese companies aimed at acquiring overseas markets and meeting their demand become more important because of Japan's structural issues such as a decreasing birthrate and an aging population as well as a shrinking labor force. Amid intense competition for acquiring overseas markets, overseas M&A activity is one of the important strategies adopted by Japanese companies for accelerating growth. Under such conditions, overseas acquisitions by Japanese companies in 2020 decreased to 557 deals from 826 deals in 2019, due in part to the impact of COVID-19. Nonetheless, in 2021 such acquisitions are on a recovery track and it is important to continue to supply funds in response to the needs of Japanese companies for M&A.
JBIC will support Japanese companies in rebuilding supply chains due to the spread of COVID-19, in developing business for realizing a decarbonized society and in conducting M&A activities in the form of equity participation as well as fund investment through JBIC IG Partners.
Overview of JBIC IG Partners (JBIC IG)
JBIC IG is an investment advisory firm established in June 2017, by JBIC and Industrial Growth Platform, Inc. (IGPI). JBIC IG applies the respective strengths of JBIC and IGPI as follows: JBIC has knowledge and experience of financing international projects as Japan's policy-based financial institution; IGPI has the knowledge of investment business and broad experience in providing companies with hands-on support for long-term, sustainable growth in corporate and business value. JBIC IG aims to create long-term, sustainable value for Japanese investors and industries through the development of global business opportunities and a disciplined investment approach.
About JBIC IG Partners
JBIC IG Partners is an investment advisory firm established by JBIC and IGPI.
Business Model of JBIC IG
JBIC IG composes overseas funds by partnering with foreign sovereign wealth funds (SWF) and international investors, through investment advisory services to overseas funds.
As its first effort, in September 2017, JBIC IG entered into a co-investment framework agreement with the Russian Direct Investment Fund. In January 2019, JBIC IG established a venture capital fund with AS BaltCap, the largest fund manager in the Baltic region. By the end of June 2021, JBIC IG executed a total of 22 investments in these two funds. Additionally, JBIC IG is undertaking activities to bring together and promote business collaboration between investee companies in these funds and Japanese companies. JBIC IG will continue to provide added value to Japanese industry through the creation of new investment funds.
Overview of JBIC IG Partners' Investment Structure
JBIC makes equity investments in overseas companies through investment in funds that JBIC IG Partners launched in collaboration with overseas partners.
Strengthening JBIC's Capability of Equity Financing
Support for the Realization of a Hydrogen-based Society through Equity Financing
JBIC and Mitsui & Co., Ltd. (Mitsui) made a joint investment in FirstElement Fuel Inc. (FEF) in the U.S. FEF was established in 2013 and to the present has received support from companies such as Toyota Motor Corporation and Honda Motor Co., Ltd. FEF is currently operating hydrogen stations across the State of California, which is one of the largest markets for hydrogen fuel cell electric vehicles globally.
Through its investment in FEF, Mitsui aims to gain a stronger foothold in the global hydrogen business by acquiring insight into hydrogen demand creation and the downstream hydrogen business, as well as creating synergies between a Norwegian manufacturer of lightweight high-pressure hydrogen tanks in which Mitsui invested in 2016.
Promoting Renewable Energy through Equity Financing
JBIC invested in Exergy Power Systems Europe Limited, a subsidiary of Exergy Power Systems, Inc., (Exergy), in Ireland. The investment is aimed at supporting strategic initiatives for promoting innovation by Japanese companies.
Exergy is a startup established at the University of Tokyo Hongo Campus in 2011 to develop, produce, sell, and operate next-generation power battery systems. Exergy aims to enter the market for ancillary services to adjust electric power supply in Ireland, where the adaption of renewable energy is advancing, capitalizing on the fast response capability, high discharge capacity, and excellent durability of their proprietary next-generation batteries.
Also, JBIC and the Chugoku Electric Power Co., Inc. (Chugoku) made a joint investment in Energy Fiji Limited (EFL), in Fiji.
EFL is a vertically integrated electric utility that generates, transmits, and distributes electricity as the only power company in Fiji, a country located in the middle of the South Pacific. The Fijian government has a majority shareholding in EFL, and EFL aims to promote renewable energy projects such as hydropower and solar power projects to achieve the targets and objectives set under the National Development Plan. Chugoku aims to pursue investment opportunities for overseas renewable energy projects and participate in power transmission and distribution, retail, and new power-related business. Chugoku, through its investment in EFL, expects to enhance its know-how and technology cultivated through its domestic and overseas electricity business, and plans to use such know-how and technology to further expand its business overseas.