J-STAR acquires energy company ESCO

The Japanese firm invested in energy solutions provider ESCO through its second fund, which is now about 55 percent deployed.

Japanese private equity firm J-STAR has fully acquired energy solutions provider ESCO for an undisclosed amount, according to a source familiar with the transaction.

The deal will support ESCO in building its organisational strengths and creating a more sustainable business model, J-STAR said in a statement.

ESCO provides energy saving products and services to residential and commercial buildings and also conducts inspections of Japan’s high voltage substation facilities.

ESCO is the seventh portfolio company of J-STAR’s second fund, a 2012-vintage vehicle that raised ¥20 billion ($162 million; €149 million), which is now about 55 percent deployed.

In May, the firm acquired insurance business Nihon Hoken Service (NHS) and bought Sokisha in November, as an add-on acquisition to NHS, as reported by Private Equity International.

ESCO has received active support from the government in the late 1990s when Japan’s Ministry of Economy, Trade and Industry implemented a scheme allowing businesses to receive subsidies for projects that used ESCO’s energy efficient products. The company’s volume orders at that time increased from ¥1 billion to ¥40.6 billion, according to a statement.

In Japan, energy shortage has become a structural problem especially after the suspension of several nuclear power plants triggered by the earthquake in 2011, and has also resulted in new energy regulations as well as an increased dependence on alternative energy sources.

Japan’s solar and wind energy markets have attracted investment from several private equity firms in the past months.

In August this year, private equity and infrastructure firm Hudson Clean Energy Partners has committed $300 million in solar power projects to Adenium Energy Capital, which manages solar photovoltaic investments in Italy, Jordan, Egypt and Japan.

In April GE Financial Services announced equity investment in a 32 megawatt solar project to be developed by Japanese power plant developer Pacifico Energy.

In January, Bain Capital launched the $80 million buyout of Japan Wind Development, a wind farm operator and developer, as reported by PEI.