Kansai Electric Power is set to acquire Orix Electric Power, a unit of financial services company Orix, according to sources.
The deal between the Japanese companies is estimated to be worth around 17.5 billion yen ($159 million).
Kansai Electric has been struggling on its home turf in western Japan since the country`s electricity market was fully liberalized last spring. The acquisition of the Tokyo-based Orix Electric, which sells power to condos, will expand the utility`s presence in the capital area -- and, it hopes, boost earnings.
Orix Electric was founded in 2010 by Orix and property developer Daikyo. It has about 80,000 customers in the Tokyo metropolitan area and the western part of the country. But it, too, has had a hard time building up its business, and since May it has been soliciting bids from potential buyers.
Kansai Electric, Osaka Gas and Tokyo Electric Power Co. Holdings, among others, expressed interest. Kansai Electric was the highest bidder, but it took time to finalize the sale, as the companies had to work out how to handle Orix Electric`s existing customer contracts and employees.
Orix owns 85.8% of Orix Electric, while Daikyo holds the rest. The plan is to have Orix Electric create a wholly owned power retailing subsidiary by splitting itself up. Then, Kansai Electric will acquire the unit`s shares.
Orix is to finalize the plan internally in early September, before inking the contract. Kansai Electric intends to send a director to Orix Electric.
Kansai Electric began selling power to households in the Tokyo area in July. It aims to win 100,000 retail customers there by the end of March 2019, but as of the end of June only 14,000 had signed on.
Since most of Orix Electric`s customers are in the capital region, the acquisition will bring Kansai Electric much closer to the target.
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