Japan’s Orix Agrees to Buy 22% Stake in Ormat for $627 Million

FIMI fund and the Bronicki family will sell shares, making Orix the company’s single biggest shareholder

The logo of Orix Corp is pictured in Tokyo, Japan, April 7, 2015.
Reuters / Toru Hanai

Orix, a Japanese financial services group, agreed on Thursday to buy a 22% stake in the Israeli geothermal energy company Ormat Technologies for $627 million and work with it in developing new energy projects around the world.

Orix will buy a 13.9% stake in Ormat from the Israeli private equity fund FIMI and another 7.1% from the Bronicki family, who founded the company five decades ago, the two companies said. Orix will become the single biggest shareholder in the company when the deal close in the third quarter.

The price worked out to $57 a share, a 3% discount on Ormat’s opening price on the New York Stock Exchange Thursday morning. Ormat shares were down 2.6% at $57.64 early afternoon local time in New York.

“With Orix’s significant presence around the world, access to capital and strong positioning throughout Asia, we believe Ormat can enhance and accelerate its strategic growth plans in the renewable energy market,” Gillon Beck, Ormat’s chairman, said in a statement.

“We expect this collaboration will expand the number and quality of growth opportunities that Ormat enjoys around the world, particularly in Asia,” he added.

Using proprietary technology – most notably its Ormat Energy Converter, which converts low-, medium- and high-temperature heat into electricity – Ormat owns and operates geothermal and other types of power plants the United States, Kenya, Guatemala and Guadeloupe. Last year it had $663 million in revenues, two-thirds from power generation and the rest from equipment sales.

Orix’s business activities span energy, private equity, infrastructure, automotive, ship and aircraft, real estate and retail financial services. Under the agreement, Ormat will have exclusive rights to develop, operate and provide equipment for Orix geothermal energy projects outside of Japan and to serve as technical partner and co-investor with Orix in Japan.

Orix will also assist Ormat in obtaining project financing. The Japanese company will have rights to name three people to an expanded nine-person Ormat board of directors and propose a fourth person to be mutually agreed with other shareholders.

In addition to bringing in a new partner for the company, the sale is a windfall for FIMI, which will be earning a 300% return on the $140 million investment it made in the company in 2011.

The fund, which is led by Ishai Davidi, took advantage of a 60% collapse in Ormat’s share price that year to begin accumulating a 13% in Ormat stock. It later signed a joint-control agreement with the family and bought another 12% from them, a move that helped the Bronickis repay a 600 million shekel ($166 million at current exchange rates) loan they had taken four years earlier to head off a hostile takeover.

FIMI led an overhaul of company, merging Ormat Industries with Ormat Technologies, renegotiating money-losing power contracts in California that had been behind the company’s sagging share price and reducing debt.