Good evening, ladies and gentlemen, thank you for joining this telephone conference of ORIX Corporation for Annual Results for the Consolidated Fiscal Year Ended March 31, 2021. The attendees on today's conference are member the Board of Directors, Representative Executive Officer, President and CEO, Mr.

Inoue; Member of the Board of Directors, Senior Managing Executive Director, Mr. Taniguchi; and Executive Officer, Head of Treasury and Accounting Headquarters, Mr. Yano. As we begin the conference, we have some ask.

In order to avoid feedback, if you have communication devices such as mobile phone nearby, please turn them off or move them away from the telephone. And if we experience severe feedback during the meeting, with the consent of the organizer, we may discontinue the meeting for a while and speak to - the participant who is causing the feedback.

We hope that you understand, and we will hear from Mr. Yano in the first half and from Mr. Inoue during the second half, followed by Q&A. We expect the whole meeting to take about one hour. We would like to begin the meeting without further ado. Mr. Yano, the floor is yours..

Thank you, good afternoon. I am Yano, Head of Treasury and Accounting Headquarters. Thank you for joining us today for the FY 2021 March and the business performance announcement of ORIX. So let me explain. Please refer to Page 2 of the handout first, the net income and ROE. The net income of FY 2021 was at JPY 192.4 billion, with ROE of 6.4%.

The result was lower than the prior year, but we managed to achieve net income in excess of JPY 190 billion, which is provided as the guidance at the time of interim.

Despite the further spread of the COVID-19 virus and the state of emergency enforced by the government twice over, the profit bottomed in the second quarter and started to improve from the third quarter. Please refer to the chart on the right.

At ORIX, there are business results of some subsidiaries and affiliated companies that are recognized with a three-month lag, which means that we have hit the bottom in first quarter in actual fact and continued to recover steadily since then. Please refer to the next slide breakdown of FY 2021 segment profits.

Total amount of segment profit was JPY 318.9 billion. Please refer to the chart on the left that shows the trend of segment profit over the past five years. Pale blue is investment gains, while dark blue is the base profit. The base profit was JPY 229.6 billion. This is a decline of JPY 70.7 billion on year-over-year.

However, if we exclude the three areas of businesses that was severely affected by the pandemic, which I'm going to be explaining in a little more detail later. The profit was up by JPY 7.6 billion year-over-year. This was thanks to the robustness enjoyed by Environment and Energy, bank insurance and banking and credit.

We believe that the result proves the strength of our diverse business portfolio. On the other hand, the investment gains was JPY 89.3 billion, timely exit to ensure high return on investment allowed us to maintain a certain level of profit generation.

In Japan, investment gains were recognized through the disposition of logistics facilities, Environment and Energy businesses, while some gains were realized in the United States and in Asia. Please turn to the next page. I would now like to explain the impact of COVID-19 pandemic to our business.

On this page, we share the impact to our business segments in each quarter. In some businesses, the impact is still persisting. However, the impacted amount is following a declining trend from the second quarter.

Here again, we can confirm the recovery trend of our profit now a little more into the details of the impact first, the three 3 areas of businesses that were affected severely by the pandemic. Real estate operations business has followed an uneasy trend affected by the fluctuation of the occupancy rate of hotels and inns.

While the occupancy rate fell to as low as single-digit percentage in the first quarter, it made a significant recovery in November of the last year, thanks to Go To Travel campaign. Due to a rise in the number of COVID positive cases over the festive season, the occupancy rate fell again in January of this year.

But started to recover slowly in February and March, aircraft leasing business is still going through tough time.

However, the demand for domestic flight is picking up in some countries where vaccination has progressed faster, which gives us confidence in the mid to long-term or even within this fiscal period we can expect the recovery trend to get started. Airport concession business books the results were three months back.

So the earnings of Kansai Airport in October to December was booked in the fourth quarter results. So number of Japanese domestic flights improved in December and mitigated a negative impact in the fourth quarter.

On the other hand, there are some businesses that were negatively affected by the pandemic in the first half, but started to recover in the second half. Like Corporate Financial Services and Maintenance Leasing as well as ORIX USA that has steadily recovered in third quarter with no further negative impact experienced in the fourth quarter.

Please refer to both Page 5 and 6 the slide show the segment performance. The breakdowns are shown in both profits and assets. In the fourth quarter, six segments posted growth from the third quarter, another evidence of a broad recovery. As to the details of the segment performance, please refer to Page 16 and onwards.

I would like to make one brief remark about the results at this point in time. First, the Corporate Financial Services and Maintenance Leasing segment profit was down by JPY 3.8 billion at JPY 59.1 billion.

The segment was affected by COVID-19 in the first quarter, however, started to follow a recovery trend towards the fourth quarter with auto trending well, boosted by a recovery in rental car demand with profit up on year-over-year.

Segment assets decreased by JPY 131.1 billion year-over-year due to decline in finance leasing and installment loans, but with excessive liquidity at the backdrop. We avoided extending new loans at lower spread and did not increase the asset balance just for the sake of it.

Now the Real Estate segment, segment profit was down by JPY 55.5 billion at JPY 24.7 billion. In the Investment and Operation unit, the base profit of hotels and inns decreased. The further amount of investment gains were down due to a large disposition gains being posted in the prior year with the DAIKYO condominium business.

Solid condominium management business translated into an increased profit of JPY 1.4 billion compared to the previous year. New investments in logistics facilities are ongoing and segment asset increased by JPY 50.9 billion year-on-year. And the asset management business, AUM, has been increasing steadily.

At the end of March 2021, our AUM stood at JPY 1.3 trillion. Moving on to PE investment and concessions segment profit was JPY 3.4 billion, down by JPY 40.7 billion year-on-year. Domestic private equity investment, we have invested into new projects, one in the first quarter and three in the third quarter. And the number of investees increased at 17.

Businesses in general are solid, and we are booking more profit. I have already covered the concession business before. Moving on to Energy and Environment, profit for this segment was JPY 28.6 billion, up by JPY 16.9 billion year-on-year, a major improvement in the profit. Mega solar business increased in profit in Japan.

And also, we had sales - gain on sales for the wind power in India, which contributed. And we announced two major investment projects for renewable energies overseas, one of which was Greenko Energy in India. And we have acquired 20% equity March this year. And the other project is Elawan Energy in Spain.

We now have a basic agreement to acquire 80% of the equity. And we expect to close in the first quarter for this fiscal year. Moving on to the insurance segment, segment profit was JPY 55.1 billion, up by JPY 10.3 billion compared to the previous year. New policies through online and non-face-to-face equipment increased, contributing to stable profit.

Profit in the fourth quarter is down compared to the third quarter, but this is due to active investment into advertising for new policy and also expanded sales of foreign currency denominated investment candle. This means that we have U.S. dollar-dominated liabilities and U.S. dollar-dominated assets. And finally, the currencies are matched.

However, accounting-wise, the impact of ForEx is different from asset to liability, and we had a negative impact in the fourth quarter, but we have already implemented countermeasures to minimize this impact. Segment assets was increased by 24% due to higher level of AUM, thanks to the increase of new policies.

Moving on to banking and credit segment, segment profit was JPY 48 billion, up by JPY 8.9 billion year-on-year. Similar to ORIX Life, non-face-to-face online activities were leveraged in order to capture the demand for real estate investment loans, and we have seen stable growth in both profit and assets.

Moving on to aircraft and ship segment, segment profit was down by JPY 40.5 billion, but we secured JPY 3.8 billion profit and profit increased compared to the third quarter, as I explained in the impact of COVID-19. As for aircraft leasing business, we are cautious.

However well, depending on when the international flights recover, we can have some expectations of recovery for the future. Moving on to ORIX United States, segment profit was JPY 43.6 billion, down by JPY 13.1 billion year-on-year.

And in the beginning of the term, we had some reserve and impact for energy-related assets translating into negative profit. But we have seen some recovery from the second quarter, and the profit level remains high. In the third quarter, we acquired a major arranger targeting low-income housing called Boston Capital.

And the OCU in this field has become top player with this acquisition. And at the end of March 2021, AUM stood at $78.1 billion. Moving on to ORIX Europe, segment profit was JPY 37.9 billion, which was down by JPY 5.9 billion year-on-year. But last year, we booked profit from the sales of - part of the business of RobecoSAM.

So if we exclude this impact, actually, the profit has increased. Globally, this segment has done well and the market is seeing the rapid recovery and the AUM at the end of March 2021 was €307.4 billion, which was a major increase compared to the previous fiscal year's end.

And we have seen a very steady increase of AUM balance as well in this fiscal year. In the fourth quarter, we have acquired 70% equity of asset management company in the infrastructure alternative investment called Gravis Capital Management.

We will continue to invest into industries where we can leverage our strength in the area of asset management as well. Moving on to Asia and Australia at the end, segment profit was JPY 14.7 billion and although some impairment was booked with some PE investees. We have seen solid profit coming from local operations in China, Taiwan and Australia.

We have also booked a gain on sales and evaluation with some investees. And that's all from me about the performance at the end of March 2021. Now we would like to ask our CEO, Mr. Inoue, to explain the business..

So this is Inoue from ORIX. So the state of emergency has been repeated. And just like the prior occasions, unfortunately, this presentation session would have to be carried out in this format. I'm sorry for the inconvenience. Let us start my explanation from Page 7. So 2021 March end, net income was down by 36.4% year-over-year at JPY 192.4 billion.

So a large decline from the prior year is something that we have not experienced since the global financial crisis, and we are terribly sorry for this result. So the major attributing factor to this result was the aircraft-related businesses, Kansai Airport concession as well as real estate operation businesses.

So the P&L of these areas, unfortunately, have declined by JPY 99 billion year-over-year. But these businesses, we hope, will start to recover rapidly once we start to see the end of COVID-19 pandemic. Of course, it is dependent on how fast the vaccination is going to proceed.

However, we think that we will be able to start making positive contribution from these businesses as well. 2021 March end shareholders' return. At the time of interim, we have said that we'll be paying out JPY 76 per share or a payout ratio of 50%, whichever higher. So this time, we have decided to apply a payout ratio of 50%.

So JPY 78 per share for the full year. In other words, in the second half, per share dividend is going to be JPY 42. As for the financial soundness, S&P, Moody, Fitch, in fact, has given us the credit rating of single A- with the outlook of negative, R&I AA- with outlook of stable. But depending on the progress that are to be made in our pipeline.

There may be some stress that will be put on the credit rating, which may result in the downgrading, which I would like you to bear in mind. Now in 2022 March end net income, we target at achieving JPY 250 billion. As for the full year dividend, we target to pay out JPY 78 with interim dividend to be JPY 39.

Of course, there are so many complex external factors that affect us. So this year is going to be pretty tough for us to focus ahead. But at the time of the interim for this fiscal period, we hope that we have some more clarity, so we hope to be able to revise our net income target at that time.

Now as to FY 2022 March end, we have set aside a repurchase - share repurchase program of JPY 50 billion. So the total payout should be on and around 57% for this year. So please refer to Page 8. Here in Japan, so it is very much dependent on how COVID-19 is going to trend going forward, which would give us some further clarity.

But for the time being, I think we have to continue to watch over the development. But in the Western countries, inclusive of Europe as well as United States, the vaccination in fact is progressing quite rapidly, we believe. So therefore, we hope to be able to recover our businesses in those geographical locations.

However, in the developing nations, inclusive of India, they are still struggling with COVID-19 pandemic. So therefore, we have to continue to closely watch over the development in those countries as well. FY 2023 March end, we aim to recover the net income of JPY 300 billion.

However, please give us a little more time before we can say this out loud with confidence. And unfortunately, at the 2021 March end, the ROE, unfortunately, was as low as 6.4%.

To recover this ROE back to the level of 11% is something that with shares repurchased as well as rebalancing by generating investment gains such as the segment that are severely affected by the COVID-19 and also, they include - so if we were to combine all those efforts.

We hope to recover the ROE in light of the business conditions by ways of allocating the dividend as well new investment in general reserve as well share repurchase earlier than 2026. But I think it is too early for us to give you a certain kind of idea for the mid- to long term at this point in time.

So we would like to set a priority in recovering back our net income to JPY 300 billion. That remains to be unchanged. In the last year, ORIX Group, they were - we were surrounded by very special, of course, conditions because of COVID-19 pandemic.

So therefore, we will be very mindful of carrying out the day-to-day management in a very cautious manner. So well, not only for the season, but we have given you the policy that we will be putting a lot of emphasis on the shareholders' return.

Now on a continued basis, the allocation of the net income will be determined in light of the business conditions by way of allocating the dividend as well as new investments in general reserves as well as shares repurchase.18.49 It goes without saying that this policy, of course, we have to strike about the right balance between the share price level of the time.

And again, it goes without saying that as the management of ORIX, we are not satisfied with the current share price level. This is something that I felt the need to reiterate at this point in time. Now at the end of this month we will be concluding the acquisition of Elawan Energy S.L.

And through this company, we are going to carry out the renewable energy in European countries in earnest. In the last year, we have acquired Greenko. And in addition to that, the infrastructure fund asset management company, Gravis Asset Management would allow us to perhaps explore a possibility of launching a renewable energy fund as well.

Greenko as well as Elawan have very different projects in their development pipeline.

And if you were to combine all that, the generating capacity would reach to somewhere around 17 gigawatts with a project total amount being JPY 1.6 trillion, of which JPY 1.2 trillion will be procured by the project - through the means of project financing as well as cash on hand and the financing by each.

Now in addition to that, several years ago, we had invested in geothermal business company, the largest of its kind in the world, Ormat Technologies, 170-megawatt with the total project JPY 100 billion is underway.

Now in the next several years, the renewable energy area requires additional investment, and they could perhaps be a possibility of further M&A as well. In any case, it will remain to be one of our focal area for ORIX.

Here in Japan, the up and running environmental resources management, Yayoi plant in the vicinity, the capacity of 1.6 megawatt dry biogas power generation plant is under construction, and we'll be testing the operation - end of this month.

The total amount of investment is JPY 6.1 billion and the 500 metric tons of industrial and other waste per day is accepted at both Yayoi and its vicinity. And moreover, as the geothermal plant operation in Hachijojima as well as the Minami-Kayabe in Hokkaido, the geological survey has been concluded.

So we will be working at the development over time. The project, the total amount, is JPY 18 billion, with a capacity of 13.1 megawatts. Other than these projects here in Japan, the pipeline for renewable energy is now being secured at - to the extent of JPY 80 billion or so. So please refer to Page 10.

ORIX Group as a solar power operator, we are operating the facility of 870 megawatts of capacity. In 2018 June, we had established ORIX Renewable Energy Management, OREM, which is an O&M company.

And through this company, we were able to contain some of the degradation of the power avoiding or minimizing the opportunity loss by making use of power generation marginally in system that - is embedded with artificial intelligence. So we have been proceeding with the digitization of the power plant.

By avoiding the opportunities of this, we will be able to add our - add up the profit by several tens of billions of yen. Based on this knows and health as well as leveraging all the data that we have been able to collect, we would - we are considering to take part in the AUM activities for the third-party operators. Please turn to Page 11.

Last year, we experienced a failure with a key investment for Kobayashi Kako. Currently, the company is under business suspension, and we are pursuing the possibility of turnaround. By the end of this fiscal term, we should be able to decide on the direction.

As for PE investment, in the last several years, we have enjoyed a total of JPY 200 billion worth of capital gain. Learning from the experience of Kobayashi Kako, we will continue to be active in Japan, U.S., China and Europe in major M&A projects, including carve-out projects as well as business successions.

In 2013, when we acquired Robeco, the focus is mostly on traditional equity and fixed income management. But after that, a real estate organizer, servicer and also low-income housing syndicator asset manager, Boston Capital, was acquired in the U.S. We have also acquired Gravis Capital in the U.K.

At the end of March 2021, our AUM stands at approximately JPY 50 trillion. We will continue to conduct acquisition at the right time. We are continuously investing into new logistics facilities domestically as well.

Against the backdrop of a strong demand for e-cars, there is a stronger need from overseas investors, and we are continuing the development mostly in the metropolitan area. We already have pipeline worth JPY 150 billion and we will continue to run the business model of turnover, consisting of development, operation and sales.

As digitalization accelerates, there is heightened need for data centers. We will consider new form of data center with lower power consumption for both the new development as well as the replacement of our existing facilities. I would like to report on the current status of MICE IR. Osaka area is still in the state of emergency.

And the situation requires caution continuously. But our policy is to continue to assess the investment efficiency and respond accordingly. It is important for us to follow the government policy for decarbonization and minimize the risk, which is specific to reclaimed land and improve the collaboration with MGM as well as group of local companies.

And also, we need to carefully consider whether the business case stands without the inbound traffic. In other words, we need to face this uncertain situation. And we may have to apply some conditions. But still, in that way, we are preparing the proposal for RFP.

As for Kansai Airport, although there is no inbound traffic, in preparation for the Osaka Expo in 2025, we are receiving support from the central government, and we will be conducting a large-scale renewal of Terminal 1. And the cost of this renewal would be approximately JPY 70 billion. Please turn to Page 12.

Next, I would like to touch upon ESG related matters. In October 2021, we plan to renew our sustainability report. Based on the specific objective by the government for decarbonization, we will indicate our policy at ORIX, including CO2 reduction target. ORIX has top-level renewable energy business in Japan.

And through our network, we can continuously contribute for the decarbonized society, which is developing in various countries around the world. CO2 emission by ORIX Group in Japan was approximately 1.3 million tons at the end of March 2020.

On the other hand, we're also contributing in terms of CO2 reduction worth 3 million tons at the end of March 2020 through our renewable energy business. We are already reducing three times as much as we're emitting domestically.

So after the termination of FIT period, we can use the reduction of CO2 as carbon credit, and this has potential of generating sufficient asset value. We are now calculating and aggregating the emissions of our group companies overseas.

Considering how much emission is done by the group, maybe the overseas group companies are not meeting a material amount. But by including the overseas data, we should be able to announce our CO2 emission in a more accurate manner.

Challenges going forward include a biomass mixed fuel - biomass coal mixed fuel power in Soma and Hibikinada and the operation of hotels and the CO2 reduction at the waste processing plants. It is very important for us to address these issues one by one specifically. Please turn to Page 13. ORIX Group runs various businesses globally.

We need specialists in each of these areas to be actively engaged. We provide a support system and programs to help them develop their own careers independently. Diversity and inclusion promotions are the sources of the growth for the whole ORIX Group.

In terms of the female workplace participation, 40% of our professional staff are female and 26.2% of the managers are women. We are focused on supporting women's careers so that they can continue to work in a better environment. In order to introduce fresh vitality and the differing perspectives into the group, we are actively hiring mid careers.

60% of the staff that joined us last year are mid-career hires. We also focused on disabled persons hiring. In order to promote this, we have established a special subsidiary for ORIX business support and they are contributing to the promotion of operational efficiency.

And from 2016, we have started a project to transform the workplace, including work style reform and providing better motivation for work, providing a better environment for people to be actively and taking their own initiative, participating the work.

In 2018, we started providing support for our business succession for medium and the small size businesses, including maintenance of employment, improve the management system as well as succession. We are supporting the employment creation and the local economy. Page 14 shows the governance.

And half of the 12 directors at ORIX are independent directors. At one time, I sat on the Nomination Committee due to the request by the outside directors. However, since June, General Shareholders Meeting this year, we went back to the structure where all of the members are outside directors.

From Slide 21, we have increased the performance-based compensation and the share component of director's compensation. And the ratio currently is 1:1:1 between fixed bonus and the share component. And we have also started discussing whether or not to reflect the ESG into the directors and executive compensation.

High-level transparency and governance, we need to maintain the structure of this. This is the basic stance, and we will continue to respond to the society's demand this way. And we will also respond to the requests and demands of the stakeholders, including shareholders with regard to ESG.

That concludes my presentation, and thank you very much for your kind attention..

Thank you very much. [Operator Instructions] So to begin with from SMBC Nikko Securities, Muraki-san. Please ask your question..

I am Muraki from SMBC Nikko Securities. With regard to shareholders return policy. Now for Mr. Inoue, dependent on the progress of the business performance, you may decide to - or there could be a possibility of revision at the time of the interim for the net income.

If that happens, the shareholders return will be conducted in the ways of increase of the dividend or maybe a top-up of the shares repurchased could that be a possibility? And in conjunction to that of course, there are various different investments, the unrealized gains, especially at the companies like Yayoi and also MICE IR, the major investment at the time of fall of this year, do you think that will be taken into account? And would that affect your shareholders' policy - return policy?.

So first of all, at the time of the interim, the revision for our earnings reconsideration, there could perhaps be a possibility of the revision, but it could be to the upside or the downside even. So of course, we have a great expectation to revise upward our guidance for this year.

And if it goes beyond our expectation right now, JPY 78 of dividend is not something that would make our investors happy for sure. So dependent on the execution of the projects in the pipeline, that will be taken into account. So we may decide to increase the amount of shares repurchase or the dividend payout.

So we would have to decide that in light of the situation at the time. And also, how do we foresee the business performance trending from here down the road? So I think it will be around October, we hope that we have a little more clarity. So I hope that you - that this would be enough, and I hope that you are satisfied with this answer.

Now with regard to Yayoi, also the unrealized gain, of course, we are thinking about what we can do about it. And if I go into much of the details, I think it will be a provision of insider trading information. So therefore, of course, there will be new, of course, investment opportunities as well.

So it is not in my of course, policy to increase the asset in a continuous manner. Rather, I think I am very much for the fact that we would carry out the rebalancing of the portfolio and inclusive like Yayoi as well as in the United States. In other words, I think I will not be discriminatory in terms of making certain decisions.

So - but with regard to MICE IR though, the execution of our MICE IR project, and that, of course, is in excess of JPY 1 trillion in total amount. So there is a CO2 emission reduction target, which will be shared by the government and how that will translate into carbon credit.

But I think the investment amount will be somewhere around JPY 1 trillion in any case. So with MGM and ORIX and Osaka-based companies that have already submitted their LOI. I think in total of JPY 500 billion or JPY 600 billion of equity and the rest will be procured from banks. So that is the idea for the financing as of now.

So that may perhaps put pressure on the dividend payout or the sales repurchase is not our option. So I hope this answers your question..

Yes, thank you very much well understood. Thank you..

Thank you, Daiwa Securities, Watanabe-san. Please ask your question..

Yes, this is Watanabe with Daiwa Securities. Page 7, shareholders' return you want to maintain the dividend level and the total return is indicated here.

Do you plan to change this in the future? And also during - at the interim, do you plan to share with us more specific shareholder return policy?.

Regard to payout ratio. Interim dividend announcement is usually done at this point, and we don't usually talk about the full year dividend. But considering the special situation, JPY 250 billion is not really back to cruise speed for us. So JPY 250 billion, please accept this.

But for the full year, we will go to JPY 78 and JPY 250 billion of share buyback at 57% net ratio. But this is all about extraordinary situation. I hope you understand that.

JPY 78 dividend, would it be lower? Or if we cannot fully achieve JPY 250 billion for some reason, we want to point to JPY 78, and we want to do the share buyback of around JPY 50 billion regardless. We do have sufficient cash flow, so we should be able to cover all this.

And the net income achievement, to what extent can we achieve that? That's another question.

Can we exclude the COVID-19 impact and for the 3 businesses that I talked about, can we see an improvement in profit very clearly? Well, JPY 99 billion, lower than previous year, but if we can see gradual recovery, then we have to make changes to these numbers as well.

So hopefully, during the interim announcement in October, we can give you some more specifics about this. And hopefully, after that, mid- to long-term policies, directions can be indicated. And as far as the shareholder return is concerned, we are really hoping that we can give you more specifics at that point in time.

But this is all I can share with you right now, and this is me being very honest..

Thank you. That's very clear thank you very much..

Thank you for the question, from JPMorgan Securities, we have Otsuka-san..

Thank you for the opportunity, I am Otsuka from JPMorgan. So I have a question with regard to net income. So this year, JPY 250 billion is your guidance, which means that you're expecting to recover back JPY 60 billion or so.

But if you were to break it down by 10 segments, which segments do you foresee the recovery coming from?.

So aircraft, of course, related businesses, leasing, especially back in December of last year, Avolon, of course is one example 30, in fact bodies of aircraft will in fact, have to go through grounding and that has been decommissioned as well. So therefore, the risk of the financing impact, the negotiation has been concluded.

So it is in approvable condition for Avolon, I must say. And as for the aircraft-related businesses, the existing LCC, there are some companies that have failed. But there are new LCC, 100 or so, in fact, that have emerged. So the narrow-body needs, in fact, arising from these new LCCs.

So in the second half, I hope to see the aircraft businesses starting to recover. To be honest, hotel businesses as well as inn businesses here in Japan is very much affected or influenced by the vaccination. I am - I have a kind of a negative perception over the development of vaccination here in Japan, but still.

So this is why I am slightly pessimistic in terms of the recovery of these operational businesses in Japan. But of course, there's the renewable energy, Greenko as well as Elawan, the pipeline. So those projects in the pipeline, in fact is scheduled to conclude within this year.

So therefore, the pension-related fund, we may divest to those kind of companies or we may decide to continue to operate or we may give. We may launch renewable-related funds through Gravis Capital. So there are various different options. So to be honest with you, tens of billions of profit can be generated from renewable energy.

And also, at the same time, the logistics facilities, there are several facilities that we are foreseeing ourselves disposing as well. So taking those into account, but I don't think I can carry on. And you may think that, that does not allow us to reach to JPY 250 billion.

That would be the existing line of assets, we should be able to recover back to this level. So there's Yayoi, as we mentioned by some other person. And also, there are some assets that could be securitized in United States as well. So therefore, I think JPY 250 billion is not aspirational target.

But what I'm thinking, so therefore, is not achieving JPY 250 billion, but going beyond and going back to the level of JPY 300 billion. But if we become too aggressive, we may make mistakes just like we have done so with Kobayashi Kako. So we would need to be cautious somewhat, but the JPY 250 billion is not an unachievable target.

So that answers your question, I hope..

Well, in short, with base profit, so is there any kind of risk that put a lot of pressure on this base profit? So that was my impression from what you have shared?.

So especially the corporate financing-related businesses, we are not going to be engaging the lower spread businesses. And inclusive of regional banks, there is refinancing that is underway. So therefore, we don't want to outstretch ourselves into those areas of businesses.

And under new businesses, we have not been expanding very much other than the logistics investment, so the logistics facilities investment.

And so more than 5% of ROI and also NOI of 3% or beyond so therefore, if there was to be an arbitrage that can be enjoyed, and there are about 10-or-so deals in the pipeline, and we may be able to generate some investment gains from the disposition.

So like banks, we are, of course, not thinking about depending on those kind of financial institutions for further financing..

Thank you very much for the detail. Thank you..

Thank you. Mitsubishi UFJ, Morgan Stanley. Tsujino, please ask your question..

Thank you. You spoke about the current credit ratings and you said if the current situation continues, downgrade possibility does exist. That's what you mentioned. If the current situation continues, ROE remains to be low. So downgrade is a possibility, I suppose.

But why did you intentionally mention this, highlight this, in this presentation and in terms of shareholders' return, you will revisit this before the end of the fiscal year and you will maybe make some announcements about this important timeframe? So up until then, what can change? Can we expect dramatic improvement in profit or can we expect a major improvement in the coverage in terms of vaccines in Japan, changing the situation completely? I don't think so.

So what would be the factors that need to be materialized in order for us to see a positive revision of shareholders' return? I can't really think of anything. With regard to MICE IR, there are many conditions now that have to be fulfilled? There are some more restrictions. That's the impression that I got from your presentation today.

So maybe the project will be delayed even further or maybe reduced in size dramatically. And if those scenarios come true, how would the scenario develop, i.e., maybe this is just my own thinking.

Please give us more details?.

As far as downgrading is concerned, maintaining single A is the standard message from ORIX. And Elawan, that was about JPY 80 billion worth of project. And Elawan, once this is executed, S&P RAC ratio is lower than 10%, which means that it wouldn't happen immediately. But when the timing or review comes around, it's possible that we would be BBB+.

So what we wanted to do was give you a heads-up. And ORIX financing situation or ORIX response would not change at all because of this. It's very simple. We have been talking about simple A over time, and we will be BBB+. So we just wanted to give you the heads up. That's the only thing that we wanted to do.

And of course, there are various assumptions with regard to MICE IR. Maybe the way I explained was not sufficient if you had such negative impression. I would say that this is a very large project. And Osaka MICE IR is ORIX MGM. There's nobody else. That is the issue.

In other words, with the Prefecture of Osaka and city of Osaka, we have to continue to negotiate. And if the state of emergency continues to be in place, how do we do the presentation? And we want to really push this and force this. And the Expo is in 2025. By which time COVID-19 should be over, but will Expo really take place.

And for the Expo, infrastructure must be prepared. But in order to prepare the infrastructure, there is going to be an impact on MICE IR as well. If there is no Expo and no infrastructure building, then we would be in trouble. So we are providing certain conditions as we negotiate with the Prefecture and city of Osaka.

That's what I'm saying in terms of conditions. And I don't think you should really take this whole situation too negatively. So I just want to make some corrections. Now overall, the numbers do not look very positive or rosy according to your assessment. But we're not really talking about that rosy story.

With our existing assets, once the COVID-19 impact is over, JPY 99 billion or JPY 100 billion catch-up would be easily done and we also have new deals in place, which means that, by interim, we should have a bit idea about the outlook and give you a clearer idea. That was the meaning of this explanation today.

So I do apologize, I - you took it too negatively. The impression of my presentation is too negatively or too rosy. I don't really know how you perceive my presentation, but JPY 25 billion, we believe, is achievable. And there is also potential upside. In which case, at the interim, we will adjust some numbers and give you the present explanation.

That was the message that I was intending to deliver today.

Tsujino, does that answer your question?.

So up such to JPY 250 billion, it was very difficult for me to think that it was going to be realistic as a scenario. I was wondering what kind of round would enable such a wonderful upside for us.

So I just wanted to know more details?.

JPY 250 billion is the achievable level that we are indicating, and we say JPY 250 billion. And from your perspective, the number may be too small. Maybe some of you believe that this number is too low. But anyway, we are talking about JPY 250 billion.

And in the meantime, if we can catch up with the situation, there could be a potential upfront, but we cannot really promise that right now. We need more time to talk about the upside. That's the message..

Sasaki-san from Bank of America..

My name is Sasaki. I would like you to give me a brief answer to my question. So I think you have made the use of the same kind of schematic previously. So after 26 March, you have no kind of - no indication of 26 March end and there is no mention of JPY 500 billion.

So I just wondered why this was the case? And in terms of the presumption, JPY 2.6 trillion worth of pipeline and JPY 1.3 trillion. So I believe you have shared with us the pipeline of JPY 2.3 trillion or so.

So how is this right now?.

So JPY 192 billion is the only amount that we were able to generate this time around. So it's just that we tend a little humble and decided not to mention this JPY 500 billion of a target. So we - so immediate target for us, of course, will be JPY 300 billion - JPY 250 billion and then JPY 300 billion and JPY 400 billion as on and so forth.

So therefore, otherwise, unlike or Toyota, you may think that we are almost a negligible company. But of course, we would do our best. You see JPY 192.8 billion of net income is such a humble amount of profit. So this was why we were hesitant in mentioning this target. So one, two years ago, we did generate JPY 300 billion.

So this is why we have shared with you the target of JPY 400 billion to JPY 500 billion. But with - even if it was to be just in the sky, but we were hesitant in mentioning this target of JPY 400 billion to JPY 500 billion. We do have a very different, of course, projects in the pipeline.

On an EDS basis, it will be somewhere around the numbers that you have mentioned. But on the Japanese side, so inclusive of logistics facilities, it is about JPY 200 billion to JPY 300 billion or so. Elawan, Greenko, especially with Greenko, as you know, in India, COVID-19 pandemic is pretty serious. So therefore, the development, in fact, is delaying.

And with regard to Elawan, at the end of May, the construction work will be completed somewhat. So how that - does that contribute to the profit? So do we divest or do we hold or do we operate? There are various different options. So that would affect the total amount of the deals in the pipeline.

We do have this JPY 1.2 trillion of deal in the pipeline still. So in the United States recently, JPY 140 billion of a deal emerged. But as a result of due diligence, we were not able to carry out the full-fledged due diligence. And going over to the location and engaging ourselves in prior discussion was not possible.

So this was why we had to decline the deal. But once the COVID-19 is over and done with, we will be able to resume these deals. And although there is a certain kind of - the range may be broad in terms of what's in the pipeline, but the ROA of more than 3% can be achieved. We think, in terms of the investment that is in the horizon.

And - but it does not, of course, contribute in the immediate term to our P&L. So this is why when we start, 2023, 2024, 2025, so we would be very cautious in analyzing the numbers and so that we know when to execute these deals. And this is why we have not made a mention of what you have asked for..

So just to confirm, so ORIX still for the long-term, so you have not changed your views on us in a long-term?.

No, we haven't..

Thank you for that, but I think last time, in 2024, JPY 400 billion and 2026 JPY 500 billion, we may have shared that. So that may delay for maybe one or two years perhaps.

But that is something that was unavoidable because of COVID-19?.

Yes, but you see there are someone like Mr. San who is generating the profit and achieving record high. So this was why we don't want to give excuses by telling you that is all COVID-19..

Thank you..

Nomura Securities, Sakamaki-san. Please ask your question..

This is Sakamaki, Nomura Securities. I have a question about Page 12. Environment and Energy it seems that you are really highlighting this business a lot. And you have the reduction target. And depending on that, importance of business may change.

I was wondering if the size of the business would shrink in some areas?.

No, that doesn't happen. Several years ago, solar business was increased to full scale and the CO2 emission was not considered at all at that time. We just look at cash flow, FIT, about JPY 40, generating enough revenue. So we decided to do this business. And cash flow, once we have enough cash flow, we thought we would sell this business.

If we sell this asset right now, capital gain would be maybe 2 to 2.5 times. However, because for now, we have the CO2 problem, we put a stop to this. If we hold and operate this business, including carbon credit, we may be able to enjoy this as a new asset. This is the perspective.

So to be honest, for solar, we just look at the results, and it turned out to be a good asset. CO2 reduction, hotels and inns, this is the biggest concern for us CO2 emission from this business. We need to do something to reduce the emissions. And as I mentioned before, Hibikinada and Soma, as I mentioned, we have to figure out how to work this out.

Luckily or not likely, METI says that the mixed fuel, including coal, doesn't have to be finished by 2038. And if we leave it until 2038, depreciation will be completed. So investment would be zero, which means that if we continue to generate power from mixed fuel well, in the past, we could get more revenue.

But anyway, by 2038, maybe we have to rebuild everything and turn it into power generation based on biomass. We have to consider all these different possibilities. Several years ago, we had a plan that was for this power generation business, but now we have to rewrite the scenario.

Other than that, we're not really changing or transforming any other businesses.

Does it answer your question?.

Yes, thank you..

So thank you for the question. So, it's time for us to conclude this session. So this is - the next question will be the last question. So from Citigroup Securities, we have Niwa-san..

Thank you very much for this opportunity. I'd like to ask a question about new investment. So when you provided the answer to Mr. Sasaki, I'm referring to Page 7 and 8. And in the last year, JPY 50 billion was the amount.

So what is the image for this year? And the second question, on Page 8, in order to achieve JPY 400 billion of net income in the year after next or how much of an investment is needed in order to achieve this goal every year? Because of Kobayashi Kako, you had shared with us your cautious attitude that you're applying.

But how much of a new investment this is to be made in order to achieve this numeric target?.

So as to Kobayashi Kako, to be honest, we had failed in due diligence. That was a mistake. We do joke about it. But all those people who are - who graduated from the third rated kind of university may have arrived at such a deal. So this is why we need to invite an expert for the due diligence of such deal as Kobayashi Kako.

But in any case, we would - it doesn't mean to say that we would kind of shine away from making new investments. It was certainly a valuable learning on our part. So we would, of course, remain to be cautious in getting out the due diligence. But in any case, my policy is that we need to be thorough in the due dividends processes.

And we should not - it should not be halfhearted. And if we have some kind of anxiety as a result of due diligence, the rep and warranty may be perhaps made a little more stringent, perhaps. So in any case, we would, of course, remain to be cautious. I just have to describe it in such a way.

But as for myself, JPY 20 billion, JPY 30 billion of a loss can be borne is not what I want to be saying. But I think that amount is not something that is recoverable.

So what was the other question?.

Thank you.

As a matter of fact, the current fiscal period that is up and running as compared to last year, how much more would you be investing? How much would you be investing newly every year in order to achieve that profit goal?.

I think JPY 300 billion to JPY 400 billion of investment should be continued and JPY 200 billion to JPY 300 billion of an existing asset can be securitized. And we have JPY 13 trillion of total assets as of now. And I think we have been explaining this over and over again.

So this JPY 13 trillion is to be increased to JPY 14 trillion, JPY 15 trillion and JPY 20 trillion. I have some doubts about it because JPY 13 trillion perhaps at the most JPY 15 trillion. We need to, of course, reshuffle our portfolio and we want to bring up the ROE to teens percentage.

And so this is why - which means that we would push down the ROA as a matter of fact. So in order for us to achieve our numeric target, JPY 300 billion to JPY 400 billion worth of new investment may have to be made every year. So JPY 200 billion to JPY 300 billion worth of securitization may have to be done as well.

So these are the ideas that I have in order to achieve our target..

When you said JPY 500 billion, you meant by investment amount or what?.

Yes, exactly. I was referring to the numbers that you have mentioned in the past. And so not just the existing line of businesses. There are 3 areas that are severely affected by COVID-19. JPY 90 billion worth of loss, unfortunately, was experienced by these 3 major businesses.

Of course, we will be able to bring this back if the COVID-19, of course, is over and done with. So going back to JPY 300 billion level, is not a difficult task to be concluded. And of course, if we were to execute all of that, that is in the pipeline, so JPY 50 billion, JPY 70 billion of our profit contribution can be expected.

And also here in Japan, the private equity investment, excluding Kobayashi Kako, that is, in a year or two years' time. I think there are some deals that will allow us to generate some capital gain as well.

So if we do a good job of managing all this, JPY 300 billion to JPY 400 billion of an achievement is not that tough, of course, dependent on the market, I would add. So that's my idea..

Thank you very much for all the detail that you have shared. Thank you..

Thank you. That concludes the Q&A session. Mr. Inoue, please give us your conclusion - concluding remarks..

Thank you very much. JPY 192.4 billion, we find this number very regrettable. And in relation to that, we will be issuing dividends, maybe not to your satisfaction, but we will be delivering the dividend. We want to go back to cruise speed and achieve more than JPY 300 billion as soon as we can. So I hope that you can give us some time. Thank you..

That concludes today's conference by ORIX Corporation. We would like to thank all the participants for staying until the end of the program..