As for the PE investments, as you know, at the time of Yayoi for JPY80 billion, it was JPY260 billion, so it increased dramatically. So how much the denominator is, it’s difficult to say. And when you say it, the buyers might say that they are not going to buy at high price, so it’s difficult for us to say about the PE investment. But renewable energy and others and the real estate, especially the renewable overseas, development NOI is about 8% or 9%, exit NOI is 3% to 4%. So those are the numbers for our exit strategy. For real estate, as I said, 5% is the entrance and the 3% is the exit. So if you consider like that, I think that you’ll be able to have a good grasp of those numbers.
Unidentified Analyst: Yes. So renewable energy, so it’s like doubling. And it is likely to be sold, and in your segment disclosure, certain assets with a certain size are included. So that means that you already have a certain level of unrealized gain?
Makoto Inoue: Yes, that’s correct. The issue is that when we disclose it there will be an insider issue. So I would like you to understand that.
Unidentified Analyst: I see. Thank you. It’s now clear. Thank you.
Operator: Thank you. We’re nearing to close. So this is going to be last two questions. UBS, Okada-san and then Niwa-san. So we’ll start with Okada-san.
Taiki Okada: Yes, this is Okada from UBS Securities. I was looking at Page 10. And the full year profit plan JPY105 billion for overseas, how likely is this going to be achieved? So overseas environment energy and Asia and Australia, hedge costs will continue to stay high in the second half as well. That’s my expectation. So capital gain and also asset size increase in the second half, do you think that will enable the achievement of the targets? And also for Asia and Australia, compared to the last fiscal year, the profit level is maybe lower in the first and second quarters of this year. And do you think this is going to recover during the second half of this fiscal year? So I want to understand the likelihood of achieving the profit plan for overseas business.
Makoto Inoue: Well, for aircraft and ships we believe that it is possible to achieve because we are selling off aircraft and also on ORIX owned aircraft offered to investors who want to use them as tax holders. So we believe that for aircraft and ships, it’s possible to achieve the target. And for vessels, we will be selling about four vessels that’s in the plan, and that’s achievable according to current market situation. Environment and Energy, especially Elawan, Avolon asset sales is in the center in the focus. For Avolon, the profit contribution has a three-month delay. So can we do this before the end of December, that’s the question? If not, then 27 may not be able to be achieved and that will be pushed out to the next fiscal year.
So this is still in the flex. For Asia and Australia, again we will have two or three to be sold. That’s in the plan and the internal process is ongoing. One of them we’re trying to sell is an asset in China, and we need approval from the authority. So as long as the approval is granted, there is no three-months delay for this. So we can sell before the end of March next year. For Asia and Australia, last year, we sold one lease company. And because of the absence of that, the number looks smaller this time around. But with regard to lease business then, we are seeing steady recovery. But in terms of gain on sales, we will have maybe one or two these company’s sales but we do not expect a big capital gain coming from this. So that is why we are presenting this number.
I hope that answers your question.
Operator: Okada-san, Did you ask a question? Next Niwa-san from Citigroup Global Markets.
Koichi Niwa: Thank you. My name is Niwa. Hope you can hear me.
Makoto Inoue: Yes.
Koichi Niwa: Thank you. On the follow-up question about the aircraft and ships, I’d like to ask another question. There are three questions. The next year, what would be the segment profit expected? And the second is the collection of the insurance, what will be the time frame, if you can comment on that? And the third, inorganic possibilities. I think that the aircraft industry is very active. As for the funding, it’s not very easy and it’s not going to get easier. So inorganic possibilities, I think it’s quite – it’s a good time for considering that. So if you can comment on that.
Makoto Inoue: As for the next fiscal year target, we are checking, as for the insurance, Avolon $300 million, we are asking for that payment. And AerCap and others, Russian insurance company, a partial collection or recovery has been completed. So domestic aircrafts in Russia, if they go outside of the country, they will be foreclosed. So they don’t want to have that. And so the payment was done for part of it. So for Avolon, $300 million out of the $300 million, the $70 million is going to be paid by the Russian company, so we are currently negotiating. But Roy’s insurance company negotiation, it has become a litigation. So about that, I will take probably one or two years. So if the collection $70 million from Russia is possible, then it’s not going to take that much time.
For the next year target for aircraft and ships, although we have not yet announced this, but JPY350 million to JPY40 billion. So most of the JPY40 billion or two-thirds is the aircraft and one-third is ships. As for ships, most of them are already sold. So the ships, the – unless there is a lowering of the marine transport, we won’t be able to make an order. So this is not very clear. But as for the aircraft, it’s very active. But as for the acquisition, acquiring at low price is very difficult. But the aircrafts, we have inflation hedging. So when the interest rate goes up, the leasing goes up. So no negative spread is likely to emerge. So post pandemic, the lease factor is 0.5% to 0.6%. Right now it’s 0.8% to 0.9%. So this is because of the rising interest rate.
So leasing of the aircraft based upon the inflation in interest rate, it changes so aircraft? How can I say this? There is not much negative impact from the cost. I hope you answered your question.
Koichi Niwa: Yes. Thank you. Thank you very much.
Operator: Thank you. It’s time to close the Q&A session. Lastly, we have closing remarks from Inoue-san.
Makoto Inoue: Yes. The numbers will be tail heavy second half heavy, which may be causing some concerns among you. But from October to December in the third quarter, to what extent do we see progress in terms of capital gains and that will probably enable us to give you more detailed or more accurate numbers when we do the earnings announcement in December. Interest rate hike in the U.S. is impacting our allowance for doubtful debt, it is increasing. We want to make some improvements, although it’s difficult to do so. But other than that, things are going very smoothly. So we expect and appreciate your kind support going forward. Thank you. And that concludes the second quarter earnings announcement. Thank you very much for staying with us until this – until the end of the meeting. Thank you, and goodbye.
