New energy partnerships are expected to drive a return in dealmaking between Australian and Japanese companies to pre-pandemic levels this year as Japan’s ongoing need for imported energy generates activity.

After a decline in mergers and acquisitions between the two countries since borders closed two years ago, a new report by law firm Herbert Smith Freehills predicts that Japan’s transition away from fossil fuels to alternative sources of energy will revive economic activity with Australia.

The report says the number of new energy partnerships more than doubled last year to 25. There were 19 new collaborations on hydrogen, ammonia and other green energy projects, and new deals in that space are expected to increase this year as several existing hydrogen projects in Australia are being considered.

Japanese firms Kawasaki Heavy Industries, ENEOS and Iwatani Corp have financial support from a green innovation fund to develop hydrogen technology. However, Australia faces competition from other providers and will have to ensure it leverages off its existing relationships after decades of supplying commodities to Japan.

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