In the face of strong competition from Chinese and European companies, Hitachi, Mitsubishi Electric and MHI have decided to consolidate their hydroelectric power generation system operations in a bid to strengthen and expand the related business.
Although the current negotiations are officially described as 'initiating concrete discussions' the three companies intend soon to establish a joint operational company and build up a coherent business structure by integrating their various activities related to hydroelectric power generation systems, including marketing, servicing, engineering, and development and design.
Their market is developing in a complex way. In Japan, while the number of projects to build large-scale new plants has been decreasing, demand for renovation and preventive maintenance of existing power generation facilities and for upgrading of power generation capacity is expected to remain constant. In overseas markets, vigorous and sustained demand is anticipated in such countries as China, where large-scale electric power development projects are in progress, as well as in Latin America and India. The business environment continues to be severe, however, due to Chinese manufacturers' expansion into overseas markets, in addition to existing competition with European companies.
Hitachi, Mitsubishi Electric and MHI have reached a common recognition that the most effective way to strengthen and expand related business would be to pool their resources and engage in joint operations. Through integration of their engineering, development and design functions, the three companies will secure the human resources to maintain and pass on the strengths they possess now, particularly in pumped storage power generation, in particular in the area of variable-speed pumped-storage power generation, which is superior in responding to fluctuations in electricity demand and therefore expected to attract rising market demand. For manufacturing, an optimal production structure will be established through organic co-ordination of the three companies' production facilities and development of overseas activities.
The new company will be owned equally by Mitsubishi and Hitachi, and is expected to commence operations in October 2011. Its scope of business will cover marketing, installation and after-sale servicing of hydroelectric power generation systems for electric utilities both in Japan and overseas, engineering relating to these systems, and development and design of main components for these systems including water turbines, water turbine generators and control systems.
The company name, representative, head office location, capitalisation, and so on have yet to be decided.
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