Hitachi to acquire ABB's power grids business

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Hitachi to acquire ABB's power grids business

Hitachi to acquire ABB's power grids business

Industry News
Dec 18,18

Hitachi plans to strengthen its energy solutions business through this deal and expects to close the acquisition by the first half of 2020.

Hitachi to acquire ABB's power grids business

Tokyo, Dec 18, 2018: Hitachi has signed an agreement with ABB Ltd to acquire the power grids business from ABB. Hitachi plans to initially acquire an 80.1 per cent stake in the power grids business and expects to close the acquisition in the first half of 2020, making power grids a consolidated subsidiary. Hitachi has entered into a purchase option to acquire the remaining 19.9 per cent stake in Power Grids, making Power Grids a wholly-owned subsidiary.

As a result of this agreement, Hitachi will offer innovative energy solutions globally by combining ABB's grids offering including advanced digital grid solutions with Hitachi's digital technology. In addition, Hitachi aims to build an energy platform that connects various fields such as mobility, life and industry. Hitachi will expand provision of the platform to, and collaborative creation using it with ABB's broad range of customers to promote more efficient use of electricity throughout society and empower and grow the social innovation business.

"Today's agreement between ABB and Hitachi is a significant turning point in the global power and energy markets at a time when digital technology is fundamentally changing our society and the pattern of energy demand and supply is diversifying. Hitachi will combine ABB's strengths in the power grids business with our digital technology to build an energy platform that contributes to innovating the energy business. This creates further innovation for business fields such as life and industry and helps us address society's issues and improve quality of life," said Toshiaki Higashihara, President & CEO, Hitachi Ltd.

The power grids market is rapidly expanding, driven by increasing adoption of renewable energy, rising energy demand and supply in emerging countries, the expansion of distributed power sources such as electric vehicles and storage batteries, deregulation of the electric power sector in countries and regions, and advances in electric power system reform. The market is forecasted to reach more than $100 billion (approx. JPY11 trillion) by 2020, at a steady annual growth rate of four per cent or above for the period from 2017 to 2020. In particular, advanced energy management systems to optimise supply of, storage and control energy using digital technologies are growing rapidly as well as innovations in grid systems for next generation transmission network, which contributes to the formation of more flexible energy infrastructure addressing promotion of renewable energy and regional characteristics.

"The combination of ABB's power grids business with Hitachi positions power grids business for a successful long-term future as a globally leading infrastructure business. We crystallise the value we have built through the transformation of the last years and focus new ABB on digital industries. ABB's power grids business will strengthen Hitachi as global leader in energy infrastructure and Hitachi will strengthen the position of ABB's power grids business as a global leader. Our shareholders will directly benefit through the return of the proceeds of the divestment. Building on our existing partnership announced in 2014, the initial JV will provide continuity for customers and our global team," said Ulrich Spiesshofer, CEO, ABB.

ABB's power grids business operates four segments, all of which are global market leaders. Grid automation provides protection control system and remote monitoring control systems to realise grid network stabilisation, and management systems for supply and demand electricity market for trading electricity. Grid integration includes digital substation, system integration and service solutions, High Voltage Direct Current (HVDC) systems, and power semiconductors. High voltage products includes Gas Insulated Switchgear (GIS), and Transformers includes power, distribution and transaction transformers for railways.

For example, in the HVDC market expanding with the increased application of renewable energy, ABB has undertaken around 120 HVDC projects representing a total installed capacity of more than 130,000 MW, which accounts for about half of the global installed base and possesses the most advanced technologies being able to design and manufacture most key products in-house. Moreover, ABB's power grids business is known for its well-established global customer base in various utilities and industries which include companies operating in railways, natural resources such as oil, and IT as well as major electric power companies. ABB power grids' revenues totaled $10 billion (approx. JPY1.1 trillion) for 2017, and operational EBITA was approximately $1 billion (approx. JPY110.7 billion) for 2017.

In order to accelerate the collaborative creation with customers in the Social Innovation Business, Hitachi, as an innovation partner for the IoT era is strengthening solutions utilising Lumada which has accumulated Hitachi's experience in OT x IT x Products, as well as empowering the formation of global organisation and front-line functions. In particular, Hitachi has identified the power and energy business as one of the core pillars of the Social Innovation Business which supports building social infrastructures attributing to the realisation of the Sustainable Development Goals (SDGs) and a promising society advocated in Society 5.0. In December 2014, Hitachi entered into a strategic partnership agreement with ABB and formed a joint venture for HVDC operations in the Japanese market in November 2015 and jointly offers solutions to reform the power systems for domestic electric power companies.

Furthermore, by building an energy platform to realise more efficient use of electricity throughout society, Hitachi aims at expanding its Social Innovation Business in areas such as mobility (railways and electric vehicles etc.), life (smart city, buildings etc.) and industry (manufacturing facilities, plants etc.), and at providing a wide range of customers with innovative energy solutions.