Hitachi to Acquire ABB's Power Grid Business

By Shin Kai

Category:
Acquisition or Partnership

Hitachi, Ltd. announced that it is acquiring the power grid business from ABB Ltd. and has signed an agreement with ABB.  Hitachi plans to initially acquire an 80.1% stake in the ABB Power Grid 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% stake in Power Grids, making Power Grids a wholly-owned subsidiary.

Hitachi and ABB agreed to the enterprise value of the company operating power grids business separated from ABB as US$11 billion.  The purchase price of 80.1% stake is expected to be approx. US$6.4 billion (approx. JPY704.0 billion) after deducting debt-like items from the enterprise value.  The final price will be determined after customary adjustments for net working capital and net debt based on the actual amounts at the closing date.

With the acquisition of the ABB power grid business, Hitachi will offer innovative energy solutions business globally by combining ABB’s world-leading grids solutions and products with Hitachi’s digital technology.  In addition, by building an energy platform to realize more efficient use of electricity throughout society, Hitachi aims at expanding its Social Innovation Business, not only in the Power and Energy area, but also in areas such as mobility (railways and electric vehicles etc.), life (smart-city and buildings etc.) and industry (manufacturing facilities and plants etc.), and at providing a wide range of customers with innovative energy solutions.

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 realize grid network stabilization, 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);
  • “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 megawatts, which accounts for about half of the global installed base and processes 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 US$10.0 billion (approx. JPY1.1 trillion) for 2017, and operational EBITA was approx.  US$1 billion (approx. JPY110.7 billion) for 2017.  The division has approx. 100 manufacturing bases, approx. 200 sales locations, and around 36,000 employees globally.

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 utilizing “Lumada”, which has accumulated Hitachi’s experience in OT x IT x Products, as well as empowering the formation of global organization 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 realization of the Sustainable Development Goals (SDGs) and a promising society advanced 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.

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