Hitachi to Strengthen Energy Solutions Business with the Acquisition of ABB's Power Grids Business

Tokyo, Japan, December 17, 2018 --- Hitachi, Ltd. (TSE:6501, Hitachi ) today announced that it has decided to acquire the world-leading power grids business from ABB Ltd (NYSE:ABB, ABB) and has signed an agreement with ABB. Hitachi plans to initially acquire an 80.1% 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% 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 ABBs world-class grids offering including advanced digital grid solutions with Hitachis 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 ABBs broad range of customers to promote more efficient use of electricity throughout society and empower and grow the Social Innovation Business.

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 US$100 billion (approx. JPY11 trillion)*1 by 2020, at a steady annual growth rate of 4% or above for the period from 2017 to 2020*1. In particular, advanced energy management systems to optimize 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.

*1 based on Hitachis analysis

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); 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 megawatts, 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, ABBs 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$10.0 billion (approx. JPY1.1 trillion)*2 for 2017, and operational EBITA*3 was approx. US$ 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.

*2 Calculations based on US$1 = JPY110.

*3 Operational EBITA: a key performance indicator used by ABB. See ABB's Form 20-F for details.

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*4 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 advocated in Society 5.0.

In December 2014*5, Hitachi entered into a strategic partnership agreement with ABB and formed a joint venture for HVDC operations in the Japanese market in November 2015*6 and jointly offers solutions to reform the power systems for domestic electric power companies.

*4 Hitachis solution to accelerate digital innovation

*5 News release ABB and Hitachi to form strategic power grid partnership for HVDC in Japan announced on December 16, 2014.

(http://www.hitachi.com/New/cnews/month/2014/12/141216.html)

*6 News release Hitachi ABB HVDC Technologies, Ltd. commences business operations for HVDC in Japan on October 15, 2015. (http://www.hitachi.com/New/cnews/month/2015/10/151015a.html)

With the acquisition of the ABB power grids business, Hitachi will offer innovative energy solutions business globally by combining ABBs world-leading grids solutions and products with Hitachis digital technology. Furthermore, 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.

Toshiaki Higashihara, President & CEO of Hitachi, Ltd., said: Today's agreement between ABB and Hitachi is a significant turni

LINK:	http://www.hitachi.eu/en-gb/press/hitachi-strengthen-energy-solutions-...
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