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Mitsubishi sees 'mega suppliers' vying in world power market

Wednesday, September 21, 2016 - 10:25

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After losing a multibillion-dollar bid for Alstom SA's energy business, Mitsubishi Heavy Industries Ltd is positioning itself to defend its market share against rivals Siemens AG and General Electric Co.

[NEW YORK] After losing a multibillion-dollar bid for Alstom SA's energy business, Mitsubishi Heavy Industries Ltd is positioning itself to defend its market share against rivals Siemens AG and General Electric Co.

A competition among the world's three "mega suppliers" of thermal power equipment and services is bound to continue after General Electric outbid the others to reach a US$10 billion deal for Alstom's power generation assets, Shunichi Miyanaga, chief executive officer of Japanese equipment manufacturer Mitsubishi Heavy Industries, said.

Mitsubishi is focused on establishing more efficient supply chains to gain a leg up on its competitors, which are more vertically integrated, he said.

"I was very sorry that we lost our bid to GE in the Alstom acquisition," Mr Miyanaga said in an interview at Bloomberg's Houston office on Tuesday.

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If Mitsubishi had been successful in its bid to take over Alstom, it would've been a different story, he said, "but we were not successful, so we need to fight with a different kind of strategy".

The Tokyo-based manufacturer has seen its shares tumble 19 per cent this year after cutting profit and sales forecasts. 

The company that traces its roots to the automobile manufacturer and now makes everything from forklifts to power turbines is eliminating more than a quarter of its product lines so it can concentrate on the most competitive businesses, Mr Miyanaga said. More than half of its sales now come from outside of Japan.

Mitsubishi Heavy is the majority owner of Mitsubishi Hitachi Power Systems Ltd, a thermal power generation venture with Hitachi Ltd that was first announced in 2012.

Paul Browning, chief executive officer of Mitsubishi Hitachi Power Systems Americas Inc, said in the same interview Tuesday that the company's heavy-duty gas turbine is now the most fuel-efficient and largest product in the world, bigger than ones offered by General Electric or Siemens.

General Electric declined to comment, referring instead to a June press release about it being recognised by Guinness World Records as powering the world's most efficient combined-cycle power plant.  Siemens didn't immediately provide comment.

Earlier this year, Mitsubishi Heavy Industries moved its US headquarters from New York to Houston to be closer to the energy industry, which accounts for the largest chunk of its business, Mr Miyanaga said.

He said his company plans to increase its total US workforce by as much as 20 per cent over the next two years.

On the move of his company's US headquarters to Houston from New York: "The biggest market for us is energy and oil and gas, and Houston is the best place, we decided.

It was very attractive for us to be stationed here, to hire more skilled engineers and workers," Mr Miyanaga said.

On low energy prices helping the company grow: Because of low natural gas prices, "we're actually seeing a lot of investment in natural gas power plants, not just in the US but also in Mexico and Latin America," Mr Browning said.

The company is hoping to fly its first Mitsubishi Regional Jet to the US next month, Mr Miyanaga said.

The aircraft, the first passenger plane developed in Japan in more than half a century, had two test flights aborted to the US in August due to issues associated with its air-conditioning system.

Mr Miyanaga said the company identified the cause of the problem as the sensor system in the air-conditioning system.

Mitsubishi Heavy Industries is working with Exxon on large-scale projects in the US and Canada to liquefy natural gas more efficiently for export.


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