Dissolving Mitsubishi Hitachi Power Systems and exiting thermal power (2019)

What a joint venture’s risk-sharing left behind

The core of this decision can be seen to be, at once, the accounting for a financial loss and a re-questioning of the very form of risk-sharing that a joint venture is. When a project won single-handedly is carried into a joint venture, responsibility easily blurs once a loss arises. The integration in which Hitachi and Mitsubishi Heavy pulled thermal power into one carried, in exchange for the gain of scale, a structure in which the party performing the work and the party winning the order were misaligned. The price of a $3.4B (¥376bn) settlement loss can be seen as no small part a product of that structure.

The swap of folding up thermal power and buying the grid was also a bet that got ahead of the era’s demand for decarbonization. The judgment to move the pillar of the energy business from the upstream of power generation to transmission and distribution, from the domain that emits carbon dioxide to the domain that delivers, connects to today’s configuration built around Hitachi Energy. How far the choice to deliberately let go of the founding-lineage thermal power supports the next growth will be mirrored in how much of an earner Hitachi Energy grows into from here.