MHI to Acquire Pratt & Whitney Power Systems
Small and Medium-size Gas Turbine Business Unit of P&W -- Agreement Signed with United Technologies, U.S. Conglomerate --
Mitsubishi Heavy Industries, Ltd. (MHI) has concluded an agreement with United Technologies Corporation (UTX) (UTC) of the U.S. under which MHI will acquire Pratt & Whitney Power Systems (PWPS), the small and medium-size gas turbine business unit of Pratt & Whitney (P&W), an aeroengine manufacturer. Earlier this week, MHI and UTC, P&W's parent company, signed the agreement.
PWPS engages primarily in the engineering, assembly and sales of aero-derivative gas turbines and also provides services of gas turbines and engineering, procurement and construction of related power generation systems. The company has approximately 430 employees. By the acquisition, Turboden s.r.l. of Italy, a manufacturer of Organic Rankine Cycle (ORC) turbines and an affiliate company of PWPS, will also become an affiliate of MHI.
MHI, which has focused its gas turbine business principally on large-capacity, high-efficiency systems, will significantly diversify its power generation product portfolio with the acquisition of PWPS. PWPS's aero-derivative gas turbines have been highly acclaimed, especially for emergency power generation applications, for their compact design and rapid start-up time, with over 1,700 units delivered to date worldwide. Going forward, significant growth is anticipated in applications requiring a flexible power source complementary to a renewable-energy power source. Robust market demand is also expected as small power sources for application in emerging markets. PWPS's main products to date have been 30MW (megawatt) class machines, but currently the company is developing new 60MW class models, which are expected to boost PWPS's market share significantly.
Turboden's ORC turbines have the capability to generate power or supply hot water using a relatively low-temperature heat source, e.g. biomass, factory waste heat or geothermal energy. Until now the company has sold more than 300 units in 20 countries, primarily in Europe. In Japan, increasing opportunities are emerging to use this technology in biomass and geothermal applications.
For many years MHI and P&W have been in a collaborative relationship in aeroengine production, including recent joint development of the new jet engine for the Mitsubishi Regional Jet. After acquisition of PWPS, we will maintain our collaborative relationship in the supply of engine parts for gas turbines and development of new machines as MHI targets expansion in aero-derivative gas turbine business.
In its 2012 Medium-Term Business Plan, a comprehensive three-year plan launched this fiscal year, MHI set a basic policy calling for full utilization of its strengths and synergy effects through consolidation and restructuring of all operations into four business domains – "Energy & Environment" and "Defense & Aerospace," for example – and to accelerate global business development in a quest to expand its business scale to the 5 trillion yen level. Among the four business domains, the company now considers Energy & Environment of highest importance, and its new business plan calls for concentrated investment of management resources into this area as a way of achieving business scale expansion rapidly. The acquisition of PWPS falls in line with this initiative.
In its gas turbine business, MHI is presently establishing a global structure to substantially increase manufacturing capacity of large high temperature high-output gas turbines annually. In addition to output from its Takasago Machinery Works in Japan, shipments have now also begun from MPSA's Savannah Machinery Works, a new gas turbine manufacturing and service facility located in Pooler, Georgia. With the addition of flexible and reliable small and medium-size offerings to its product portfolio through the acquisition of PWPS, MPSA will now be able to meet broader customer needs through combinations of those units and high-efficiency machines.
Going forward, MHI intends to further strengthen its marketing activities for gas turbines, which offer clear benefits in terms of efficient energy usage and reduction of environmental burdens, leveraging the merits of both large-capacity and aero-derivative gas turbines as well as their synergy effects.