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On Thursday, Japanese infrastructure giants Hitachi and Mitsubishi Heavy announced a joint venture into the energy market to make gas turbines, boilers and fuel cells.
The move is aimed at competing with General Electric and Siemens as demand for electricity-generating equipment grows in Asia.
Shares in the two companies have soared after they said they would merge their thermal power businesses. Hitachi rose 2.8% in Tokyo trade, Mitsubishi added 3%.
The two Japanese conglomerates said they planned to reach a final agreement by the end of April 2013 and to complete the merger by Jan. 1, 2014, with Mitsubishi Heavy holding 65% of the newly merged company and Hitachi the remainder.
The businesses targeted for inclusion in the new company -- which won't include their nuclear power operations-generated about Y1.1 trillion ($13.4 billion) over the past year, based on recent results.
The announcement of an agreement between the two companies comes more than a year after Hitachi and Mitsubishi Heavy held talks about merging some infrastructure businesses including the power systems operations. However, the talks fell apart when a newspaper leak about the merger upset Mitsubishi Heavy, which backed away from the deal.
Domestically, the demand for fossil fuel facilities has spiked because of the fall in popularity of nuclear power.
After the tsunami and earthquake in March 2011 sparked a nuclear scare, Japanese utilities have taken all nuclear plants offline leading to an energy shortfall.
For more information on the Japanese energy market, see the latest research: Japanese Energy Market
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