Hitachi, Mitsubishi Electric and Mitsubishi Heavy Industries Agree to Discuss Consolidation of Hydroelectric Power Generation System Business

Tokyo, July 5, 2010 – Hitachi, Ltd. (NYSE: HIT / TSE: 6501, “Hitachi”), Mitsubishi Electric Corporation (TSE: 6503, “Mitsubishi Electric”) and Mitsubishi Heavy Industries, Ltd. (TSE: 7011, “MHI”) today announced that they have reached a basic agreement calling for the three companies to initiate concrete discussions toward consolidation of their hydroelectric power generation system operations in a quest to strengthen and expand related business. Going forward the three companies look to jointly establish an operational company and build up a coherent business structure by integrating their various activities pertaining to hydroelectric power generation systems, including marketing, servicing, engineering, development and design, in order to further develop the business aggressively.

In the coming years, hydroelectric power generation is expected to attract continuous demand as a clean renewable energy contributing toward the realization of a low-carbon society. In Japan, while the number of projects to build large-scale new plants has been decreasing, demand for renovation and preventive maintenance of existing power generation facilities and for upgrading of power generation capacity is expected to remain solid. In overseas markets, vigorous and sustained demand is anticipated in such countries as China, where large-scale electric power development projects leveraging the nation's abundant water resources are in progress, as well as in Latin America and India. The business environment continues to be severe, however, due to Chinese manufacturers' expansion into overseas markets, in addition to existing competition with European companies.

Under these business circumstances, Hitachi, Mitsubishi Electric and MHI reached a common recognition that the most effective and expeditious means to strengthen and expand related business would be to pool their respective operating resources and engage jointly in hydroelectric power generation system operations. Through integration of their engineering, development and design functions, the three companies will secure the human resources to maintain and pass on to the next generation their technologies and expertise unique to hydroelectric power generation system business. With this initiative, the companies also will strengthen the competitiveness of their world-leading technologies in pumped storage power generation, particularly in a field where high speeds, large capacities and high heads are required. Especially in the area of variable-speed pumped-storage power generation¹, which is superior in responding to fluctuations in electricity demand and therefore expected to attract rising market demand, the three companies aim to secure the world’s leading position. For manufacturing, an optimal production structure will be established through organic coordination of the three companies' production facilities and development of overseas activities as well.

Through business integration, the three companies will secure knowledge of market needs precisely and strengthen and expand their hydroelectric power generation system business through development and provision of products offering the advanced technologies required. Through these activities, the three companies look to contribute further toward the realization of a low-carbon society and stable supply of electricity.

¹ Note: A pumped storage power generation system consists primarily of an underground power generation plant and two water reservoirs – on the upper and lower sides of the plant. By releasing the water stored in the upper reservoir into the lower reservoir and thereby driving pump-turbines, power is generated. By pumping up the water in the lower reservoir to the upper reservoir using surplus electricity when electricity demand is low, repetitive power generation becomes possible. A variable-speed pumped-storage power generation system, which is capable of instant adjustment of power generation, is regarded as a promising technology for large-scale power generation/storage systems that contribute to power grid stability.