Toshiba, GE Weigh Fossil-Fuel Power JV

TOKYO (Nikkei)--Toshiba Corp. (6502.TO) and General Electric Co. will begin discussions about forming a joint venture for the development and sale of fossil-fuel power equipment, The Nikkei reported in its Thursday morning edition.

The two firms are seen taking equal stakes in the unit, which may be launched as early as this year.

A deal would mark another instance in which heavy-electric-machinery firms combine their strengths in such equipment to gain an edge in a highly competitive market. Last November, Mitsubishi Heavy Industries Ltd. (7011.TO) and Hitachi Ltd. (6501.TO) decided to integrate their power equipment businesses.

GE controls roughly 35% of the global market for large gas turbines that are the core component of natural gas-fueled power plants, vying for the lead with Germany's Siemens AG. The U.S. firm developed a gas turbine with record efficiency last September. Meanwhile, Toshiba builds generators that convert the rotation of turbines into electricity, and it also constructs power plants.

Toshiba and GE aim to jointly develop cutting-edge, highly efficient combined cycle gas turbine equipment. The plants are seen having outputs of up to 1 million kilowatts, roughly equivalent to a nuclear reactor.

The firms anticipate a boost in orders stemming from sales synergies. Toshiba has ties with Japanese utilities that are rushing to build new fossil-fuel power plants following the 2011 nuclear accident, and it also has major clients in Thailand and other Southeast Asian markets. GE has powerful sales networks in the U.S., Europe and such emerging markets as India. Demand is seen growing in the U.S., where inexpensive shale gas has become widely available, and in emerging markets enjoying economic growth.

The global output capacity of fossil-fuel power plants in 2035 is expected to be 70% higher than the 2009 level. This projected increase is equivalent to the output of more than 2,000 large power plants. And facilities that use natural gas, which emit half the carbon dioxide as those burning coal, are expected to become mainstream.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires