Power Systems Business Strategy
Hitachi IR Day 2011

June 16, 2011

Tatsuro Ishizuka
Vice President and Executive Officer
President & CEO,Power Systems Company
Hitachi, Ltd.
© Hitachi, Ltd. 2011. All rights reserved.

Power Systems Business Strategy

Contents
1. Business Overview
2. Great East Japan Earthquake
3. Market Environment
4. Business Policy and Growth Strategy
5. Thermal Power Business6. Nuclear Power Business
7. Power Distribution, Renewable Energy and Other Businesses
8. Business Performance Trends and Targets
9. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

1-1 Business Overview
Thermal Power BusinessCoal-fired thermal
power plants

Nuclear Power Business
Boiling water reactor nuclear power plants (ABWR, ESBWR)

IGCC

Preventive maintenance,
nuclear fuel cycle, etc.
<Major equipment of nuclear power plants><Major equipment of coal
coal-fired
fired
thermal power plants>
Steam turbines andpower generators (TG)

Reactor pressure
vessel20%
FY2010consolidated
60% revenues¥813.2 billion 20%

Wind power
generation
systems

Reactorequipment

Solar power
generation systems

Main Control
Room Panel

Proton beam therapy
system

Gas turbines
Boilers and AQCS

Hydroelectric power generation systems, drive systems, smart grids,
power semiconductors, etc.

Power Distribution
Distribution, Renewable Energy andOther Businesses
IGCC: Integrated Gasification Combined Cycle

ABWR: Advanced Boiling Water Reactor

ESBWR: Economic and Simplified Boiling Water Reactor© Hitachi, Ltd. 2011. All rights reserved.

3

1-2 FY2010 Results
FY2009-FY2010 Results
FY2009(Actual)
FY2010(Actual)(Billion yen)

YoY

Revenues

882 1
882.1

813 2
813.2

92%

Operating income

22.0

22.0

100%

Revenues

Revenues declined in thermal power systems due to delays with someprojects. Lower sales were recorded for preventative maintenanceservices for nuclear power generation systems. And the Great East
Japan Earthquake lowered sales (¥16.2 billion).

OperatingincomeDespite the impact of the Great East Japan Earthquake (¥9.6 billion),
operating income was on a par with FY2009 due to better project
management, cost cutting, etc.

© Hitachi, Ltd. 2011. All rights reserved.

4

Power Systems Business Strategy

Contents
1. Business Overview
2. Great East Japan Earthquake
3. Market Environment
4. Business Policy and Growth Strategy
5. Thermal Power Business6. Nuclear Power Business
7. Power Distribution, Renewable Energy and Other Businesses
8. Business Performance Trends and Targets
9. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

2Great East Japan Earthquake—Damage andRestoration Status in Power Systems Company
国分地区
DamageReportHitachi district
Ibaraki Prefecture

The 6+ earthquake on the Japanese seismic scale
damaged buildings and production facilities in the
Hitachi district.
Power, water and other lifelines were affected. Hitachi
Port was damaged
g by
y the tsunami.

Restoration Status
Hit hi district:
Hitachidi t i t All exceptt some operations
ti
resumedd on
March 29
Hitachi Port : Resumed loading and shipping
gas turbines from wharf 2 on Aprilg
p 3

Most operations have resumed,
thanks to urgent restoration work
© Hitachi, Ltd. 2011. All rights reserved.

6

Power Systems Business Strategy

Contents
1. Business Overview
2. Great East Japan Earthquake
3. Market Environment
4. Business Policy and Growth Strategy
5. Thermal Power Business6. Nuclear Power Business
7. Power Distribution, Renewable Energy and Other Businesses
8. Business Performance Trends and Targets
9. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

3-1 Market Trends in Japan
Market changes caused by the Great East Japan Earthquake

Uncertainty in nuclear power market(Shelving of new construction plans, earthquake- andtsunami-proofing of existing plants, etc.)

Recovering
eco e g demandde a d foro powerpo e infrastructure
ast uctu e(Restoration of damaged power generation facilities)

Demand for power shortage countermeasuresand stable supply(Shorten time for a regular inspection of thermal power
plants, restarting of idled thermal power plants, increasing
demand for thermal p
power,, renewable energy
gy and distributed
power sources, etc.)© Hitachi, Ltd. 2011. All rights reserved.

8

3-2 Overseas Market Trends
World Electricity Generation by Type(Tr kWh)

183%

30
20

127%
100%

10
0

RenewableenergyNatural gas
Oil
Coal
Nuclear

2005

2015

2030

Source: Prepared from International Energy Outlook 2010

World electricity generation is expected
to grow by 1.8 times (from 2005 to 2030)
generation will continue toCoal-fired gplay a significant role in power sector(Replacement demand)
Many countries have indicated they willproceed with nuclear power plans
Increased adoption of renewable energy

Market trends by region
EuropeAsia, etc.

Shift in demand for new coal-fired
thermal power plants from Western
Europe to Eastern Europe
Considering making CCS systems
mandatory
Some countries are reviewing
nuclear power plans
Accelerated adoption of renewableenergy
CCS：Carbon Dioxide Capture and Storage

Increased planning of new super
critical thermal power generation
plants, particularly in China,
India and ASEAN nations
Stricter environmental regulationsin China
Many countries going ahead with
nuclear power plans
Accelerated adoption ofrenewable energy

Americas
GTCC market expansion due toincreased shale gas productionMore stringentgenvironmental
regulations in the U.S.
Promotion of CCS demonstration
projects
Continuation but slowdown innuclear power plans
Accelerated adoption ofrenewable energy

GTCC： Gas Turbine Combined Cycle© Hitachi, Ltd. 2011. All rights reserved.

9

Power Systems Business Strategy

Contents
1. Business Overview
2. Great East Japan Earthquake
3. Market Environment
4. Business Policy and Growth Strategy
5. Thermal Power Business6. Nuclear Power Business
7. Power Distribution, Renewable Energy and Other Businesses
8. Business Performance Trends and Targets
9. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

4-1 From Recovery to Growth
Accelerate global development

Key
policies

Thermal powerbusiness■Expand business in growth markets(China, India, ASEAN nations, etc.)

Nuclear powerbusiness■Target countries proceeding with new nuclear
power plant construction

Renewable energy,
etc.

■Sell
S wind power and solar power generation
systems overseas■Expand particle beam therapy system business

Expand services business
Cooperate with local partners, expand bases

Support for restoration and rebuilding efforts following theGreat East Japan Earthquake
Strengthen support over the medium and long terms for Fukushima and existing
nuclear power plants
Restore damaged power generation facilities
facilities, shorten regular inspection timeframes,
timeframes
restart idled thermal power generation plants, expand and strengthen supplies ofgas turbines for emergency generation and sales of private power generators© Hitachi, Ltd. 2011. All rights reserved.

11

4-2 Accelerate Global Development
Globally develop the Power Systems Company
500

Overseas revenue
ratio
Overseas revenues(Billion yen)

Increase manufacturing and engineering subsidiaries
Increase thermal p
power orders and strengthengsales
structure in emerging economies, centered on China,
India and ASEAN nations

250

Bolster overseas marketing
0 FY2006 FY2007

EuropeAsia

Hitachi Power Europe GmbHPower Systems Company
Babcock-Hitachi K.K.

FY2008FY2009FY2010Americas
Hitachi Power Systems America, Ltd.

GE-Hitachi Nuclear Energy LLC

HEU

HAL

J
Japan
AE P
Power S
Systemst
C
Corporationti

HCH

Core Group companies
Sales subsidiaries

BGR Turbines Company Private
Limited (Established Sept. 2010)
BGR Boilers Company Private
Limited (Established Aug. 2010)

Nuclear power JSOs

HAS

Service subsidiaries
Manufacturing andengineering subsidiaries

HAUL

Hitachi-GE Nuclear Energy, Ltd.

[Group total: 47 companies ,23 companies (Japan), 24 companies (Overseas)] (5 JSO for nuclear power)
HEU : Hitachi Europe Ltd.
HAS: Hitachi Asia Ltd.

HAL: Hitachi America, Ltd.
HCH: Hitachi (China) Ltd.
HAUL: Hitachi Australia Pty Ltd. JSO: Joint Sales Office© Hitachi, Ltd. 2011. All rights reserved.

124-3 Measures to Boost CompetitivenessProduction and procurement

Project management

Strengthen global production framework

Strengthen overseas project management(HR and organizational structure)

Strengthengmanufacturing
g bases in Japanp as
Mother Factories
Strengthen overseas manufacturing bases

Increase enrollees in development program
FY2011: 500 people

Worldwide lowest cost procurement,
manage exchange rate fluctuations

Rigorous risk management(Utilize experience in EPC worldwide)

Establish global procurement offices

Services business
Expand thermal power global services
business
Form alliances and cooperate with local partners
Utilize M&A and partnership to expand businessnetwork

Nuclear power advanced maintenance((Cooperatepwith GE and others))
Promote integration of global maintenance andservices business
EPC：Engineering，Procurement，Construction

Ｒ＆Ｄ
Strengthen global R&D framework■Establish cooperative structure between threecore regional bases (Japan, Europe and U.S.)
and universities in the regions(Promote CCS technology development)

Promote future technology developmentby pitching for and participating in
national projects
Participate in thermal power, nuclear power andrenewable energy component testing anddemonstration projects© Hitachi, Ltd. 2011. All rights reserved.

13

Power Systems Business Strategy

Contents
1. Business Overview
2. Great East Japan Earthquake
3. Market Environment
4. Business Policy and Growth Strategy
5. Thermal Power Business6. Nuclear Power Business
7. Power Distribution, Renewable Energy and Other Businesses
8. Business Performance Trends and Targets
9. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

5-1 Thermal Power Business Basic Policy
FY2015: ¥650 billion
Revenues
FY2010: ¥460 billion■ Upgrade response to
Great East Japan Earthquake■ Actively
yp
promote gglobal business

Upgrade response to Great East Japan Earthquake■ Quickly
Q i kl restartt td
damagedd ththermall power facilities
f iliti anddidled thermal power plants■ Supply emergency power to address summer power shortages

A ti l d
Activelydeveloplin
i globall b l markets
k t■ Step up global development of highly efficient coal-fired
thermal power business■ Expand business by deepening localization in growth markets

Develop business in strategic products■ ExpandE
d environmentalit l systemst(AQCS) businessb i■ Expand gas turbine business© Hitachi, Ltd. 2011. All rights reserved.

15

5-2 Upgrading Response to Great East Japan Earthquake
Quickly restart damaged thermal power facilities and idled thermal power plants■ Established a Great East Japan
Earthquake Restoration Division■ Restored or quickly restarted plants
11 plants 5,545 MW (As of June 15)

Restarted plants■Recovery in Power Output (Plan)【ＭＷ】

8,963 9,315

10,315

No. of restored plants◆JX Sendai Oil Factory

5,545Work to restore or restart thermal
power facilities

22
19
plantsplants23
plants◆Nippon Paper Ishinomaki◆Shinchi Thrmal 1

11plants◆Haranomachi Thermal 2

Quick restoration of shipments(Apr. 14 loading and shipment)

Jun. 2011 Sept.

Dec. Mar. 2012

◆Hirono Thermal 2, 3
◆Joban-kyodo Thermal 7, 8

■Nigata Thermal
Emergent Power

Emergencygyp
power supplies
pptoaddress summer power shortages■ Activities to supply gas turbines for emergency power
generation
80 MW-class gas turbines for Ohi thermal power plant,
H-25 gas turbines for Niigata thermal power plant, andH 25 gas tturbines
H-25
bi
for
f industrial-use
i d ti lprivatei t electric
l ti
power generators■ Promote environmental countermeasures for power
supplyDeNOx Catalyst for Hitachinaka power plant●Ohi Thermal 2◆Hitachi Rinkai 1■Ohi Thermal
Emergent Power●Hitachi Rinkai 2●Hitachinaka Thermal 2●Kashima Thermal 1, 4, 6

●Higashi Ohgishima Thermal 1●Futtsu Thermal 4-3
43●：Recovery Completed◆Kashima-kyodo Thernal 4●Anegasaki Thernal 3◆：Under Restoration●Goi Thernal 2■：Emergent Power Supply© Hitachi, Ltd. 2011. All rights reserved.

16

5-3 Actively Develop in Global Markets (1)Integrated supply of BTG + AQCS ⇒ Optimize entire plants
AQCS
Boilers (B)Turbines (T)Generators (G)

○

○

○

DeNOx
Systems
Catalysts○○■Steam turbines and power generators (TG)Highly efficient and reliable
Achieved world's highest level efficiency with the new
No 2 unit of Isogo Thermal Power Plant for Electric
No.
Power Development Co., Ltd.

Precipitators Desulfurizers○○○■Boilers (B)Highly efficient combustion:
Low Nox/CO2 emissions, high economical efficiency
Compatiblepwith various coal types
yp :Applicable to low grade coals
OthersCompany I
Company H
Company G

Turbines and generators

CCS*Steam condition: 25MPa 600℃/620℃

HitachiHit
hi
20%

2006～2010
123,570MW
Company A

Company F
Company E Company D

Low-pressure turbines

Top share

Co pa y B
Company
Company C

Source: McCoy Reports 2010 (Excluding China and India)■AQCS
Integrated system (DeNOx reactor, precipitator, desulfurizer )High performance DeNOx catalyst: In
High-performance
In-househouse development andproduction system

DeNOx Catalyst ShareOthersDeNOx systems

DeNOx
catalyst

2010
Order share

Top share

Hitachi
26%
Company A

Company D Company C

Company B

Source: Hitachi estimate© Hitachi, Ltd. 2011. All rights reserved.

17

5-4 Actively Develop in Global Markets (2)Step up global development of highly efficient coal-fired thermal power business
Europe,South Africa
Hitachi Power Europe GmbH

Maasvlakte(Under construction) B[1,100 MW]

Asia
Hitachi Works

Moorburgg(Under construction) B[820 MW×2]

Americas
Babcock-Hitachi
K.K. Kure Branch[FY2010 orders]

Hitachi Power Systems America, Ltd.

Keephills-3
Keephills
3(Under commissioning) BTG[495 MW]

Duke Energy(Under construction) B[900 MW]TEPCO/Hitachinaka 2(Under construction) BTG[1,000 MW]
Wilhelmshaven
Rotterdam(Under construction) BTG (Under construction) BTG[790 MW][790 MW]

Medupi-1 - 6(Under construction) B[800 MW×6]

Kusile-1- 6(Under construction) B[800 MW×6]

South Korea/Yonghung
Thermal Power Plant
No. 5 and 6 units(Preparing for construction)TG[870 MW×2]
South Korea/Dangjin
Thermal Power Plant
No. 9 and 10 units(Preparing for construction)B[1,000 MW×2]

29 plants[24plants[24.88 GW]* undernderConstruction mainly
in industrialized nations*: including plants preparing for construction

Revenues
Japan, Asia, etc.

Americas

Europe, Africa¥460billion¥650
billion

FY2010FY2015 target

B: Boilers, TG: Steam turbines and generators© Hitachi, Ltd. 2011. All rights reserved.

18

5-5 Actively Develop in Global Markets (3)Expand by deepening localization in growth markets■ Thermal power market trends(1) Shift in new construction to emerging markets,
especially in Asia

(2) Rising demand on coal-fired thermal power plants for
upgrade and major repair

Projected Thermal Generation Facility Capacity
Unit: GW
6,000 Source: IEA WEO2010

5,585

24%

11%

224

4,206

4,000
3,182

Other
Non-OECD

3,000

1,518

OECD

2008

2020

2030

2035

59%
Source: UDI<Industrialized countries>■ Market super critical■ Expand services businessthermal power plant■ Expand environmental
business■ ExpandE
d environmentalit l andd■ Accelerate development ofGT business
A-USC and IGCC
■ Enter services business87%

25 years or older
Under 25 years

Worldwide total(25 years or older: 41%)

■ Global
Gl b l businessb istrategyt t<Emerging markets>

345

41%

89%

India
China

1,000

13%

Asia, Near andMiddle East,
Australia

881

75%

ASEAN

2,000

0

Unit: GW
Americas

Europe, Africa
5,049

5,000

Aging Thermal Power Plants■ Expand business by further deepening localization
Expand global procurement and production bases
Expandpservices business■ Public-private package proposals

A-USC：Advanced Ultra Super Critical IGCC：Integrated Gasification Combined Cycle© Hitachi, Ltd. 2011. All rights reserved.

19

5-6 Actively Develop in Global Markets (4)Expand global procurement and production network■Expand global procurement bases■*Global procurement ratio target: 70% (FY2015)■Strengthen procurement system
Strengthen cooperation in procurement in four regions
Conduct IPOs in Asian belt zone (June 2011)((Dalian,, Shanghai,g , Singapore,g p, etc.))■Expand global production network■Expand functions at China (Dalian)
manufacturing facility
Bolster gas turbine production bases, as well as
steam turbine parts[Site expansion] Sanshilibao Harbor Industrial Zone
1997 Established
Dalian Hitachi Machineryy&
DHME
Equipment Co., Ltd.
2011 Began
expansion2012 Begin shipments
2016 Complete
expansion■Establish new Chinese DeNOx catalyst
production subsidiary (June 2011)
Respondp
to rapid
p market expansionpfor DeNOx catalystsyspurred by tougher environmental regulations[Target] Capture a 30% share in China[Location] Hangzhou, Zhejiang■Established Indian manufacturing joint ventures
(A
(Aug.
and
d Sept.
S t 2010)
Enter Indian coal-fired thermal power market
Bolster sales, lower costs
Sales force in India

＋

BGR-E

Increase orders

Technological capability[Track record, reliability]

HPE

Hitachi

Manufacturing joint ventures
Supply power
generation
facilities(EPC)

Supplyproducts
d t

BGR-B

BGR-Ｔ

Indian market
Signing ceremony (Aug. 2010)

BGR-E： BGR Energy Systems Ltd. BGR-T： BGR Turbines Company Private Ltd. BGR-B：BGR Boilers Company Private Ltd.
IPO：International Procurement Office DHME：Dalian Hitachi Machinery & Equipment Co,Ltd
EPC：Engineering Procurement Construction© Hitachi, Ltd. 2011. All rights reserved.

20

5-7 Actively Develop in Global Markets (5)Expand global services business■ Utilize extensive overseas network to expand business field■ Expand services business through investment in facilities, cooperation with local partners,andd M&AsM&A■ Make more high-value-added product and technology proposals
Hitachi Power Europe GmbH (HPE)

Hitachi/Babcock-Hitachi K.K. (BHK)

Dalian Hitachi Machinery &Equipment Co., Ltd.
Meeraner
Donges St
D
Steell M
Dampfkesselbau
Tec GmbH
GmbH<Europe, Africa>
Enter new markets,
spearheaded by HPE
Hitachi Power Africa Pty. Ltd.

Core Group companies

Service subsidiaries

Hitachi CanadianIndustries Ltd.

Babcock-Hitachi
Dongfang BoilerCo., Ltd.

Mechanical Dynamics &Analysis, Ltd.
Babcock-Hitachi(Philippines) Inc.
(BHPI)<Near and Middle East,
East Asia, Southeast Asia>
BGR-T
Expandtarget fields, spearheaded by
BGR-B
Hitachi, BHK and BHPI
Clyde Babcock-Hitachi(Australia) Pty.,
Pty Ltd.(CBH)
Ltd (CBH)

Manufacturing and engineering subsidiaries

Hitachi Power Systems America, Ltd.

<Australia>
Expand business,spearheaded by CBH<North America, South America>
Utilize cooperation among three
entities
titi tot expandd businessb i<Services Business Revenues>
FY2010: Approx. ¥100 billion

FY2015: Approx. ¥150 billion© Hitachi, Ltd. 2011. All rights reserved.

21

5-8 Expand AQCS Business
Expand business, centered on DeNOx systems
Step up development of CCS technologies
and catalysts■ Step up the pace of joint demonstration projects with■ DeNOx system delivery track record
Unit: GW

Europe18

European and American customers, quickly develop
commercial systems
2005
2010
2015
2020

China
34
26

Japan
32

Americas22

Pilot test
■Chemical absorption
Raw gas experiment(Netherlands, etc.)

South Korea,
TaiwanSource: Hitachi estimate

Total: 131GW
Global share 26% ((No.1))■Oxy-combustion
System evaluation test

Demonstration test
■Canada Saskatchewan
Power Corporation
Comprehensive Collaborative
Agreementg
on Low-Carbon Energy
gy Develop
Technologies(2010-2012)
commercial
equipment
CCS demonstration project Orderfor 150 MW-class STG■Germany Vattenfall
Oxy-combustion burner test

■ Market trends
Tougher environmental regulations in the Americas,
Europe and China
Expanding market for AQCS due to thesettougherh regulations
l ti■ Main orders in recent years
Concluded comprehensive supply agreement for
DeNOx catalysts with U.S. electricity company(April 2010)
Received first DeNOx systems order from
Polish power company (August 2010)
CCS：Carbon Dioxide Capture and Storage■Chemical absorption
Develop CO2 absorption liquid (H3-1)
Conducted trials in U.S. Department ofEnergy (DOE) project*(Feb. 2010, May 2011)
Confirmed approx. 30% improvement
in energy consumption comparedwith conventional absorption liquid.

Move todemonstration
project.

*Experiment conducted by North Dakota University, with joint investment
by DOE, North American electricity utilities and other parties© Hitachi, Ltd. 2011. All rights reserved.

22

5-9 Expand Gas Turbine Business
H-25

H-80

■Top-class performance in heavy-duty gas turbines■Expand market by handling different types of fuel(Coke gas, etc.)
Fi t co-generationFirstti power generationtifacility began operating in China(in December 2010)■Capture demand for distributed power sourcesin growth markets (such as China, the Middle East, etc.)■Increase p
production capacitypy (Completed(psummer 2010))■Order target: At least 30 units/year■Hitachi developed the H-80 80MW-class gas turbine,
the world's largest capacity two-shaft, heavy-duty typegas turbine, in a short time.
■Expand business by opening up new markets
Enter market for blast furnace gas burning facilities■Replacing gas turbines of Unit 1 at Shin-Oita thermal
power plant at Kyushu Electric Power Co., Inc.
(6 gas turbines)

Europe / Russia/
East Asia
14 Southeast
A i
Asia
Africa9
North America

7

24

40

39

9 South Asia

Central andWest Asia/Middle East
South America

H-25 order
track record:

HITACHI
15%

Other
8%

■Received order to replacepgas
g turbines of Unit 1
at Yanai power plant at Chugoku Electric Power Co., Inc.
(in June 2010) (6 gas turbines)

Large GTCC

142 unitsCompany B 30%
Company A 47%
Market Share (20-40 MW-class GT)[McCoy Reports 2010: Heavy-duty type]
GTCC：Gas Turbine Combined Cycle[3 of the 6 turbines areoperating]
4th turbine: Jan. 2010
2nd turbine: Jul. 2010
6th turbine: Mar. 2011

GT：Gas Turbine■Develop and strengthengbusiness byy employing
y g highly
g yefficient GT with high operating efficiency
in collaboration with GE© Hitachi, Ltd. 2011. All rights reserved.

23

Power Systems Business Strategy

Contents
1. Business Overview
2. Great East Japan Earthquake
3. Market Environment
4. Business Policy and Growth Strategy
5. Thermal Power Business6. Nuclear Power Business
7. Power Distribution, Renewable Energy and Other Businesses
8. Business Performance Trends and Targets
9. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

6-1 Nuclear Power Business Basic Policy
Raise
R
i th
the safety
f t off nuclearlpower generationti
as an effective
ff ti source off
energy for curbing CO2 emissions to meet continuing global demand.
FY2020: ¥360 billion

Revenues
FY2010: ¥180 billion■Lend support for countermeasures at the
Fukushima Daiichi nuclear power station andother existing nuclear power plants■Step up development of overseas businessSupport Fukushima countermeasures and offer services for the nuclear power
sector in Japan
Propose medium- to long-term countermeasure plans at joint Japan/U.S. projects
Actively help to bring the Fukushima Daiichi nuclear power station incident to an end.
Promote work for mothballing facilities over the medium term and eventual reactor
decommissioning
Promote safety measure (at new and existing facilities) to revive the appeal of nuclear power
Actively offer interim storage facilities (such as storage vessels for spent fuel, etc.)

Step up development of overseas business
Develop globally under the “OneOne Team
Team” framework with GE
Focus on expanding sales to countries moving forward with plans toconstruct new nuclear power facilitie© Hitachi, Ltd. 2011. All rights reserved.

25

6-2

Support Fukushima Countermeasures and Offer
Services for the Nuclear Power Sector in JapanCountermeasure support system
Fukushima ProjectjSupervisorypy Office

Japan-U.S. joint specialist team;medium- to long-term
countermeasuresg<Strengthen support system>-Provide a Hitachi Group response-More than 2,200 people are working on this project, including
cooperating companies((Includes a total of approx.
pp
1,200
,
local secondees))-Offer short-term and medium- to long-term countermeasuresthrough the newly established organization-Hitachi and Mitsubishi Heavy Industries have begun discussions
on joint supportive measures

Hitachi-GE Nuclear Energy, Ltd.
BechtelBasic plans

ExelonIndividual
projects

GEH

Hitachi-GE/
HPSA

Medium- to long-term
projects

Fukushima Power Plant
Technology Dept.
Fukushima Power Plant
Engineering Dept.

Medium- to long-term countermeasures■Install perpetual cooling system■Enclose reactor, extract andtransfer fuel■Treat seawater, dispose of waste fluid

Continuing to transportcooling system modules andother equipment to the site

Horizontal development, etc.
■ Propose countermeasures and promoteincreased safety of nuclear power plants■ Start p
producingg storageg vessels for spentpfuel for spent nuclear fuel and plan output increase*50 containment vessels has been delivered to Recyclable-Fuel Storage
Company© Hitachi, Ltd. 2011. All rights reserved.

26

6-3 Step up development of overseas businessContinue to promote nuclear power businessunder the “One Team” framework with GE■ Target countries proceeding with plans
Deepen and develop
t constructtot t new nuclearlpower plants
l tcollaborative relationship■ Established Vietnam Nuclear Power Project
Promotion Office (January)■ Promote global maintenance and service businesses
E
Expandd salesl off outstandingt t di Hitachi
Hit hi technologyt h l(WJP*,(WJP* etc.)t )■ Continue development to improve safety (ESBWR, etc.)
Lithuania(ABWR)Ｕ.Ｓ.
(ESBWR)

Hitachi-GE Nuclear Energy, Ltd.
■■■ HPSAGE-Hitachi
GE
Hitachi Nuclear Energy LLC

Vietnam(ABWR)India(ESBWR)

Hitachi President Hiroaki Nakanishi
and GE CEO J. Immelt (May 2011)

JSO: Joint Sales Office
Main focus (Reactor Type)*WJP: Water Jet Peening (Stress-mitigation technology)© Hitachi, Ltd. 2011. All rights reserved.

27

Power Systems Business Strategy

Contents
1. Business Overview
2. Great East Japan Earthquake
3. Market Environment
4. Business Policy and Growth Strategy
5. Thermal Power Business6. Nuclear Power Business
7. Power Distribution, Renewable Energy and Other Businesses
8. Business Performance Trends and Targets
9. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

7-1Power Distribution, Renewable Energy and Other Businesses
Basic Policy

FY2015: ¥280 billion■ Strengthen power distribution business■ Expand and boost sales in renewable energy business

Revenues
FY2010: ¥170 billion■ Expandp
and boost sales of particlepbeam therapy
py systemyPower distribution business■ Strengthen systems integration■ Bolster overseas business development

Renewable energy business■ Expand sales of wind and solar power generation systems■ Promote power stabilization business for supporting growing
use of renewable energy■ Aim to establish a world-leading position in adjustable speed pumped
hydro generation (Business integration with Mitsubishi Group)

Particle beam therapy system■Expand and boost sales based on technologies amassed
over many years and high operating track record© Hitachi, Ltd. 2011. All rights reserved.

29

7-2 Power Distribution Business
Provide solutions from power generation to power transmission and smart grids■ Established new division to harness the Hitachi Group’s
gcollective strengths■ Promote system integration in power distribution systems worldwide■ Strengthen and accelerate STATCOM and HVDC
St
Strengthenth organization
i ti

Establish and strengthen
Total coordination

Power Systems
Company

Transmission & Distribution
Systems Division

Enhancecooperation

Japan AE
Power Systems
Corporation(Established April 2011)

Information &Control Systems
Company
Research &Development Group
Hitachi ResearchLaboratory
STATCOM: Static synchronous compensator
HVDC: High Voltage Direct Current

Power Distribution
Engineeringgg Dept.
pTransmission and
Grid Solutions Center
Power Distribution
Research Dept.

ExpandE
d ordersdini¥6 trillion*
global marketg*2010 Hitachi estimate© Hitachi, Ltd. 2011. All rights reserved.

30

7-3 Renewable Energy BusinessWind power systems■ FY2015 target: No. 1 share in Japan■ Advantage in windy and hilly regions(Efficiency, durability)■ Expand sales of bottom-mounted offshore systems

Solar power systems■ Leading system integrator bused on
cutting-edge technologies■ Provide high efficiny systems■ Address customer needs(Coordination with storage batteries, etc.)

Output stabilization systems for supporting popularization

Kamisu Wind Power Plant
Wind Power Ibaraki, Ltd.

Ohgishima Solar
Power Plant TEPCO■Economically stabilize output throughcoordination and control
Effect of coordination with
distributed power systems-Reduce volume of secondary batteries introduced-Reduce Fuel consumption

Power grid

■ Various storage battery systems (Lead, lithium)■ Coordination
Cdi ti andd controlt l with
ith existingi ti
distributed power supplies (High economic viability)
Output: intermittent

Storagebatterysystems

Distributed
generators© Hitachi, Ltd. 2011. All rights reserved.

31

7-4 Actively Develop Particle Beam Cancer Therapy System
Expand orders based on technologies amassed over many years and high operating track record
University of Tsukuba:First delivery of a proton beam therapy system■ Stable operations for nearly 10 years (Since 2001)
M.D. Anderson Cancer Center:
Track record in advanced treatments■ Developed spot scanning irradiation technology (Beamscanning system)
Nagoya City:
First application of private-sector finance in Japanto equip a hospital■ Order for installation of an entire proton beam therapy system

Spot scanning irradiation technology■ Able to irradiate cancer tumors withcomplex shapes with higher precision
than conventional techniques■ Minimizes
Minimi es impact on normal tissue
tiss e■ Reduces burden on hospital staff as
preparation is not necessary for eachpatient unlike other systems

Hokkaido University: Japan's FIRST Program■Joint development of next-generation molecular-tracking
radiotherapy system
FIRST: Funding Program for World-Leading Innovative R&D on Science and Technology

M
Mayo
Cli i
Clinic:Turn-key order for 2 systems from major U.S. general hospital■ Applying spot scanning irradiation technology in all treatment
rooms

Grow
G
o Hitachi
tac healthcare
ea t ca e ddivisions o as a key
ey busbusiness
ess■ Increase investment to cater to diverse customer needs■ Aggressively develop globally leveraging track record of deliveries in the U.S.
© Hitachi, Ltd. 2011. All rights reserved.

32

Power Systems Business Strategy

Contents
1. Business Overview
2. Great East Japan Earthquake
3. Market Environment
4. Business Policy and Growth Strategy
5. Thermal Power Business6. Nuclear Power Business
7. Power Distribution, Renewable Energy and Other Businesses
8. Business Performance Trends and Targets
9. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

8-1 Business Performance50%
Revenues(Billion yen)

1,200
,
1,000

40%

39%

41%

813.2

810.0

882.1

1 100 01,100.0

8.0
7.9

870.0
6.0
6
50
5.9
9
6.0%

566.7

4.0
3.9

400

3.5%
2.5%

200
0

Operatingincome ratio (%)

32%

800
600

45%

Overseas revenue ratio

2.7%

2.0
1.9
1.2%

Loss
FY2006
Thermal powerbusiness revenues

FY2009FY2010

Nuclear powerbusiness revenues

FY2011
Power distribution,
renewable energy andother business revenues

FY2012
Targetg

FY2015
Targetg

0.0-0.1

Operating income ratio© Hitachi, Ltd. 2011. All rights reserved.

34

8-2 FY2011 Outlook
FY2010 Results and FY2011 Forecasts
FY2010 (Actual)
FY2011 (Forecasts)(Billion yen)

Revenues

813 2
813.2

810 0
810.0

100％

Operating income

22.0

10.0

45％

YoY

Revenues

Revenues are expected to be on a par with FY2010
FY2010. Higher sales ofthermal power systems overseas and in Japan (due to demandfollowing the Great East Japan Earthquake) should offset fewer
nuclear power plant orders due to the Earthquake.

OperatingincomeExpecting operating income to decline 55% in line with lower nuclear
power system revenues because of the Great East Japan Earthquake
and costs incurred in recovery/reinforcement of production equipments.

© Hitachi, Ltd. 2011. All rights reserved.

35

Power Systems Business Strategy

Contents
1. Business Overview
2. Great East Japan Earthquake
3. Market Environment
4. Business Policy and Growth Strategy
5. Thermal Power Business6. Nuclear Power Business
7. Power Distribution, Renewable Energy and Other Businesses
8. Business Performance Trends and Targets
9. Conclusion© Hitachi, Ltd. 2011. All rights reserved.

9 Conclusion
The World Market Leader Advancing the Future Global Society with Evolutionary Energy
Technologies

AccelerateA
l t global
l b l businessb idevelopmentdltExpand services business

FY2015 targets
Revenues: ¥1.1 trillion
Overseas revenue ratio: 50%
Operating income ratio: 6%© Hitachi, Ltd. 2011. All rights reserved.

37

Cautionary Statement
C t i statements
Certaint t
t foundfd in
i thisthi documentdt may constitutetit t “forward-looking“fd l ki statements”
t t
t ” as definedd fi d ini theth U.S.
U S Private
P i t Securities
S
iti Litigation
Liti ti R
Reformf
A
Actt off 1995
1995. SSuchh “f“forward-looking
d l kistatements” reflect management’s current views with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or
current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions which indicate future events and trends may identify“forward-looking statements.” Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ
materially from those projected or implied in the “forward-looking statements” and from historical trends. Certain “forward-looking statements” are based upon current assumptions of
future events which may not prove to be accurate. Undue reliance should not be placed on “forward-looking statements,” as such statements speak only as of the date of this document.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include, but are not limited to:■economic conditions, including consumer spending and plant and equipment investment in Hitachi’s major markets, particularly Japan, Asia, the United States and Europe, as well as levels of demand in the
major industrial sectors Hitachi serves, including, without limitation, the information, electronics, automotive, construction and financial sectors;■exchange rate fluctuations of the yen and other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated, particularly against the U.S. dollar and the euro;■uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing;■uncertainty as to general market price levels for equity securities in Japan, declines in which may require Hitachi to write down equity securities that it holds;■the potential for significant losses on Hitachi’s investments in equity method affiliates;■increased commoditization of information technology products and digital media
media-related
related products and intensifying price competition for such products
products, particularly in the Components & Devices and the DigitalMedia & Consumer Products segments;■uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technologies on a timely and cost-effective basis and to achieve market acceptance for such products;■rapid technological innovation;■the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses the percentage-of-completion method to recognize revenue from sales;■fluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum and synthetic resins or shortages of materials, parts and components;■fluctuations in product demand and industry capacity;■uncertainty as to Hitachi
Hitachi’ss ability to implement measures to reduce the potential negative impact of fluctuations in product demand,
demand exchange rates and/or price of raw materials or shortages of materials
materials, partsand components;■uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business;■uncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitiveness and other cost reduction
measures;■general socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States and Europe, including, without
limitation, direct or indirect restrictions by other nations on imports and differences in commercial and business customs including, without limitation, contract terms and conditions and labor relations;■uncertainty as to the success of alliances upon which Hitachi depends,
depends some of which Hitachi may not control,
control with other corporations in the design and development of certain key products;■uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing technologies;■uncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or may become parties;■the possibility of incurring expenses resulting from any defects in products or services of Hitachi;■the possibility of disruption of Hitachi’s operations in Japan by earthquakes, tsunamis or other natural disasters, including the possibility of continuing adverse effects on Hitachi’s operations as a result of theearthquake and tsunami that struck northeastern Japan on March 11, 2011;■uncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as Hitachi’s ability to protect its confidential information or that of its customers;■uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its significant employee benefit related costs; and■uncertainty as to Hitachi’s ability to attract and retain skilled personnel.

The factors listed above are not all-inclusive and are in addition to other factors contained in Hitachi’s periodic filings with the U.S. Securities and Exchange Commission and in othermaterials published by Hitachi.

© Hitachi, Ltd. 2011. All rights reserved.

38