Mitsubishi Electric and Mitsubishi Heavy Industries (MHI) have signed an agreement to form a joint venture to integrate their power-generator systems businesses, effective 1 April 2024.

The two companies will execute an absorption-type company split that enables the transfer of their respective power-generator systems businesses to the proposed joint venture.

Before establishing the joint venture, they will form a preparatory company, with the remaining details expected to be finalised by the end of December this year.

The partnership between the sister companies follows a previous thermal plant joint venture between Mitsubishi Heavy and Hitachi, reported Reuters.

The previous thermal plant joint venture agreement was scrapped in 2020, after a conflict between the parties and a South African project.

MHI, in a statement, said: “The method will be an absorption-type company split in which a preparatory company, which will be established by Mitsubishi Electric as a wholly owned subsidiary, will become the succeeding company, and Mitsubishi Electric and Mitsubishi Heavy Industries will be the transferring companies.

“The preparation company will issue common stock for the split from Mitsubishi Electric and Mitsubishi Heavy Industries, with all shares being allotted to Mitsubishi Electric and Mitsubishi Heavy Industries respectively, however, both companies will mutually determine the number of shares to be allotted to each company.

“The two companies will make adjustments so that Mitsubishi Electric will hold 51% and Mitsubishi Heavy Industries will hold 49% of the shares in the joint-venture company as of the effective date.”

MHI said that climate change due to global warming is driving global efforts to achieve carbon neutrality by reducing greenhouse gas emissions to net zero.

The rising demand for electricity would drive practical transitions to new forms of energy, such as hydrogen, ammonia and other carbon-free fuels, alongside thermal-power generation.

Large-scale power plants will play an important role in balancing the variability of renewable energy due to weather and other factors, said the company.

Mitsubishi Electric and MHI have agreed to integrate their power-related businesses, technologies, and assets to enhance market competitiveness.

The integration will strengthen the partnership between the two companies and support the expansion of their power-generator systems business and contribute to a carbon-neutral world.

The proposed transaction will not bring any changes to the capital stock or capital reserves of both companies, said MHI.