Mitsubishi Heavy Industries (MHI) and Hitachi have signed an agreement to collaborate in China’s market for distributed gas engine power generation systems.

Under the deal MHI will transfer to Hitachi 35 per cent of its shareholding in Mitsubishi Heavy Industries Engine Systems (Shenzen) Co. Ltd., which sells gas engine distributed power systems in China.

MHI Shenzen will then be renamed and converted into a joint venture company by the end of 2014, and will enable MHI and Hitachi to strategically evaluate the market for distributed gas engine power systems in China.

Both companies expect this market to "expand rapidly" due to China’s rapidly growing electricity demand and the government’s policy on encouraging distributed power systems.

MHI has a well-established track record of introducing distributed power generation systems in Japan and overseas, while Hitachi has been actively engaged in the energy service business and engineering and operation business for cogeneration systems, primarily in Japan.

The joint venture will enable both companies to penetrate the Chinese market and will be headquartered in Shenzen.