Mitsubishi Heavy Industries and Hitachi Ltd are to combine their fossil-fuel power generation businesses to take on larger foreign rivals.

Mitsubishi will take 65 per cent and Hitachi 35 per cent in a new company that can face up to competitors such as Siemens AG and General Electric Co, which are bagging contracts even in Japan.

Hitachi CEO Hiroaki Nakanishi told a press conference that the alliance was necessary due to a challenging global economy and competition from established global operators as well as emerging rivals in China and India.

While fossil-fuel fired generation in Japan has benefited from a post-Fukushima backlash against nuclear, bids on gas turbine projects are now open to foreign players.

GE and Toshiba Corp recently triumphed over Mitsubishi Heavy for a Chubu Electric Power Co contract for expanding a gas turbine combined cycle (GTCC) plant.

The merger deal will complete by January 2014 and, at least for now, excludes the firms’ nuclear power businesses.

Talks between the companies on merging infrastructure businesses had been called off more than a year ago.

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