Hitachi grids will hit 2025 target after green revolution

The power grid business Hitachi bought is involved in projects like connecting the world’s largest offshore wind farm in the North Sea to Britain. (Shutterstock)
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Updated 26 September 2020

Hitachi grids will hit 2025 target after green revolution

  • Demand for wind and solar power growing because of pandemic, says CEO

ZURICH: The power grids business Hitachi bought from ABB for $11 billion is likely to hit the upper end of its 2025 targets despite the effects of a coronavirus downturn over the next two years, CEO Claudio Facchin has said.

Hitachi ABB Power Grids, whose products connect power stations to homes and factories, expects a recovery as countries launch stimulus packages and the electricity industry switches to greener technologies.
The company which competes with Siemens, General Electric and Hyundai, is due to give an update on its financial targets in October.
“We see the pandemic as having a temporary effect and we’re optimistic about the future,” Facchin told Reuters.
“COVID-19 has a negative impact on us in 2020 and 2021, but by 2023 and 2024 we should not see any more effect. We expect an actual positive swing when the recovery and stimulus packages kick in,” he said.
Although global electricity demand is set to fall 6 percent this year, demand for wind and solar is rising 5 percent, the International Energy Agency estimates.
“The pandemic has accelerated the conversion from fossil fuels to renewable sources of energy like wind and solar,” said Facchin, 55, who also led the business when ABB was its owner.

FASTFACT

The global power grid market is worth $100 billion.

“We are helping customers master the additional complexity of variable renewable energy sources and combining information technology and operational technology to improve efficiency.”
Projects at Zurich-based Hitachi ABB Power Grids, whose annual orders of $10 billion are equivalent to 10 percent of Hitachi’s revenue, include connecting the world’s largest offshore wind farm in the North Sea to Britain’s power grid.
In China it is delivering some of the world’s longest powerlines, including a 1,700 km link to transmit hydro-generated electricity from Sichuan province to Jiangxi province.
Facchin said he was confident the business could beat the 2 to 3 percent growth annual growth rate for the $100 billion global power grid market.
The company, which employs 36,000, will tap Hitachi’s expertise in IT and digital technology to enable predictive maintenance of power grids, for example.
It will use Hitachi’s financing arm will to help clients fund projects, and increase its service business, Facchin said.
The Italian executive was confident he could raise profitability, which investors saw as a problem when ABB owned it.
It is targeting operational EBITA margins of 8 to 12 percent, up from 6.5 percent expected in the year to March 2021.
“We are going to be at the upper end of this corridor by 2025,” Facchin said.


‘The stock market, stupid’ — Trump’s claim is looking hollow 

Updated 29 October 2020

‘The stock market, stupid’ — Trump’s claim is looking hollow 

  • The timing of the Wall Street downturn is the worst possible for the incumbent, who has declared every new peak in the S&P as a personal victory throughout his presidency
  • The likes of Apple, Amazon, Alphabet and Facebook are due to declare their earnings for the third quarter, and how those numbers are received could give the indices a boost

Before the US election of 1992, candidate Bill Clinton summed up what he saw as the reason he would become president: “It’s the economy, stupid.” He was proved right as voters disowned the economic policies of President George H.W. Bush in their droves to elect Clinton. 

Until the COVID-19 pandemic began to ravage the US economy in March, President Donald Trump would have been able to make the same claim. For the four years of his presidency, the US economy had continued the progress initiated by his predecessor to recover from the 2009 global financial crisis.

By most measures — growth, employment, inflation — the Trump years had been good, and those on the top of the pile had even more reason to be grateful thanks to the big tax cuts he had made a flagship policy.

The pandemic changed all that in the space of a few weeks as lockdown measures shocked the economy. Jobless claims soared to all-time records, bankruptcies and closures affected large swathes of American business, and gross domestic product collapsed. The International Monetary Fund forecasts that the American economy will shrink by 4.3 percent this year.

But Trump could still claim instead that “it’s the stock market, stupid” as a reason he could be re-elected. Mainly because of the trillions of dollars injected into the economy in the form of fiscal stimulus, US share indices had swum against the economic tide.

The S&P 500 index hit an all-time high in September, allowing Trump to boast that under his administration, investors and the millions of people whose livelihoods depended on the financial industry had never had it so good.

Now, it looks as though even that final claim is looking more fragile. For the past couple of days, US and European stock markets have gone into reverse as investors took fright at the rising number of COVID-19 cases and the re-imposition of economic lockdowns in many countries.

Trump might argue, with a little justification, that Wall Street is worried about the prospect of Joe Biden being elected president by the end of next week. Certainly the contender, by definition, is something of an unknown quantity in terms of economic policy.

He is also known to favor some policies — such as tighter regulation on environmental sectors, more spending on health care, and higher taxes for federal services and projects — that have traditionally been regarded as contrary to the philosophy of “free market” America.

In particular, the energy industry is worried about possible restrictions on shale oil and gas production that Biden and his “green” team are believed to favor. However, it should be pointed out that the Democratic candidate has specifically said he will not ban shale fracking, as some environmentalists want.

In any interesting side-story, the state of Texas — one of the biggest in terms of electoral college votes — would seem to have more to lose than any other if the energy scare stories about Biden were true. Yet the contest there between Democrats and Republicans is the closest it has been for decades, according to opinion polls.

The timing of the Wall Street downturn is the worst possible for the incumbent, who has declared every new peak in the S&P as a personal victory throughout his presidency and a sign of his deal-doing prowess. If even this claim is denied to him in the final week of campaigning, it would make the uphill battle against the polls even more difficult.

There is a chance that Big Tech might offer some relief. The likes of Apple, Amazon, Alphabet and Facebook are due to declare their earnings for the third quarter, and how those numbers are received could give the indices a boost, given that they were the ones largely responsible for the big market gains earlier in the year.

But for Trump, any such respite might be too little, too late. It looks as though Wall Street and Main Street are finally catching up in their gloom, and there is nothing the president can do about it.