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Business

Itochu, Kansai Electric to build US power plant

Shale gas revolution opening up opportunities for Japanese businesses

TOKYO -- Trading house Itochu and utility Kansai Electric Power will construct and operate a natural-gas-fired power plant in the U.S., taking advantage of the shale gas boom that has slashed fuel costs.

The plant's generating capacity will total about 1 million kilowatts, roughly on a par with a nuclear reactor, putting this among the largest U.S. power projects for both Japanese companies. The facility will be run by a joint venture 50% owned by the Itochu group, 30% by the Kansai Electric group and 20% by German industrial giant Siemens.

The plant is expected to cost about 100 billion yen ($915 million). It is slated to go online in 2020.

The facility will be located in the northeastern state of Pennsylvania, near a shale gas well, providing ready access to cheap fuel. Gas and steam turbines, to be provided by Siemens, will be used in tandem for efficient power generation.

Natural gas accounted for 33.8% of U.S. electricity generation last year, topping coal's 30.4% share, government data shows. The development of technology to extract shale gas from underground rock formations, a process known as hydraulic fracturing or fracking, has massively reduced production costs.

Itochu's electricity operations center on the U.S., with stakes in 16 plants there. This project will bring the trading house's total U.S. generating capacity to roughly 2.5 million kilowatts, among the most for a Japanese company. Itochu's machinery segment, which includes its power business, logged a 46.4 billion yen net profit for the fiscal year ended March 31.

Kansai Electric began looking overseas more recently amid tough times at home. It has brought only two nuclear reactors back online after the 2011 Fukushima Daiichi disaster, and it has faced stiff competition from industry newcomers since the liberalization of the retail electricity market in spring 2016.

The company aims to spend 500 billion yen abroad between fiscal 2016 and fiscal 2025 to spur growth. It has invested in two other U.S. power plants.

(Nikkei)

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