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Japanese conglomerates Mitsubishi Heavy Industries and Hitachi Ltd have decided to merge their thermal power businesses to take a vantage position in the domestic fossil-fuel power business. Mitsubishi Heavy will hold 65 percent stake in the merged entity, whereas Hitachi will have a 35 percent stake. The merger will likely be concluded by January 2014.

Reports suggest the merger is also a concerted effort to forestall competition from global majors like Siemens and General Electric (GE) that are foraying into the Japanese energy market.

As of now, both companies have decided to merge their gas turbine and other fossil-fuel power generation equipment businesses, keeping out nuclear power generation - an area where Mitsubishi Heavy has an alliance with France's Areva SA, the world's biggest maker of nuclear plants. Hitachi also has a joint venture with GE in nuclear power.

Commenting on the development, Mitsubishi Heavy CEO Hideaki Omiya said at a joint news conference in Tokyo, "There are many Japanese companies today that are battling each other domestically and then again with foreign competitors. Instead of wasting our energy doing that, we should be banding together to become even bigger to take on our foreign rivals." Omiya did not rule out a joint effort in nuclear energy in the future.

Hitachi CEO Hiroaki Nakanishi said the merged entity will be well equipped to handle difficult market conditions as well as edge out rival companies, especially from emerging economies like China and India. Reports indicate that the merged entity could clock annual sales of about $18.3 billion.

Fossil-fuel power business prospects have considerably brightened in Japan in the aftermath of the Fukushima incident. Domestic power utilities have taken nuclear plants offline and are now depending heavily on fossil-fuel utilities. This in turn has opened up the domestic market for gas turbine projects to global power infrastructure companies. Mitsubishi Heavy and Hitachi have taken strident steps to guard this lucrative market against serious forays by foreign players.