It is time. We would now like to start the web conference on the completion of Hitachi's acquisition of ABB's Power Grids business and establishment of a new company. Thank you very much for taking the time out of your busy schedule to attend this meeting. This meeting is held in the form of video conference to prevent the spread of COVID-19. The speakers will speak without their masks on to make it easier for you to listen to. This meeting is scheduled from 3:00 P.M. to 4:00 P.M. Japan time. Speakers' presentations and comments will be interpreted simultaneously between Japanese and English. The materials are posted on Hitachi, Ltd. news release website and IR website, so please take a look. We will now start the web conference. Let me first introduce the speakers. Toshiaki Higashihara, President and CEO of Hitachi, Ltd.
Toshikazu Nishino, Executive Vice President of Hitachi, Ltd. and Chairman and Director of Hitachi ABB Power Grids. Tomomi Kato, General Manager of Financial Strategy Division of Hitachi, Ltd. Claudio Facchin, CEO of Hitachi ABB Power Grids. Four speakers will be attendant today. Higashihara, Nishino, and Kato are joining from Japan, and Facchin from Switzerland by web conferencing system. First, President Higashihara would like to say a few words.
Good afternoon, ladies and gentlemen. Thank you very much for taking time out of your busy schedules to attend this web press conference today. As you have been informed, yesterday Japan time, Hitachi ABB Power Grids was launched as scheduled. This acquisition has brought us excellent assets that will help drive Hitachi into becoming a truly global company, not just in the energy sector, but in the overall business area where Hitachi operates. The first asset we acquired through this deal is the platform to accelerate our social innovation business on a global basis. The newly inaugurated company boasts the number 1 technology in the world and market share in its power grid business, operating in over 90 countries around the world with products and service offerings to over 15,000 customers.
We will combine this OT, operational technology, in the form of power grids and Hitachi's IT platform, Lumada, together to create an energy platform so that it can be utilized across Hitachi's entire organization and to the whole of the world. Talents are absolutely necessary for social innovation business. We need to share challenges with customers and together work to provide solutions. We need such frontline staff. In this new company, we have people from Europe, U.S., China, and other parts of Asia. Also from regions that we have not been able to reach very much, such as South America and Middle East. They have sites in these regions. Altogether, this company has a total of over 4,000 such frontline personnel. By combining ABB's frontline personnel and Hitachi's frontline personnel, we would like to continue to promote our social innovation business.
The second asset we gained is the platform to accelerate Hitachi's global management. In different regions, in order for us to deploy our social innovation business, we need talents that are required by that particular region. We also need to procure components that are needed in the region. Procurement, talents, finances. For these areas, we need across the board shared services. We would like to expand this on a global basis, and this new company already has shared service functions. By combining the global operations of this new company as well as Hitachi's, we will be able to bring the cost further down. I have likened the establishment of this new company to the arrival of Black Ships to Japan in 1853. Back in 1853, Black Ships led by Commodore Perry arrived in Japan.
Japan was thrown into a confusion. This new company that we established is like the Black Ships that I myself invited. We want the company to be the driving force for transformation, just as the Black Steamships were for our country in the 19th century. The new company's off to start navigating in this unprecedented business environment due to COVID-19. COVID-19 will most likely expand the use of digital technology at an accelerating pace and elevate the importance of electricity as an increasingly vital lifeline. Building a decarbonized society with further introduction of renewables, amongst others, is one of the most urgent challenges of the SDGs. I am convinced that the inauguration of this new company will provide us with a significant opportunity for us to contribute to creating such a sustainable society.
I hope you will look forward to the growth of both Hitachi ABB Power Grids and Hitachi Limited. This acquisition deal, day one, is such that the assets from ABB were carved out, and those assets are now being checked by our auditors. Therefore, we have not been able to disclose all the financials. Our apologies for that, but at the earliest possible stage, we would like to disclose them. At the end of July, we're going to make a first-quarter performance announcement, and at that time, to the extent possible, we would like to disclose the financials of ABB to the extent that we can. Thank you. That concludes my remarks.
Thank you. Next, regarding the completion of Hitachi's acquisition of ABB's power grid business and the establishment of the new company, Mr. Nishino will explain. Please wait till we switch the screen. Mr. Nishino, please.
Nishino.
Nishino speaking. Thank you. Regarding the new company, I would like to make a presentation. The next slide, please. This is the first slide. Perhaps this slide may not be included in your package, but these are answers to the frequently asked questions in the form of photos. Just briefly, on the left, there are three photographs. Is there chemistry? Can we combine our forces? Well, actually, the answer is yes. We are fully prepared to be together. The young leaders of both companies, Hitachi and Hitachi ABB Power Grids, are gathered, and they're working together very well. On the right-hand side, the members of the management of both companies are shown. In terms of chemistry and working together, no problem. Lower right, we had a panel discussion yesterday. On the left, in the middle, is Dr. Birol of IEA, the top person of IEA.
What's going to be the future of energy? Is there going to be increased investment? We had a panel discussion with IEA, and they said that they would like to support Hitachi's business strongly. These are some of the pictures from yesterday's event. As Mr. Higashihara explained, situation around energy is changing very rapidly. Decarbonization, renewables introduction, and electrification, distributed power supply, large-scale centralized power supply. The next slide. This is the slide that was prepared by the IEA that I mentioned. Investment into renewables, including investments into new grids. This is to increase for the time being. That's what this says. This is the outline of the deal. There's almost no change from what we have already announced. What we would like to get across is that we have completed our deal process as scheduled.
There were some concerns raised, but in terms of cash and enterprise value, they are all in line with our expectation and was as scheduled. The next slide, please. Mr. Higashihara earlier talked about this. By combining energy technology and Lumada, we will be able to deliver social, environmental, and economic values on a global basis. In order for us to be a truly global leader, what are the assets that we can leverage that we have acquired this time? There are threefold. A business basis, management basis, including customer base and business infrastructure. Let me elaborate on them. Business basis. I'm repeating this many times, but we have a number one market share in many areas, very good products and software solutions we have acquired. By combining this with Lumada, social systems and energy technology can be combined, creating huge changes and new business opportunities we expect.
This is the management basis. We have very important customers that we have acquired. Hitachi itself has an important customer base, but on top of that, we have a huge customer base added this time of 15,000. Frontline staff are as crucial. As you can see from this slide, on the left-hand side by region, on the right-hand side by region, how many we have acquired. Highlighted in red are regions we have not been able to focus on very much. We have acquired these personnel, and as a result, we will be able to increase overseas revenue quite substantially. You will see that Hitachi will be transformed quite substantially as a result of this acquisition. Mr. Higashihara said that we have to create value that is fit for the region, that meet the needs of the region.
We have so many diverse frontline staff that we acquired. We will be able to create and deliver values that are right for the region, and I think this picture shows how that can be done.
I'm often asked about synergy. This is hop, step, jump. This is the value that we plan to create, and I'm often asked about value as the business value. The final year of the next medium-term plan 2022, we think the value will be about double. Aside from products, we have very compelling software. The company's asset management or the business management can leverage the software, and this is used on a global basis. Hitachi Group and Lumada will have this as part of us, so we can expect bigger change going forward. Next slide, please. Needless to say, from energy to the final users, we can combine with Lumada and this will promote the social transformation in the medium to long term. Next, please. Hitachi and ABB are now joining hands to back up the success of this new company.
As President Higashihara said, Hitachi will become even stronger top leader, and we can go up the stairs, the steps for that goal. Thank you for your attention. Lastly, this is the management team of the new company. The detail of the business will be explained by CEO Mr. Claudio Facchin and the directors. From Hitachi, we have five and two from ABB. The two from Hitachi are non-Japanese, one in the U.K. and one in Switzerland. That concludes my presentation. Thank you. Thank you very much. Let's continue with the program. From Switzerland, the new company's CEO, Claudio Facchin, will deliver greetings and a presentation. Please bear with us while we switch the slides on the screen. Mr. Facchin, the floor is yours.
Good afternoon to everyone. It's a pleasure to be here and taking the time to walk you through Hitachi ABB market. You heard already from Nishino-san that there is a tremendous transformation ongoing in the energy space. This is about, obviously, driving for decarbonization. It's about higher integration of renewables. It's about energy efficiency. If you look at the way the transmission and distribution infrastructure is going to be managed going forward, it has tremendous additional complexity because of the change of the pattern of the generation of that electricity from centralized to decentralized, from more renewables that create variability, a need of exchanging on bidirectional. Also very much increased complexity on the patterns of consumption of that electricity. If you look at consumption from data centers, they require highly reliable and high-quality power supply.
If you look at electric vehicles and electrification of mobility, all of that is driving increase in consumption while the overall energy consumption, it's still expected to increase at a lower pace. The electricity is gaining a larger share of that energy provisioning. If you look at in the next 10, 15, 20, 30 years, there is a clear need to look at this overall grid infrastructure more interconnected. If you want to continue with investing on resilience, if you want to make sure that infrastructure provides electricity in a crisis time like we're just living now on a global scale, then interconnectivity, resilience, and obviously in order to manage that digitalization, is an essential part of technology investments and innovation. Next, please.
As part of that market that we see on average growing 2%-3% because of what I just mentioned before, there is a driver for increased electrification. There are also parts of that market that are actually growing much faster. If you look at on the right-hand side, we talk about EV charging infrastructure, we talk about electrification and increased need of mobility, rail transportation. Distributed energy resources are growing double-digit. Data centers, the need of providing reliable electricity to data centers. All those are what we call in our strategic plan, high growth segments. They're growing two to three times the average of the market growth. We have specific initiatives, and when you look at what we're going to share later on, where do we see opportunities to create synergies with Hitachi?
That is one area where Hitachi is present, both in terms of technology but also in terms of market, in terms of customer relationship. Those are the areas that we will then be focusing on to support our growth plan. Next, please.Our global footprint, you heard also Higashihara-san highlighting that. It's about our 36,000 employees worldwide. If you look at the footprint, very well-balanced, one-third in Europe, one-third in the Americas, one-third in Asia, Middle East, and Africa. I think important is to also highlight that we have close to 6,000 between sales engineers and field engineers that are present out there fronting, being close to our customers. Obviously, our customer base, two-thirds utility energy space, but one-third and growing faster, obviously, on the industry, on the transport, and on the infrastructure.
Very important also, our strength in innovation, more than 2,000 engineers and scientists in also many parts of the world that allow us to have a better understanding and be close on developing technology in all the key markets. Global footprint and four business units that have been also working to preserve an unparalleled installed base that we have, which is an essential part of the asset. Us understanding that installed base and sharing with our customers how to optimize managing that installed base is an essential part of our growth plan and creating value for our customers. Next, please. With a bit of more granularity, Power Grids, it's four businesses.
If you start from the bottom of the chart, the foundation or the product technology, the components, we're clearly number one across the portfolio, both on transformers and high voltage, which are the essential parts of the grid on the transmission and distribution side. On the transformers, we have a complete range that goes from distribution to ultra-high voltage, including traction transformers, including dry type, liquid insulation, low losses that support the decarbonization. We have a unique also footprint with more than 60 factories with many adjacent also service centers. High voltage products, also the broadest portfolio, covering all the way up to the highest voltage levels, 1,200 kV on the AC side, 1,100 kV on the DC side. On the next one is grid integration.
That's where we concentrate our efforts to preserve our leadership and strengthen our leadership on power quality, flexible AC transmission systems that allow AC transmission lines to provide more electricity, to provide better quality of that electricity, and upgrading the infrastructure in many parts of the world. We're also clearly leading on the high voltage DC technology. We've been the first one commercializing that technology over 60 years ago. We've been innovating since then, and we now basically with 130 gigawatt worth of installed capacity, we're number one with more than 50% of the installed base worldwide based on ABB technology. On top of that, we said it, we need more automation, we need more software, we need more digitalization to cope with the higher complexity. Currently, if you look at the top 250 global electric utilities, we're supporting about half of them.
If you look at also our software solutions, whether it's on the power generation plant side, whether it's on the transmission distribution, whether it's on the utilization of that electricity, our software solutions support over EUR 4 trillion of mission-critical infrastructure assets, and that's the value that we create with our customers. Next, please. If you look at the digitalization, it's very important for us to understand that digital grid is not just about digitalizing the components, making it more intelligent. This is an essential part of what we do. We are investing in digitalization in all those four business units that we just walked you through. It is important to also, though, digitalize the processes across the value chain.
Our digital grid approach is starting with helping our customers to also digitalize the planning phase, so that that planning phase help them in optimizing OpEx, optimizing CapEx, and then moving to optimizing OpEx further down during the life cycle by providing asset performance management solutions, workforce management solutions that allow our customers to optimize operations and maintenance. That's why you see in our strategy for the digital grid, not only digital substations, but also asset performance management, also virtual remote management technologies, and certainly communication, which is an important part of that portfolio. If you look at now these aspects, there is a clear opportunity for us to leverage what comes now from Hitachi in terms of technology, in terms of IT and OT technology, that will add, for instance, artificial intelligence, machine learning capabilities into our digital grid strategy.
Next, please. When you look at how we come together, it was very natural for us to draw a chart where we both started from the very beginning, sharing that in order for us to support the energy transition as we've been supporting, we need to continue, and we need to do more by working together with our customers. We serve utilities, industries, infrastructure. We have a broadest portfolio across all those. We are a technology and market leader, and if you now come and look at the need of digitalizing, then Lumada adds, and the whole Hitachi IT, OT technology with the huge investments that have been made so far on that side will create an opportunity for us to strengthen that position. Next, please. How would we do this?
If you start from the customer, and that's also was very easy for us because if you look at the segmentation of the markets, as we mentioned, we're strong, two-thirds of our business on the energy and utility side, but we also mentioned that segmentations toward industries, mobility, smart life cities, IT being data centers, and much more. That's where Hitachi will bring a lot of value. Not only in terms of access those markets and segments, but also accessing the technology that Hitachi brings to then create a joint approach between the digital platform and the energy platform.
We are right there bringing in all the components, all the technology needed for the energy platform, as Nishino-san would mention it, which is needed for all these customer segments, and then combining the strength across the value chain, be it on the generation side, be it on the transmission distribution side, or on the consumption side in terms of IT, OT, technology, and services. Next, please. Here is a very simple example. Obviously, we just started yesterday live with a joint venture, but we have already identified opportunities, and here we just want to share one as a concrete example. On the short term, what we will be able to do is take existing opportunities that we have developed with our customers to, for instance, manage better the energy with our energy management systems, and then add the capability of Lumada for real-time forecasting.
For helping through artificial intelligence, analyzing the data, and making sure that that energy system has that predictive aspect as well, that will then help our customers reducing consumption, improve their efficiencies, and obviously create value through also then decarbonizing their own footprint. Next, please. When you look at the situation that we're in, there is no doubt that the COVID-19 impact in 2020 is felt. It's felt across the segments, it's felt by our customers, and as a consequence, it's also impacting our business. From a market point of view, Nishino-san was mentioning, we had yesterday a panel session where we had concrete inputs from Fatih Birol from the IEA. There is an impact in the first part of the year 2020.
With all the plans of investing on decarbonizing, accelerating those investments, integrating more renewables, electrification being an essential part of that, upgrading and investing on the grid infrastructure will be coming back after 2021. We clearly see that the fundamentals of the market, despite COVID, which for us is a temporary challenge, will continue as we have seen in our plan. On our side, obviously, during this period, we have reprioritized. We have started by saying, number 1 priority, protecting our people, but right after that, preserving business continuity. In some markets now, we obviously start looking at preparing for what we call the new norm, and leveraging some of the learnings in this process to continue collaborating even stronger with our customers and partners. Next, please. Coming back, COVID impact is there, but it's a temporary one.
We don't see a change in our Vision 2025. Our aim when we established this plan in 2017 was to grow, to leverage the opportunities that this market transformation is offering, and making sure that we support our customers, again, decoupling economic growth from environmental impact. That, if you do it right, will create opportunity for us to grow. What you also see in this slide represented is that in order for us to create that profitable and sustainable growth, we also have invested to shift our portfolio. To invest in competitiveness, but also to shift in terms of business models, also to add more software, more services.
That's why we set ourselves the ambition that we want to double the service revenues in this strategic period, that we want to fully digitalize our portfolio, and we want to continue to invest in being best in class in quality and delivery and operations. If you do all this right, then we've been investing substantially in the past, and we will continue to do this with the support of Hitachi. We will continue to grow faster than the market. We will strengthen our number one position, and I'm very excited the power grids team to also leverage the learning that Hitachi has in embedding the Sustainable Development Goals in the strategy. We have already identified a few of those that are for sure, very relevant to our strategy. Next, please.
To summarize, three key messages. Number one, we're committed as a global leader to the sustainable energy transition. Number two, we will, with all the efforts, with investments on technology, on people, on competitiveness, on operations, to drive for profitable and sustainable growth, and we are in an attractive market. Number three, we will continue to focus on customers and people. We've been setting those priorities since the start of our strategic plan. We have a fantastic alignment with Hitachi team on the aspect of being close to our customers and being close to our people. Yes, there is an unprecedented situation that we're facing altogether due to the COVID-19, but that will be, at a certain point in time, over, and we will come out of this even stronger than before. Thank you.
Mr. Facchin, thank you very much. At this moment, we would like to move on to questions and answers. Those of you with questions, on the screen of the video conferencing system, there's a button for you to raise your hand. Among those who have raised a hand, we will call upon your name. Please unmute, state your name and affiliation before asking your questions. Once we designate a questioner, we will be releasing all the buttons for questions pressed. If we move on to the next question, you will have to press the button once again. The video of the questioner will not be shown this time. We would like to take questions first from those of you on the Japanese channel, and then move on to those of you on the English channel. That will be the order.
Those participants on the Japanese channel, may we take questions from you. Please press the button for questions if you have any questions that you wish to ask. Koide-san, please unmute your microphone and start your questions. Well, thank you. Can you hear me? Yes, we can. Well, thank you. I have a question of Mr. Higashihara. Just once again, acquisition of ABB from Hitachi's overall point of view. Well, growth investment, JPY 2.5 trillion. I understand that this acquisition is part of it, and the remainder is going to be for Lumada and IT-related investment. This time, the customer base that ABB has had, Lumada's products will be sold to ABB's customers. The business environment, therefore, after the acquisition, is going to have a major impact on Hitachi's business performance going forward. Once again, if you could talk about the significance of this deal.
Well, answer. Higashihara speaking. We talked about this in the medium-term business plan. JPY 2.5 trillion of growth investment. JPY 1 trillion out of it is spent on ABB. That has remained unchanged. What has been Hitachi's strength? We have been asking that ourselves. Hitachi's strength is that OT, IT, and products, we have all of them, and there's not many companies around the world who has all three. Well, there are lots of cyber technology. There are lots of companies with products who are growing. IT, OT, and products, we have them all, and we provide solutions to customers' problems, and we contribute to social innovation. I don't think there's many companies who can do that. Well, ABB Power Grids team is now joining hands with us, forces with us.
The new company, if it engages in social innovation with their technology and ours, power grid operations can be controlled. OT and products, plus Hitachi's IT combined. By so doing, social innovation business can further be accelerated. JPY 1 trillion of investment that we are making is not an expensive one. That's my belief. That's my answer.
Thank you. Just to continue, in relation to that, in terms of Hitachi's energy business, as was reported today, fossil fuel, power generation, nuclear power, we've been talking about all along. Energy demand is shifting from power generation to transmission and distribution. Is the shift taking place? What's your thinking on energy?
Answer. Well, I think what's going to happen is as you suggested, but for details, I would like to turn to Nishino. I would like him to answer in collaboration with ABB.
Well, Nishino speaking. You are right, there's a background to it. In terms of power generation, with respect to fossil fuel power generation, we did downscale that. Hitachi does understand the business of power generation. Mr. Facchin earlier said, power sources are going to change. There are going to be renewables sources. Of course, hydropower will continue to be important. As that's been the case all along. We know about power sources and grids where innovation is happening a lot. That's where we're going to focus on in making investments and creating assets. That's our thinking. As you rightly suggested, in terms of assets, we will focus on power grids and digitization. Why do we think we can win? Well, as I said, on the demand side as well, on the user's side, we've been creating a lot of innovations.
By bringing all of them together, we will be able to offer something special, and that's what we aim at. In terms of that, grids are important. Well, if I may add to that, going forward, we should not look at just either demand or supply. We have to look at both to strike the right balance and control effectively. In that regard, power grids are going to be very important. One last question about numerical targets. Mr. Facchin in his presentation said that there's no change to the plan for 2025, and the operating margin of 10%, that should be the threshold for acquisition for Hitachi. Right now, the margin is lower than that. ABB is now undergoing a structural reform, I think. Hitachi's 10% margin target of 2021, given that, how will the margin change? Could it be raised to 10%?
What is the scale and the timeline? Well, Nishino will answer. We had discussion on this with Mr. Facchin, has come to an understanding, and we have drawn up a business plan. Because of COVID-19, factories are suspended, it will have to be delayed somewhat, unfortunately. It's unfortunate, a few percentage points reduction may have to be accepted. As I said, we are implementing structural reform, and it's been done very well, actually. To give you the conclusion, 2021 MTMP, the last year of the plan, I think we will be able to meet all the goals that we set. For the next MTP, the enterprise value of this company is such that while 10% is on the standalone basis, of course we will create synergies. In 2021, on a standalone basis, we would like to create synergies.
As Mr. Facchin said, we are preparing for such synergies to be generated. Toward 2024, we would like to increase the size of the business to double that it was at the time of acquisition.
Question. The size being double, does that mean operating margin is going to be double as well?
Well, I'm talking based on the enterprise value. Well, if we acquired at A, it should be 2A in several years' time. That's what I mean. Thank you.
Next question, please raise your hand. Next. Mr. Nakamura, please unmute and ask your question.
Thank you very much. Do you hear me?
Yes, I do.
36,000 overseas employees will join. Hitachi Group, more than 50% will be foreign nationals. In the energy sector, it will be mostly foreign nationals. The seed of Hitachi becoming a global company, especially in the energy sector, which used to be a domestic business. I want to ask you if you can keep up and how to mix the components. How do you think this can be worked out?
Nishino will answer that. Thank you for a very fundamental question. I was a CSO for eight years. The rail business acquisition and Johnson Controls and HVAC, been doing all that, and there were lessons learned. For this time, I have two answers. We prepared ourselves significantly to launch this system, establish this system. This template was rail. When we started the rail business, we struggled, but now it's working very well, and the leadership is Japanese and an Italian or British man. This company is run by diverse talents. There's one British man as the Vice President in the management meetings. After all this experience, we now have Claudio-san and other members. We've discussed for 18 months. As I showed you at the beginning
The young members are learning each other, and they are highly motivated to create a new culture. I have two answers to your question. Whether we can manage this, we already will practice and trained ourselves significantly, and we've come this far. Secondly, Claudio-san and others, what we've done in the past, Claudio-san and other members learned so much from us, from what we've been through. Now joining the new members to Hitachi, they are now recognizing the big value. That's a big difference. Long story short, we already practiced. Claudio-san, please.
Yes. Claudio-san, please. The question is the integration of the culture and the management. Yeah. Why? Myself and you believe it can lead everybody to their success.
Thank you, Nishino-san. I think you have described it already very well. There is, as I mentioned also in my presentation, there was almost a natural way of looking at things when we put the two aspects on how obviously we manage the business, but also how we see this team and joining forces can really, on the long term, support not only the business as such, but the bigger vision and perspective that Hitachi brings in with social innovation. The aspect of addressing first the customer and creating an environment and business models that allow us to collaborate and co-create with our customers. We had that same approach, but discussing with Hitachi, discussing with Nishino-san and his team, we found out actually that in many aspects, they have developed their approach already, and we can leverage from that. We can share experiences.
Nishino-san also triggered already a couple of young talent sessions that helped us in understanding that it's more what we have in common. We're all passionate about technology. We're all passionate about people. We're all passionate about this energy transition, and we're all passionate by doing it in a green way. I think that's a fantastic opportunity and a foundation for us. Now, the challenges are there, but I think together we're much stronger to drive those changes and to deal with the short-term challenge and create the opportunity with our customers.
Thank you. May I ask you one more question? You already explained, once again, ABB's existing foundation, Hitachi's IoT, Lumada IoT technology will be added on top of that. By doing that, what will become possible? If you could once again explain what will be added. If you could elaborate once again. Nishino would like to explain.
In my slide, ABB Power Grids, a great software package was shown. As Claudio-san explained, President Higashihara explained, this is the OT part. This is extremely strong, extremely powerful. Enterprise asset control, Maximo is a well-known software. It is comparable to that. Claudio's team has that, this is used in big volume globally. This is mission-critical, so it cannot be used everywhere, but by joining Hitachi, it can be used in many areas, many industries.
One more point, Hitachi is strong in the areas that are close to the management. For example, the management optimization and the visualization and logistics. Hitachi Industrial team is involved in that. ABB's strength is in OT, and Hitachi is in IT and ERP that is closed in management. Hitachi is strong there, too. There's overlaps, but very complementary. The customers are now expecting us to visualize with more digitalization and improve the management efficiency and capture more opportunities. To meet that challenge, we think we are a great combination. Thank you very much for the answers. Well, thank you for the questions. To continue, those of you with questions, please press the button for questions. Now we have a person wishing to ask questions. Please unmute. Start.
Yes. Thank you. Can you hear me?
Yes, we can.
I have two questions that I would like to ask. Question number 1. In recent times, Hitachi newly introduced management indicators ROIC. R-O-I-C. You are starting to disclose ROIC by business segment, and that you're going to focus on disclosing those numbers. Hitachi ABB Power Grids, this new company, will it play a role in increasing the ROIC for Hitachi overall, or will it be some time before it can do so? Will it take a medium to long-term for this new company to help Hitachi raise ROIC? The latest number shows that ROIC is 9.4%. Energy sector alone, ROIC is low at 4%. You don't have to talk about the current numbers, but what is the role expected of ABB Power Grids in terms of increasing ROIC number for Hitachi? Kato will respond to that question.
At the outset, our CEO, Higashihara, explained this, but we are now reviewing various aspects of our business plan at the moment. At around the end of this month, we will be announcing the outlook for Q1 results. For this Power Grids business, now that we have acquired it will be reflected in the outlook that we will be announcing at month-end. ROIC will be shown at that time, so if you could please wait until then. Well, let me answer that. Just as Higashihara said, this business was first carved out, and then brought to the group. Balance sheet is not yet finalized. In terms of the direction, as Mr. Facchin said, digitization will increase even further. Given that direction, I'm sure ROIC for Hitachi will be raised because of this business that we have acquired. Well, thank you for the answer.
In other words, the performance announcement for April through June, well, you're saying that you will not be able to come up with a definite ROIC outlook, correct? Yes. The answer is yes. I think some of you know. We cannot just cook up the numbers. We have to have a neutral party reviewing the numbers. ABB's auditor is different from Hitachi's auditor. It's going to take a while to go through the auditing process. It's the accounting rule that we have to follow. As Higashihara-san said, once the numbers are finalized, we will be reporting them to you. I hope you understood. My second question is as follows. Just to represent the equity market, what they're thinking, one and a half years ago, Hitachi announced that this deal will take place.
I would like to turn to Mr. Facchin for an answer for this, actually. Once the deal was announced, ABB equity price, stock price went up. On the other hand, Hitachi's stock price, because of various factors, did go up as well. For this particular project, Hitachi was not necessarily positively evaluated. Well, actually, looking at the changes in Hitachi's stock price, this project, this deal was not necessarily positively looked at. What you talked about and the opportunity for Power Grid in the future, the presentation was very robust. It seems that the stock market did not see it that way. They had a different view of the deal. Are you saying that the stock market is in the wrong? As you said, you're going to see increased profitability, that enterprise value of this business is going to double.
Well, what ABB cannot do, but Hitachi can do, and what ABB did not know, but Hitachi does know. Why the discrepancy between your view and stock market view? Well, because you are insiders, you may know what's wrong about the stock analysts' views. What are they, if you could elaborate? Well, Mr. Facchin was a member of ABB until two days ago. If he's to answer, he may divulge insider information. Let Nishino, myself, answer your question. Well, the stock market, the equity market, and the financial analysts, their views were that ABB's discontinued business numbers, they were not very good, and perhaps because of that, their view was not necessarily positive. The market was not necessarily sold. There are backgrounds to this. There are twofold. Discontinued business number disclosed by ABB was not growing. That was one aspect.
Siemens, GE are competitors, their trends. I think those were the two factors that led to that dim view. Power Grids business that's led by Mr. Facchin, therefore, was not necessarily positively evaluated. I'm not in a position to say that stock analysts were right or wrong, I think making a judgment based on just two factors I mentioned must have been difficult. Let me share my thinking. ABB's discontinued business, our counterpart, Timo-san, the CFO, my counterpart, we had a lot of extensive discussions on this, I cannot share all the details. The disclosed numbers actually include non-Power Grids business, substantially. For areas where structural reform were necessary, we performed a structural reform and then carved out for such businesses. Mr. Facchin has focused on this, worked on this very hard.
One-off cost was included quite extensively because of these efforts made. Just looking at the numbers, people may have concerns, and that is something that we can't do anything about. These are all details on the ABB business side. In due diligence, we did see numbers, but we cannot share them with you at this moment. Now, another part of the background is Siemens and GE, their performance is not very stellar. Siemens Energy, the company that you know well about, this company, whether their performance is good or not, I'm not in a position to judge. In terms of technology, well, Siemens Energy, wind power turbine, well, they have a lot of non-power grid business. Their business is not necessarily power grid alone. Wind power business of theirs, their performance is disclosed, but not very good.
Another company that they have, they're not doing very well either. We don't have a comparable company that we can compare against. Those of you in the market, I'm sure you are performing a lot of analysis and have taken a hard look at what we are doing versus what others are doing. There are no apple-to-apple comparison. Because of that, perhaps, they made the analysis that they did. One-off cost, Mr. Facchin pursued structural reform, and there is public announcement that was made about that. Shutdowns of several factories because of the relationship with the residents in the community, South Wharton factory, for example, we have already made announcements. I hope what I have said will be of reference to you. Thank you.
Thank you. Now we would like to take questions from the English channel. If you have any questions, please press the raise hand button. Pia Chikina-san, please unmute and ask your question, please.
Hi. Yes, thank you very much. Can you hear me?
Yes, we hear you.
I have two questions, and maybe questions are directed to Claudio as well as to the other presenters. First is, can you please talk about the restructuring that has been performed over the past couple of years? One of the speakers mentioned that restructuring was successful, but we would like to hear more details on this. The second is, if you could please talk about the order book, because one of the market concerns has been that the order book has been declining in line with declining T&D spending since 2015. My understanding is that you expect that trend to stabilize or maybe turn to positive. If you could talk about order book that you have on hand now. Thank you.
Yes, sir. Claudio, please.
Sure. Thank you. If you allow me, I will also add to what Nishino-san said before on the point about how we see the market and why we're firmly of the opinion that once you look at this business with the right timeframe, this life cycle is long. Investments in mission-critical infrastructure, it takes a long time to decide. It takes also a long time to design and to implement and execute. We've been, and I personally have been over 25 years in this market. We have seen, and always as a leader in this market, we have seen in the past crisis. We have seen downward market trends. We also have seen significant growth market trends in the last couple of decades.
There is one essential difference on what we see today in this market transformation, is that there is, while in the past there was more of a local trend, there was more of a regionalized decision-making process on where to invest, how to invest, which source of energy, what type of grid. Going forward, because of what we explained before, there is a much clearer foundation on where those investments, because of the integration of renewables, because of the different patterns of consumption, are going into. We see those trends very much globally. We as a market leader globally, we are in a unique position to tap into those opportunities and share those learnings and add the value to the customers across that market. Once you look at then the period of the downturn of the market, the picking up, then obviously you always have a lag.
I link into your questions about the growth. If you look at the last couple of years, we've been able, despite not such a positive market trend because of the many reason we explained, we've been able to grow our top line. Our orders, our order backlog, has been growing in the last couple of years, not only in terms of $, but also in terms of quality. Because of the business, the trend on the revenue when the orders and the order backlog translates into revenue, into deliveries, into execution, there is always a lag of one, two years. We have been seeing, and you've seen it in the numbers that we have been disclosing before in 2017 and 2019, that we did not manage to grow on the revenue side.
The order backlog will support, hopefully we will be out soon out of this crisis, will support again that growth. When you look at it, the long cycle, we are 100% convinced that we are in a market that will support growth. Yes, as also you were mentioning, we had to deal with, I would not call it so much restructuring, more transformation. We've been investing. Part of our strategic plan 2025 was to invest additional efforts, money, resources, in transformation initiatives. Part of those transformation initiatives are related to footprint changes. Nishino-san was mentioning some of those. We will have to continue to do those. We keep on adapting our footprint to the demand. That's just responsible business decisions that we make on a daily basis, we make on a monthly basis, on a quarterly basis.
What we don't change is our strategic long-term plan. We know that this market will need a certain portfolio. We know that in order for us to deliver that technology, we need to also, as a market leader, shape that portfolio and shape the way we deliver with different business models, that portfolio. That's something that I see now joining forces with Hitachi, that we'll have a tremendous opportunity to drive that change on the longer term. The market, yes, there are challenges. Yes, the pandemic is creating a challenge. It's in front of us. We're dealing with this. We are setting the priorities right to deal with this, but it's a temporary window.
We know that this will change, and if government, if markets, and ourselves will continue to drive the decarbonization, will continue to drive the sustainable aspect of the energy, we will see a lot of these investments coming back. There is a temporary dip on investments. We need to deal with it. We need to take the actions in order to manage the cost accordingly. On the long term, we also don't want to compromise on investing in innovation as we have been doing in the last 100 over years.
Thank you.
Thank you. It's now past the scheduled closing time. One last question from the Japanese channel, I think we can accommodate. Those of you with questions, please press the button for raising your hand. I see a hand raised. Unmute yourself and state your questions, please.
Yes. Can you hear me?
Yes, we can.
One last question. It was in the presentation, but in terms of the impact from COVID-19, things are changing very much these days. You say that this business is going to grow. Why? With the acquisition, what changes will take place? Which areas will decline? What other areas will grow? Overall, the business is going to grow, but, if you could please provide the details. Well, Nishino will answer.
As we discussed earlier, of course, we're impacted by COVID-19. It's impacting both Hitachi's business as well as Power Grids' business and customers' business. As Claudio-san explained, we are receiving orders very successfully. Orders are being built increasingly, actually. We are receiving almost record-high orders, it's just that there's been some delay because of COVID-19. Compared to when we made the decision to acquisition, our stance remains unchanged. Why do we believe so?
Of course, there are things that have changed ever since the announcement was made. We've been talking about investments into renewables. There's a very strong tailwind. Right now, oil and gas is down. Overall, investment is rising, but there are areas that are stalled. There are other areas that are growing. Claudio's team is very adept in securing orders, and that's because they have a global footprint that allows them to get orders successfully. As I said, orders are building up very successfully, and there's some delay, as I said. In the meantime, we would like to pursue Hitachi's reform. Now that we have this business, we are able to elevate our globalization initiative one level, two levels higher.
Of course, there are some revisions made to the original plan, but we have the same understanding, the same thinking, to approve this acquisition, and that was the case. Inclusive of orders, our business continues to be robust. There's impact from COVID-19, sure. In terms of enterprise value and in terms of Hitachi pursuing reforms, there should be no delay. Because of that, we made a decision to close this deal. Thank you.
Thank you.
Our time has come. We will close the web conference on the completion of Hitachi's acquisition of ABB's Power Grid business and the establishment of a new company. Thank you very much again for taking time out of your busy schedule to attend this meeting.