J-Power Systems Corp Examines Offshore Plant Establishment

J-Power Systems Corporation (JPS), a joint venture between Sumitomo Electric Industries and Hitachi Cable to produce high voltage power cables, examines establishment of a cable plant at overseas, which has no offshore plant yet. JPS has continued full operation at its domestic plants since 2004 with active demand for foreign power infrastructures. The firm seeks next capital expenditure for local production of high voltage power cables and cultivation of cable laying human resources at overseas when the domestic power cable market has already peaked out and higher cost competitiveness is needed among international cable makers.JPS posted net sales of 77 billion yen in fiscal 2006 ended March 2007, which upped by 27.5% from fiscal 2005 and 40% of which were offshore sales. The demand was very active for domestic and foreign power companies. Kiyoshi Shimojima, president of JPS said the firm holds order backlogs as much as the firm continues full production by fiscal 2008.JPS receives cable orders in Middle and Near East, North Africa, Asian countries including China, Australia and the USA. For example, the firm is currently dealing 2 large projects in Singapore and Canada each of which is valued at 12-13 billion yen and 3 middle projects in Hong Kong, Laos and Thailand each of which is valued at 4-6 billion yen.Mr. Shimojima said the firm is currently concerned about 2 bottlenecks with very strong demand. One is that there is no room to expand output capacity at domestic cable plants. The other is shortage of human resources to lay cables while the firm usually receives full-turnkey orders.Mr. Shimojima explained the firm has already utilized rest spaces and nonperforming assets in the domestic plants, which were generated when Sumitomo Electric Industries and Hitachi Cable integrated their high voltage cable businesses into JPS. JPS cannot expand output capacity at the domestic plants with another reason that domestic high voltage cable market has already peaked out. As to human resources, JPS engaged about 100 employees for late 2-3 years and the total number of employees became to 1,030 as of April 1, 2007. However, the firm seeks another measure to keep its cable laying techniques for a long range. Sumitomo Electric Industries, one of parent companies of JPS, announced on Thursday its new 5-year management plan for fiscal 2008-2012, which included a strategy to expand overseas sales of high voltage power cables with possibility of M&A. Sumitomo Electric Industries transferred its high voltage power cable business fully to JPS. Consequently JPS is possible to establish an offshore JV or to acquire a foreign cable maker in near future.