Toshiba Corp will invest 700 billion yen ($8.6 billion) in the environment and energy sectors over the next three years, as the Fukushima atomic crisis casts a shadow over the prospects for the firm's nuclear power business, a report said on Tuesday.

Engineers are battling to plug radiation leaks and bring the Fukushima nuclear plant northeast of Tokyo under control more than two months after a 9.0 magnitude earthquake and deadly tsunami that devastated a swathe of Japan's coastline and tipped the economy into recession.

The industrial conglomerate's strategy, including mergers and acquisitions, will expand the company's 2011-2013 capital and research-and-development budget to more than 3 trillion yen, up 50 percent from 2008-10, the Nikkei newspaper reported, without identifying sources.

A spokesman for the company said he could neither confirm nor deny the report. Toshiba is set to announce its three-year management strategy at 0430 GMT.

The company, whose products run the gamut from rice cookers to nuclear power plants, has stepped up efforts to tap the markets for solar and other renewable sources of energy, as well as smart grids, where demand is seen growing rapidly around the world.

Smart grids are designed to accommodate a range of generation options, including renewables, and to provide customers and utilities with more real time information, enabling them to manage usage and supply more efficiently.

Toshiba last week announced it would buy unlisted Swiss smart-meter manufacturer Landis+Gyr for around $2.3 billion.

The company also announced on Monday an alliance with South Korean wind power firm Unison Co. The Japanese firm will buy some 3 billion yen in Unison convertible bonds as the first step of the deal.

It will raise its stake in the producer of wind power generation equipment to about 30 percent in about a year, the Nikkei reported.

Toshiba also plans to boost output at a lithium ion battery plant in Kashiwazaki, Niigata Prefecture, in anticipation of higher demand for use in smart-grid systems, the paper said.

(Reporting by Isabel Reynolds in Tokyo and Arpita Mukherjee in Bangalore; Editing by Joyjeet Das and Joseph Radford)