Mitsubishi, Hitachi resolve dispute from prior to power businesses merger

Mitsubishi Heavy Industries and Hitachi have settled a dispute over losses related to coal-fired power plants in South Africa. The thermal power systems division of the two companies have meanwhile merged to form the Mitsubishi Hitachi Power Systems.

The losses stem from the troubled construction of the Medupi and Kusile coal power plants for South African state utility Eskom.

Mitsubishi Heavy had demanded that Hitachi shoulder nearly 91 billion rand ($6.3 billion at current rates) in cost overruns for boiler contracts held by a joint venture. The figure is likely to total roughly $4.6 billion in an arrangement, according to South African media, which has said that Mitsubishi Heavy is considering selling a flagship shipyard in Nagasaki, while Hitachi is solidifying plans to sell listed subsidiary Hitachi Chemical and its diagnostic imaging business.

The South African projects were initially handled by Hitachi and later taken over by Mitsubishi Hitachi Power Systems, a joint venture established in 2014 through the merger of the two companies' thermal power equipment operations. Mitsubishi owns 65% of the venture, with Hitachi holding the rest. The orders were initially estimated at roughly 570 billion yen. Local labour disputes led to delays. Costs ballooned.

Totaling 9,600 MW of capacity, the two plants are equipped with boilers.

The Presidents & CEOs of both companies commented on the settlement as follows:

Seiji Izumisawa, President & CEO, Mitsubishi Heavy Industries, Ltd.

I am pleased that MHI and Hitachi have been able to settle this case today. Despite a significant gap in the way we viewed the situation, we continued earnest discussions and were able land on a conclusion that both sides could accept. I express my deepest thanks to all those working on these projects and the effort they are putting in over many years. We will now work towards the completion of the projects, along with strengthening the management of MHPS and transforming our power business to ensure sustainable growth.

Toshiaki Higashihara, President & CEO, Hitachi, Ltd.

I am pleased that we have reached the settlement for this long-standing issue today on satisfying conditions for both companies. This settlement was achieved by sincere discussion for the benefit of all stakeholders including our customers and shareholders. I would like to express my deepest appreciation to everyone concerned in both companies. Hitachi will further focus on social innovation businesses to become a global leader in contributing to realize human-centric society where people can live in safety, security and comfort.