Hitachi : MHI reach settlement over South African project
December 18, 2019 at 02:59 pm IST
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Japan's Hitachi Ltd and Mitsubishi Heavy Industries Ltd (MHI) said on Wednesday they had reached an out-of-court settlement of their dispute over losses stemming from a South Africa power plant project.
Hitachi will pay MHI a settlement of 200 billion yen ($1.8 billion) in March and transfer to MHI its entire 35% stake in their joint venture Mitsubishi Hitachi Power Systems, the companies said in separate statements.
Hitachi said the stake transfer would reduce its burden by 70 billion yen, meaning it would pay 130 billion yen to MHI.
In 2007, Hitachi won a contract to build 12 boilers for the Medupi and Kusile power plants of South African utility Eskom.
It later transferred the contract to the joint venture, Mitsubishi Hitachi Power Systems Ltd, which was set up in February 2014 by combining the thermal power generation businesses of the two companies.
But the power stations were hit by cost overruns and delays, and Hitachi and MHI disagreed on whether some costs were incurred before or after the creation of the venture.
Hitachi said it would book expenses of 378 billion yen related to the settlement for the fiscal year ending March 31. As a result of this and other factors it lowered its annual net profit forecast to 170 billion yen from 360 billion yen previously.
(Reporting by Ritsuko Ando in Tokyo and Nivedita Balu in Bengaluru; Editing by Arun Koyyur/David Evans)
Hitachi specializes in manufacturing and marketing of electronic and industrial equipments. Net sales (including intragroup) break down by family of products and services as follows:
- social infrastructure and industrial systems (24.7%): elevators, escalators, industrial facilities, railway systems, power generation units, etc. The group also provides engineering and construction of nuclear, hydroelectric, and thermal power plants services;
- information and telecommunications products and services (20.1%): systems integration, cloud computing, software, servers, hard disks, PCs, ATMs, data communication base stations, payment terminals, etc.;
- materials and components (16.6%): semi-conductor materials, printed circuit cards, cables, copper and forged steel products, magnetic materials, organic and inorganic chemical products, etc.;
- construction equipment (10%) : hydraulic excavators, wheel loaders, mining equipment, etc.;
- automotive systems (9.4%): powertrain systems, control systems, etc.;
- electronic products (9.2%): fiber-optic components, screen tubes, testing and measurement equipment, medical equipment, equipment for manufacturing semiconductors, etc.;
- household appliances (4.7%): heating and air conditioning equipments, refrigerators, washing machines, etc.;
- other (5.3%): mainly transport, financial and logistical services.
Net sales are distributed geographically as follows: Japan (49.2%), Asia (21.3%), North America (12.7%), Europe (10.8%) and other (6%).