MHI Begins Talks with Oshima Shipbuilding Regarding Utilization Plan for Koyagi Plant at Nagasaki Shipyard & Machinery Works

Koyagi Plant was established in 1972 as a dedicated facility to build large tankers (very large crude carriers, or VLCCs), aimed at expanding the shipbuilding operations of the main plant in Nagasaki Shipyard's Tategami Area ("Tategami Plant"), and enabling mass production. Later, amid the sharp downturn in shipbuilding that followed the second oil crisis (1979) and the subsequent period of boom and bust in ship demand, as well as the rise in competition from South Korea, China, and rival domestic firms, MHI shifted from the construction of tankers to bulk carriers and container vessels, and in recent years has concentrated on continuous construction of gas carriers such as LPG and LNG carriers and took the measures to improve and strengthen the business as much as possible, including capital investments to improve productivity, organizational streamlining, and structural reforms. As the result, the plant has continued operating as MHI's main facility for large ships for more than 40 years, however, considering the long-term market conditions for gas carriers and other vessels, and the competitive environment, MHI reached the conclusion that additional fundamental measures were necessary, including reconsidering the future of Koyagi Plant.

At the same time, since there are many companies involved in the shipbuilding business in Nagasaki Prefecture, and the impact on the local community is substantial, MHI Group is pursuing measures to strengthen Tategami Plant's shipbuilding business, and recognizing that an effective utilization plan for the facilities at Koyagi Plant will be essential, MHI has held discussions with Oshima Shipbuilding that led to the current agreement.

Going forward, MHI Group will continue to maintain its relative advantage, and by concentrating resources on ships for which it can provide added value, will continue to develop its shipbuilding business. To achieve this, MHI plans to pursue a range of measures, including strengthening engineering capabilities, developing cutting-edge technologies and differentiated equipment, diversifying its business model (technology licensing and support for gas carriers and other vessels, expansion of the repair business), and modernization of facilities at Tategami Plant and Shimonoseki Shipyard & Machinery Works. In addition, through the project to establish Nagasaki as a center for cruise ship maintenance, repair, and operation (MRO) being conducted in cooperation with the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), Nagasaki Prefecture, and the city of Nagasaki, MHI will also pursue measures to repair and construct cruise ships, further contributing to the development of the local community.