SCE, Mitsubishi, SDG&E and COR have entered into a stipulation to join SDG&E and COR in the arbitration

Mitsubishi Heavy Industries, Ltd.
On October 17, 2013, Mitsubishi Heavy Industries, Ltd. (MHI) announced that Southern California Edison (SCE) filed a demand for arbitration against MHI and Mitsubishi Nuclear Energy Systems, Inc., a wholly-owned subsidiary of MHI (together, Mitsubishi) under the dispute resolution procedure specified in the contract (Purchase Order) for the supply of Replacement Steam Generators for San Onofre Nuclear Generating Station (SONGS). With regard to the arbitration process, two entities that are minority co-owners of SONGS will participate as additional claimants. Details are as below:

    1. The entities as additional claimants of the arbitration
    (1) Name:
    a) San Diego Gas & Electric (SDG&E)
    b) City of Riverside (COR) (Note.1)
    (2) Location:
    a) 8326 Century Park Court, San Diego, California 92123
    b) 3900 Main Street, Riverside, California 92522
    2. Background of the arbitration process and description of its contents
    (1) Background:

    On July 18, 2013, Mitsubishi received from SCE a notice of dispute, as specified in the article on dispute resolution in the contract. After receiving the notice, Mitsubishi submitted a timely written response to SCE in accordance with the contract. Later, on October 17, 2013, SCE and Edison Material Supply LLC, a wholly-owned subsidiary of SCE, filed an arbitration demand to the International Chamber of Commerce (ICC) in accordance with the same dispute resolution article because the discussions by both companies did not reach a resolution of the dispute.
    Simultaneously with SCE's notice of dispute, on July 18, 2013, the minority co-owners of SONGS, SDG&E and COR filed lawsuits in California Superior Court in San Diego, California against Mitsubishi and Mitsubishi Heavy Industries America, Inc. , a wholly-owned subsidiary of MHI, alleging breach of the warranty obligations of the contract, tort liability etc. Both lawsuits were removed to the U.S. District Court in the Southern District of California by Mitsubishi. Soon thereafter, Mitsubishi filed a motion in each case requesting the Court to stay the lawsuits pending the completion of the arbitration proceeding because it believed that all disputes pertaining to the contract should be resolved by the arbitration. On March 14, 2014, the Court granted Mitsubishi's motions to stay the suits and issued an Order compelling SDG&E and COR to arbitrate their claims as required by Mitsubishi's contract with SCE. In light of this Order, on May 16, 2014, SCE, Mitsubishi, SDG&E and COR have entered into a stipulation to join SDG&E and COR in the arbitration.

    (2) Contents of the arbitration:

    Within 30 days of the approval of the stipulation by the ICC, SDG&E and COR will submit pleadings, in which they set forth their claims and requests for relief.

    3. Amount claimed

    As stated above, the amount of claims will be set forth in their pleadings which will be submitted within 30 days after approval of the stipulation by the ICC.

    4. Prospect of the arbitration

    As announced on October 17, 2013, the allegations and demands made by the parties disregard the history of the contract negotiations and performance and are factually incorrect, legally unsound, and inappropriate. Through the arbitration process, Mitsubishi will aggressively defend itself by accurately presenting the facts involved and the applicable legal principles. At the same time, Mitsubishi will take actions in the arbitration with the parties for its counterclaims because it has been damaged by inappropriate actions by SCE regarding the restart of SONGS and the repairs of the steam generators.

    Mitsubishi’s liability to SCE is limited by the contractual provisions to which the parties agreed, as SCE has discussed in its filing with the U.S. Security and Exchange Commission, and includes an overall limitation of liability (approximately $137 U.S. million) as well as a preclusion of consequential damages, including the cost of replacement power. Accordingly, at this moment, Mitsubishi does not expect there to be an impact by its dispute with four parties including SCE on the results of our operations based on the limitation of liability and our belief that Mitsubishi has fulfilled its obligations under the contract.

    If there are any new matters which require disclosure, Mitsubishi will update the information promptly.

    Note.1 SONGS is co-owned by SCE (78.2%), San Diego Gas & Electric Company (20%), and City of Riverside (1.8%).