Regarding MHI's Request for Payment from Hitachi, Ltd. Related to South Africa Project

As part of this business integration, assets and liabilities, contracts with customers and others, and rights and obligations thereunder, related to the boiler construction projects for Medupi and Kusile thermal power stations (hereinafter "South African Projects"), for which companies such as Hitachi Power Africa Proprietary Limited (hereinafter "HPA"), a consolidated subsidiary of Hitachi in the Republic of South Africa, received orders in 2007, were transferred (hereinafter "South African Asset Transfer") from HPA to Mitsubishi Hitachi Power Systems Africa Proprietary Limited (hereinafter "MHPS-Africa"), a consolidated subsidiary of MHI.
At the time the contract between MHI and Hitachi for the South African Asset Transfer was concluded, MHI was aware that there were already major losses incurred, and asserted this to Hitachi. Therefore, in the contract, Hitachi and HPA were responsible for contingent liabilities arising from events that occurred prior to the Effective Date of Company Split, and for any claims that had already accrued as of the said date, while MHPS and MHPS-Africa were responsible for the execution of the project on and after the Effective Date of Company Split. On that basis, it was agreed in the contract that the future project schedule and cash flow estimates dating back to the Effective Date of Company Split shall be refined, and the definitive price of the South African Asset Transfer shall be determined based on the refined estimate, and that the difference in price shall then be adjusted.
Subsequently, MHI and Hitachi worked together, respecting the spirit of the merger, to refine the project schedule and cash flow estimates through detailed and courteous discussion. Currently, MHI and Hitachi have still not completed the price adjustment for the South African Asset Transfer. However, given that it was already expected as of the Effective Date of Company Split that the South African Projects would incur a loss, MHPS-Africa has the right to receive the price adjustment payments and other payments from Hitachi or HPA to the amount calculated under the legally binding contract. Furthermore, MHI believes that HPA's balance sheet directly before the Effective Date of Company Split did not reflect the losses that were already expected at that time. Presently, there is still not agreement on this issue.
On March 31, 2016, MHI demanded that Hitachi pay ZAR 48,200 million (equivalent to approximately ¥379.0 billion, ZAR 1 = ¥7.87) to MHPS-Africa as part of the price adjustment and other payments (hereinafter "Partial Demands for Payment"), and part of the said rights to receive payments from Hitachi is included in "Others" in the current assets of MHI's consolidated balance sheet.

Then, on January 31, 2017 MHI demanded that Hitachi pay ZAR 89,700 million (equivalent to approximately ¥763.4 billion when ZAR 1 = ¥8.51) as the price adjustment and other payments (hereinafter "Current Demands for Payment"), which includes the Partial Demands for Payment. The Current Demands for Payment were calculated based on the refinements to the project schedule and cash flow estimates dating back to the Effective Date of Company Split, in accordance with the contract. Therefore, the Partial Demands for Payment, which is based on MHPS-Africa’s cash flow estimates after the Effective Date of Company Sprit, and Current Demands for Payment have a different meaning each other, and the difference does not mean a deterioration of the cash flow estimates for the South African Projects after the Effective Date of Company Split. In addition it does not mean an increase in the current assets recorded on MHI's consolidated balance sheet.

With these Current Demands for Payment, MHI exercises its legitimate right based on the legally binding contractual agreement, and the company will continue discussions with Hitachi on this issue.