SDG&E and COR submitted pleadings to ICC

Mitsubishi Heavy Industries, Ltd.
On October 17, 2013, Mitsubishi Heavy Industries, Ltd. (MHI) announced that Southern California Edison (SCE) and Edison Material Supply LLC (EMS) (Note1) 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). Following the announcement, on May 19, 2014, MHI announced that SCE and Mitsubishi have entered into a joint stipulation with San Diego Gas & Electric (SDG&E) and City of Riverside (COR) that are minority co-owners of SONGS (Note 2) to join SDG&E and COR in the arbitration. Following the acceptance of the stipulation by the International Chamber of Commerce (ICC) on June 16, 2014, on July 18, 2014, SDG&E and COR submitted pleadings, in which they set forth their claims and request for relief. Details are as below:

    1. Date of the approval of the stipulation by ICC:
    June 16, 2014 (U.S. Time)

    2. The entities as additional claimants of the arbitration (Note 3)
    (1) Name:
    a) SDG&E
    b) COR
    (2) Location:
    a) 8326 Century Park Court, San Diego, California 92123
    b) 3900 Main Street, Riverside, California 92522

    3. Background of the demand for arbitration and description of its contents
    (1) Background:
    As previously announced on May 19, 2014, on July 18, 2013, the minority co-owners of SONGS, SDG&E and COR filed lawsuits against Mitsubishi and Mitsubishi Heavy Industries America, Inc., a wholly-owned subsidiary of MHI. On March 14, 2014, the U.S. District Court in the Southern District of California granted Mitsubishi’s motion 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, EMS, Mitsubishi, SDG&E and COR entered into a stipulation requesting the ICC to join SDG&E and COR in the arbitration and ICC approved the stipulation on June 16, 2014. In accordance with the stipulation, SDG&E and COR submitted pleadings to ICC joining in the claims and requests for relief set forth in SCE and EMS' demand for arbitration.

    (2) Contents of the arbitration:
    SDG&E and COR acted through SCE in all matters relating to the Purchase Order, and both SDG&E and COR have adopted the factual allegations of SCE. SDG&E has also alleged alternative claims for breach of the warranty obligations of the Purchase Order, tort liability, etc.

    4. Amount claimed
    Both SDG&E and COR have adopted SCE and EMS's claim that the Claimants' are entitled to damages in an amount of not less than $4 billion (approximately 400 billion yen). However, neither SDG&E nor COR has identified whether or the extent to which their damage claims will increase the total amount claimed by Claimants.

    5. Prospect of the arbitration
    As announced on October 17, 2013 and May 19, 2014, 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 Edison Material Supply LLC is a wholly-owned subsidiary of SCE.
    Note.2 SONGS is co-owned by SCE (78.2%), San Diego Gas & Electric Company (20%), and City of Riverside (1.8%).
    Note 3 SDG&E and COR will participate in the arbitration process as co-claimants with SCE and EMS.