BGR Energy settles disputes with Hitachi, Japan

The company stock rose as much as 17% as it reached a settlement agreement with Hitachi to execute NTPC contracts

BGR Energy Systems has executed an agreement with Hitachi, Japan and Hitachi Power Europe GmbH (HPE), Germany to settle their disputes. The company also decided to withdraw all pending litigation and legal proceedings filed by BGR.

“The agreement provides for certain payments to be made by HTC to the company in a phased manner over a period of time on achievement of number of ,ilestones/events/transactions so as to realise the objectives mentioned here in above,” BGR Energy informed BSE.

The agreement has come into effect and has become legally binding with effect from April 29, 2016 upon fulfilment of the conditions mentioned therein, said the company.

The company said the company has filed relevant applications for withdrawal of all pending litigations and other legal proceedings filed against HTC, HPE, Mitsubishi Heavy Industries Limited, Mitsubishi Hitachi Power Systems Ltd. and Mitsubishi Hitachi Power Systems Europe GmbH, in fulfillment of the conditions of the agreement.

The agreement provides for execution of NTPC contracts for Solapur (2x660 MW) and Meja (2x660 MW) of supercritical Steam Generators (Boilers) and Lara (2x800 MW) Supercitical Steam Turbine and Generators (STG) (collectively referred to as NTPC projects) and for certain arrangement with respect to the future of the JV partnership between HTC, HPE and the company in respect of the existing joint venture companies viz, BGR Boilers and BGR Turbines Company after completion of NTPC projects in compliance with the NTPC contract and other related conditions. The total value of these contracts are around Rs 7,900 crore.

BGR set up two JVs – BGR Boilers Private Limited and BGR Turbines Company Private Limited – with Hitachi in 2010 to carry on the business of design, engineering and manufacture of supercritical steam generators (SG) and supercritical steam turbine and generators (STG) of 660 MW, 800 MW and 1000 MW capacity.

These JVs have not witnessed significant progress in setting up of manufacturing facilities. Until 2014-15, these companies acquired substantial land for manufacturing facilities and also made significant progress towards purchase of capital equipment.

BGR and Hitachi together were planning to invest around Rs 2,325 crore to set up a boiler, turbine and generators manufacturing facility at Cheyyur, near Chennai. The fate of joint venture between the two companies is not known. When contacted, BGR's spokesperson declined to comment.

On February 1, 2014 the global integration of thermal power businesses of Mitsubishi Heavy Industries Limited (MHI) and Hitachi, Ltd. (HL) through a joint venture viz., Mitsubishi Hitachi Power Systems Limited (MHPS) was brought into effect. In the light of this global integration, Hitachi, Ltd. and Hitachi Power Europe GmbH (HPE) have ceased to be Qualified Manufacturers (QM) of steam turbine and generators and steam generators respectively. This, as a consequence, has impacted setting up of manufacturing facilities and carrying on future business.