Notice Regarding Transfer of Equity Interest in Equity Method Affiliate
We announce that IHI’s consolidated subsidiary JAPAN EAS INVESTIMENTOS E PARTICIPAÇÕES LTDA (“JEI”) has agreed to transfer its whole equity interest in Estaleiro Atlântico Sul S.A (“EAS”) to EAS’ other shareholders, which are members of the Camargo Corrêa Group and the Queiroz Galvão Group.
Details
1. Reason for Transferring Equity Interest
JEI acquired its equity interest in EAS in 2013. At that time, the rising demand for oil and natural gas, as well as Brazil’s increasing investment in structures and plants for offshore-resource development, made the investment in EAS an attractive opportunity for IHI to join the facilities-related side of Brazil’s offshore-resource development business.
Recently, however, the outlook for the JEI investment in EAS has been adversely impacted by several factors, including the recession in Brazil and the corruption scandal and related investigations involving Petróleo Brasileiro S.A. (“Petrobras”), which, among other things, have affected Sete Brasil, a drillship counter-party of EAS, and payments to EAS under its contracts with Sete Brasil. As a result, EAS’ financial performance has not been as expected at the time when JEI joined EAS. Also, facing financial difficulties due to the recession in Brazil and the long-term oil price downturn, Petrobras has significantly reduced its investment plan and IHI cannot expect the market condition for offshore-resource development facilities, for which IHI made the investment, to recover in the near term.
Under these circumstances, IHI and the other shareholders in JEI decided to transfer JEI’s whole equity interest in EAS to the Camargo Corrêa Group and the Queiroz Galvão Group, and IHI has decided to withdraw from all involvement with EAS.
IHI still thinks that Brazil can be a profitable market from a medium- and long-term perspective, and maintains its bases in Brazil.
2. Overview of the Equity Method Affiliate to Be Transferred
| (1) Corporate Name | Estaleiro Atlântico Sul S.A． |
| (2) Location | Ipojuca, State of Pernambuco, Brazil |
| (3) Title and Name of Representative | CEO, Harro Burmann |
| (4) Lines of Business | Design, Manufacture, and Distribution etc. of Vessels and Offshore Platforms, etc. |
|
(5) Capital (as of the end of December 2015) |
685,680,000 reais |
| (6) Date of Formation | November 21, 2005 |
|
(7) Major Shareholders and Ratio of Equity Interest (as of the end of December 2015) |
Camargo Corrêa Naval e Participações Ltda． 33.333% Queiroz Galvão Naval S．A． 33.333% JEI 33.333% |
(For reference) Overview of JEI
| (1) Corporate Name | JAPAN EAS INVESTIMENTOS E PARTICIPAÇÕES LTDA |
| (2) Location | Rio de Janeiro, Brazil |
| (3) Title and Name of Representative | President, Fuminori Odagiri |
| (4) Lines of Business | Investment in EAS |
|
(5) Capital (as of the end of December 2015) |
322,000,000 reais |
| (6) Date of Formation | May 29, 2013 |
|
(7) Major Shareholders and Ratio of Equity Interest (as of the end of December 2015) |
IHI Corporation ：60.448% JGC Corporation ：24.627% Japan Marine United Corporation ：14.925% |
3. The Assignees
|
(1) Corporate Name |
Camargo Corrêa Naval e Participações Ltda． Queiroz Galvão Naval S．A． |
| (2) Relationship with IHI | There is no connection to be described between the companies. |
4. Transfer Schedule
|
(1) Transfer of Equity Interest |
Mid-April, 2016 (Expected) (JEI is scheduled to transfer its whole equity interest following the completion of required procedures, including approvals, in Brazil) |
5. Future Outlook
There will be little or no impact of the transfer on IHI’s consolidated and non-consolidated financial results for the business year ending in March 2016, because the provision for loss has been posted in the financial statements for the business year ending in March 2015.