Hitachi will pay MHI a settlement of 200 billion yen ($1.8 billion) in March and transfer to MHI its entire 35% stake in their joint venture Mitsubishi Hitachi Power Systems, the companies said in separate statements.

Hitachi said the stake transfer would reduce its burden by 70 billion yen, meaning it would pay 130 billion yen to MHI.

In 2007, Hitachi won a contract to build 12 boilers for the Medupi and Kusile power plants of South African utility Eskom.

It later transferred the contract to the joint venture, Mitsubishi Hitachi Power Systems Ltd, which was set up in February 2014 by combining the thermal power generation businesses of the two companies.

But the power stations were hit by cost overruns and delays, and Hitachi and MHI disagreed on whether some costs were incurred before or after the creation of the venture.

Hitachi said it would book expenses of 378 billion yen related to the settlement for the fiscal year ending March 31. As a result of this and other factors it lowered its annual net profit forecast to 170 billion yen from 360 billion yen previously.

(Reporting by Ritsuko Ando in Tokyo and Nivedita Balu in Bengaluru; Editing by Arun Koyyur/David Evans)