CHIYODA REPORT 2019
For the year ended March 31, 2019

Corporate Philosophy
Enhance our business in aiming for harmony between energy and the environment andcontribute to the sustainable development of society as an integrated engineering company through theuse of our collective wisdom and painstakingly developed technology.
Every Chiyoda Group employee engages in corporate activities with thisphilosophy in mind as we strive for corporate group management that earns the trust and empathyof all our stakeholders, including shareholders, ­customers, business partners,
employees and local communities.

ProfileChiyoda Corporation is a world-leading, fully integrated
international engineering company with a significant presencein the global oil and gas market, and customers in more than
60 countries. Especially in the field of LNG plant engineering andconstruction, Chiyoda is a global leader, with a track record ofundertaking projects that account for around 40% of the world’s
total LNG plant capacity.
Established in 1948, Chiyoda started with domestic projects
in petroleum refining, petrochemicals, and gas processing. Since
the 1970s, Chiyoda has developed a powerful global footprint,
taking advantage of the many opportunities in the engineering,procurement, and construction (EPC) of energy-related plants,
while building a first-class reputation for technological capability,
safety, and reliability.
During its 70-year history, the Chiyoda Group has been growing
steadily under the corporate philosophy of enhancing business byaiming for “Energy and the Environment in Harmony.”

VisionThe Chiyoda Group is committed to being an “Innovate Engineering Company,”
shaping the future of energy and the global environment with passion andcutting-edge technology.

Contents 
Introduction
00 Profile
01 Corporate Philosophy
Management View
02 Message from the
Chairman & CEO
04 Message from the COO
06 Vision for the Revitalization Plan
and the Future
08 Revitalization Plan
10 New Capital Structure
12 New Strategy &Integration Risk Division
Special Feature
14 Ichthys Onshore LNG Facilities
16 Topics

Forward-Looking Statements

ESG Section
23 Sustainable Development Goals
24 ESG Factsheet
25 Initiatives for Safety
Corporate Governance
28 Members of the Board
30 Corporate Value
32 Organizational Structure
33 Outside Directors
Corporate Section
34 Chiyoda’s History
36 At a Glance
38 Business Trends
40 Major Project
42 Financial 11-year Summary
44 Corporate Data

Statements made in this annual report withrespect to plans, strategies, and future
performance that are not historical facts areforward-looking statements involving risks
and uncertainties. Chiyoda cautions thata number of factors could cause actual
results to differ materially from such statements including, but not limited to, general
economic conditions in Chiyoda’s markets;
demand for, and competitive pricing pressure on, Chiyoda’s products in the marketplace; Chiyoda’s ability to continue to win
acceptance for its products in these highly
competitive markets; and movements ofcurrency exchange rates.
Note: “FY2018” and “the year under review”
represent the one-year period ended March
31, 2019, and “FY2019” represents the
one-year period ending March 31, 2020.

Review of Operations
18 Overview
19 Energy Business
20 Environmental Business
21 Digital Transformation Business22 Message from the CDO

1

Message from the Chairman of the Board & CEO

My name is Kazushi Okawa. I was recently appointed the
Chairman of the Board and CEO.
Chiyoda Corporation made a significant loss in its financial

Chiyoda redefines thevalue of engineering andcreates shared value forall its stakeholders.

Chairman of the Board & CEO

regarding politics and the economy, including worldwide

results for fiscal 2018, caused by a substantial cost increase

discussions on the paradigm of globalism, the transition to ain ongoing large-scale LNG projects. After closely examining

decarbonized society, and the rapid progress of technologi-

the factors leading to this situation and our strengths, we

cal innovation toward digital transformation. The engineering

have formulated a new Medium-Term Management Plan,

industry has also reached a major turning point on the wave

“Chiyoda’s Revitalization Plan.” It provides for radicalof such massive change. We are facing an era when we willchanges promoting revitalization and growth, and weneed to redefine the value of “engineering,” going beyond

launched this new plan in fiscal 2019. At the same time, we

the simple concept that EPC execution of plants is the goal,

have strengthened our financial base with a privately placed

as was the case before. While we have only just launched

equity capital increase and loans. We are working on the

our Revitalization Plan, we will be working hard on innovative

realization of the Revitalization Plan and our medium- totechnologies, the mission of any engineering company,

long-term growth strategy by simultaneously developing ouralong with the social implementation of systems for whichrisk management structure and enhancing our EPC execu-

there is social demand, making full use of digital technolo-tion and management capacity.

gies in the areas of energy and the global environment. The

As an integrated engineering company, Chiyoda won the

Kazushi Okawa

The business environment surrounding Chiyoda is undergoing significant changes due to increased uncertainty

trust of customers in Japan and all over the world by focus-

major changes surrounding Chiyoda, inside and out, act ascompelling inputs for growth.

ing on the social development and implementation of new

While the groundwork for the Revitalization Plan has beentechnologies and production systems around the world,

set in place, everything else has yet to begin. We will take awhile always looking one step ahead. I believe thatleap forward to become a company that is respected by

Chiyoda’s history has long been supported by our discern-

society and all of our stakeholders as an integrated engi-

ing assessment ability of new technologies and systems

neering company that is running ahead of the times.

based on their social, economic, and environmental value,

Chiyoda can visualize the big picture of the society of theand our strong project execution capability.

next generation while achieving the Revitalization Plan,

To further boost our project execution capability andcultivating and promoting human resources who form theachieve revitalization as quickly as possible, we will integrate

foundation of our value creation, developing our risk

the departments for addressing risks, which were decentral-­management capabilities, and enhacing our EPC execution

ized in the past. The new risk management structure willcapacity.

analyze and manage all risks in an integrated manner before
receiving orders for projects, and after completing the proj-

We deeply appreciate the continued understanding andsupport of all of our shareholders.

ects, while at the same time providing assistance to theproject teams. For example, we will fully identify the locationand impact of the risks inherent in the projects and manage
them thoroughly by taking appropriate measures.

Chairman of the Board & CEO
Chiyoda Corporation

2

Chiyoda Corporation CHIYODA REPORT 20193

Message from the President & COO

Chiyoda accelerates its
distinctive strength ofengineering and shapes theglobal sustainability.

Future Outlook of the Market
In the energy field, particularly in the area of LNG, demand isoffshore wind power generation has been set in motion in

growing steadily, reflecting the worldwide trend of shifting toearnest. In the area of pharmaceuticals and life science, aa low-carbon society. Orders for FEED (Front End Engineering

new market is also expanding along with medical advances.

Design) and bids for EPC are being activated for new con-

In these areas of the global environment, it appears highly

struction projects and expansion of LNG plants. Chiyoda willprobable that new and different business opportunities willdevelop these potential projects into solid orders by appro-

be created, and we will focus on these areas as a future

priately assessing and evaluating the risks of each project.

growth field.

In the area of the global environment, the domestic market

Masaji Santofor renewable energy is expected to grow steadily, given thatPresident & COO

Execution of the Revitalization Plan
I am Masaji Santo, the President and COO of Chiyoda Corporation.
We have formulated its new Medium-Term Management Plan, “Chiyoda’s Revitalization Plan—Initiatives
for revitalization and the future,” in response to the financial results for fiscal 2018. In addition to our initiative to further develop our risk management structure, the foundation for the plan, we have strengthened
our governance and built a system for enforcing the separation between the supervision of management
and execution of operations. The Company will be managed under a new system in which Kazushi Okawa,
Chairman of the Board and CEO, will take charge of the supervision of management, while I will be incharge of the execution of operations.

To achieve the Revitalization Plan as quickly as possible, we

Our excellent human resources, the most important asset

will diligently promote the further development of the riskof an engineering company, remain intact. We will develop

management structure, the enhancement of EPC execution

and enhance our human resources, who will pursue higher

and management capacity, and the reinforcement of human

added value with a broader perspective by actively recruiting

resources. I believe that it is most important that eachexternal human resources in the years ahead.

employee is genuinely dedicated to individual responsibility
under a revitalization process with a firm commitment.

Growth Strategy and Vision for the Future
Current Business Environment of Chiyoda

We will focus on the LNG area, which will continue toby 2030. As for our business model, by redefining Chiyoda’s

steadily grow in the future. At the same time, we will also

value in engineering without adhering solely to EPC, we will

We have strengthened our financial base through thereceived new orders for large-scale projects overseas such

expand our business domains in the areas of energy and thework on the incubation of future technologies to solve energy

approval of a capital increase approved at the general meet-as an olefins facility in Texas and Golden Pass LNG, and our

global environment, recognizing the shift to a low-carbon

and global environmental issues, including the improvementing of shareholders held on June 25. It is of paramountengineering work is steadily gathering momentum. We willsociety as a major business opportunity. Furthermore, weof the asset value of customers throughout the project life

importance that we complete ongoing large-scale projects

execute the EPC work while communicating even more

aim to innovate our EPC execution capacity and diversify ourcycle; the business of compound energy system manage-

such as Cameron LNG, Freeport LNG, and Tangguh LNG.

closely with the parties concerned, including customers,

business and services into new areas, utilizing digital innova-

ment, carbon management and circulation technology; andThese take priority, supported by the strengthened financial

joint venture partners, vendors, and subcontractors.

tion technologies. In terms of business domains, the energy

advanced pharmaceutical manufacturing technology. These
services can become the pillars of our business in the future.

base. Train 1 of Cameron LNG commenced production and

In Japan, large-scale EPC projects are also making prog-field currently represents almost 80% of our activity, while theshipment of LNG in mid-May to early June, and the first train

ress in the area of the global environment, such as a battery

area of the global environment accounts for the remaining

With these initiatives, we will drive our business forward

of Freeport LNG commenced production of LNG in August.

energy storage system in Hokkaido and a biomass firing

20%. However, we will aim to increase the percentage of ourwith the aim of achieving “Energy and the Environment in

The construction work at Tangguh LNG is making steadypower plant in Chiba.

activity in the global environment to between 35% and 50%

Harmony,” our corporate philosophy.

progress as well. Other than these projects, we have also

4

Chiyoda Corporation CHIYODA REPORT 20195

Vision for the Revitalization Plan and the Future
The Chiyoda Group pledges to continue as an enterprise thatleverages cutting-edge technology and talented humanresources to create value for society.
Our Corporate Philosophy proclaims “Energy and theEnvironment in Harmony,” and we are pursuing business with
our CSR Values as shared values.
We redefine our strength in engineering value through theimplementation of the Revitalization Plan and accelerate ourgrowth strategy by expanding the core business fields of“Energy” and the “Global Environment.”

Realization of Our
Corporate Philosophy–Our Mission to Accomplish–
Enhance our business aiming for harmony between
energy and the environment, and contribute to the sustainable development of society as an integrated
engineering company through the use of our collective
wisdom and cutting-edge technology.

EPC Execution
Optimize design
Guarantee high quality

Revitalization Plan

Mirai Engineering for the future inenergy and the global environment** Mirai = the future

GlobalStandards• ISO 26000• United Nations Global Compact• SDGs• Paris Climate Agreement• United Nations Convention on
Biological Diversity

Chiyoda’sStrengths

The Chiyoda
Group’s CSR Values
1. A Reliable Company
2. Environmental Initiatives
3. Social Contributions
4. Respect for Human Rights
5. Commitment to Fairness

SocialIssues6• Human Rights• Anti-Corruption• Global Warming• Economic Disparity• Appropriate Employment• Individual Issues in Local
Communities• Securing Energy Resources

Chiyoda Corporation CHIYODA REPORT 2019

Value Provision• Data-centric plant delivery• Optimized plant system operation to
improve productivity and save manpower
through automated and remotely
controlled systems• Development and provision of optimal,
diversified compound energy systems
and demand chain systems• Creation of a carbon neutral society
through managing carbon anddeveloping new technologies• Development of technologies related tosmart cells, iPS cells for cures, andregenerative medicine

Integration &Optimization

New Technology
Commercialization
Integration of basic researchcapabilities and knowledge applied
through EPC

Provide the best solution forcomplex constraints and challenges
by utilizing a mix of technologies
across diverse areas●• Achievement of SDGs●• Enhancement of Corporate Value

What are the SDGs
(Sustainable Development Goals)?
These are goals that need to be realized by the year 2030 inorder to achieve sustainable development of society. They
consist of 17 major goals and 169 targets that were adopted
by the United Nations General Assembly in September 2015
to provide a basic framework for action in the international
community of both developing and developed countries.
In this report, we are reconfirming our own corporate
activities and displaying icons for the relevant goals alongside such activities.

The Chiyoda Group Supports the SDGs.

7

Revitalization Plan (Medium-Term Management Plan)
During fiscal 2018, Chiyoda experienced substantial losses mainly due to significant unexpected cost
increases in ongoing LNG projects. In order to cope with this challenge and to prevent further losses,
Chiyoda announced its Revitalization Plan, which consists of 1) a financial restructuring plan, 2) the buildingof the foundation for revitalization, and 3) a long-term vision for the future growth.
The Revitalization Plan is vital for Chiyoda’s business operations and cultural change taking into accountthe events of the past few years. The new management team and Board have undergone a strict assessment
and set up a turnaround plan in conjunction with a capital injection (explained on page 16 and 17) thatgives Chiyoda a sound basis upon which to thrive.
During this revitalization process, the new management team will put all of its efforts into recoveringbusiness performance and re-establishing the Company as a reliable and successful partner for sustainablegrowth. The Chiyoda Group strives to create a society of “Energy and the Environment in Harmony” using
its engineering expertise.

1 Further Develop Risk Management Structure
The responsibility of setting up business strategy, risk management, and project support will be put together and incorporated into
the new Strategy & Risk Integration Division.
Marketing / Pre-Order

EPC Execution• Selective project intake in line with
Chiyoda’s strengths and capabilities• Conducting thorough risk evaluationand setting up countermeasures• Further improvement of estimate
accuracy• Execution (with proper contingency
plans for worst-case scenarios)

Actions Addressing the Causes of Losses
1 Further Develop Risk Management Structure• Enhancement of project support
system• Integrated management of profitability
for overall project life cycles• Prevention and minimization of causesof disruptions and disputes• Company wide support for earlycountermeasures• Proper project audits, including thirdparty input

Upgrade EPC execution and management methods

2 Enhance EPC Execution and Management Capacity

Promote use of digitalsolutions

Upgrade EPC management methods and strengthen construction execution capabilities. Enhance overall project control capabilities and prevent expansion of losses through prompt countermeasures.

Thoroughly manage costs, schedules, quality of design, procurement, construction

3 Reinforce Human Resources

Use digital tools to manage resources

A mindset of pursuing higher added value and with literacy in risk, contracts, and finance. Improved management capabilities incost and schedule management.

Advance methods of data management
Manage construction budgets and records

Strengthen construction
execution capabilities

Through these measures, we aim to further decrease fixed costs, improve profitability, and increase shareholders’ equity. It is planned
that sales, general and administrative (SG&A) expenses for the fiscal year ending March 31, 2020 will be decreased ¥1.5 billion, or
85.7% of ¥1.75 billion for the fiscal year ending March 31, 2019, to ensure net income is profitable. The shareholders’ equity ratio is
expected to recover to over 20% by the fiscal year ending March 31, 2023 (FY2022).

Quantified Fixed Cost Reduction

Net Profit / New Orders

Billions of Yen

Billions of Yen

900

(5.9)

600

350

20.9

389

15.5

%

120

36

80

24
12

3.28

15
0

6
–40

FY17

FY18

FY19

–300

–215
FY18

Net profit•R eview of overseas offices and subsidiaries:
50% cost reduction•R eview of domestic subsidiaries: business
transfers, spin-offs•R eductions in headquarters expenses: reduce
executive compensation, IT, depreciation, andoverseas travel expense• Increase in efficiency(digital transformation-based): automation

8

Chiyoda Corporation CHIYODA REPORT 2019

Prevention of future losses through countermeasures

Billions of Yen

0

0

–80

FY19 FY20 FY21 FY22 FY23
New orders• Order intake of LNG/Gas ¥200–¥450 billion
Global environment ¥100–¥150 billion• Net profit of ¥10–¥20 billion annually• Accumulated net profit of ¥90 billion in five years

Reinforce human resources who can flexibly manage required construction productivity

Shareholders’ Equity /Shareholders’ Equity Ratio

40

300

17.5

• Increase in ratio of independent,
external Board members (40%)• Limiting of Board members who
also serve as executive officers(only COO and CFO)

2 Enhance EPC Execution and Management Capacity

Further develop risk management and project execution structure by weighing estimated risks more prudently under full-scale
operations of the Strategy & Risk Integration Division.

1.1

Further Enhancements ofCorporate Governance

–12

–61
FY18

3 Reinforce Human Resources
Promote a Culture of Meritocracy• Competence-based promotions• Performance-based evaluations and compensation–24

FY19 FY20 FY21 FY22 FY23

Shareholders’ equity

Diversify Individual Capabilities

Shareholders’ equity ratio (right)• Shareholders’ equity ratio to surpass 20% by
the fiscal year ending March 31, 2023
• Elimination of accumulated losses within the
period of this business plan

• Rotation of employees through positions to gain valuable experience• Introduction of employees to different and complementary skills

Reinforce andFurther Develop Human Resources• Approach geared toward pursuing higher addedvalue• Literacy in risk, contracts, and finance• Cost and schedule management

Proactive Recruitment• Recognition of external talented personnel who are complementary to corporate goals

9New Capital Structure
Chiyoda experienced substantial losses in fiscal 2018, mainly due to significant unexpected cost increases inongoing LNG projects. The first major revision to the full-year forecasts came with the mid-year results in
November 2018: operating and ordinary income slid from modest profits into major losses, raising concerns anddoubts about the Company’s financial stability. In the second half of said fiscal year, additional losses emerged atboth the Cameron (U.S.) and Tangguh (Indonesia) projects. Mounting losses and negative cash flows led to acapital deficit as of March 31, 2019.
In order to strengthen the financial condition of the Company, we began negotiations with external parties tosecure additional funding in November 2018 and a financing package was announced on May 9, 2019. Over thecourse of negotiations, Mitsubishi Corporation (the Company’s largest shareholder) and MUFG Bank became
the sponsors that could handle the considerable funding needed to secure the Company.

Outline of Measures to Enhance Financial Strength e established a financing package totaling ¥180 billion forW
the execution of the Revitalization Plan.
The financing package consists of three parts:
1) ¥70 billion from preferred (non-voting) shares
2) A long-term loan of ¥90 billion (from Mitsubishi Corporation)3) A subordinated loan of ¥20 billion (from MUFG Bank)The funds are to be used for:• Working capital for ongoing and future projects• Restructuring of corporate operations• Investment in digital transformation to improve EPC
execution capability and efficiency
These measures will allow the Company to:• Invest in ongoing and future projects• Continue to pursue opportunities in the growing LNG field

Mitsubishi Corporation: Preferred shares, long-term loan
MUFG Bank: Subordinated loan

Procure funds
necessary forcontinued
operation and3 S ubordinated loan: improvement of
earnings structure,¥20 billion
while minimizing
the dilution ofexisting shares
1 P
 referred Shares:¥70 billion
2 L ong-term loan:¥90 billion

Negative net
worth: ¥59.2
billionOutline of Class A Preferred Shares
Preferred shares receive a dividend but have no voting rights.
Preferred shares are first in line for dividend payments, ahead of holders of common (voting) shares.
The annual dividend rate for this class of preferred shares has been set at 3% over the holding period.
In this transaction• Mitsubishi Corporation will purchase 175,000,000 shares at ¥400 per share (totaling ¥70 billion).
• Mitsubishi Corporation has the right to sell the preferred shares back to Chiyoda, in exchange for common (voting) shares(“conversion right”).
• After July 1, 2021, Mitsubishi Corporation has the right to sell the preferred shares back to Chiyoda in exchange for the agreed
redemption price (“put option”).
• After July 1, 2021, Chiyoda has the right to buy the preferred shares back from Mitsubishi Corporation for the agreed redemption
price (“call option”), in the event it has the financial strength to do so.
Note: At present, it is understood that Mitsubishi Corporation has no intention of immediately exercising the abovementional conversion right or put option. Also, Chiyoda
understands that Mitsubishi Corporation intends to assist Chiyoda in improving its corporate value with a medium- to long-term perspective.

Overview of Third-Party Allotment of Preferred Shares to Mitsubishi Corporation
 fter extensive negotiations with externalA
parties, Mitsubishi Corporation was the only
partner willing to reach a deal satisfactory toboth parties.
The paid amount of ¥70 billion was necessaryfor eliminating negative net worth of Chiyoda.
In addition, the paid amount was decided
taking account of the impact of dilution on
existing shareholders of Chiyoda.
In addition, the paid amount was decided
taking account of the impact of dilution on theexisting shareholders of Chiyoda.
The third-party allotment was approved througha special resolution at the annual general
meeting on June 25, 2019.

Class A Preferred Shares
1

Number of shares offered forpurchase

175,000,000

2Total amount to be paid

¥70 billion (¥400 per share)

3

Payment dateJuly 1, 2019 (projected)*

4

Dividends from surplus

Fixed rate: 3% per annual over the holding period

5

Voting rights

None

6

Conversion right into commonsharesCan be exercised after July 1, 2019
Conversion price: ¥100, non-adjustable7

Put option by Mitsubishi(cash consideration)

Can be exercised after July 1, 2021

8

Call option by Chiyoda(cash consideration)

Can be exercised after July 1, 2021

9

Redemption price for put option
and call option

Higher of the below:① Share price at the exercise timing of options② Total amount paid in + equivalent of payable
and accrued dividends

Overview of Borrowings
Mitsubishi Corporation has also agreed to lend
Chiyoda Corporation ¥90 billion in two tranches.
• ¥30 billion at a rate under discussion; five-year
term; backed by collateral• ¥60 billion at 1.50%; also for five years;
unsecured UFG Bank, Japan’s largest bank and aMmember of the MUFJ Financial Group, hasagreed to lend Chiyoda ¥20 billion under thefollowing terms:• Interest rate of 2.5%
• Five-year term
• Unsecured (no collateral)• Subordinated (ranks behind senior debt in theevent of a liquidation)

Long-Term Loan from Mitsubishi
1

Amount of borrowing① ¥30 billion ② ¥60 billion

2

Interest rate

① Agreed on the terms applicable until July 2019,
and terms after July 2019 are under discussion② 1.50%3

Borrowing period① Five years ② Five years

4

Collateral① Applicable ② Not applicable

5

Subordination① Not applicable ② Not applicable

Subordinated Loan from MUFG Bank
1

Amount of borrowing¥20 billion

2

Interest rate

2.50%

3

Borrowing period

Five years

4

Collateral

Not applicable

5

Subordination

Applicable

We are highly confident that the financing package will pave the way for the Company to be revitalized.
The financing package of preferred shares and loans will also secure our cash flows,
and we expect to return the shareholders’ equity ratio to over 20% by fiscal 2023 by acquiring steady profits

After Conversion of All Preferred Shares

totaling approximately ¥90 billion in the five years from fiscal 2019.
BeforeMitsubishi Corporation
33%

Others67%

May 9, 2019
Masaji Santo

Common shares become diluted to one-quarter
After

Mitsubishi Corporation(conversion to common shares)

Mitsubishi
Corporation(Existing)President & COO
OthersMore than 80%

10Chiyoda Corporation CHIYODA REPORT 201911

New Strategy & Risk Integration Division
In May 2019, Chiyoda received a financial package from Mitsubishi Corporation and MUFG Bank, Ltd.
In addition, Mitsubishi Corporation will support to enhance Chiyoda’s strategy and risk management capabilities by sharing know-how and management expertise. The Strategy & Risk Integration Division was
launched in November 2018 with an allocation of 30 staff and was fully operational by July 2019. The teamconsists of executive officers from the Sales, Project, and Corporate Divisions and has appointed external
resources to senior management positions.
The division is positioned as a “direct report organization” to the Executive Committee in order to instill
more disciplined governance.
Operation of the Strategy & Risk Integration Division at full-scale will further develop the risk management
and project execution structure, taking account of estimated risks more thoroughly through a focus on risk
assessment before new orders are signed and during the execution phase.

Mr. Hasegawa spent almost thirty years at
Mitsubishi Corporation, engaged in finance andaccounting, and for nine of those years he wasinvolved in the energy business. He has a close
relationship with Chiyoda, through accounting
and taxation in the EPC business, and was
also seconded to Chiyoda during the previous
period of financial difficulty. Since April 2019,
he is the head of the new Strategy & Risk
Integration Division.

Improving and strengthening risk
management is a continuous action.
It involves the constant anticipation of
unexpected risks and eliminating them.
Risk management is not based on asimple theory, it is achieved throughhard work and expertise gained on thefront lines.

Fuminori Hasegawa
Senior Vice President,
Director of Strategy &Risk Integration Division (SRI)

Organizational Structure of Strategy & Risk Integration Division
The new Strategy & Risk Integration Division is divided into six business units, comprising about 30 persons. The purpose of thedivision is to enhance Chiyoda’s risk management approach with a greater focus on transformative processes and innovations thatare essential to improving the Company’s risk management approach.
The department consists of internal and external experts from the field and also reports activities to the President & COO.

Concept of the Structure

Q1. As head of the new SRI Division, how do you define your role
relative to the responsibilities of management?
The SRI Division has two functions: 1) providing assistance tomanagement and 2) managing risk throughout the project life
cycle. The division was formed from the consolidation of the
Project Management Department, Project Legal Department,
and Corporate Planning Department, among other departments.

It analyzes all risks before accepting an order for a project until
the completion of the project, as well as the receipt of payment.
The division also assists management in sophisticateddecision-making and the steps to be taken, thereby helping
maximize profits from the project and minimize risks.

Fully operate the Strategy & Risk Integration Division to further develop the risk management and project execution structure, by more
prudently taking into account estimated risks

Management support / Strategy planning function

Project support / Risk monitoring function

Corporate Planning Division

Project Management Division

Q2. How do you assure that the new risk management process isworking as expected?
There is no right road to risk management. The path to thesophistication of Chiyoda Corporation’s risk management
capabilities is the creation of a web with multiple internal communication routes that enables the organic, effective sharing of

information, to allow many employees to act while consideringrisk management and to reduce the number of unexpectedoccurrences.

Strategy & Risk Integration Division
Enhancement of its function of corporate strategy and risk management

Before Submission of New Order• Make order in line with the Company’s available
resources and capabilities that focus on
Chiyoda’s strengths• Selective project intake through thorough evaluation of
associated risks and estimated profits• Further improvement of accuracy of estimates byintroducing enhanced evaluation mechanism• An execution plan with an adequate contingency plan

12

Chiyoda Corporation CHIYODA REPORT 2019

During EPC Execution• Enhancement of project support system bycooperating with project operations• Integrated management of projects’ overallprofit and loss

Q3. How are management and project managers being integrated into
your division’s strategy?
We would like to ask project directors and project managers toprimarily focus on solving issues and problems at the worksite.
However, projects have become complicated and require enormous sums of money, and there are a number of problems thatcannot be solved by one person. In that environment, it isimportant to solve problems by requesting additional funds,
human resources, and knowledge from management.
The Strategy & Risk Integration Division works as a bridge
between project directors, project managers, and management.

• Prevention and minimization of causes of disputes• Companywide support for early countermeasures• Project audits including a third-party engagement

13Special Feature
Project Overview
Client: INPEX Operations Australia Pty Ltd.

 ore than 8,000 onshore workers on-site each dayMduring peak construction

Location: Darwin, Australia

Onshore facilities include: PSCC contractor: JKC JV
E(JGC, KBR, Chiyoda) NG: Approx. 8.9 million tons per year at peakL
(4.45 MMTY x 2 trains)
LPG: Approx. 1.65 million tons per year at peak
 ondensate: Approx. 100,000 barrels perC
day at peak

Ichthys LNG in Darwin, Australia
INPEX-operated Ichthys LNG is ingenuity at its best. It is one of
the world’s mega projects that incorporates the whole development chain and all production components; subsea, offshore,
pipeline, and onshore. Ichthys LNG integrates effectively threemega facilities into one mega project, incorporating some of theworld’s largest and most advanced offshore facilities off theWestern Australian coast, massive onshore processing facilities
near Darwin in the Northern Territory, and an 890 kilometer
subsea pipeline.
LNG Ichthys will deliver 8.9 million tons of LNG per annum
and 1.6 million tons of LPG per annum, along with approximately
100,000 barrels of condensate per day at the peak of operation.
The gas produced will help ensure Japan’s long-term
energy security.

Ichthys LNG
Onsure Processing
Facilities(Trains 1, 2)

Photo courtesy of INPEX:
Ichthys LNG Onshore Processing
Facilities at Bladin Point near
Darwin, Australia• Two LNG processing trains• LPG and condensate plants• Combined cycle power plant• Administrative facilities• Utilities• Materials off-loading facility• Product load out jetty

Key Milestones
2000 
INPEX discovers Ichthys gas and condensate field
Sep. 2008 
Announces Darwin as onshore processing facilities location
Jan. 2012 
FID for Ichthys LNG Project
May 2012 
Official groundbreaking ceremony
May 2018 
JKC delivers the first LNG train to INPEX
Oct. 2018 First LNG cargo shipment departs Ichthys LNG
Nov. 2018 
Ichthys LNG celebrates startup of operations

October 2018: Ichthys LNG—First LNG Cargo Shipment Undertaken by
the LNG Carrier Pacific Breeze
In October 2018, Ichthys LNG saw its first LNG cargo shipment depart from the onshore
gas liquefaction plant in Darwin in the Northern Territory of Australia to the
Naoetsu LNG Terminal in Niigata Prefecture, Japan.

Ichthys LNG Offshore
Processing Facilities

Bladin Point
Ichthys LNG Onshore Processing Facilities

About
800 km pipeline

NORTHERN TERRITORY
CPF

DarwinCentralProcessing
Facility

Ichthys

INPEX-operated Ichthys LNG is a large-scale
LNG project operated by INPEX, the first Japanese operator
at a world-class LNG project.

Perth

WESTERN AUSTRALIA

14

Chiyoda Corporation CHIYODA REPORT 201915

Topics
1

Groundbreaking Ceremony for One of theWorld’s Largest Battery Energy Storage System Projects

The groundbreaking ceremony for one of the world’s largest batteryenergy storage system projects, led by North Hokkaido Wind
Energy Transmission Corporation, was held in October 2018.
The project is part of the “Grid Reinforcement Pilot Project
for Wind Turbines” supported by the Ministry of Economy, Tradeand Industry’s Agency for Natural Resources and Energy.
Chiyoda is the EPC contractor for one of the world’s largest
battery energy storage systems at an electricity substation.
The battery energy storage market will continue to grow in
the future with the widespread adoption of renewable energy,
and Chiyoda intends to gain experience and knowledge of
renewable energy creation and energy storage and to continue
developing this market with its spirit of taking on challenges in
the future.

2

16

Chiyoda Corporation CHIYODA REPORT 2019

EPC Contract for One of theLargest-Capacity Biomass Firing Power Plants in Japan

In August 2018, Chiyoda was awarded the EPC contract—
including trial operation—for one of the largest-capacity biomass firing power plants in Japan. The plant is a 75 MW 100%
biomass firing power plant, planned by Sodegaura Biomass
Power Generation Co., Ltd., in Sodegaura, Chiba Prefecture.
For the project, Chiyoda will be the EPC contractor for a
100% biomass firing power plant to be built in Asahi Kasei
Corp.’s Chiba factory and a biomass fuel storage silo facility to
be built by Nippon Phosphoric Acid Co., Ltd. The agreement
also includes two years of planned maintenance after the startof the plant’s commercial operations.

This is a key project in accordance with Chiyoda’s mediumto long-term vision as it will further reduce the environmental
impact through the introduction of higher-efficiency technology
in the renewable energy field. It will also help enhance
Chiyoda’s track record as an EPC contractor for diverse powersource facilities.

Masaji Santo at the groundbreaking ceremony

Digital Technologies to Enhance Engineering,
Procurement, and Construction (EPC)

Chiyoda has developed digital systems to enhance engineering,procurement, and construction (EPC) execution at construction
sites. Material and field labor controls have had a particularly
large impact on EPC execution. Developing more efficient control methods is an issue that needs to be addressed.
Chiyoda and SkymatiX, Inc.*1 developed a material control
system utilizing a radio frequency identification (RFID) systemand drones, while Chiyoda and NTT PC Communications
Incorporated*2 developed a system for monitoring workers’
locations using beacons. In December 2018, Chiyoda used
these systems at a construction site in Brunei.
Material and field labor controls were once left to workers at
the construction site, but these systems reduce the time spent
locating materials and mobilizing the necessary labor. The systems are expected to control field labor and materials, shorten
idle time of workers and construction machinery, reducematerial remanufacturing costs, and improve the availability of
construction machinery and labor.

3

Drone in operation in Brunei (Photo provided by SkymatiX, Inc.)

In the future, Chiyoda plans to use these systems in large
overseas projects to enhance EPC execution.
*1 A start-up that provides drones and other remote sensing services*2 A service engineering company involved in networking, data centers, andcloud computing

4

Golden Pass LNG Export Project

Chiyoda International Corporation, a U.S.-based wholly owned
subsidiary of Chiyoda and its joint venture partners Zachry
Group and McDermott International, Inc. were awarded the EPC
Contract for Golden Pass LNG Export Terminal in February
2019. The project is promoted by Golden Pass Products, LLC,a joint venture between Qatar Petroleum and ExxonMobil
affiliates,and located in Sabine Pass, Texas.
The scope of work includes engineering, procurement,
construction, and commissioning for the LNG liquefaction andexport facilities, with a production capacity of around 16 million
tons of LNG per year (approximately 5.2 MTPA x 3 trains). It isscheduled to be operational in 2024.
Qatar Petroleum and ExxonMobil are premier global producers of LNG, and have been major customers of Chiyoda for overfour decades. This award to construct the Golden Pass LNG
export project symbolizes the continued trust and confidence
that Qatar Petroleum and ExxonMobil have in the performanceand strength of Chiyoda to successfully move this project
toward completion. Based on the lessons learned from theAt the ceremony of ExxonMobil and Qatar Petroleum’s final investment decision tofund the Golden Pass LNG export project

recent U.S. Gulf Coast project, the risk management system has
been significantly reinforced and the partnership has been
structured to emphasize the strengths of each partner, including
an appropriate level of risk management.

17

Review of Operations
Overview
Chiyoda has developed a wealth of expertise and experience over the decades in this highly challenging
industry. The world-class services offered by Chiyoda are supported by extensive technological expertisein pursuit of “Energy and the Environment in Harmony.” The industry is highly complex, requiring a longterm commitment of invested capital, human resources, know-how and experience, and the ability todevelop technological superiority at all levels of the business. Chiyoda meets those goals. The Fiscal year2018 (year ended March 31, 2019) was extremely challenging, as Chiyoda faced significant losses andstructural changes in its corporate organization.

Business Performance
A substantial amount of unanticipated additional work occurredin the final phase of construction of Cameron Train 1. In addition, worker productivity was low due to a continuously highworker turnover rate. Having made a very strict review of theseprojects’ conditions, similar restraints existed on completion of
Cameron Train 2 and Train 3, and Chiyoda therefore acknowledged additional costs. The project schedule for the Tangghu
LNG Project in Indonesia has been impacted by several factors,
and requires a significant amount of additional work and costs
to complete. Negotiations with the clients regarding theschedule and costs are still underway. (Note: the change ofcontract was reached in July.)
Amid these circumstances, Chiyoda is continuously executing large-scale LNG Projects worldwide: for examples, twotrains for Ichthys LNG Project (Australia) and the third train of
Yamal LNG (Russia) has been completed. In addition, an EPC
contract has been awarded for the Golden Pass LNG Project in
the U.S. Front-end engineering design (FEED) for the Qatar
north expansion project has been completed and the FEED and
EPC preparation work for Nigeria’s Train 7 LNG are underway.

Consolidated Financial Results
On a consolidated basis, for fiscal 2018, new orders amounted
to ¥771,559 million, backlog to ¥1,016,356 million, and revenue
to ¥341,952 million. Operating loss came to ¥199,795 million,
while ordinary loss amounted to ¥192,998 million and of loss
attributable to owners of the parent amounted to ¥214,948
million. Losses are mainly due to an increase in incremental
construction costs for the Cameron LNG project caused by acontinuously high worker turnover rate. The project schedule for

the Tangghu LNG Project in Indonesia, meanwhile, is being
impacted by several factors and requires significant additional
work and costs to complete. Negotiations with the clients regarding
schedule and costs are still ongoing. (Note: the change of contract
was reached in July.) In addition to thorough risk assessment
for project execution, risk evaluations of pending arbitration
cases have been revised, which led to additional costs.

Outlook for Fiscal 2019
The consolidated numerical target forecasts for fiscal 2019, theyear ending March 31, 2020, are as follows: new orders of ¥550
billion, revenue of ¥390 billion, operating income of ¥12 billion,
ordinary income of ¥12 billion, and net profit ¥6 billion (Forex
rate of ¥110 = US$1). Furthermore, Chiyoda has launched the“Target 20” internal campaign, which aims for the further utilization of digital technology. Along these target lines, Chiyoda
strives to strengthen competitiveness based on enhanced operations through digitalization in each area of the EPC business,
as well as corporate management practices.

18

Chiyoda Corporation CHIYODA REPORT 2019

Management Policy
Chiyoda decided on a new Medium-Term Management Plan toreplace “Mirai Engineering”—which was initially announced inAugust 2017 and first revised during November 2018—at aBoard of Directors’ meeting held on May 9, 2019. The Company
will also issue preferred shares by third-party allotment tostrengthen its financial position.
Dividend Policy
In the previous Medium-Term Management Plan, announced inAugust 2017, management strongly recognized the importanceof sharing corporate profits with its shareholders; however, due
to the current accumulated losses, management deeply regrets
that it was unable to pay out a dividend for fiscal 2018. In addition, with careful consideration of our business circumstancesand performance, there is no dividend planned for fiscal 2019.
Chiyoda aims to recover its financial strength and eliminate
accumulated losses within the period of its Revitalization Plan
(fiscal 2019–fiscal 2023).

Energy Business
LNG Plants & Other Gas-Related Work
Since the construction of the first LNG plant in the Middle East in the 1970s, Chiyoda has successfully
constructed numerous LNG plants all over the world. Chiyoda has consolidated its position as the world’s
leading contractor of LNG plants with its proven track record. The Company contributes to stable energy
supply throughout the world and low-carbon emissions from its ongoing efforts to improve plant design
and to develop and apply new technologies.

Overseas
Chiyoda is executing EPC work for projects in Australia, theUnited States, Russia, and Indonesia. The Ichthys LNG plant(Australia) started production of both trains. The Yamal LNG
third train (Russia) was successfully completed a year ahead ofthe delivery schedule under contract and accounts for a total
production capacity of 16.5 mtpa. FEED work for a four-Train
LNG expansion project in Qatar has also been completed.
Meanwhile, A new LNG plant project in the United States has
been awarded, and FEED and EPC proposal preparation work in
Nigeria is underway.
In other gas-related work, Chiyoda is engaged in the EPC
work of a helium production facility as well as being involved in
the EPC management work for modification and revamping
projects of LNG/gas processing plants constructed by Chiyoda
in Qatar.

Japan
Renovation and modification projects are underway for existing
LNG-receiving terminals and for seismic upgrades of facilities inaccordance with the Basic Act for National Resilience.

Yamal LNG, Photo courtesy of Novatek

Refinery/Petrochemical/Metal
Chiyoda started its business with domestic petroleum refineries, and has been expanding into otherpetrochemical and metal areas, with a focus on continuous innovation. We provide a wide range of services in these areas, from planning to EPC, operation and maintenance, expansion, and improvements.
In addition, Chiyoda’s services cover the introduction of process technologies that support clients’environmental requirements and more.

Overseas
EPC work started for a large-scale ethylene production plant in
the Gulf Coast Area of the United States. Chiyoda is executing
engineering, procurement, construction, and commissioning(EPCC) activities for a residue fluid catalytic cracking (RFCC)
project in Malaysia. Also in Malaysia, EPC activities on a petrochemical tank terminal are ongoing and a Group company basedin Southeast Asia is engaged in project management for downstream projects including refineries and petrochemicals in Asia.

Japan
Chiyoda is executing EPC work for renovation of existing refining
facilities aiming to reduce sulphur content in bunkering fuel as
per new regulations that will go into effect in 2020. It has also
undertaken various other revamping/modification work.
Furthermore, Chiyoda has completed EPC work related tohigh-function chemical product plants, and is executing EPC
work for other chemical facilities, in addition to production plants
for hydrogenated petroleum resin.

19

Review of Operations

Environmental Business

Digital Transformation BusinessPharmaceutical / Biochemistry / General ChemistryBusiness Alliance Agreement with Cutting-Edge
AI Technology Company

Chiyoda has been engaged in the field of engineering and construction of pharmaceutical facilities formore than 40 years, and has experience on more than 400 projects.
In addition to conventional low molecular-weight pharmaceutical manufacturing facilities (finishing andAPI), Chiyoda has expanded its knowledge of biotechnology and cell technology, and is increasing its
project experience in such new fields as high molecular-weight pharmaceuticals, medium molecularweight pharmaceuticals, and regenerative medicine.

Japan
Chiyoda completed EPC work for pharmaceutical production
plants and developed cutting-edge injection production facilities
for high-potency pharmacologically active agents and related
pharmaceutical facilities. EPC work is in progress for production
facilities of medium molecule and active pharmaceuticalingredients (APIs).

One of the world’s
largest production
facilities of drug
substances forbio-pharmaceuticals;
Photo courtesy of
UNIGEN

Environment / New Energy / Infrastructure
The interest in global environmental preservation issues, such as global warming due to greenhouse gases,
is increasing. Aiming to achieve “Energy and the Environment in Harmony,” Chiyoda has been offering
environmental preservation technologies since its foundation. In addition to offering licensed technologies,
Chiyoda has been active in developing its own technologies in the fields of air pollution control andwastewater treatment, and has delivered these technologies to various clients as environmental pollution
control technologies. Continuing in this spirit, Chiyoda is developing new technologies as well as
improving existing technologies.

Overseas
Chiyoda has completed new international airports in Bohol, thePhilippines, and Mongolia. Further, Chiyoda introduced the
Chiyoda Thoroughbred 121 (CT-121) Process to flue gas desulfurization facilities at four existing coal-fired plants in India. In
Dubai, UAE, a demonstration project of a vegetable-growing
facility using artificial light was completed last year, and business development activities are ongoing aiming to introduce
commercial facilities elsewhere in the Middle East and Russia.

20

Chiyoda Corporation CHIYODA REPORT 2019

Japan
Chiyoda is executing EPC work for the world’s largest batteryenergy storage system project in Hokkaido, flue gas desulfurization facilities at existing coal-fired plants, demonstration facilities forCO2 separation units, and photovoltaic (mega solar) facilities, while
factories complying with the latest food hygiene standards anda research facility for a food plant have been completed. In the
new energy business field, a demonstration plant for producing
bio-jet and diesel fuels was completed, and EPC work for oneof the largest-capacity biomass firing power plants is ongoing.
Moreover, work is underway on a demonstration projectcommercializing a hydrogen supply chain, through theAdvanced Hydrogen Energy Chain Association for Technology
Development, an organization jointly established with Mitsubishi
Corporation, Mitsui & Co., Ltd., and Nippon Yusen (NYK Line).

In fields related to digital innovation, Chiyoda established a comprehensive alliance agreement with GRID, Inc., one of the leaders in
AI technologies in Japan, and started research for enhancing the productivity of plants by using AI technologies. The Company has
started demonstration projects regarding AI technology application for several clients.

Chiyoda and GRID have established abusiness alliance agreement for AI technologies for improving plant profitability
throughout the plant life cycle.
GRID is a leading Japanese venturecompany that develops and produces its
original AI framework ∞ReNom.
GRID uses a wide variety of state-ofthe-art AI technologies, such as deeplearning, Deep Q Network, and MP
problem algorithms, to provide AI solutions
to various industries.

Analysis by engineering
design method.
Creation of learning dataand evaluation criteria

Plant owner

Engineering

Learning data fromphysical model

Big data on such areas asoperations, malfunctions,maintenance, the environment, etc.

AI development
AI algorithm development.
Model construction byvarious algorithms

Plant AI solutions

Combination ofalgorithms

Operation optimization support

Program Concept
Chiyoda is implementing projects using AI technologies to improve plant productivity in a tie-up agreement with GRID. Under these
initiatives, Chiyoda has signed a memorandum of understanding with Abu Dhabi Gas Liquefaction Co. (UAE) to provide state-of-the-art
digital technologies for its LNG Plant. Additionally, the Company has an agreement with PT Donggi-Senoro LNG (Indonesia) for thedevelopment of AI technology to improve productivity of LNG plant facilities.

Chiyoda launched a new digital transformation
business development unit aimed at increasing
customer value utilizing cutting-edge technologies such as big data analytics and AI.
The digital transformation businessdevelopment unit will enable Chiyoda to offer
added value to customers through AI solutions
by aggressively applying big data analytics, IoT,
and AI technologies.
Chiyoda’s advanced services combining
Chiyoda’s core technologies with AI and big datatechnologies can improve a plant’s profitability byenhancing its reliability and productivity.

Chiyoda’s
core
technologies

Big data / AI
technologies

Improvementin profitabilityof plants

21

Message from the CDO

ESG Section

In April 2018, Chiyoda introduced a new Chief Officer System, which serves to streamline processes andcreate new growth opportunities. In light of the recent rapid and remarkable advances in digital technology,
management has formulated a new digitalization strategy for all Chiyoda Group companies. Chiyoda has also
appointed a Chief Digital Officer (CDO). The CDO leads Chiyoda’s digital transformation to make it more
efficient, profitable, and competitive.

Sustainable Development Goals (SDGs)

CDO and His Main Duties.

The Sustainable Development Goals are goals that must be
realized by 2030 in order to achieve sustainable development ofsociety. They consist of 17 major goals and 169 targets that wereadopted by the United Nations General Assembly in September
2015, to provide a basic framework for action in the international
community for both emerging and developed countries.

As a member of this community, the Chiyoda Group is
responding to this movement by engaging in actions intended
to contribute to the achievement of these goals. Chiyoda supports the SDGs with its corporate activities. For more details on
Group companies’ activities, please find icons for the relevantgoals side-by-side with corresponding activities.
Please refer to the Chiyoda Group Sustainability Report.

Toshiya Momose

https://www.chiyodacorp.com/en/csr/csr/report.html

CDO

Main Duties
1. Advancement of Digital Transformation
To enhance corporate competitiveness by utilizing digital technologies

Chiyoda Supports the SDGs

2. New Business Development
To explore new business fields with cutting-edge digital technologies

1. Digital Transformation

2. New Business Development

Chiyoda started activities named “Target 20” to accelerate its
digital transformation. Target 20 aims to achieve a 20%
enhancement in the work efficiency of individual employees,
along with greater synergistic competitiveness.
These activities consist of 1) digitalization, 2) workflow
reforms, and 3) workstyle reforms, thus incubating mind-sets
and a culture conducive to taking on challenges.
This includes, for example, automated engineering, procurement data utilization, robotic process automation (RPA), andconstruction productivity improvement.
As a result of these activities, Chiyoda will be able torespond to clients’ requirements via speedy project execution
and seamless digitalization from engineering to operation.

Chiyoda started the business development of its digital technology
innovation field and acceleration of its digital strategy. Chiyoda’s
target is to optimize plant operation and maintenance and improve
production efficiency. These targets will be accomplished througha combination of 1) plant engineering technologies, 2) accumulated
big data, and 3) digital technologies represented by state-of-the-art
AI technology.
Both plant engineering technologies and EPC experience are a
key part of Chiyoda’s core competence to analyze big data and giveaccurate predictions using AI for optimum suggestions to clients.
In these ways, Chiyoda will contribute to enhancing
clients’ plant availability, maximize clients’ asset value, andrealize profitability.
A

Big data analytics (visualizes and predicts current
and future changes basedon accumulated data.)

Field Labor Safety,
Material, Construction,
Equipment Tracking

Digitalization

IoT
Chiyoda Advanced Work Package
Supply Chain
Management
SystemMaterial
Control,
Completion
Control

Workflow Reforms

Remote Operation

Visualization

ChiyodaDocument
Management
System 2

D

Data
Accumulation

DCS systems

Chiyoda Corporation CHIYODA REPORT 2019

Process simulation,
dynamic process study,
CFD., etc.

IoT

Participation in International Initiatives

United Nations Global Compact
Chiyoda agreed to be a participant in the United Nations Global Compact (UNGC) in November 2012. The UNGC is
a voluntary corporate responsibility initiative established at the United Nations Headquarters in 2000. Chiyoda hasestablished a Code of Conduct in line with its corporate philosophy, “Energy and the Environment in Harmony,” while
expanding its business globally. As an endorser of the UNGC’s 10 principles in four fields—human rights, labor, theenvironment, and anti-corruption—Chiyoda further fulfills its role as a good corporate citizen and aims to contributeto the sustainable growth of international society.

Optimization /Improve Efficiency

Artificial intelligence,etc. (optimization andimprovement based on
predictions)

Real

Weather
conditions
Site sensors
Noise, vibration,
image, etc.

Robotics Process Automation
Workstyle Reforms

O

Engineering

Big data (collects and accumulates information generated
by a large amount of IoT
devices)

Automated Engineering

22

VirtualAnalysis andVisualization• Plant construction and provision of infrastructure• Cultural advancement and community support• Sharing of technological knowledge and job creation• Collaboration with local communities• Technological development for a low-carbon andcarbon-free society• Environmental protection and climate change aversion• Stable, safe, and affordable energy production• Effective use of natural resources

Sensors and Control
transmitters valvesSmartpositioners

Productivity
improvement

23

ESG Factsheet
The Chiyoda Group has embraced its corporate philosophy, “Energy and the Environment in Harmony,”since its foundation, understanding the contribution of such collaboration to the sustainable developmentof society. We recognize the unique responsibilities of major corporations in the engineering sector, andthe obligation to search for business strategies that benefit all members of society. In that regard, we
promote open, transparent communication with all our stakeholders about the operations of the Chiyoda
Group, including its ESG (environmental, social, and governance) initiatives.

Social Initiatives
Through our business, we contribute to local communities in many ways, including human resource
development, initiatives on human rights, labor, and social contributions. Further, we will create a corporate culture where the diversity, individuality, and character of employees are respected, where
people are motivated to do their best, and of which employees and their families are proud.
KPI
Situation of Employees
Average years of service
Average age of employees
Turnover rate excluding retirement

Creating Shared Value by Promoting ESG• Climate change• Water consumption• Biological diversity• Pollution and resources• Supply chain / Environment-oriented
proposals in project workE

• Safety, quality, environment,and ­information security(SQEI) management• Labor standards• Human rights• Reliability• Supply chain /Knowledge sharing• Long-term contribution to
local communities

Environmental

S• Enhanced corporate governance policy• Risk management• Tax transparency• Anti-corruption practices• Enhanced compliance programG

SocialGovernance

Creating Shared Value
An important outcome of a vigorous approach to ESG issues iscreating shared value for the Company and its stakeholders. Thiscan be defined as the product of sustainable growth using sustainable means; that is, the creation of long-term growth for theCompany by methods that address important environmental andsocial challenges with corporate governance duly practiced.

Within the Chiyoda Group, our approach in this regard is built
on a social ­responsibility-oriented culture that recognizes therisks inherent in the engineering business, and aims to realize“Energy and the Environment in Harmony” using all the
resources available to it.

KPI

Environmental Data of Chiyoda Group Company Offices
Power consumption (CGH, Koyasu, TW100, Tokyo Office)Energy consumption (CGH, Koyasu, TW100, Tokyo Office)CO2 emissions (CGH, Koyasu, TW100, Tokyo Office)
Chilled water consumption (CGH, Koyasu)
Steam consumption (CGH)
Waste disposal volume (CGH, Koyasu)
Waste recycling rate (CGH, Koyasu)
Printing paper consumed (CGH, Koyasu)

Unit

2014

2015

2016

2017

2018 (FY)

Tons

19,209
1,435
3,591
92.0
95.6
230

10,936
1,065
3,364
89.5
93.5
206

7,670
783
1,146
87.8
95.8
222

12,242
614
901
91.5
93.2
197

17,138
1,059
5,665
76.8
94.6
347

Tons
t-CO2
%
%
Cases

1,000 kWhkl*
t-CO2
1,000 m3
GJ
Tons
%
Tons

12,609
4,016
6,500
14.9
6,564
247
95.8
128

11,635
3,624
6,545
13.7
5,840
264
94.6
106

12,526
3,826
7,210
17.5
5,914
262
92.3
88

11,129
3,430
6,337
15.5
5,168
233
93.8
66

10,331
3,295
6,083
17.5
4,541
241
95.4
80

2015

2016

2017

2018 (FY)

Years

13.0
41.0
1.6

12.9
40.8
1.9

12.9
40.9
2.4

13.2
41.6
4.5

12.3
41.0
2.5

18
16
13
7.1
23
2.6
1.7
66

19
13
13
7.5
23
2.6
1.7
71

24
18
14
8.0
23
2.6
1.5
82

33
19
19
7.6
24
3.2
1.5
71

25
12
16
8.1
25
3.5
1.6
63

Persons

7
0
1
1
6

15
2
8
0
14

22
1
4
0
19

27
7
9
0
14

26
11
9
0
12

Persons

83

64

70

54

42

Persons

35

62

70

54

53

%

Assistance for Employees
Number of employees taking childcare leave
Number of employees taking sick or injured childcare leave
Numbers of employees taking nursing care leave
Numbers of employees taking temporary retirement for nursing care reasons
Number of employees working reduced hours for childcare reasons
Number of employees dispatched for on-site training /on-site instruction
Volunteer Activities
Number of employees participating in reconstruction assistance
Number of employees participating in cleanup activities aroundthe office location
Vaccine donations by Ecocap collection
Donation of school lunches by TABLE FOR TWO%
Persons%
Years
Persons%%
Persons
Persons
Persons
Persons
Persons

Persons

32

95

127

157

110

Vaccines

209
1,817

267
1,782

228
1,860

231
1,581

292
1,561

Lunches

Governance Initiatives

Our environmental and social activities are intended to continuously enhance our business, while
striving toward the objective of “Energy and the Environment in Harmony” and further contributing to
the sustainable development of society.

Environmental Data of Domestic Construction Sites
Industrial waste disposal quantity
Final landfill disposal quantity
CO2 emissions
Industrial waste recycling rate
Electronic manifesto penetration rate
Environmental proposals

2014

Years

Diversity of Employees
Ratio of female employees among new recruits
Number of female employees among new recruits
Ratio of women among all employees
Average service years of female employees
Number of women in management positions
Ratio of women in management positions
Ratio of employment of persons with disabilities
Number of non-Japanese employees

Environmental Initiatives

Unit

We are dedicated to achieving even greater transparency and stability by conducting our operations
fairly in accordance with the highest ethical standards.

KPI
Actions for Compliance
Number of employees receiving compliance training(New recruits, mid-career hires, and executives and associate executives)
Number of employees receiving compliance training for overseas
assignment, site managers of field offices and export controls
Number of employees attending compliance seminars
Number of employees receiving compliance e-learning
Number of reports to the Compliance Consultation andReporting System
Initiatives for Business Continuity
Business continuity plan training
Actions for Information Security
Number of serious information security-related incidents
Data Related to Governance
Number of outside directors

Unit

2014

2015

2016

2017

2018 (FY)

Persons

279

156

166

150

112

Persons

551

512

523

314

168

Persons
Persons

264
2,611

389
2,849

717
2,841

662
5,213

172
4,669

Reports

14

15

24

25

36

Training
sessions

–

1

2

2

2

Incidents

0

0

0

0

0

Persons

2

2

4

4

5

* Crude oil equivalent

24

Chiyoda Corporation CHIYODA REPORT 201925

Initiatives for Safety
One of the Chiyoda Group’s CSR medium-term policies is to instill in everyone involved that safety is acore value. We make ongoing efforts to ensure all employees fully understand that safety should be theirNo. 1 priority.

SQEI—Safety within Chiyoda
Within Chiyoda, we believe that safety is all about protecting ourpeople, the environment, assets, and reputation, not only for thisgeneration but also for future generations.
Through strong safety leadership, worker engagement, anda united team approach, we live up to our policies to ensurecompliance with country legislation, client requirements, andinternational standards and industry good practices as well as
fulfill our moral obligations to society and the environment.
Chiyoda’s safety culture within its corporate and affiliatedoffices is nurtured through continuous dialogue and consultations, training (including the use of virtual reality simulators),
conventions, safety briefings and safety talks, among others.
With regard to safe project execution, Chiyoda applies thePareto Principle, which states that roughly 20% of the input (activities) is responsible for approximately 80% of the outcomes (results).
Our C-SAFE primary management control areas are:• Select the best subcontractors available• Ensure everybody understands safety, health, environmental,
and security (SHES) requirements• Train all personnel prior to commencing any work
• Confirm subcontractor’s readiness to start work
• Work toward improvements by focusing on coreleading indicators•L earn from our lessons and ensure the sustainability ofcorrective actions

HSE• Focus on life critical activities and apply life-saving rules
C-SAFE is Chiyoda’s company-specific safety program,consisting of management systems and behavior improvement techniques.
The program follows a pragmatic approach to manage
safety with due consideration to fluctuating global demandwhen we cannot always rely on conventional theories.
C-SAFE applies best-in-class methodologies to enable us
to cope better and do so with enthusiasm and resilience when
faced with challenges and ad-hoc situations.
We are on a safety journey, applying our C-SAFE programthat underpins:•C lear leadership expectations (comply, respect, and intervene)• Clear communication with our personnel on a regular basis,demonstrating that safety is a core value• Belief (that all incidents are preventable)• Measurement of leading indicators and investigation of allincidents including near misses to prevent recurrences• Promotion of a just reporting culture• Continuous training of all our personnel to ensure a working
environment where we see each other work safely, resulting
in our families seeing us returning home free from harm
• Supporting of global “Building Responsibly” initiatives thatserve as the industry standard on worker welfare so thatcompetitiveness is not at the expense of the worker

The term HSE (health, safety, and the environment) is often
used in the engineering industry. The Engineering HSE Section
ensures that our engineering construction work complies with all
relevant requirements on design safety and environmental matters.
Chiyoda’s core expertise comprises 40 different kinds oftechnical safety and environmental activities including the management and modeling of explosion, radiation, and dispersion
effects as well as the production of the various components of a
Safety Case for our clients. In addition to this traditional technicalapproach, the Chiyoda Group designs and promotes such
cultural safety initiatives as a Companywide training program toinculcate a safety mind-set in all our engineers, from the conceptual stage through to detailed engineering and implementation.
The Technical Safety Section at Chiyoda has held Design
Safety Induction Courses for its engineers, lead engineers, andmanagement since 2013. As part of the course, engineers aretaught to recognize how a safety design associated with theirdiscipline contributes to preventing hazardous events or mitigating consequences. Course content also includes the basics ofdesign safety, HSSE studies (e.g., bow-tie analyses, safety
critical elements, performance standards), and a multi-discipline
approach to barrier ownership. We also run a higher-levelcourse for lead engineers and managers that focuses more on
project execution.
Such training develops broad understanding and consideration of safety matters, helping our engineers provide the very
best solutions to our clients. For more information, please visit
our corporate website.
For more information, please visit our corporate website.
Safety Message (video) is accessible athttps://www.chiyodacorp.com/en/csr/safety/message.html

Safety First: Leadership and Worker Engagement at Domestic & Overseas Locations

Safety Culture of Chiyoda
Placing importance on “safety at the construction site,” Chiyoda
has been promoting its original C-SAFE program and fostering asafety culture with the motto “every incident is preventable,” asmentioned in the corporate SQE policy. The logo was created by
employees and is for remembering that a “safety culture begins
with each one of you.” The logo expresses our strong will toensure that our safety culture gets passed on to the next generation. The logo perfectly suits the Chiyoda Group and will help
focus the eyes of future generations on all the business activitiesof the Chiyoda Group, and will urge each Group employee tocarefully consider the issue of safety and maintain a new “safety
first” awareness.
Within Chiyoda, we nurture a safety culture where we promote
the mind-set that “safety is a core value and a top priority.” Safety
is a direct contributor to good business performance. We firmly
believe that exemplary performance can only be achieved
through our passion for “safety first.”

Mikawa site (office), Japan

Toyota site (office), Japan

Chiyoda’s C-SAFE Vision
I see myself working safely
I see you working safely
We see that each other work safely
Our families wants to see us coming home safely
C-SAFE is Chiyoda’s company-specific safety
program, consisting of management systems
and behavior improvement techniques.

INPEX-operated Ichthys LNG onshore processing facilities, Darwin, Australia

26

Chiyoda Corporation CHIYODA REPORT 201927

Corporate Governance:
Members of the Board
To further improve the corporate governance of Chiyoda, the Company has made several changes to the Board of Directors. First, thenumber of Board members was reduced from 14 to 10, and the ratio of independent directors on the Board was increased 40%, thereby
enhancing the external monitoring function of Chiyoda.
In addition, Board members from the executive ranks of Chiyoda are now limited to the chief operating officer (COO) and the chief
financial officer (CFO). This move further separates the operations and management of Chiyoda and the Board’s monitoring of management.
For more information, please refer to page 7of the Chiyoda Revitalization Plan
https://www.chiyodacorp.com/ir/a1d5f9f00b6f3f972818f72e967a9340.pdf

Nobuo Tanaka*2
Director*

3

Mr. Tanaka started his career at METI in 1973,
and has served in a number of high-ranking
positions, including director general of theMultilateral Trade System Dept. He was
Minister for Industry, Trade and Energy at the
Embassy of Japan, Washington, D.C., andalso served twice as director for Science,
Technology & Industry at Paris-based OECD.
As chairman of the Sasakawa Peace
Foundation and former executive director of
the IEA, Mr. Tanaka brings a wealth of experience and wisdom to Chiyoda’s Board.

Hiroshi Yamaguchi*2
Director*3

Mr. Yamaguchi has cultivated an abundanceof knowledge and experience in his long careerin the energy industry. He has served as
representative executive vice president, andchief technology officer and chief safety
officer at Tokyo Electric Power Co., and is now
president of Kanto Electrical Safety Inspection
Association and chairman of the Forum ofElectrical Safety Inspection Association.
He will leverage such knowledge andexperience in his role as an external director,
contributing to sound management decisions
and rigorous audits in service of Chiyoda.

Please see below an introduction to members of the Board and their anticipated contributions to Chiyoda.

Members of the Board (10)Audit & Supervisory
Committee

External

Aiichiro Matsunaga*2
Director

COO

Independent external
Board members

Executive Officers

Mikio Kobayashi*2
Director, Audit & Supervisory
Committee Member*3

Chairman of the Board& CEO

Mr. Okawa, a corporate advisor to major
shareholder Mitsubishi Corporation, wasappointed on June 25, 2019. Before taking on
this role, Mr. Okawa led Mitsubishi’s infrastructure project and plant engineering
departments. He served as a Board memberof Chiyoda from 2010 to 2013 and was also a
director of Mitsubishi Corporation for three
years starting in June 2010, cultivating a
wealth of knowledge in his career that will beof paramount importance to Chiyoda in theyears ahead.
Mr. Okawa will lead Chiyoda’s turnaround
efforts.

Masaji Santo*1
President & COO

Mr. Santo has developed extensive experience through a long career at Mitsubishi
Corporation, as president of Mitsubishi Chile(Ltda) and senior vice president of Mitsubishi
Corporation. He was appointed as an outside
director of Chiyoda Corporation in June 2013and proceeded to assume the role of representative director, president & CEO in June
2017. In June 2019, he relinquished his
position as president & CEO and becamepresident & COO, with responsibility foroverall business operations.

Mr. Kobayashi joined Chiyoda on assignment
as a member of the Audit & Supervisory
Committee in 2014 after a career spanning 30
years at Mitsubishi UFJ Trust and Banking
Corp. He has extensive experience as acorporate director and officer for a number ofcompanies.
Mr. Kobayashi is highly regarded for his
expert opinions and a neutral, objective
approach to making business decisions.

President

Senior Vice Presidents

Vice Presidents

Masaji Santo (COO, CSO*4)

Masao Ishikawa

Nobuyuki Uchida

Yasumitsu Abe

Hideaki Tomiku

Shuichi Wada (CCO*6, CHRO*7)

Jinei Yamaguchi

Masao Fujiwara

Toshiaki Furugori

Setsuo Iuchi (Assistant to President)

Hideo Matsui

Terunobu Iio

Masaki Kadono

Hiroyuki Shimizu

Masakazu Fujiwara

Executive Vice Presidents

Koji Tarutani (CFO)
Fuminori Hasegawa (CRO*5)

Koji Tarutani*1

Tsunenori Kazama*1

Executive Vice President & CFO

Director

Mr. Kazama has cultivating a wealth of knowledge and experience in his 42-year career at
Chiyoda. Starting from his early career as a
fluid dynamics engineer in domestic andinternational oil and gas projects, he assumed
the roles of business development coordinator,
project manager, and general manager of all
floater projects, and undertook senior project
management positions including project director/Project sponsor in charge of various LNG
and gas-related projects all around the world.
His extensive project experience will add
strength to the oversight of Chiyoda’s corebusinesses in this time of recovery and growth.

Ms. Narahashi was appointed to the Board inJune 2018 as a member of the Audit &Supervisory Committee. She has amassed
considerable experience as a lawyer at
Japan-based, international law firms including
Anderson, Mori, and Tomotsune, as a vicepresident of investment banking at Deutsche
Securities, Inc., and as a manager of legal
and compliance activities at major insurers
Mika Narahashi*2
including AIG and Metlife.
Director, Audit & Supervisory
Ms. Narahashi brings considerable interna3Committee Member*tional law experience to the Board.

EXECUTIVE OFFICERS

Masahiko Kojima (Assistant to President)

Mr. Tarutani, after serving as general managerof the Legal Division of both Mitsubishi UFJ
Financial Group and The Bank of Tokyo–
Mitsubishi UFJ Ltd., was appointed representative director and executive vice president and
CFO of Chiyoda in June 2019. He brings extensive financial and legal experience to the Board.

Chiyoda Corporation CHIYODA REPORT 2019

Director, Audit &Supervisory Committee
Member*1 Representative director*2 External director*3 Independent external director

Arata Sahara

28

Takahiro Kitamoto

Mr. Kitamoto joined Chiyoda in 2018 after an
extensive career at Mitsubishi Corporation,
which he joined in 1982. He brings 20 yearsof experience in risk management and has
also served as CFO at a Mitsubishi groupcompany in China.
His background in accounting and finance,
specializing in business audits, will serve
Chiyoda well during these challenging times.

CFO

Board members who
concurrently serve as
executive officers

Kazushi Okawa*1

Mr. Matsunaga joined Chiyoda as an external
director in June 2019 after an extensive careerat Mitsubishi Corporation. He recently served
as regional CEO for Latin America and the
Caribbean, and president, of Mitsubishi
Corporation do Brasil, and was appointedGroup CEO of Mitsubishi Corporation’s
Industrial Infrastructure Group in April 2019.
His experience includes business areas suchas infrastructure, power generation, and newenergy, all areas of great importanceto Chiyoda.

Munetaka Horiguchi
Yasuyuki Maeda (CPO*8)
Toshiya Momose (CDO*9)
Junichi Kunihiro
Kenichi Ishiguro*4 CSO: Chief Sustainability Officer*5 CRO: Chief Risk Management Officer*6 CCO: Chief Compliance Officer*7 CHRO: Chief Human Resources Officer*8 CPO: Chief Privacy Officer*9 CDO: Chief Digital Officer

29

Corporate Value
Chiyoda’s Corporate Governance System and Internal Controls (As of April 2019)
Chiyoda pledges to constantly strive for sustainable growth and to enhance the corporate value of the
Chiyoda Group on a medium- to long-term basis. To achieve this goal, the Group established the Chiyoda
Corporation Corporate Governance Policy in 2015, which developed Chiyoda’s basic views and guidelines
with regard to corporate governance. Chiyoda will continue to earnestly secure soundness and transparency of its corporate management through the policy.

General Shareholders’ Meeting
Appoint / Dismiss

Submit / Report

Board of Directors

To ensure speedy and accurate decision-making to deal
with rapidly changing social and economic environments,

Supervisory Committee” system in 2016. Chiyoda also

Chiyoda adopted an executive officer system. By shifting toestablished the Legal & Compliance Department, the SQEIthe “Company with Audit and Supervisory Committee”

Risk Management Department, the Crisis Management

system, with the new functions, responsibilities, andDepartment, and the Internal Audit Division.

authorities that are described above, Chiyoda will be able toInternal Control Committee and the Compliance Committee.

Appoint / Dismiss

Appoint /Dismiss

Directors(Audit & Supervisory Committee Members)

Accounting Auditors

ReportReportAppointture, Chiyoda shifted to a “Company with Audit and

To reinforce internal controls, Chiyoda established theReport / Statement of Opinions

Audit & Supervisory Committee

Directors(Excluding Audit & Supervisory
Committee Members)

Basic Views on Corporate GovernanceIn order to further reinforce its corporate governance struc-

Appoint / Dismiss
Audit / Report

improve and implement the soundness and transparency ofSubmit / Report

Major Committees for Internal Control

Internal Control Committee

President & COO

ReportCooperate

Cooperate /ReportExecutive Committee(Advisory Council)

Compliance Committee

Instruct

Submit / Report

ReportInstructInternal Audit
Division

Audit

Financial
Audit

Internal
Audit

Business Execution Divisions
Control / Supervise

Group Companies

management and prompt decision-making, further
enhancing its corporate value.

Board of Directors and Meetings of the Board of Directors

New Governance Approach
One of the major foundations of a first-class corporate
governance culture is a strong Board of Directors. While
experience gained in the management and operations of
Chiyoda is extremely important, the ability to voice opinions
about the direction and strategy of Chiyoda from an external
perspective is equally valuable.
For the last several years, Chiyoda has looked to increase

The Board of Directors consists of 10 directors, including

management supervision by the Board from an objective andAudit & Supervisory Committee members, and holds monthly

neutral perspective. Agendas for the Board of Directors’

meetings. It makes important management decisions andmeetings include management plans, important personnel

Audit & Supervisory Committee.

oversees the Company’s operations. The outside directors

matters, and large investment and loan plans.

Thus, external directors have a larger proportionate

allow for appropriate decision-making and rational• By reducing the number of Board members who also
serve as executive officers (2 versus 6); and• By having external directors constitute a majority on the“voice” in deciding the actions of Chiyoda; a larger majority
on the Board is separated from the day-to-day activities of

the weight and influence of external perspectives by

Chiyoda; and an independent majority controls the decisionschanging the composition of the Board. It has achieved thisof the audit function. Oversight is the key function of the

Audit & Supervisory Committee

in four significant ways:

Board: these measures maintain and enhance that function.

The Audit & Supervisory Committee comprises three

To enhance the auditing activities of the Audit & Supervisory

members, including one full-time member. The Committee

Committee, employees who specialize in such activities aremonitors the overall performance of duties by directors.

deployed to assist the Audit & Supervisory Committee in the

Two of the members are independent officers and one of

execution of its duties.

• By reducing the size of the Board from 14 to 10 members;• By increasing the ratio of external directors to 40%(4 of 10) from 29% (4 of 14);the members has considerable expertise in accounting.

Reinforcing Internal Controls
The Chiyoda Group constantly conducts self-assessments

has established the Internal Control Committee, which

control systems. In addition, the Company has establishedcoordinates and summarizes the opinions voiced within thethe Internal Audit Department as an autonomous unit toCompany. The Internal Control Committee proposes

perform evaluations. Chiyoda has a system in place for

improvements on internal controls to the Executive

auditing the development and operation of a suitable overall

Committee, whenever it considers necessary.

internal control framework and constituent components, andfor submitting reports to the Executive Committee.

30

In addition, to enhance internal controls, the Companyof existing internal control functions and reinforces internal

Chiyoda Corporation CHIYODA REPORT 2019

A “Company with Audit and Supervisory Committee” systemof representative directors, and other general decision-

does not have Audit & Supervisory Board members or an

making regarding business execution.

Audit & Supervisory Board. Instead, we established an Audit

In a “Company with Audit and Supervisory Committee,”& Supervisory Committee that comprises three or more

system the decisions on the execution of important opera-

directors, a majority of whom are outside directors.

tions may be delegated to directors. After the shift to the

A director and Audit & Supervisory Committee member“Company with Audit and Supervisory Committee” system isholds voting rights on the Board of Directors as a director

completed, we will have enabled speedy decision-making

and is involved in the determination of proposals for theand flexible operations by executive officers. In addition, theappointment and dismissal of directors who are not Audit &oversight of operations will become the major role of theSupervisory Committee members, the selection and removal

Board of Directors.

31Organizational Structure

Outside Directors

Organization and Policy of the Company

In light of the magnitude of the impact on existing share-

the Company), in order to ensure fairness, transparency,

The Company, in accordance with laws and regulations,

Development and Management of Internal Control Systemholders, the Company appointed Mr. Nobuo Tanaka, aand objectivity in the decision-making process of thehas developed and manages an internal control system to• Framework to ensure compliance with laws and regulations

Director of the Company, and Mr. Mikio Kobayashi, Mr.

Company. The Company consulted them on the third-party

ensure the proper execution of operations. To enhance• Framework for information retention and management

Hiroshi Yamaguchi, and Ms. Mika Narahashi (these four

allotment and received the following opinion as of May 9,internal controls, the Company has established the Internal• Framework to protect against loss and for risk management

Directors are Outside Directors for whom the Company has

2019: “The third-party allotment is deemed necessary andControl Committee, which coordinates and summarizes the• Framework to ensure efficiency

acknowledged as independent officers of the Company andappropriate, and the third-party allotment shall not neces-

opinions voiced within the Company. At the end of the fiscal• Framework of the Chiyoda Group’s internal control systemnotified the TSE, and are members of the Audit &sarily be deemed disadvantageous to minority shareholders

term or whenever it considers necessary, the Internal• Framework to ensure the effectiveness of audits by theSupervisory Committee and Directors of the Company whoof the Company.”

Control Committee proposes improvements, etc. on internal

Audit & Supervisory Committee

controls to the Executive Committee. The Executive• Framework for reporting to the Audit & Supervisory Committee

Committee then reviews the proposals from the Internal• Framework for securing the appropriatenessControl Committee, and the Board of Directors makes theare to a certain extent independent from the management ofNameof financial reportingnecessary decisions on the internal control system.

Hiroshi Yamaguchi

Nobuo Tanaka

Although Mr. Tanaka does not have direct experience in corporate management, he has appropriately carried out his
duties as Outside Director by drawing on his abundant knowledge in the energy field cultivated through his assignment as
Executive Director of the International Energy Agency and his overall knowledge, and we therefore have nominated him as a
candidate for Outside Director.

Mika Narahashi

Ms. Narahashi has expert knowledge and experience as a lawyer in addition to her background in corporate law. The
Company expects that she will greatly contribute to the oversight of management from the perspectives of law, compliance,and governance.

Mikio Kobayashi

Mr. Kobayashi has extensive experience as a corporate director and officer for a number of companies and has also served
as an Audit & Supervisory Committee member of the Company. He has consistently offered expert opinions from a neutral
and objective point of view, and the Company expects that his experience and insight will be beneficial to management
oversight.

An overview of the frameworks for ensuring proper
execution of operations (the basic policy on the internal
control system) determined by the Board of Directors is asfollows (Last revision: March 28, 2018).
For more information, please visit our corporate website.
https://www.chiyodacorp.com/en/about/governance/

Reason for the nomination

Mr. Yamaguchi offers appropriate opinions from a neutral and objective point of view as an Outside Audit & Supervisory
Committee member of the Company, leveraging his abundant knowledge of the energy industry and experience. Basedon these achievements, he was nominated as a candidate for Outside Director with the opinion that he will leverage hisabundant knowledge and experience in his oversight of management.

Outline of Management Status of Frameworks for Ensuring Proper Execution of Operations
The Company has developed and manages an internal

Major Management Initiatives in FY2018

control system based on the “Policy on the Internal Control• Initiatives relating to compliance with laws

System,” resolved by the Board of Directors, as statedand regulations

above. The Company strives for continuous improvement by• Initiatives relating to loss and risk management

confirming the status of frameworks in each division and• Initiatives relating to ensuring efficiency

sharing information at meetings of the Internal Control• Initiatives relating to the Chiyoda Group’s internalCommittee, which were held twice in FY2018.

control framework• Initiatives relating to ensuring the effectiveness of audits
by the Audit & Supervisory Committee

Remuneration for Directors and Audit & Supervisory Committee Members
Total amount of remuneration for the term under review
No. of Persons

Base Remuneration(Millions of yen)

Performance-BasedRemuneration(Millions of yen)

Remuneration forPurchase of Treasury
Stock(Millions of yen)

Directors(Who are not Audit & Supervisory Committee members)

8

187

0

44

Directors(Who are Audit & Supervisory Committee members)

6

66

N/A

N/A

• Initiatives relating to reporting to the Audit &Supervisory Committee

Number of Committee Meetings
Name of Committee

32

System of Remuneration

Number of Meetings in FY2018

Board of Directors

17

Executive Committee

14

Audit & Supervisory Committee

14

Chiyoda Corporation CHIYODA REPORT 2019

Category

Concept

OutlineCorresponds to roles andresponsibilities

Remuneration for Directors is ¥300 million
or less per year.

Performance-based remuneration

Corresponds to theachievements for each term

Taking into account the levels of net income and dividends
for the consolidated fiscal year under review and qualitative
elements such as the degree of achievement of management
objectives, the amount is kept within ¥200 million, or 1% of theamount of net income attributable to owners of the parent.

Remuneration for purchase oftreasury stock

Linked to long-term
achievements¥90 million or less per year.
Directors other than Directors and Audit & Supervisory
Committee members (excluding Outside Directors) acquire
treasury stock through the Directors Holding Association.

Base remuneration

33

Chiyoda’s History
We were founded in 1948, during the period when Japan was starting to make powerful moves toward its
postwar recovery. With “serving society through technology” as its founding motto, the Company has kept
moving forward in accordance with the Chiyoda’s corporate philosophy of “Energy and the Environment inHarmony” and in unswerving awareness of the requirements of the global community.

1978~

1988~

1998~

2008~

Contributes todevelopment of theoil and gas
industry beyond
the oil shock

Accelerates its
execution ofoverseas projects inmainly the
Middle East andSoutheast Asia

Expands its businessfield beyond the oiland gas industry

Executes several
LNG projects
worldwide timed
to take advantage ofthe natural gas boom

Establishes its
position as the No. 1
LNG contractor andexpands into the
U.S. market

Takes a new step
forward forrevitalization

1960

1974

1984

1993

2003

2014

Grass-roots refinery in
Mizushima, Japan

Completion of Petromin
Jeddah and Riyadh
refineries

Completion of Petromin
Mobil Yanbu Refinery in
Saudi Arabia

Order awarded for Qatargas LNG Project in Qatar

Order awarded for
Sakhalin II LNG Project by
Sakhalin Energy in Russia,
the first LNG plant in Russia

Order awarded for
Cameron LNG Projectin the United States

Scheduled to complete
Japan’s first demonstration
plant for renewable jet
and diesel fuels for euglena
Co., Ltd.

1948~

1958~

Supports rebuildingof the postwar oil
industry in Japan

Establishes its
position as a reliable
engineering company

1948
The Company’s founding

1968~

2018~

The Chiyoda
Group aims to be a
global top-tier“Integrated
Engineering andService Provider”
in the energy andenvironment fields.
 orld-leading contractor of liquefiedW
natural gas (LNG) plant construction
 teady progress in the life science andS
new energy fields—pharmaceuticals,
photovoltaic, and hydrogen trategic move into advanced medicalSand cutting-edge digital technologies

1956

1965

1976

1986

1996

2004

2014

25,000 barrels per day at
Crude Distillation Unit in
Kawasaki, Japan

Jeddah Refinery in
Saudi Arabia

Completion of LNG plant for
Abu Dhabi Gas Liquefaction
in UAE

Food processing plant for
Nada-Kobe Consumers’
Co-operative Society in
Kobe, Japan

Order awarded for PT.
Smelting Copper Smelter
Project in Indonesia

Order awarded for
Qatar-gas II LNG Projectin Qatar, the largest LNG
plant in the world

Order awarded for Yamal
LNG Project in Russia

Chiyoda’s AI Solution: New
technology development for
the next generation with Big
Data, IoT, AI, and robotics

 orporate operations with higher HSE
C(health, safety, environment) diversity
and inclusion

SPERA Hydrogen®:
Chiyoda’s Hydrogen Supply
Business—Large-scalestorage and transport ofhydrogen utilizing theorganic chemical hydride(OCH) method

34

Chiyoda Corporation CHIYODA REPORT 201935

At a Glance
GlobalHeadquarters

Major Projects in Progress(As of June 2019)

Yamal LNG

Affiliates and branches
in more thanGroup Companies
in Japan20
locations

67.93
millionGroup Companies
Overseas

1,700
Approx. 1,700
Approx. 2,700
Approx.

6,100
employees~1,600Including Overseas Engineering Satellites 

Safe Man-Hours without
LTI* at Cameron LNG Projects

AroundFreeport LNG* LTI: Lost-time injury

Golden Pass
Qatar North Field Expansion
 efinery, Petrochemical, Metal
R(e.g., Hydrogenated Petroleum Resin)

RasGas Helium 3

 harmaceutical, Biochemistry, ChemicalP(e.g., Peptide Therapeutics)

Ethylene

 nvironment, New Energy InfrastructureE(e.g., Mega Solar, Photovoltaic,
Biomass, Carbon Capture Facility)

Nigeria Train 7–40%
LNG / Gas

Cameron LNG

Tangguh Train 3of the World’s Total
LNG Plant Capacity

Mozambique LNG

Petrochemical / Refinery

Executed projects
more than

Copper Smelter

60
countries

Ichthys

Metal
Environment, New Energy Infrastructure PC / EPCm / EPsCm / EPCIE
EPC: Engineering, Procurement
and Construction
 EED / Feasibility Study / Pre-FID
F
FEED: Front End Engineering Design

Chiyoda Corporation is a world-leading, fully integrated international engineering company and EPC contractor.
We apply our technological expertise and extensive project execution experience by providing planning,
engineering, procurement, construction, and maintenance services in a wide range of business fields
including oil and gas, chemicals and petrochemicals, pharmaceuticals, environmental technology, renewableenergy, social infrastructure, and industrial facilities.
As a leader in energy-related technology, we use engineering to conquer business challenges with the aim ofachieving a balance between energy consumption and preserving the environment.

FY2018
New Orders

FY2018
Revenue¥342.0
billion¥771.6
billion

FY2018Backlog of Contracts¥

EPC Execution
Energy Value Chain Projects

Oil Refineries Chemicals &Petrochemicals and Gas Processing & LNG

Environmental Protection Projects(Liquefaction / Export Terminal & Import / Regasification Terminal)

Fine Chemicals /Pharmaceuticals Industrial Facilities

Metal Smelter

1,016.4

Global Environment Energy Projects(Flue Gas Desulfurization / Water Treatment Facilities)(Factory Automation / Food Processing Plant, etc.)

Renewable Energy(Photovoltaic / Wind / Biomass)

billionInfrastructure Projects(Airport)
Japan
Overseas

36

Chiyoda Corporation CHIYODA REPORT 201937

Business Trends
Non-Financial Highlights

Financial Highlights
Revenue and Gross Profit (Loss) Margin

Operating Income (Loss) andOperating Income (Loss) to Revenue

Billions of Yen
900

Industrial Waste Disposal Quantity*

Industrial Waste Recycling Rate*%%

Billions of Yen

%

Tons

12

40

12

25,000

100

92.0

9.5
611.5

600

481.0

19,20920,000

603.7

8

510.9

6.3

4.5

342.0
4

300

16.0

15.7

2.6

2.6

0

12,242

10,9360

40

10,000

7,670

–2.4

0

5,000

–53.0
–300

2014

2015

2016

2017

2018

–60

(FY)

Revenue
Gross profit (loss) margin (right)

–20

2014

%

30

6

2017

2018

–20.0

–60

12

%
4

11.0

2.3

3

2

2015

2016

2017

2018

(FY)

2014

2015

2016

0

–10.1

t-CO

%

6,000

33

4,000

3,591

0

0

–193.0
2017

–56.4
2018

–60

(FY)

20

Ordinary income (loss)
Ordinary income (loss) to revenue (right)

2014

2015

2016

–214.9
2017

–62.9
2018

Shareholders’ Equity, ROE, andShareholders’ Equity Ratio
Billions of Yen

%

300

90

19

10

1,146

901

0

−70

0

2014

(FY)

2015

2016

2017

2018

(FY)

2014

2015

2016

New Orders / Backlog of Contracts

Number of Non-Japanese Employees*

Number of Outside Directors*

Billions of Yen

Persons

Persons

100

6

1,600

2017

1,417
200

206.4
40.0

200.2
37.9

60

155.3
33.7

1,165

1,200

156.1
37.5

66

1,016
30

800

0

4.1

1.7

–23.1
–100

2014

2015

2016

2017

Shareholders’ equity
ROE (right)
Shareholders’ equity ratio (right)

38

Chiyoda Corporation CHIYODA REPORT 2019

0

–17.1
–60.9
–441.2

2018

–450

(FY)

404

400

71

74
4

301

20

New orders
Backlog of contracts

2015

2016

4

2017

2018

(FY)

2

2

2014

2015

2016

2017

1

0

0

2014

4

3
40
2

352

5

5

771

747
654

5.5

71

(FY)

60

877

100

82

80

2018

* Chiyoda Corporation, non-consolidated basis* Rise in CO2 emissions (FY2018) due to an increase of domestic orders

Net income (loss) attributable to owners of the parent
Net income (loss) attributable to owners of the parent to revenue (right)

18

2,000

1,000

–41.1
−250

25

24

3,364

3,000

–6.8

2016

(FY)

40

5,665*

–3

–3.1

–15

2018

Ratio of Female Employees among New Recruits*

0.6

–0.5

2017

* At domestic construction sites

CO2 Emissions Emitted at Domestic Construction Sites

1.3

3.4

–2.0

2015

2014

30

6.4

6

0

2014

0

0

(FY)

5,000

16.2
2.6

–200

20

* At domestic construction sites

Billions of Yen

4.6
22.3

2016

–58.4

Net Income (Loss) Attributable to Owners of the Parent andNet Income (Loss) Attributable to Owners of the Parent to Revenue

Billions of Yen

15

2015

–12.3

Operating income (loss)
Operating income (loss) to revenue (right)

Ordinary Income (Loss) and
Ordinary Income (Loss) to Revenue

76.8

60

15,0000

91.5

17,138

6

1.7

87.8

80

21.5
20

6.8

89.5

0

2014

2015

2016

* Chiyoda Corporation, non-consolidated basis

2017

2018

(FY) FY

2018

(FY)

* Chiyoda Corporation, non-consolidated basis

39

Major Projects
The Chiyoda Group has successfully completed various types of facilities all across the world over the
past 70 years.
The following list shows our major projects under execution and recently completed projects.

E: Engineering P: Procurement C: Construction
CS: Construction supervision CC: Construction and commissioning I: Installation V: Validation
BPSD: Barrel per stream day SCFD: Standard cubic feet per day PS: Project specification
M: Manajemen

Energy Business
ClientProject

Location

Capacity

Scope of Work

Project Status

Darwin, Australia

4.45 x 2 MMTY

E.P.C.

Ongoing

LNG Plants & Other Gas-Related WorkLNG Plants (EPC)

INPEX Operations Australia Pty Ltd.

Ichthys LNG Onshore Processing
Facilities Project

FLNG Liquefaction, LLC

Freeport LNG Export Project

Freeport, Texas, U.S.

4.64 x 2 MMTY

E.P.C.

Ongoing

FLNG Liquefaction 3, LLC

Freeport LNG Export Project Train 3

Freeport, Texas, U.S.

4.64 x 1 MMTY

E.P.C.

Ongoing

Cameron LNG, LLC

Cameron LNG Project

Hackberry, Louisiana, U.S.

4.5 x 3 MMTY

E.P.C.

Ongoing

JSC Yamal LNG

Yamal LNG Project

Sabetta, Yamal-Nenets, Russia

5.5 x 3 MMTY

E.P.C.

Completed*1

BP Berau Ltd.

Tangguh LNG Project

West Papua, Indonesia

3.8 x 1 MMTY

E.P.C.

Ongoing

Golden Pass Products, LLC

Golden Pass LNG

Sabine Pass, Texas, U.S.

5.2 x 3 MMTY

E.P.

Ongoing

RasGas Company Ltd.

Helium 3 Project

Ras Laffan, Qatar—

E.P.C.

Ongoing

Fluid Catalytic Cracking Unit

PRPC Refinery and Cracker Sdn. Bhd.

—

Johor, Malaysia

70,000 x 2 BPSD (for Residue Oil)

E.P.CC.

Completed*1

Refrigerated Gaseous Tank Facility for
Ethylene and Propylene

Dialog Plant Services Sdn. Bhd.

—

Pengerang, Johor State, Malaysia—

E.P.CC.

Ongoing

Ethylene

Confidential

Confidential

Gulf of Mexico, U.S.

Confidential

E.P.C. PS. CM. CS.

Ongoing

Capacity

Scope of Work

Project Status

Helium Recovery Unit

Refineries / Petrochemicals / Metals

Environmental Business
ClientProject

Location

Pharmaceuticals / Biochemistry / General Chemistry
Pharmaceuticals

Nichi-Iko Pharmaceutical Co., Ltd.

Finishing, Commercial

Toyama, Japan—

E.P.C.V.*2

Completed*1

CMIC CMO Co., Ltd.

Finishing, Commercial

Tochigi, Japan—

E.P.C.V.

Completed*1

Nippon Shokubai Co., Ltd.

API Commercial

Osaka, Japan—

E.P.C.V.*

Ongoing

Tosoh Corporation

Offices

Yamaguchi, Japan—

E.P.C.

Completed*1

PeptiStar, Inc.

Manufacturing Plants No. 1 and No. 2

Osaka, Japan—

E.P.C.

Ongoing2

Environment / New Energy / Infrastructure
Biofuel Plant

Euglena Co., Ltd.

Biojet and Diesel Fuel Production
Demonstration Plant

Kanagawa, Japan

125Kl / year

B. E.P.C.

Completed*1

Green Device

North Hokkaido Wind Energy Transmission Corporation

Battery Energy Storage System

Hokkaido, Japan

720 MWh

E.P.C.

Ongoing

Biomass Firing Power Plant

Sodegaura Biomass Power Generation Co., Ltd.

Biomass Firing Power Plant

Chiba, Japan

75 MW

E.P.C.M.

Ongoing

Transportation Projects

Department of Transportation and Communication, the Government of the Republic of thePhilippines

AirportPanglao Island, Bohol Province,
the Republic of the Philippines

—

P.C.

Completed*1

Environment, Energy Conservation, andIndustrial Facilities

Confidential

Precious Metal Recycling Plant

Chiba, Japan—

E.P.C.

Completed*1*1 Completed in 2018

*2 Main Contractor: Chiyoda Techno Ace Co., Ltd.

For a complete list of major projects, please refer to the
Major Project booklet on our corporate website.
https://www.chiyodacorp.com/projects/MajorProjects_201903_e_3.pdf

40

Chiyoda Corporation CHIYODA REPORT 201941

Financial Section

Eleven-Year Summary
Chiyoda Corporation and Consolidated Subsidiaries
As of and for the years ended March 31

Millions of yen (Except amounts per share and key ratios)

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Revenue¥446,438¥312,985¥247,082¥254,675¥398,918¥446,147¥480,979¥611,548¥603,745¥510,873¥341,952

Cost of Revenue

427,461

298,766

215,563

215,783

356,402404,685

435,327570,028565,521502,255

523,101

Gross Profit (Loss)

18,977

14,21931,51938,891

42,51541,46245,651

41,52038,2238,618(181,148)

SG&A Expenses

11,74912,517

13,974

14,693

17,402

20,38324,18525,50522,543

20,94818,647

Operating Income (Loss)

7,227

1,702

17,54424,197

25,11321,07921,466

16,015

15,680(12,330)(199,795)

Net Income (Loss) Attributable to Owners of the Parent

6,498

2,953

7,979

14,364

16,077

13,447

11,0293,375(41,116)6,445(214,948)

Capital Expenditures

2,159

1,853

2,085

3,409

9,428

4,453

4,107

2,698

2,131

2,400

2,480

Depreciation

1,957

2,059

2,566

2,637

2,580

3,196

3,569

3,589

3,643

3,545

2,816

8,971

8,613

(5,229)55,61514,147(17,177)(24,145)

55,526(4,375)(34,115)(37,941)

Cash Flows from Investing Activities(1,072)(2,722)(2,577)(9,140)(5,257)(16,796)(5,444)(26,750)

10,433(1,428)778

Cash Flows from Financing Activities

58,548(2,079)(805)(2,899)(4,432)(5,249)(4,569)(3,942)(2,693)(1,468)4,020

Cash and Cash Equivalents, at End of Year

135,536

139,790

130,618

173,769

180,229

145,303113,246

136,919

138,889

101,767

68,306

Total Assets¥357,816¥328,174¥353,392¥365,795¥435,379¥475,288¥515,839¥528,219¥461,331¥420,704¥352,341

Total Equity

145,917

149,253

155,758

168,737

189,356

198,031

208,405

202,128

157,125

159,418(59,154)

Long-Term Loans Payable

10,00410,000

10,208198

10,132

10,01810,015

10,0094

10,00015,870Results for the Year:

Cash Flows:
Cash Flows from Operating Activities

Financial Position at Year-End:Interest-Bearing Debt

10,022

10,004

10,208

10,198

10,22011,305

11,01010,348

10,211

10,00015,989

Shareholders’ Equity

145,513

148,683

155,242

168,120

188,386

196,411

206,395

200,166

155,339

156,099(60,882)¥  25.58¥  11.39¥  30.79¥  55.44¥  62.06¥  51.91¥  42.58¥  13.03¥ (158.76)¥  24.89–

Net Assets per Share561.12573.61599.15648.95727.24758.31796.89772.89599.83608.41–Dividends per Share

7.5

3.5

11

17

19

16

13

10

6

7.5

–

Return on Assets (ROA) (%)

3.1

1.4

4.6

6.6

6.4

5.0

4.5

3.1

(0.6)

(2.3)

–

Return on Equity (ROE) (%)

5.7

2.0

5.3

8.9

9.0

7.0

5.5

1.7

(23.1)

4.1–

Shareholders’ Equity Ratio (%)

40.7

45.3

43.9

46.0

43.3

41.3

40.0

37.9

33.7

37.5

(17.1)EV / EBITDA (Times)

0.79

15.64

4.20

4.12

3.55

8.09

6.34

4.02

3.41

26.38

(0.09)

Amounts per Share (Yen):
Basic Net Income (Loss) per Share

Key Ratios:

Debt-to-Equity Ratio (%)

0.07

0.07

0.07

0.06

0.05

0.06

0.05

0.05

0.07

0.06

(0.26)

Current Ratio (%)

161.1

175.2

173.8

165.5

166.3

156.3

151.0

146.3

141.2

153.0

83.3

Divident Payout Ratio (%)

29.3

30.8

35.7

30.7

30.6

30.8

30.5

76.7

38.7

30.1

–

Price Earning Ratio (PER) (%)

20.9

81.5

24.7

19.0

16.9

25.6

24.1

63.3

(4.5)

40.3

(0.31)

Number of Employees (Consolidated)

3,376

3,670

4,104

4,530

4,915

6,062

6,097

5,866

5,367

6,176

5,243

Share Price Range: High

1,274

946

963

1,093

1,309

1,669

1,455

1,164

933

1,110

1,129

Low

348

529

546

702

901

912

903

722

611

537

264

Others:42

Chiyoda Corporation CHIYODA REPORT 201943

Corporate Data
(As of March 31, 2019)

Corporate Data

Stock Information

Founded

1948

Closing Date

Paid-In Capital¥43,396 million

Number of Employees

5,243 (Consolidated)
1,554 (Non-consolidated)

Ordinary General June
Meeting of
Shareholders

Chiyoda Global
Headquarters

Minatomirai Grand Central Tower,
4-6-2, Minatomirai, Nishi-ku,
Yokohama 220-8765, Japan

Common StockContact Information
IR, PR & CSR Department
Minatomirai Grand Central Tower,
4-6-2, Minatomirai, Nishi-ku, Yokohama 220-8765, Japan
Phone: +81-45-225-7734
Fax: +81-45-225-7748
E–mail: irpr@chiyodacorp.com
Major Shareholders
Number of
Ratio ofshares owned shares(Thousands ownedof shares)(%)

Shareholder

March 31

Number of authorized shares

570,000,000

Number of issued andoutstanding shares

260,324,529

Number of shareholders

29,562

Listing of shares

Tokyo Stock
Exchange

Stock transaction unit

100 shares

Note: As of August 2019, Chiyoda Corporation is listed on the second section of
the Tokyo Stock Exchange.

Register of Shareholders
Mitsubishi UFJ Trust and Banking Corporation
1-1 Nikko-cho, Fuchu-shi, Tokyo 183-0044, Japan
Stock Transfer Agency Department
Phone: 0120-232-711 (Toll free within Japan)
Breakdown of Shareholders

Mitsubishi Corporation*

86,931

33.39

The Master Trust Bank of Japan, Ltd. (Trust A/C)

10,297

3.95

Individuals andothersFinancial
institutions

MUFG Bank, Ltd.

9,034

3.47

NORTHERN TRUST CO. (AVFC) RE
SILCHESTER INTERNATIONAL INVESTORSINTERNATIONAL VALUE EQUITY TRUST

8,371

3.21

26.6%

17.5%

Japan Trustee Services Bank, Ltd. (Trust A/C)

4,809

1.84

NORTHERN TRUST CO. (AVFC) RE U.S. TAXEXEMPTED PENSION FUNDS

4,500

1.72

The Mitsubishi UFJ Trust & Banking Corporation

4,274

1.64

BNY GCM CLIENT ACCOUNT JPRD AC ISG (FE-AC)

3,528

1.35

Japan Trustee Services Bank, Ltd. (Trust A/C 5)

3,170

1.21

CREDIT SUISSE AG, DUBLIN BRANCH
MAIN EQUITY ACCOUNT

3,009

1.15

Securities
companies

Total Number ofIssued Shares:

2.8%

260,324,529
Foreign investors
and others

16.9%

Other corporations

36.2%

*A
 t the Board of Directors’ meeting held on May 9, 2019, the Company entered into
an agreement regarding the issuance of Class A preferred shares by third-party
Allotment to Mitsubishi Corporation with the total amount to be paid of ¥70 billion.
For details, please refer to page 16 and 17 of this report or visit our website.

Monthly Stock Price and Trading Volume (April 2015–March 2019)
Yen
1,250

1,000

750

500

Thousandsof Shares

250

300,000
200,000
100,000

0

Share price (left)

44

2015

2016

2017

2018

2019

0

Trading volume

Chiyoda Corporation CHIYODA REPORT 201945

Chiyoda Global Headquarters
Minatomirai Grand Central Tower, 4-6-2, Minatomirai, Nishi-ku,
Yokohama 220-8765, Japan
Phone: +81-45-225-7734 Fax: +81-45-225-7748

Printed in Japan

Consolidated Financial Statements FY2018
For the year ended March 31, 2019

CORPORATE PHILOSOPHY

CONTENTS

Enhance our business in aiming for harmony between energy and theenvironment and contribute to the sustainable development of a society as anintegrated engineering company through the use of our collective wisdom andpainstakingly developed technology.

02   Consolidated Balance Sheet
04   Consolidated Statement of Operations
06   Consolidated Statement of Comprehensive Income
08   Consolidated Statement of Changes in Equity

Every Chiyoda Group employee engages in our corporate activities with this philosophy in mind as we strive for10   Consolidated Statement of Cash Flows

corporate group management that earns the trust and empathy of all of our stakeholders, including shareholders,12   Notes to Consolidated Financial Statements

customers, business partners, employees, and local communities.

48   Independent Auditor’s Report01Consolidated
Balance
Sheet
ChiyodaChiyoda
Corporation
Corporation
andConsolidated
and Consolidated
Subsidiaries
Subsidiaries
March 31, 2019

Consolidated
Consolidated
Balance Sheet
Balance Sheet
March 31, March
2019 31, 2019ASSETS ASSETSCURRENTCURRENTASSETS: ASSETS:
Cash and cash
Cashequivalents
and cash equivalents(Note 13) (Note 13)
Short-term Short-term
investments
investments(Note 13) (Note 13)
Notes and Notes
accounts
andreceivable—tradeaccounts receivable—trade(Note 13) (Note 13)
Costs and Costs
estimatedand earnings
estimatedonearnings
long-termon construction
long-term construction
contracts (Notes
contracts
3 and(Notes13) 3 and 13)
Costs of construction
Costs of construction
contracts incontracts
process in process
Accounts receivable—otherAccounts receivable—other(Note 13) (Note 13)
Jointly controlled
Jointly assets
controlledof joint
assetsventureof joint(Note
venture13) (Note 13)
Prepaid expenses
Prepaid andexpensesother and other
Allowance Allowancefor doubtfulfor
accounts
doubtful accounts
Total current
Total
assetscurrent assets
PROPERTY,
PROPERTY,
PLANT ANDPLANT
EQUIPMENT:AND EQUIPMENT:Land (NoteLand6) (Note 6)
Buildings andBuildings
structuresand (Notestructures6) (Note 6)
Machinery Machineryand equipment
and equipment
Tools, furniture
Tools,
andfurniture
fixturesand(Notefixtures6) (Note 6)
Construction
Constructionin progressin progress
Total
Total
Accumulated
Accumulated
depreciation
depreciation
Net property,
Netplant
property,and equipment
plant and equipment
INVESTMENTS
INVESTMENTS
AND OTHERAND
ASSETS:
OTHER ASSETS:
InvestmentInvestment
securities (Notes
securities
4 and(Notes13) 4 and 13)
Investments
Investments
in and advancesin and toadvances
unconsolidated
to unconsolidated
subsidiaries
subsidiaries
and associatedand associatedcompaniescompanies(Note 5) (Note 5)
Goodwill Goodwill
Software Software
Asset for retirement
Asset for retirement
benefits (Notebenefits8) (Note 8)
Deferred tax
Deferred
assets tax(Noteassets10) (Note 10)
Other assets
Other assets
Allowance Allowancefor doubtfulfor
accounts
doubtful accounts
Total investments
Total investments
and other assets
and other assets

ThousandsThousandsofof
U.S. Dollars
U.S. Dollars
Millions of Yen
Millions of Yen (Note 1) (Note 1)
2019
2019
2018
20182019
2019¥ 68,306 ¥ 68,306¥ 101,767 ¥ 101,767$ 615,375$ 615,375
1,150
1,150
2,240
2,240
10,367
10,36744,44944,44936,466
36,466400,445 400,445
24,162
24,16240,41840,418217,676
7,494
7,494
15,916
15,916
67,51865,94565,94541,96741,967594,099
110,967 110,967
131,374 131,374
999,704
5,707
5,707
5,563
5,563
51,420(1,254 )(1,254(1,245) )(1,245(11,297))
326,929

326,929
374,470

217,676
67,518594,099
999,704
51,420(11,297 )374,470
2,945,309 2,945,309

4,952
4,952
4,952
4,952
44,61444,614
13,524
13,524
13,504
13,504
121,844 121,844
5125125225224,613
4,613
6,404
6,404
6,142
6,142
57,701
57,701272
2721151152,4542,454
25,666
25,66625,23625,236231,229 231,229(13,952 ) (13,952(13,165) ) (13,165(125,694)) (125,694 )
11,714

11,714
12,071

12,071
105,534

105,534

1,603

1,603
2,067

2,067
14,44814,448

4,789
427
4,816
5
701
1,528
(174 )

4,789
6,183
427468
4,816
5,194
5203
701
11,9081,528
7,953(174(185) )6,183
43,151
4683,852
5,194
43,394203 46
11,9086,315
7,953
13,766(185(1,573))

43,151
3,852
43,39446
6,315
13,766(1,573 )13,697

13,69733,796

33,796
123,401

123,401

LIABILITIESLIABILITIESAND EQUITY
AND(CAPITALEQUITY (CAPITALDEFICIENCY)
DEFICIENCY)
CURRENTCURRENT
LIABILITIES:LIABILITIES:Current portion
Current
of long-term
portion of debt
long-term(Notesdebt
6, 7(Notes
and 13)6, 7 and 13)
Notes and Notes
accounts
andpayable—tradeaccounts payable—trade(Note 13) (Note 13)
Advance receipts
Advance
onreceipts
construction
on construction
contracts contracts
Income taxes
Incomepayabletaxes(Notepayable13) (Note 13)
Deposits received
Deposits received
Allowance Allowancefor warranty
forcosts
warranty
for completed
costs for completed
works
works
Allowance Allowance
for losses on
forconstruction
losses on construction
contracts contracts
Provision for
Provisionbusiness
forstructurebusinessimprovement
structure improvement(Note 16) (Note 16)
Accrued expenses
Accrued andexpensesother and otherTotal current
Total
liabilities
current liabilities
LONG-TERM
LONG-TERM
LIABILITIES:LIABILITIES:Long-term Long-term
debt (Notesdebt
6, 7(Notes
and 13)6, 7 and 13)
Liability forLiability
retirement
for retirement
benefits (Notebenefits8) (Note 8)
Provision for
Provision
treatment
forof
treatment
PCB wasteof PCB waste
Asset retirement
Asset retirement
obligationsobligations
Other
Other
Total long-term
Total liabilities
long-term liabilities

TOTAL

¥

121 ¥ ¥ 121 2 ¥ $21,095$
1,095
175,277 175,277
147,654 147,654
1,579,078 1,579,078
122,252 122,252
76,29476,294
1,101,371 1,101,371
708
7088948946,383
6,383
1,329
1,329
1,224
1,224
11,981
11,981372
3724194193,355
3,355
67,637
67,6373,288
3,288
609,344 609,344
1,825
1,825
16,44916,44922,97922,97918,06718,067207,026 207,026
392,505

392,505
247,847

247,847
3,536,086 3,536,086

15,889
1,546
267
1,022
264

15,88910,022
1,546
1,176
2673441,022
1,008
26451910,022
143,152
1,176
13,9303442,408
1,0089,207
5192,379

143,152
13,930
2,408
9,207
2,379

18,98918,98913,071

13,071
171,079

171,079

COMMITMENTSCOMMITMENTS
AND CONTINGENT
AND CONTINGENT
LIABILITIESLIABILITIES(Notes 12, (Notes
14, 15 and12, 14,20)15 and 20)
EQUITY (CAPITALEQUITY (CAPITALDEFICIENCY)
DEFICIENCY)(Note 9): (Note 9):
Common stock—authorized,
Common stock—authorized,
570,000 thousand
570,000shares;
thousand shares;
issued, 260,324
issued,thousand
260,324shares
thousandin 2019
sharesandin20182019 and 2018
Capital surplus
Capital surplus(Accumulated(Accumulated
deficit) retained
deficit)earnings
retained earnings
Treasury stock—at
Treasurycost,stock—at
1,357cost,thousand
1,357shares
thousandin 2019
sharesandin 2019 and1,356 thousand
1,356shares
thousandin 2018
shares in 2018
Accumulated
Accumulated
other comprehensive
other comprehensive
income (loss):income (loss):
UnrealizedUnrealized(loss) gain (loss)
on available-for-salegain on available-for-salesecurities securities
Deferred loss
Deferredon derivatives
loss on derivatives
under hedge
underaccounting
hedge accounting
Foreign currency
Foreigntranslation
currency translation
adjustments
adjustments
Defined retirement
Defined retirement
benefit plans
benefit plans
Total
Total
Noncontrolling
Noncontrollinginterests interests
Total (capitalTotal
deficiency)(capital deficiency)
equityequityTOTAL

ThousandsThousandsofof
U.S. Dollars
U.S. Dollars
Millions of Yen
Millions of Yen (Note 1) (Note 1)
2019
2019
2018
20182019
2019¥ 352,341 ¥ 352,341¥ 420,337 ¥ 420,337$ 3,174,246$ 3,174,246

TOTAL

-3-

-3-

TOTAL

43,39643,39643,396
37,112
37,112
37,112(139,956 ) (139,956
77,024)(1,435 )(1,435(1,434) )43,396
390,958 390,958
37,112
334,348 334,348
77,024(1,260,867(1,260,867))(1,434(12,929)) (12,929 )(5 )(5 ) 6464 (50 )
(50 )
(50 )
(50
(1,778) )(1,778 ) (450 )(450 )(102 )(102
2,159)
2,159 (923 )(923 )
926
926
1,013
1,0138,343
8,343(60,114 ) (60,114
157,557)
157,557(541,571 ) (541,571 )
960
960
1,861
1,8618,651
8,651(59,154 ) (59,154
159,418)

159,418(532,919 ) (532,919 )¥ 352,341 ¥ 352,341¥ 420,337 ¥ 420,337$ 3,174,246$ 3,174,246

notes to consolidated
financial statements.
See notes See
to consolidated
financial statements.

02

Chiyoda Corporation Consolidated Financial Statements FY201803

Consolidated
Statement
Operations
Chiyoda Corporation andConsolidatedof
Subsidiaries

Chiyoda Corporation and Consolidated Subsidiaries

Year Ended March 31, 2019

Consolidated Statement of Operations
Year Ended March 31, 2019

Consolidated Statement of Operations
Year Ended March 31, 2019

Millions of Yen
2019
2018
REVENUE
COST OF REVENUE
Gross (loss) profit
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES(Note 11)
Operating loss
OTHER INCOME (EXPENSES):Interest and dividend income
Equity in earnings of associated companies (Note 5)
Gain on sales of investment securities
Reversal of provision for loss on business of subsidiaries andassociated companies (Note 5)
Gain on sales of shares of subsidiaries and associatedcompanies
Interest expense
Foreign exchange gain (loss)
Commission fee
Provision for business structure improvement (Note 16)
Loss on disposal of fixed assets
Other—net¥ 341,952¥ 510,873$ 3,080,657

523,101

502,255

4,712,625(181,148 )

8,618(1,631,968 )

18,647

20,948167,992(199,795 )(12,330 )(1,799,960 )

3,303
194

2,585
680
202

29,7561,752

979(238 )
3,638

1,732(212 )(667 )(208 )(1,825 )(335 )(100 )

643(16,449 )(3,026 )(908 )

17,19850,580(LOSS) INCOME BEFORE INCOME TAXES(194,181 )

4,867(1,749,380 )

11,090
10,580(5,475 )3,741

99,913
95,32021,670(1,734 )195,233(215,852 )

6,602(1,944,614 )

NET (LOSS) INCOME ATTRIBUTABLE TONONCONTROLLING INTERESTS(903 )

156(8,143 )NET (LOSS) INCOME ATTRIBUTABLE TOOWNERS OF THE PARENT¥ (214,948 )

6,445$ (1,936,471 )

NET (LOSS) INCOME-4-

Chiyoda Corporation Consolidated Financial Statements FY2018

PER SHARE OF COMMON STOCK (Notes 2.z and 18):
Basic net (loss) income
Cash dividends applicable to the year

Yen

¥ (830.02 )2018¥ 24.89
7.50

U.S. Dollars
2019$ (7.48 )See notes to consolidated financial statements.

8,821(2,144 )32,777

5,614

Total income taxes

2019

12,441Other income—net

INCOME TAXES (Note 10):
Current
Deferred04

Thousands of
U.S. Dollars(Note 1)
2019¥

(Continued)-5-(Concluded)05

Chiyoda Corporation Statement
and Consolidatedof
Subsidiaries
Consolidated
Comprehensive Income
Year Ended March 31, 2019

Consolidated Statement of Comprehensive Income
Year Ended March 31, 2019

Millions of Yen
2019
2018
NET (LOSS) INCOME

Thousands of
U.S. Dollars(Note 1)2019

¥ (215,852 )¥ 6,602$ (1,944,614 )OTHER COMPREHENSIVE LOSS (Note 17):
Unrealized loss on available-for-sale securities
Deferred gain (loss) on derivatives under hedge accounting
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive (loss) income of associates

(69 )
1,719
(1,348 )(87 )(850 )(315 )(2,276 )(1,001 )420
450(628 )
15,487(12,144 )(784 )(7,664 )Total other comprehensive loss

(636 )(2,723 )(5,734 )COMPREHENSIVE (LOSS) INCOME¥ (216,488 )¥ 3,878$ (1,950,348 )TOTAL COMPREHENSIVE (LOSS) INCOME
ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests¥ (215,638 )(849 )¥ 3,775103$ (1,942,691 )(7,657 )See notes to consolidated financial statements.

-6-

06

Chiyoda Corporation Consolidated Financial Statements FY201807

Consolidated Statement of Changes in Equity (Capital Deficiency)

Chiyodaoda Corporation
ChiyodaChiyodaCorporation
ChiyodaChiyodaCorporation
ChiyodaCorporation
andCorporation
Consolidated
andCorporation
Corporation
Consolidated
andandConsolidated
andConsolidated
andSubsidiaries
andConsolidated
Consolidated
Subsidiaries
Consolidated
Subsidiaries
Subsidiaries
Subsidiaries
Subsidiaries
Subsidiaries
ChiyodaCorporation
andConsolidated
Subsidiaries
Year Ended March 31, 2019lidatedonsolidated
Consolidated
Statement
Consolidated
Consolidated
Statement
Consolidated
ConsolidatedofStatement
ChangesStatementof Statement
ChangesStatementofStatement
inChanges
Equityof inChangesofEquity
Changesof(CapitalofinChanges
Changes
Equity(Capitalin Equity
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in (Capital
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EquityEquity(Capital(Capital
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Consolidated
Statementof
ChangesinEquity(Capital
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ear Ended
Year
March
Year
Ended
March
Year
31,
Ended
Year
Year
2019
March
Ended
31,Ended
Ended
March
2019
31,
March
March
2019
31,
March
31,
2019
31,
2019
31,2019
2019
Year
Ended
March
31,
2019
Thousands
Thousands
Thousands
Thousands
Thousands
Thousands
Thousands
Thousands

Millions
Millionsof YenMillionsof Millions
YenMillions
of YenMillions
Millionsof Yenof YenofofYen
Yen
Millionsof
Yen
Accumulated
Accumulated
Accumulated
Other
Accumulated
Other
Accumulated
Comprehensive
Accumulated
Accumulated
Other
Comprehensive
Other
Comprehensive
Other
Comprehensive
IncomeOther
Other
Comprehensive
IncomeComprehensive
Comprehensive(Loss)
Income(Loss)
IncomeIncome(Loss)
IncomeIncome(Loss)(Loss)(Loss)(Loss)
Accumulated
Other
Comprehensive
Income(Loss)
Outstanding
Outstanding
Outstanding
Outstanding
Outstanding
Outstanding
Outstanding
Unrealized
Unrealized
Unrealized
Unrealized
Deferred
Unrealized
Deferred
Unrealized
Unrealized
DeferredDeferredDeferredDeferredDeferred
Outstanding
Unrealized
Deferred
NumberNumberof NumberofNumberNumberof Number
Numberof of ofof
(Accumulated(Accumulated(Accumulated(Accumulated(Accumulated(Accumulated(Accumulated(Loss)(Loss)
Gain (Loss)
Gain(Loss)
Gain(Loss)(Loss)(Loss)
Gain(Loss)
Gain(Loss)
Gain
Gain
Gain
(Loss)
Gain
Foreign(Loss)(Loss)
Gain(Loss)
Foreign
Gain
Gain
Gain
Foreign
ForeignDefined
ForeignDefined
Foreign
ForeignDefinedDefinedDefinedDefinedDefinedTotal Total TotalTotal
Total
Total
Total
Numberof(Accumulated(Loss)
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ForeignDefined
Total
SharesSharesof Sharesof Sharesof
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Deficit)
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onDerivatives
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AvailableAvailableon Derivatives
on Derivatives
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on on
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onCurrency
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Retirement
Currency
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Retirement
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Retirement
EquityEquityEquity
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EquityCommonCommonCommonCommonCommonCommonCommonCommonCommonCommonCapitalCommonCommonCommonCapitalCapital
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Treasury
Treasury
Treasury
for-Sale
Treasury
for-Sale
Treasury
Treasury
for-Sale
underfor-Sale
underfor-Sale
Hedge
for-Sale
for-Sale
under
Hedge
under
Translation
Hedge
under
Hedge
under
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under
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BenefitTranslation
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BenefitBenefit
Benefit
Benefit
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Plans Plans
Plans
Total
Plans
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Total TotalInterests
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Interests
Total
TotalInterests
Interests
Deficiency)
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Deficiency)
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Deficiency)
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Stock
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Surplus
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Securities
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Total
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Deficiency)

ALANCE,
CE, BALANCE,APRILBALANCE,APRIL
1,BALANCE,2017
BALANCE,APRILBALANCE,1, 2017APRIL
1,APRIL
2017
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1,
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1, 20171,
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258,973
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258,973¥ 43,396
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43,396¥ 43,396¥ 43,396¥ 37,112¥ 43,396¥¥¥43,396
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72,132¥ 72,132¥ ¥72,132¥ (1,431¥¥72,132¥ ¥72,132(1,431
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258,973
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6,445 6,445 6,445
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CE, BALANCE,MARCHBALANCE,MARCHBALANCE,
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31, 31,
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31,258,967
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258,967
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ALANCE,
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2019
31,
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2019
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31,MARCH
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2019
31, 31,
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31,258,967
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2019
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- 7 - - 7 - - 7 - - 7 -- 7 ---777---

08

Chiyoda Corporation Consolidated Financial Statements FY201809

Chiyoda Corporation Statement
and Consolidatedof
Subsidiaries
Consolidated
Cash Flows

Chiyoda Corporation and Consolidated Subsidiaries

Year Ended March 31, 2019

Consolidated Statement of Cash Flows
Year Ended March 31, 2019

Consolidated Statement of Cash Flows
Year Ended March 31, 2019

Millions of Yen
2019
2018
OPERATING ACTIVITIES:(Loss) income before income taxes
Adjustments for:
Income taxes paid
Depreciation
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts(Decrease) increase in allowance for warranty costs forcompleted works
Increase (decrease) in allowance for losses on
construction contracts
Increase in liability for retirement benefits
Foreign exchange (gain) loss—net
Increase in provision for business structure improvement
Decrease in provision for loss on business of subsidiaries
and associated companies
Gain on sales of shares of subsidiaries and associatedcompanies
Equity in earnings of associated companies
Loss on disposal of fixed assets
Gain on sales of investment securities
Changes in operating assets and liabilities:
Decrease (increase) in trade notes and accounts
receivable, and costs and estimated earnings onlong-term construction contracts
Decrease in costs of construction contracts in process
Increase (decrease) in trade notes and accounts payable
Increase (decrease) in advance receipts on
construction contracts
Increase in accounts receivable—other
Decrease in jointly controlled assets of joint venture
Increase in interest and dividends receivable
Other—net
Total adjustments
Net cash used in operating activities—(Forward)¥ (194,181 )¥Thousands of
U.S. Dollars(Note 1)
2019

4,867

$ (1,749,380 )

6,230
2,816
41
1

(1,750 )3,545
327(218 )

56,13425,369
372
10

(52 )

102

(473 )

64,40963(980 )
1,825

(25 )
44
477

580,263571(8,828 )
16,449(12,777 )(979 )(194 )
335(1,732 )(680 )(8,821 )(1,752 )3,026(202 )

7,908
8,149
28,180(19,550 )8,289(10,420 )

71,24473,421
253,877

46,210(23,097 )20,055(2,144 )(2,541 )
156,239(8,014 )(26,992 )
31,920(631 )(691 )(38,983 )

416,312(208,089 )
180,683(19,316 )(22,893 )1,407,561¥ (37,941 )¥ (34,115 )$(341,819 )Millions of Yen
2019
2018
Net cash used in operating activities—(Forward)
INVESTING ACTIVITIES:Net decrease in time deposits
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible assets
Payments for purchases of investment securities
Proceeds from sales and redemption of investment securities
Proceeds from sales of shares of subsidiaries resulting inchange in scope of consolidation (Note 19)
Proceeds from liquidation of subsidiaries and associatedcompanies
Payments of loans receivable
Proceeds from collections of loans
Other—net
Net cash provided by (used in) investing
activities

Thousands of
U.S. Dollars(Note 1)2019

¥ (37,941 )¥ (34,115 )$ (341,819 )

1,150(642 )
3(1,611 )(109 )
1,791

2,028(550 )
362(2,044 )(338 )
896

10,366(5,785 )27(14,521 )(983 )
16,143

1,684
138
(2 )
59

(4,229 )
757
5

1,249
(19 )
533

778

(1,428 )

7,010

6,220
(231 )(1,939 )(29 )149
10,000(10,004 )(1,552 )(61 )56,037(2,081 )(17,472 )(263 )(4,020 )(1,468 )(36,220 )FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS(317 )(108 )(2,864 )NET DECREASE IN CASH AND CASH EQUIVALENTS(33,461 )(37,121 )(301,452 )CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

101,767

138,889

916,828¥ 68,306¥ 101,767$ 615,375

FINANCING ACTIVITIES:Net increase in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt
Payments of cash dividends
Other—net
Net cash used in financing activities

CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consolidated financial statements.

-8-

10

Chiyoda Corporation Consolidated Financial Statements FY2018(Continued)-9-(Concluded)11

Chiyoda Corporation and Consolidated Subsidiaries
Notes
to Consolidated Financial Statements
Year
Ended
31, 2019
Notes
toMarchConsolidated
Financial Statements

Year Ended March 31, 2019
1.

BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

Chiyoda-CCC Engineering (Pte.) Limited ceased to be an associated company in the current
consolidated fiscal year due to sale of its stock and excluded from application of the equity method.

The accompanying consolidated financial statements have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting
regulations and in accordance with accounting principles generally accepted in Japan ("Japanese
GAAP"), which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards ("IFRS").

Xodus Group (Holdings) Limited ceased to be an associated company in the current consolidated
fiscal year due to sale of its stock and excluded from application of the equity method.
Investments in the remaining unconsolidated subsidiaries and associated companies are stated atcost. If the equity method of accounting had been applied to the investments in these companies,
the effect on the accompanying consolidated financial statements would not be material.

In preparing these consolidated financial statements, certain reclassifications and rearrangements havebeen made to the consolidated financial statements issued domestically in order to present them in aform which is more familiar to readers outside Japan. In addition, certain reclassifications have been
made in the 2018 consolidated financial statements to conform to the classifications used in 2019.

Most of the foreign consolidated subsidiaries have a December 31 year-end, which is different fromthat of the Company. As a result, adjustments have been made for any significant transactions
which took place during the period between the year-end of these subsidiaries and the year-end of
the Company.

The consolidated financial statements are stated in Japanese yen, the currency of the country in which
Chiyoda Corporation (the "Company") is incorporated and principally operates. The translations ofJapanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers
outside Japan and have been made at the rate of ¥111 to $1, the approximate rate of exchange at March
31, 2019. Such translations should not be construed as representations that the Japanese yen amounts
could be converted into U.S. dollars at that or any other rate.

The excess of the cost of acquisition over the fair value of the net assets of an acquired subsidiary at
the date of acquisition is amortized over a period of 10 to 20 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All
material unrealized profit included in assets resulting from transactions within the Group is also
eliminated.

Japanese yen figures less than a million yen are rounded down to the nearest million, except for per
share data.
U.S. dollar figures less than a thousand U.S. dollars are rounded down to the nearest thousand, except
for per share data.
2.

b.

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated
Financial Statements—Under Accounting Standards Board of Japan ("ASBJ") Practical Issues
Task Force No. 18, "Practical Solution on Unification of Accounting Policies Applied to Foreign
Subsidiaries for the Consolidated Financial Statements," the accounting policies and procedures
applied to a parent company and its subsidiaries for similar transactions and events under similar
circumstances should in principle be unified for the preparation of the consolidated financial
statements. However, financial statements prepared by foreign subsidiaries in accordance witheither International Financial Reporting Standards or generally accepted accounting principles in the
United States of America (Financial Accounting Standards Board Accounting Standards
Codification) tentatively may be used for the consolidation process, except for the following items
that should be adjusted in the consolidation process so that net income is accounted for inaccordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill;(b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity
through other comprehensive income; (c) expensing capitalized development costs of R&D; and(d) cancellation of the fair value model of accounting for property, plant and equipment andinvestment properties and incorporation of the cost model of accounting.

c.

Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity
Method—ASBJ Statement No. 16, "Accounting Standard for Equity Method of Accounting forInvestments," requires adjustments to be made to conform the associate's accounting policies for
similar transactions and events under similar circumstances to those of the parent company when
the associate's financial statements are used in applying the equity method unless it is impracticable
to determine such adjustments. In addition, financial statements prepared by foreign associatedcompanies in accordance with either International Financial Reporting Standards or generally
accepted accounting principles in the United States of America tentatively may be used in applying
the equity method if the following items are adjusted so that net income is accounted for inaccordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill;(b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity
through other comprehensive income; (c) expensing capitalized development costs of R&D; and(d) cancellation of the fair value model of accounting for property, plant and equipment andinvestment properties and incorporation of the cost model of accounting.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Consolidation—The consolidated financial statements as of March 31, 2019, include the accountsof the Company and its 20 (21 in 2018) significant subsidiaries (together, the "Group").
The merger was a consolidation takeover where Arrow Human Resources Co., Ltd. was a surviving
company, while Chiyoda U-Tech Co., Ltd. and Chiyoda Business Solutions Co., Ltd. ceased to exist.
Therefore, Chiyoda U-Tech Co., Ltd. and Chiyoda Business Solutions Co., Ltd. were excluded fromthe scope of consolidation as of April 1, 2018. In addition, Arrow Human Resources Co., Ltd.
changed its business name to Chiyoda U-Tech Co., Ltd. on the same date.
CA engineering LLC has been added to the scope of consolidation from the current consolidated
fiscal year.
Under the control and influence concepts, those companies in which the Company, directly or
indirectly, is able to exercise control over operations are fully consolidated, and those companies
over which the Group has the ability to exercise significant influence are accounted for by the equity
method.
Investments in three (five in 2018) associated companies are accounted for by the equity method.

- 10 -- 11 -

12

Chiyoda Corporation Consolidated Financial Statements FY201813

Notes to Consolidated Financial Statementsd.

Construction Contracts—Under Japanese GAAP, construction revenue and construction costs arerecognized by the percentage-of-completion method if the outcome of a construction contract can be
estimated reliably. When total construction revenue, total construction costs and the stage ofcompletion of the contract at the balance sheet date can be reliably measured, the outcome of aconstruction contract is deemed to be estimated reliably. If the outcome of a construction contract
cannot be reliably estimated, the completed-contract method should be applied. When it is probablethat the total construction costs will exceed total construction revenue, an estimated loss on thecontract should be immediately recognized by providing for a loss on such construction contracts.

k.

Long-Lived Assets—The Group reviews its long-lived assets for impairment whenever events orchanges in circumstance indicate the carrying amount of an asset or asset group may not berecoverable. An impairment loss is recognized if the carrying amount of an asset or asset groupexceeds the sum of the undiscounted future cash flows expected to result from the continued use
and eventual disposition of the asset or asset group. The impairment loss would be measured as theamount by which the carrying amount of the asset exceeds its recoverable amount, which is thehigher of the discounted cash flows from the continued use and eventual disposition of the asset or
the net selling price at disposition.

Concerning the construction contracts, the Group applies the following accounting methods:l.

Software—Software for internal use is amortized on a straight-line basis over its estimated usefullife (five years at the maximum).

Unbilled costs on contracts, which are accounted for by the completed-contract method, arestated as costs of construction contracts in process.
Payments received in excess of costs and estimated earnings on contracts, which are accounted
for by the percentage-of-completion method, and payments received on the other contracts, arepresented as current liabilities.

n.

Allowance for Warranty Costs for Completed Work—The allowance for warranty costs forcompleted work is provided based on past rate experience.

o.

Cash Equivalents—Cash equivalents are short-term investments that are readily convertible into
cash and exposed to insignificant risk of changes in value. Cash equivalents include time deposits,
certificates of deposit, and commercial paper, all of which mature or become due within threemonths of the date of acquisition.

Allowance for Losses on Construction Contracts—The allowance for losses on construction
contracts is provided for an estimated amount of probable losses to be incurred in future years in
respect of construction projects in progress. When there are losses on completed-contract method
applied contracts, the allowance for losses on construction contracts is offset against the costs ofconstruction contracts in process in the balance sheet.

p.

Short-Term Investments—Short-term investments are time deposits which will mature threemonths after the date of acquisition. Short-term investments are exposed to insignificant risk ofchanges in value.

Provision for Business Structure Improvement—To improve business structure, the provision forbusiness structure improvement is provided based on anticipated loss reasonably estimated in andafter next consolidated fiscal year.

q.

Provision for Treatment of PCB Waste—Provision for treatment of PCB (Poly ChlorinatedBiphenyl) waste is provided based on estimated costs of the treatment for PCB products andequipment as well as their collection and transportation fees.

r.

Retirement and Pension Plans—The Company and consolidated subsidiaries have funded or
unfunded defined benefit pension plans and defined contribution pension plans for employees.
Certain consolidated subsidiaries have defined benefit corporate pension plans or severance
lump-sum payment plans, and calculate retirement benefit expenses by using the simplified method.

Costs of preparation work for unsuccessful proposals and other projects that are not realized arecharged to income, as incurred, and are included in cost of revenue.
e.

f.

g.

Investment Securities—All marketable securities are classified as available-for-sale securities andare reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a
separate component of equity. The cost of securities sold is determined based on themoving-average method.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-averagemethod or at amortized cost. For other-than-temporary declines in fair value, investment securities
are reduced to net realizable value by a charge to income.

h.

Jointly Controlled Assets of Joint Venture—The jointly controlled assets of the joint venture
consist of jointly controlled cash recognized based on the Company's share of the venture.

i.

Allowance for Doubtful Accounts—The allowance for doubtful accounts is stated in amounts
considered to be appropriate based on the Group's past credit loss experience and an evaluation ofpotential losses in the receivables outstanding.

j.

Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation iscomputed by the declining-balance method, except for buildings owned by the Company andstructures acquired on or after April 1, 2016, that are depreciated using the straight-line method, at
rates based on the estimated useful lives of the assets. The range of useful lives is from 8 to 57
years for buildings and structures, from 4 to 17 years for machinery and equipment, and from 4 to 15
years for tools, furniture, and fixtures.

- 12 -

14

m. Other Assets—Intangible assets and goodwill are carried at cost less accumulated amortization,
which is calculated by the straight-line method over their estimated useful lives.

Chiyoda Corporation Consolidated Financial Statements FY2018

The Company and its domestic consolidated subsidiaries account for the liability for retirement
benefits based on the projected benefit obligations and plan assets at the balance sheet date. The
projected benefit obligations are attributed to periods on a benefit formula basis. Actuarial gains andlosses are amortized on a straight-line basis over 10 years within the average remaining service
period.
Actuarial gains and losses that are yet to be recognized in profit or loss are recognized within equity(accumulated other comprehensive income), after adjusting for tax effects, are recognized in profit orloss over a certain period no longer than the expected average remaining service period of theemployees.

- 13 -

15

Notes to Consolidated Financial Statementss.

Asset Retirement Obligations—Under Japanese GAAP, an asset retirement obligation is defined
as a legal obligation imposed either by law or contract that results from the acquisition, construction,
development and normal operation of a tangible fixed asset and is associated with the retirement ofsuch tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted
cash flows required for the future asset retirement and is recorded in the period in which the
obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset
retirement obligation cannot be made in the period the asset retirement obligation is incurred, theliability should be recognized when a reasonable estimate of the asset retirement obligation can be
made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement costis capitalized by increasing the carrying amount of the related fixed asset by the amount of theliability. The asset retirement cost is subsequently allocated to expense through depreciation over
the remaining useful life of the asset. Over time, the liability is accreted to its present value eachperiod. Any subsequent revisions to the timing or the amount of the original estimate ofundiscounted cash flows are reflected as an adjustment to the carrying amount of the liability andthe capitalized amount of the related asset retirement cost.

t.

Research and Development Costs—Research and development costs are charged to income as
incurred.

u.

Leases—Japanese GAAP require that all finance lease transactions be capitalized by recognizing
lease assets and lease obligations in the balance sheet.

w. Foreign Currency Transactions—All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at thebalance sheet date. Foreign exchange gains and losses from translation are recognized in the
consolidated statement of operations to the extent that they are not hedged by foreign currency
forward contracts.
x.

Foreign Currency Financial Statements—Balance sheet accounts of consolidated foreignsubsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet
date except for equity, which is translated at the historical rate. Differences arising from suchtranslation are shown as "Foreign currency translation adjustments" under accumulated othercomprehensive income in a separate component of equity. Revenue and expense accounts ofconsolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate asof the balance sheet date.

y.

Derivatives and Hedging Activities—The Group uses derivative financial instruments, including
foreign currency forward contracts and interest swap contracts, as a means of hedging exposure toforeign currency risks and interest rate risks. The Group does not enter into derivatives for trading or
speculative purposes.
Derivative financial instruments are classified and accounted for as follows:(1) All derivatives are recognized as either assets or liabilities and measured at fair value, withgains or losses recognized in the consolidated statement of operations.

All other leases are accounted for as operating leases.
v.

(2) For derivatives used for hedging purposes, if such derivatives qualify for hedge accounting
because of high correlation and effectiveness between the hedging instruments and the hedged
items, gains or losses on derivatives are deferred until maturity of the hedged transactions.

Income Taxes—The provision for income taxes is computed based on the pretax income includedin the consolidated statement of operations. The asset and liability approach is used to recognize
deferred tax assets and liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes aremeasured by applying currently enacted income tax rates to the temporary differences.

Foreign currency forward contracts are utilized to hedge foreign exchange risks. Certain assets andliabilities on construction contracts denominated in foreign currencies are translated at thecontracted rates if the forward contracts qualify for hedge accounting.

The Company and its wholly owned domestic subsidiaries file tax returns under the consolidated
corporate-tax system, which allows companies to base tax payments on the combined profits orlosses of the parent company and its wholly owned domestic subsidiaries.
On February 16, 2018, the ASBJ issued ASBJ Statement No. 28, "Partial Amendments to
Accounting Standard for Tax Effect Accounting," which requires deferred tax assets and deferred tax
liabilities to be classified as investments and other assets and long-term liabilities, respectively.
Deferred tax assets were previously classified as current assets and investments and other assets,
and deferred tax liabilities were previously classified as current liabilities and long-term liabilities
under the previous accounting standard. The revised accounting standard is effective for annual
periods beginning on or after April 1, 2018. As a result, in the consolidated balance sheet for theprevious fiscal year, "deferred tax assets" in current assets decreased by ¥5,948 million, while"deferred tax assets" in investments and other assets increased by ¥5,580 million. In addition,"deferred tax liabilities" in current liabilities decreased by ¥816 million, while "deferred tax liabilities"
in long-term liabilities increased by ¥449 million.
In addition, due to the effect of offsetting "deferred tax assets" and "deferred tax liabilities" by thesame taxable entity, total assets and total liabilities decreased by ¥367 million.
The note related to tax effect accounting has additionally included items described in Note 8(excluding total amount of valuation allowance) and Note 9 of "Accounting Standard for Tax EffectAccounting" in Paragraph 3 to Paragraph 5 of ASBJ Statement No. 28. However, such additional
information corresponding to the previous fiscal year is not disclosed, following the transitional
treatments prescribed in Paragraph 7 of ASBJ Statement No. 28.

- 14 -

16

Chiyoda Corporation Consolidated Financial Statements FY2018

Foreign currency deposits are held to hedge foreign exchange risks derived from forecasted
purchases of fixed assets denominated in foreign currency.
Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are notremeasured at market value but the differential paid or received under the swap agreements is
recognized and included in interest expense.
z.

Per Share Information—Basic net income per share is computed by dividing net income available
to common shareholders by the weighted-average number of common shares outstanding for theperiod, retroactively adjusted for stock splits.
Diluted net income per share reflects the potential dilution that could occur if securities were
exercised or converted into common stock. Diluted net income per share of common stock assumes
full conversion of the outstanding convertible notes and bonds at the beginning of the year (or at thetime of issuance) with an applicable adjustment for related interest expense, net of tax, and full
exercise of outstanding warrants.
Diluted net income per share is not disclosed because there was no potential stock having a dilutive
effect for the fiscal years ended March 31, 2019 and 2018.
Cash dividends per share presented in the accompanying consolidated statement of operations are
dividends applicable to the respective fiscal years, including dividends to be paid after the end of theyear.

- 15 -

17

Notes to Consolidated Financial Statements

aa. Accounting Changes
Effective from the current fiscal year, the overseas consolidated subsidiaries excluding the ones in
the U.S., applied "Financial Instruments" (IFRS 9) and "Revenue from Contracts with Customers"(IFRS 15). The effect of these changes on consolidated financial statements was immaterial.

The costs and aggregate fair values of investment securities at March 31, 2019 and 2018, were as
follows:
March 31, 2019ab. New Accounting Pronouncements
On March 30, 2018, the ASBJ issued ASBJ Statement No. 29, "Accounting Standard for Revenue
Recognition," and ASBJ Guidance No. 30, "Implementation Guidance on Accounting Standard for
Revenue Recognition." The core principle of the standard and guidance is that an entity should
recognize revenue to depict the transfer of promised goods or services to customers in an amountthat reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. An entity should recognize revenue in accordance with that core principle by applying
the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The accounting standard and guidance are effective for annual periods beginning on or after April 1,
2021. Earlier application is permitted for annual periods beginning on or after April 1, 2018.
The Company expects to apply the accounting standard and guidance for annual periods beginningon or after April 1, 2021, and is in the process of measuring the effects of applying the accounting
standard and guidance in future applicable periods.
3.

CONSTRUCTION CONTRACTS
Costs and estimated earnings recognized with respect to construction contracts which are accounted forby the percentage-of-completion method at March 31, 2019 and 2018, were as follows:
Millions of Yen
2019
2018

4.

Thousands of
U.S. Dollars
2019

Costs and estimated earnings
Amounts billed¥ 311,707(287,545 )¥ 449,145(408,727 )$ 2,808,174(2,590,497 )Net¥ 24,162¥ 40,418$ 217,676

Cost
Securities classified as—
Available-for-sale—equity securities¥ 411

Millions of Yen
Unrealized
Unrealized
Gains
Losses¥ 164

Cost
Securities classified as—
Available-for-sale—equity securities¥ 402

Millions of Yen
Unrealized
Unrealized
Gains
Losses
¥ 152

¥ 43

Fair
Value
¥ 511

March 31, 2019

Cost
Securities classified as—
Available-for-sale—equity securities$ 3,704

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
Losses$ 1,477$ 1,098

Fair
Value$ 4,083

Information on the available-for-sale securities sold during the years ended March 31, 2019 and 2018,
was as follows:
March 31, 2019

Securities classified as—
Available-for-sale—equity securities

Proceeds

Millions of Yen
Realized
Gains

¥7

¥1

Proceeds

Millions of Yen
Realized
Gains

¥ 896

¥ 202

Realized
LossesMarch 31, 2018

INVESTMENT SECURITIESMillions of Yen
2019
2018
Non-current—Equity securities¥ 1,603- 16 -

Chiyoda Corporation Consolidated Financial Statements FY2018¥ 453

March 31, 2018

Investment securities at March 31, 2019 and 2018, consisted of the following:

18

¥ 121

Fair
Value

¥ 2,067

Thousands of
U.S. Dollars
2019

Securities classified as—
Available-for-sale—equity securities

Realized
Losses$ 14,448- 17 -

19

Notes to Consolidated Financial Statements

7.

March 31, 2019
Thousands of U.S. Dollars
Realized
Realized
Proceeds
Gains
LossesSecurities classified as—
Available-for-sale—equity securities
5.

$ 68

Long-term debt at March 31, 2019 and 2018, consisted of the following:
Millions of Yen
2019
2018

$ 17

Long-term loans from banks, with interest rates at
1.9% (2019) and 1.9% (2018)—Unsecured
Long-term loans from banks, with interest rate at
0.8% (2019)—Unsecured
Long-term loans from banks, with interest rate at
0.7% (2019)—Unsecured
Long-term loans accounted as financial transactions,with interest rate at 3.4% (2019)—Collateralized
Obligations under finance leases
Total
Less current portion

INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATEDCOMPANIES
Investments in and advances to unconsolidated subsidiaries and associated companies at March 31,
2019 and 2018, were as follows:
Millions of Yen
2019
2018

Thousands of
U.S. Dollars
2019

Investments
Long-term receivables¥ 4,789¥ 5,613569$ 43,151

Total¥ 4,789¥ 6,183$ 43,151

Long-term debt, less current portion

Year Ending
March 31

In the fiscal year ended March 31, 2018, the U.S. Bankruptcy Court in Southern District of Texas
approved the proposed reorganization plan of ECS, and ECS became a wholly owned subsidiary of
SUBSEA 7 International Holdings (UK) Limited ("Subsea 7").

6.

ASSETS AND LIABILITIES ACCOUNTED FOR AS FINANCIAL TRANSACTIONS
Assets and liabilities accounted for as financial transactions at March 31, 2019 and 2018, were as
follows:
Millions of Yen
2019
2018
Land
Buildings and structures
Tools, furniture and fixtures
Current portion of long-term debt
Long-term debt

¥ 381
373
118
870

- 18 -

20

Chiyoda Corporation Consolidated Financial Statements FY2018

Thousands of
U.S. Dollars
2019$ 3,433
3,362
6
1,068
7,842

¥ 10,000¥ 10,000Thousands of
U.S. Dollars
2019$ 90,090

4,000

36,036

1,000

9,009

989
22
16,011(121 )

25
10,025
(2 )

8,911
201
144,247(1,095 )¥ 15,889¥ 10,022$ 143,152

Annual maturities of long-term debt, excluding finance leases, at March 31, 2019, were as follows:

EMAS CHIYODA Subsea Limited ("ECS"), which was an associated company of the Company
accounted for by the equity method, experienced financial hardship, brought about by a greater than
anticipated slowdown of the subsea market, and filed for bankruptcy protection under Chapter 11 of the
U.S. Bankruptcy Code in February 2017.

Since the negotiation with Subsea 7 progressed and the amount of settlement cost was fixed,
accordingly, the Company reversed the majority of the extraordinary loss posted in the prior year andrecorded ¥12,441 million as an extraordinary profit in the fiscal year ended March 31, 2018.

LONG-TERM DEBT

8.

Millions of Yen

2019
2020
2021
2022
2023

¥

118
122
747
10,000
5,000

Total

¥ 15,989

Thousands of
U.S. Dollars
$

1,068
1,104
6,738
90,09045,045$ 144,046

RETIREMENT AND PENSION PLANS
The Company and consolidated subsidiaries have funded or unfunded defined benefit pension plans anddefined contribution pension plans for employees.
Under defined benefit corporate pension plans, all of which are funded, employees are entitled to certain
lump-sum payments or pension payments based on cumulated points which are granted in accordancewith years of continuous employment, occupational classification and performance evaluation. Under
severance lump-sum payment plans, employees are entitled to certain lump-sum payments based onsalary and service period.
Certain consolidated subsidiaries have defined benefit corporate pension plans or severance lump-sum
payment plans, and calculate retirement benefit expenses by using the simplified method.

- 19 -

21

Notes to Consolidated Financial Statements(1) The changes in defined benefit obligation for the years ended March 31, 2019 and 2018, were as
follows:
Millions of Yen
2019
2018

(4) Reconciliation between the liability recorded in the consolidated balance sheet and the balances ofdefined benefit obligations and plan assets:

Thousands of
U.S. Dollars
2019

Balance at beginning of year
Current service cost
Interest cost
Actuarial losses
Benefits paid
Others¥ 21,174
1,092
179
(27 )
(1,506 )(16 )¥ 21,257
1,066
181
(18 )
(1,322 )11$ 190,764
9,841
1,618
(249 )(13,570 )(150 )

Balance at end of year

¥ 20,896¥ 21,174$ 188,254

Millions of Yen
2019
2018
Funded defined benefit obligations
Plan assets
Total
Unfunded defined benefit obligations¥ 21,684(20,778 )906
634¥ 22,091(21,711 )380
591$ 195,357(187,192 )
8,164
5,720

Net liability arising from defined
benefit obligations¥ 1,541¥$ 13,884(2) The changes in plan assets for the years ended March 31, 2019 and 2018, were as follows:
Millions of Yen
2019
2018

Thousands of
U.S. Dollars
2019

Balance at beginning of year
Expected return on plan assets
Actuarial (gains) losses
Contributions from the employer
Benefits paid
Others¥ 20,532
378(443 )
689(1,454 )(33 )¥ 20,128
337
359
1,010
(1,287 )(15 )$ 184,979
3,407(3,998 )6,209(13,099 )(299 )

Balance at end of year

¥ 19,669¥ 20,532$ 177,198(3) The changes in the liability recorded in the consolidated balance sheet by using the simplified
method for the years ended March 31, 2019 and 2018, were as follows:
Millions of Yen
2019
2018
Balance at beginning of year
Benefit costs
Benefits paid
Contribution to the plans
Others¥ 330
183(124 )
(78 )
3

¥ 308
164
(32 )
(72 )
(37 )

$ 2,978
1,652(1,124 )(709 )
32

Balance at end of year

¥ 313

¥ 330

$ 2,828- 20 -

22

Thousands of
U.S. Dollars
2019

Chiyoda Corporation Consolidated Financial Statements FY2018

Thousands of
U.S. Dollars
2019

972

Millions of Yen
2019
2018

Thousands of
U.S. Dollars
2019

Liability for retirement benefits
Asset for retirement benefits¥ 1,546(5 )¥ 1,176(203 )$ 13,930(46 )Net liability arising from defined
benefit obligations¥ 1,541¥ 972$ 13,884(5) The components of net periodic benefit costs for the years ended March 31, 2019 and 2018, wereas follows:
Millions of Yen
2019
2018

Thousands of
U.S. Dollars
2019

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial (gains) losses
Benefit costs in simplified method¥ 1,092179(378 )(77 )183¥ 1,066181(337 )
233
164$ 9,841
1,618(3,407 )(697 )
1,652

Net periodic benefit costs¥ 999¥ 1,308$ 9,007(6) Amounts recognized in other comprehensive income (before income tax effect) in respect ofdefined retirement benefit plans for the years ended March 31, 2019 and 2018, were as follows:
Millions of Yen
2019
2018

Thousands of
U.S. Dollars
2019

Actuarial losses

¥ 495

¥ 607

$ 4,466

Total

¥ 495

¥ 607

$ 4,466- 21 -

23

Notes to Consolidated Financial Statements(7) Amounts recognized in accumulated other comprehensive income (before income tax effect) in
respect of defined retirement benefit plans as of March 31, 2019 and 2018, were as follows:
Thousands of
U.S. Dollars
2019

Millions of Yen
2019
2018
Unrecognized actuarial gains¥ (917 )¥ (1,413 )$ (8,268 )

Total¥ (917 )¥ (1,413 )$ (8,268 )9.

EQUITYJapanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant
provisions in the Companies Act that affect financial and accounting matters are summarized below:a.

Under the Companies Act, companies can pay dividends at any time during the fiscal year in
addition to the year-end dividend upon resolution at the shareholders' meeting. Additionally, forcompanies that meet certain criteria, an Audit & Supervisory Board may declare dividends (except
for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its
articles of incorporation. The Board of Directors of a company with an audit and supervisorycommittee (as implemented under the Companies Act effective May 1, 2015) may also declare
dividends at any time because such company, by its nature, meets the criteria under the Companies
Act. The Company became organized as a company with an audit and supervisory committee
effective June 23, 2016. However, the Company does not meet all the above criteria.

(8) Plan assetsa.

Components of plan assets
Plan assets as of March 31, 2019 and 2018, consisted of the following:

b.

2019

2018

Debt investments
Equity investments
General accounts
Others

30 %
31
25
14

27 %
35
24
13

Total

100 %

100 %

The Companies Act permits companies to distribute dividends in kind (noncash assets) toshareholders subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of
Directors if the articles of incorporation of the company so stipulate. The Companies Act provides
certain limitations on the amounts available for dividends or the purchase of treasury stock. The
limitation is defined as the amount available for distribution to the shareholders, but the amount of
net assets after dividends must be maintained at no less than ¥3 million.
b.

Method of determining the expected rate of return on plan assets(9) Assumptions used for the years ended March 31, 2019 and 2018, were set forth as follows:

Discount rate
Expected rate of return on plan assets

2018

Mainly 0.7%
Mainly 1.8%

Mainly 0.7%
Mainly 1.6%

(10) Payables to defined contribution plans of the Company and consolidated subsidiaries for the years
ended March 31, 2019 and 2018, were ¥408 million ($3,682 thousand) and ¥594 million,
respectively.

Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as alegal reserve (a component of retained earnings) or as additional paid-in capital (a component of
capital surplus), depending on the equity account charged upon the payment of such dividends, until
the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common
stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may
be reversed without limitation. The Companies Act also provides that common stock, legal reserve,
additional paid-in capital, other capital surplus, and retained earnings can be transferred among theaccounts within equity under certain conditions upon resolution of the shareholders.

The expected rate of return on plan assets is determined considering the long-term rates ofreturn which are expected currently and in the future from the various components of the plan
assets.

2019

Dividendsc.

Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of suchtreasury stock by resolution of the Board of Directors. The amount of treasury stock purchased
cannot exceed the amount available for distribution to the shareholders, which is determined by aspecific formula.
Under the Companies Act, stock acquisition rights are presented as a separate component of equity.
The Companies Act also provides that companies can purchase both treasury stock acquisitionrights and treasury stock. Such treasury stock acquisition rights are presented as a separate
component of equity or deducted directly from stock acquisition rights.

- 22 -

24

Chiyoda Corporation Consolidated Financial Statements FY2018- 23 -

25

*3 Amounts of tax loss carryforwards and related deferred tax assets by tax loss carryforwards for the year ended March 31, 2019, were as follows:

M
After
After
Millions of Yen
1 Year
1 Year
2 Years
After
After
After
After
or
throughthrough
1
Year
1
Year
2
Years
3
Years
4
Years
Notes to Consolidated Financial Statements
31, 2019 throughLess
2 Years
3 Yearsor
throughthrough Marchthrough
After
March 31, 2019Less
2 Years
3 Years
4 Years
5 Years
5 Years
Total
Tax loss carryforwards*
¥ 656
¥ 115
¥ 236
for tax loss carryforwards(656 )(115 )(236 )Tax loss carryforwards*
¥ 656
¥ 115
¥ 236 Valuation¥ 47 allowance¥ 3,995¥ 40,468¥ 45,519
Valuation allowance for tax loss carryforwards(656 )(115 )(236 ) Deferred(47tax) assets(3,938 )(40,468 )(45,463 )*2 The valuation allowance increased by ¥64,433 million
increase is reversal of the parent company's deferred tax assets as
Deferred tax assets
56($580,485 thousand). The main reason for the56
10. INCOME TAXES
a result of reviewing the recoverability of deferred tax assets.
Thousantax loss carryforwards
and related
deferred tax assets by tax loss carryforwards for the year ended March 31, 2019, were as follows:*3 Amounts ofThousands
After
After
of
U.S.
Dollars
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes
1 Year
2 Years
3
After
After
After
After
Millions1ofYear
Yenwhich, in the aggregate, resulted in a normal effective statutory tax rate of approximately 31% for each of
After
After
After or Afterthroughthroughth
1 Year
1 Year
2 Years
3 Years
4 Years
the years ended March 31, 2019 and 2018.
1 Year
1 Year
2 Years
3 Years
4 Years
31, 2019 through
Less
2
Years
3
Years
4
or
throughthrough Marchthrough
After orthroughthroughthroughthroughAfter31, 2019 4 Years
Less
2 Years
5 Years
5 Years
Total
March 31,Less
2 Years
3MarchYears
5 Years
5 Years
Total3 Years 4 Years
The tax effects of significant temporary differences
and2019
tax loss carryforwards which resulted in deferred
Tax loss carryforwards*$ 1,037$ 2,133$
Tax loss carryforwards*
¥ 656
¥ 115
¥ 236
¥ 47$ 5,911¥ 3,995¥ 40,468¥ 45,519
tax assets and liabilities at March 31, 2019 and 2018, were as follows:
tax losscarryforwards(656 )(115)(236 )(47 )(5,911(3,938(40,468))(45,463)
Valuation
allowance
for tax loss$carryforwards) )(1,037(2,133)Tax loss carryforwards*$ 5,911$ 1,037$Valuation
2,133allowance$for431$ 35,997
364,579$ 410,090
Deferred tax assets
56
56
Valuation allowance for tax loss carryforwardsThousands of(5,911 )(1,037 )(2,133 ) Deferred(431 tax) assets(35,484 )(364,579 )(409,577 )Deferred tax assets
512
512 Thousands of U.S. Dollars
Millions of Yen
U.S. Dollars
After
After
After
After
*
Figures
for
tax
loss
carryforwards
weretheamountsby the effective
statutory tax rate.
1 Year
1 Year2multipliedYears
3 Years
4 Years
2019
2018
2019
or
throughthroughthroughthrough
After* Figures for tax loss carryforwards were the amounts multiplied by the effective statutory tax rate.
March 31, 2019Less
2 Years
3 Years
4 Years
5 Years
5 Years
Total
A
reconciliation
betweenthenormaleffective
statutory
tax
rates
and
the
actualeffective
tax
rates
reflected
in the accom
Deferred tax assets:Tax
lossthecarryforwards*$ 5,911$ 1,037$ 2,133$ 431$ 35,997$ 364,579$ 410,090
years
ended
March 31,consolidated
2019 and 2018,is asfollows:
A reconciliation between the normal
effective
statutory tax
rates and the actual effective tax rates reflectedinaccompanying
statementsof operations
fortheTax loss carryforwards*3¥ 45,519¥ 15,867$ 410,090
Valuation allowance for tax loss carryforwards(5,911 )(1,037 )(2,133 )(431 )(35,484 )(364,579 )(409,577 )years ended
March 31, 2019 and 2018, is as follows:
Deferred tax assets
512
512
Adjustment of percentage of completionfor foreign
20
construction
8,762
78,937* Figures for tax loss carryforwards were the amounts multiplied by the effective statutory tax rate.
2019
2018
Allowance for losses on construction contracts
8,499
600
76,575
A reconciliation between the normal effective statutory tax rates
and theeffective
actual effective
tax rates reflectedin the accompanying consolidated statements of operations for theNormalstatutory
tax rate*
Loss on valuation of investment securities
4,895
4,895
44,102
years ended March 31, 2019 and 2018, is as follows:
Expenses not deductible for income tax purposes
Normal effective
tax rate*
31 %Cost of revenue
4,747
4,029statutory42,767
2019
2018
Nontaxable dividend income
Expenses not deductible for income tax purposes
4
Accounts receivable from completed construction
Changeinvaluation
allowance
Nontaxable
dividend
income(7)
contracts
2,182
79
19,664
Normal effective statutory tax rate*
31 %Expenses( notincome tax purposes
4
in tax base between corporate income
tax and enterprise tax
Change in valuation allowance93)deductible forDifferenceLong-term accounts receivable
1,824
16,433
Nontaxable dividend income(7)
Profit/loss
injoint
ventureDifference in tax base between
5Long-term loans receivable
1,643
14,803corporate income tax and enterprise tax
Change in valuation allowance( 93)
Other—net
Difference 22
in tax base between
corporate income tax and enterprise tax
5Profit/loss in joint
Costs of construction contracts in process
1,051
958venture 9,476
Profit/loss in joint venture
22
Other—net
3
Allowance for employees' bonuses
908
1,169
8,187
Other—net
3
Actual effective tax rate
Liability for retirement benefits
584
242
5,268
Actual effective tax rate( 36) %
Actualtax rate 4,967( 36) %
Foreign tax credit carryforwards
551 effective
242* As loss before
incomeis provided,
the amountis abbreviated.
* As
losstaxes
beforeincometaxes
is provided, the amount is abbreviated.
Other
3,326
3,837
29,970is provided,
the amount 761,246
is abbreviated.
Subtotal of deferred tax assets * As loss before income taxes
84,49831,921
11. RESEARCH AND DEVELOPMENT COSTS
11. RESEARCH AND DEVELOPMENT COSTS
Valuation allowance for tax loss carryforwards* 3(45,463 )(409,577 )Research and development costs charged to income were ¥1,917 million ($17,277 thousand) and ¥1,873 million for the years ended March 31, 2019 and 2018, respectively.
11. RESEARCH
AND DEVELOPMENT
Valuation allowance for temporary
differences(37,943COSTS)(341,836 )Research and development costs charged to income were ¥1,917 million ($17,277 thousand) and ¥1,873 million for th
Subtotal valuation allowance*2(83,406 )(18,973 )(751,413 )Research and development costs charged to income were ¥1,917 million ($17,277 thousand) and ¥1,873 million for the years ended March 31, 2019 and 2018, respectively.
Total
1,091
12,948
9,832
Deferred tax liabilities:
Profit/loss in joint venture
Adjustment of percentage of completion for foreign
construction
Other
Total
Net deferred tax assets*1

¥

138

333

1,251

458

816
338

4,134

597

1,488

5,386

493

¥ 11,459- 25 -$

4,446- 25 -- 25 -*1 Net deferred tax assets as of March 31, 2019 and 2018, were recorded in the accompanying
consolidated balance sheet as follows:
Millions of Yen
2019
2018
Investments and other assets—Deferred tax assets
Long-term liabilities—Other¥ 701(207 )¥ 11,908(449 )

Thousands of
U.S. Dollars
2019$ 6,315(1,869 )- 24 -

26

Chiyoda Corporation Consolidated Financial Statements FY201827

Notes to Consolidated Financial Statements

12.

LEASES(3) Risk Management for Financial Instruments

The Group leases certain machinery, computer equipment, and other assets.

Credit risk management

Future minimum payments under non-cancelable operating leases were as follows:

Credit risk is the risk of economic loss arising from a counterparty's failure to repay or service debt
according to the contractual terms. The Group manages its credit risk from receivables on the basisof internal guidelines, which include monitoring of payment terms and balances of major customers
to identify the default risk of customers at an early stage.

Millions of Yen
2019
2018

13.

Thousands of
U.S. Dollars
2019

Due within one year
Due after one year

¥ 540
844

¥ 511
1,022

$ 4,873
7,606

Total

¥ 1,385¥ 1,534$ 12,479

Commercial paper and time deposits are exposed to insignificant default risk because transactions
are limited to companies with high credit ratings.
With respect to foreign currency forward contracts, the Group limits the counterparties to thosederivatives to major financial institutions that can bear losses arising from credit risk.

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

Market risk management (risk of foreign exchange and interest rates)(1) Group Policy for Financial Instruments

Foreign currency trade receivables and payables are exposed to market risk resulting fromfluctuations in foreign currency exchange rates. Such foreign exchange risk is hedged principallywith foreign currency forward contracts.

The Group uses financial instruments for cash surpluses, if any, invested in low-risk financial assets,such as commercial paper. For operating capital, the Group uses bank loans. Derivatives are used,
not for speculative purposes, but to manage exposure to the market risk of fluctuation in foreign
currency exchange rates and interest rates.
(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables, such as trade notes and trade accounts, are exposed to customer credit risk. Although
receivables in foreign currencies are exposed to the market risk of fluctuation in foreign currency
exchange rates, the position, net of payables in foreign currencies, is hedged by using foreign
currency forward contracts.
Cash equivalents include commercial paper, which have short maturities and are used for cash
surpluses.
Short-term investments include time deposits, which will mature three months after the date ofacquisition. Both commercial paper and time deposits are exposed to the default risks of the issuing
companies.
Investment securities are equity securities related to the business which the Group operates.
Marketable securities are exposed to the risk of fluctuations in stock prices.
Payment terms of payables, such as trade notes and trade accounts, are generally less than one
year. Although payables in foreign currencies are exposed to the market risk of fluctuation in foreign
currency exchange rates, those risks are netted against the balance of receivables denominated in
the same foreign currency, as noted above.

Interest expense associated with long-term debts is exposed to market risk resulting from changes
in interest rates. Such risk is hedged by interest rate swap contracts.
Foreign currency forward contracts are controlled under internal guidelines. The position related toparticular construction contracts is identified and is reviewed monthly. Reconciliation of thetransaction and balances with customers' confirmation replies is made, and the transactions related
to foreign currency forward contracts are executed and accounted for under internal guidelines.
Marketable and investment securities are managed by monitoring the market values and financial
position of issuers on a regular basis. The Group assesses the stock price risk quantitatively so as toaccount for significant declines in market value as impairment losses.
Liquidity risk management
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on theirmaturity dates. The Group manages its liquidity risk by holding adequate volumes of liquid assets
along with timely, adequate financial planning.
(4) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is
not available, another rational valuation technique is used instead. Also, please see Note 15 for fairvalues for derivatives.

Bank loans are used for operating capital. Although they are exposed to market risks from changes
in interest rates, the risk is hedged by using interest rate swap contracts.
Derivatives are foreign currency forward contracts and interest rate swap contracts, which are used
to manage exposure to market risks from changes in foreign currency exchange rates of receivables
and payables, and from changes in interest rates, respectively. Please see Notes 2.y and 14 formore details about derivatives.

- 26 -

28

Chiyoda Corporation Consolidated Financial Statements FY2018- 27 -

29

Notes to Consolidated Financial Statements(a) Fair values of financial instruments

March 31, 2019
Thousands of U.S. Dollars
Carrying
Unrealized
AmountFair Value
Gain (Loss)

March 31, 2019
Carrying
AmountMillions of Yen
Fair Value

Cash and cash equivalents
Short-term investments
Notes and accounts receivable—trade
Allowance for doubtful accounts*
Costs and estimated earnings onlong-term construction contracts
Accounts receivable—other
Allowance for doubtful accounts*
Jointly controlled assets of joint venture
Investment securities¥ 68,306
1,150
44,449(1,230 )¥ 68,306
1,150
44,449(1,230 )24,162
65,945(21 )
110,967453

24,162
65,945(21 )
110,967453

Total¥ 314,182¥ 314,182

Current portion of long-term debt
Notes and accounts payable—trade
Income taxes payable
Long-term debt

¥

¥

Total

¥ 191,975

118
175,277
708
15,870

Unrealized
Gain (Loss)30

217,676
594,099(191 )
999,704
4,083

217,676
594,099(191 )
999,704
4,083

Total

$ 2,830,472$ 2,830,472

Current portion of long-term debt
Notes and accounts payable—trade
Income taxes payable
Long-term debt

$

1,068
1,579,078
6,383
142,977$

1,068
1,579,078
6,383
133,850$ (9,127 )$ 1,729,507$ 1,720,380$ (9,127 )Total¥ 190,962¥ (1,013 )* Allowance for doubtful accounts corresponding to trade receivable is deducted.

Millions of Yen
Fair Value¥ 101,767
2,240
36,466(1,222 )¥ 101,767
2,240
36,466(1,222 )40,41841,967(20 )
131,374
511

40,41841,967(20 )
131,374
511

Total¥ 353,504¥ 353,504

Notes and accounts payable—trade
Income taxes payable
Long-term debt

¥ 147,654
894
10,000¥ 147,654
894
10,000Total¥ 158,549¥ 158,549

Chiyoda Corporation Consolidated Financial Statements FY2018$ 615,375
10,367400,445(11,087 )¥ (1,013 )Cash and cash equivalents
Short-term investments
Notes and accounts receivable—trade
Allowance for doubtful accounts*
Costs and estimated earnings onlong-term construction contracts
Accounts receivable—other
Allowance for doubtful accounts*
Jointly controlled assets of joint venture
Investment securities- 28 -$ 615,375
10,367400,445(11,087 )118
175,277
708
14,857

March 31, 2018
Carrying
AmountCash and cash equivalents
Short-term investments
Notes and accounts receivable—trade
Allowance for doubtful accounts*
Costs and estimated earnings onlong-term construction contracts
Accounts receivable—other
Allowance for doubtful accounts*
Jointly controlled assets of joint venture
Investment securities

Unrealized
Gain (Loss)

Cash and Cash Equivalents, Short-Term Investments, Notes and Accounts Receivable—Trade,
Costs and Estimated Earnings on Long-Term Construction Contracts, and Accounts
Receivable—Other
The carrying values of the accounts mentioned above approximate fair value because of theirshort maturities.
Jointly Controlled Assets of Joint Venture
The jointly controlled assets of the joint venture consists of cash recognized based on the
Company's share of the venture. The carrying values of jointly controlled assets of the joint
venture approximate fair value because of their short maturities.
Investment Securities
The fair values of investment securities are measured at the quoted market price of the stock
exchange for the equity instruments. Fair value information for investment securities byclassification is included in Note 4.
The above schedules do not include investment securities with fair values that cannot be
reliably determined.

- 29 -

31

Notes to Consolidated Financial Statements

Notes and Accounts Payable—Trade and Income Taxes Payable

March 31, 2018

The carrying values of the accounts mentioned above approximate fair value because of theirshort maturities.

Due in1 Yearor
Less

Current Portion of Long-Term Debt (Bank Loans) and Long-Term Debt (Bank Loans)
The fair value of fixed rate loans is calculated by discounting total principal and interest
payments to present value using a discount rate equal to the rate that would be charged if theloan was newly borrowed. The fair value of floating rate loans, which are subject to a specificmethod for interest rate swaps, is calculated by discounting total principal and interest
payments, which are handled together with interest rate swaps, to present value using a
discount rate equal to the rate that would be charged if the loan was newly borrowed.
Derivatives
Fair value information for derivatives is included in Note 14.

Investment securities that do not have a quoted
market price in an active market
Investments in equity instruments that do nothave a quoted market price in an active market
Investments in unconsolidated subsidiaries andassociated companies that do not have a quoted
market price in an active market¥ 1,554$ 10,342

2

2

23

5,613

43,151(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
March 31, 2019
Millions of Yen
Due after
Due after
1 Year
5 Years
throughthrough
5 Years
10 Years

Cash and cash equivalents
Short-term investments
Notes and accounts receivable, and costs and estimatedearnings on long-term construction contracts*
Accounts receivable—other*
Jointly controlled assets of joint venture¥ 68,232
1,150
61,52265,923110,967¥ 5,858

Total¥ 307,796¥ 5,858- 30 -

Chiyoda Corporation Consolidated Financial Statements FY2018

75,07941,947
131,374

¥ 583

Total

¥ 352,369¥ 583

Thousands of U.S. Dollars
Due inDue after
Due after
1 Year
1 Year
5 Yearsor
throughthroughLess
5 Years
10 Years
Cash and cash equivalents
Short-term investments
Notes and accounts receivable, and costs and estimatedearnings on long-term construction contracts*
Accounts receivable—other*
Jointly controlled assets of joint venture$ 614,704
10,367554,255
593,907
999,704$ 52,778

Total$ 2,772,939$ 52,778* Allowance for doubtful accounts is deducted.
Due in1 Yearor
Less

32¥ 101,727
2,240

Thousands of
U.S. Dollars
2019¥ 1,147

4,789

Cash and cash equivalents
Short-term investments
Notes and accounts receivable, and costs and estimatedearnings on long-term construction contracts*
Accounts receivable—other*
Jointly controlled assets of joint venture

March 31, 2019(b) Carrying amount of financial instruments with fair values that cannot be reliably determined
Millions of Yen
2019
2018

Millions of Yen
Due after
Due after
1 Year
5 Years
throughthrough
5 Years
10 Years

Please see Note 7 for annual maturities of long-term debt.

- 31 -

33

Notes to Consolidated Financial Statements

14.

DERIVATIVES

Derivative Transactions to Which Hedge Accounting Is Applied

Derivative Transactions to Which Hedge Accounting Is Not Applied

March 31, 2019

March 31, 2019

Contract
AmountMillions of Yen
Contract
AmountDue afterFair
One Year
Value

Unrealized
Gain (Loss)

Foreign currency forward contracts:
Selling USD/buying JPY
Buying USD/selling JPY
Buying EUR/selling JPY¥ 12,949
503
15

¥ 503

¥ 12,393499
14¥ (556 )
(3 )

Total

¥ 13,467¥ 503¥ 12,907¥ (560 )March 31, 2018

Contract
AmountMillions of Yen
Contract
AmountFair
Due after
Value
One Year(Loss)

Unrealized
Gain (Loss)

Foreign currency
forecasted
transaction

Total
PayablesTotal¥ 3,859
3,680
1,293
18

¥ 1,4441,634¥ (54 )
32(36 )¥ 8,852¥ 3,078¥ (58 )

¥ 1,636¥84¥ 1,637¥

84

March 31, 2018

Foreign currency forward contracts:
Selling USD/buying JPY
Selling EUR/buying JPY
Selling GBP/buying JPY
Selling AUD/buying JPY
Buying USD/selling JPY
Selling USD/buying KRW¥ 46,409
1,901
397
836
126
198

¥ 12,923

Total¥ 49,870¥ 12,923

Contract
Amount

¥ 354

¥ 354

(6 )
(11 )

(6 )
(11 )

¥ 335

¥ 335

Thousands of U.S. Dollars
Contract
AmountDue after
Fair
Unrealized
One Year
Value
Gain (Loss)

Foreign currency forward contracts:
Selling USD/buying JPY
Buying USD/selling JPY
Buying EUR/selling JPY$ 116,662
4,535
135

$ 4,535

Total$ 121,333$ 4,535- 32 -

Chiyoda Corporation Consolidated Financial Statements FY2018

Foreign currency forward contracts—
Accounted for under deferred hedge
accounting method:
Selling USD/buying JPY
Buying USD/selling JPY
Buying EUR/selling JPY
Buying SGD/selling JPY

Other*2:
Buying EUR/selling JPY
Buying SGD/selling JPY

March 31, 201934

Hedged Item

Millions of Yen
Contract
AmountFairContract
Due after
Value
AmountOne Year (Loss)*1$ 111,651
4,503
131

$ (5,011 )
(31 )
(4 )

$ 116,286$ (5,047 )Hedged Item
Foreign currency forward contracts—
Accounted for under deferred hedge
accounting method:
Selling USD/buying JPY
Buying USD/selling JPY
Buying SGD/selling JPY

Foreign currency
forecasted
transaction

Total
Other*2:
Selling USD/buying JPY
Buying USD/selling JPY
Buying EUR/selling JPY

Receivables
PayablesTotal

Millions of Yen
Contract
AmountFairContract
Due after
Value
AmountOne Year(Loss)*1¥ 1,600
5,163
99¥ 3,956
49¥ 6,862¥ 4,005

¥ 566
70
21

¥

2

¥ 658

¥

2

¥

67
(274 )(2 )¥ (209 )- 33 -

35

Notes to Consolidated Financial Statements

17.

March 31, 2019

Hedged Item
Foreign currency forward contracts—
Accounted for under deferred hedge
accounting method:
Selling USD/buying JPY
Buying USD/selling JPY
Buying EUR/selling JPY
Buying SGD/selling JPY

Foreign currency
forecasted
transaction

Total
Other*2:
Buying USD/selling JPY
Buying SGD/selling JPY

PayablesTotal

Thousands of U.S. Dollars
Contract
AmountFairContract
Due after
Value
AmountOne Year (Loss)*1$ 34,770
33,15911,651168$ 13,014
14,722$ (494 )293(327 )
2$ 79,750$ 27,736$ (525 )$ 14,741
7$763$ 14,749$

763*1 Fair value is based on prices obtained from financial institutions.
*
15.

2

Foreign currency forward contracts, which are applied to foreign currency translation at the contract
rate of the assets and liabilities on construction contracts denominated in foreign currencies.

CONTINGENT LIABILITIESAt March 31, 2019, the Group had the following contingent liabilities:

Guarantees on employees' housing loans and others
16.

OTHER COMPREHENSIVE LOSS
The components of other comprehensive loss for the years ended March 31, 2019 and 2018, were as
follows:
Millions of Yen
2019
2018
Unrealized loss on available-for-sale securities:
Losses arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total

Thousands of
U.S. Dollars

¥ 19

$ 172

PROVISION FOR BUSINESS STRUCTURE IMPROVEMENTThe Company recognized "provision for business structure improvement" as an extraordinary loss in thisfiscal year. As part of the Company's medium-term management plan, it has been striving to implement
structural reform including restructuring of the group companies. The Company expects ¥1,825 million($16,449 thousand) for the above restructuring in Southeast Asia region, and cost will be spent in thenext coming fiscal years.

Deferred gain (loss) on derivatives under hedge
accounting:
Gains (losses) arising during the year
Reclassification adjustments to profit or loss
Adjustment to acquisition cost of assets
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Adjustments arising during the year
Reclassification adjustments to profit or loss

Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Share of other comprehensive (loss) incomeof associates:(Loss) income arising during the year
Reclassification adjustments to profit or loss
Total
Total other comprehensive loss

- 34 -

36

Chiyoda Corporation Consolidated Financial Statements FY2018

$

(67 )
(2 )

¥ (107 )(202 )(310 )(5 )(607 )
1(606 )
(22 )

(69 )

¥ (315 )$(628 )¥ 2,554
(34 )
(21 )
2,498
(779 )¥ (3,003 )14(293 )(3,282 )1,006$ 23,010(307 )(195 )
22,507(7,019 )¥ 1,719¥ (2,276 )$ 15,487¥ (1,348 )¥

50(1,051 )$ (12,144 )¥ (1,348 )¥ (1,001 )$ (12,144 )¥ (418 )(77 )(495 )
408

¥

374
233
607
(186 )$ (3,768 )(697 )(4,466 )
3,681

¥

(87 )

¥

420

$

(784 )¥(99 )(750 )

¥

27
423

$

(900 )(6,764 )¥ (850 )¥450$ (7,664 )¥ (636 )¥ (2,723 )$ (5,734 )

¥

Total
Millions of Yen

¥

(67 )

Thousands of
U.S. Dollars
2019- 35 -

37

Notes to Consolidated Financial Statements

18.

20.

NET (LOSS) INCOME PER SHARE
A reconciliation of the differences between basic and diluted net (loss) income per share ("EPS") for theyears ended March 31, 2019 and 2018, was as follows:Year Ended March 31, 2019

Basic EPS—Net loss available
to common shareholders

Millionsof Yen
Net Loss
Attributableto Owners of
the Parent

Thousandsof Shares¥ (214,948 )

258,967

EPSa.

$ (7.48 )July 1, 2019(2) Number of newly issued sharesClass A Preferred Shares 175,000,000

Millionsof YenNet Income
Attributableto Owners of
the Parent

Thousandsof Shares
WeightedAverage
SharesYen(3) Issue price¥400 per share

EPS(4) Total issue price of stocks¥70,000,000,000

Basic EPS—Net income available
to common shareholders¥ 6,445258,968¥ 24.89

There is no dilutive effect for the year ended March 31, 2018.

(6) Amount of increase in capital

Concerning the sale of shares of Xodus Group (Holdings) Limited and its eight subsidiaries, the bookvalue of assets and liabilities of the Company at the time of sale, and the selling price of the stock of andrevenue from this sale (net) are presented below:
Millions of Yen
2018
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
Foreign currency translation adjustments
Investment accounts after the sales of shares
Gain on sales of shares
Selling price of the stock
Accounts receivable—other
OthersCash and cash equivalents¥ 2,919
1,945(2,353 )(25 )(1,051 )(994 )
1,732
2,173(377 )
192(303 )

Proceeds from sales of shares of subsidiaries
resulting in change in scope of consolidation¥ 1,684- 36 -(5) Method of subscription or allotment (planned allottee)
Allotment to Mitsubishi Corporation by third-party allotment

SUPPLEMENTAL CASH FLOW INFORMATION

Chiyoda Corporation Consolidated Financial Statements FY2018

Outline of Planned Preferred Shares(1) Payment date

¥ (830.02 )Year Ended March 31, 201838

The Board of Directors met on May 9, 2019, and resolved to issue Class A Preferred Shares (the"Preferred Shares") by third-party allotment, and to borrow funds to raise capital (the "Borrowing";"Preferred Shares" and "Borrowing" together are to be called the "Fundraising").
Furthermore, the issuance of the Preferred Shares and the amendments required to the articles ofassociation in relation to this issuance was proposed at the ordinary general meeting of shareholders of
the Company that was held on June 25, 2019.

There is no dilutive effect for the year ended March 31, 2019.

19.

(Fundraising by Issuance of Class A Preferred Shares by Third-Party Allotment and Borrowings)

U.S. Dollars

Yen

WeightedAverage
SharesSUBSEQUENT EVENTS¥35,000,000,000(7) Amount of increase in capital surplus¥35,000,000,000(8) Other notable matters
The shareholders who own the "Preferred Shares" do not hold voting rights, but have the rightto request compensation for converting shares to common stock.
Hence, there is a possibility that the existing common shares will be diluted.
Regarding this expected situation, the Company will carry out the following plan.

- 37 -

39

Notes to Consolidated Financial Statements

First, the Company will establish the right to request voting rights for compensation by cash
payment. Second, the Company will enable dual usage of these two rights for the shareholder.
These steps aim to limit possible requests for voting rights for compensation by converting
shares to common stock, and to enable the Company to acquire the Preferred Shares while
limiting the impact of potential common stock dilution as much as possible.
b.

Outline of the Borrowing

Up to five years maximum(6) Collateral assets or content of guarantee
None existent
Borrowing (3)Borrowing (1)(1) Borrowing institution(1) Borrowing institution

MUFG Bank, Ltd.

Mitsubishi Financial Service Corp.

(2) Borrowing amount(2) Borrowing amount¥20,000,000,000¥30,000,000,000(3) Borrowing rate(3) Borrowing rate
The Company agreed to pay the loan until July 2019. Further conditions are still underconsideration.

2.50%(4) Date of borrowing(4) Date of borrowing

July 1, 2019

May 16, 2019(5) Borrowing period(5) Borrowing period

Five years(6) Collateral assets or content of guarantee

Up to five years maximum(6) Collateral assets or content of guarantee

Subordinated special contracts existent

Borrowing (2)Usage of This Procured Fund

(1) Borrowing institution

The Company plans to use the capital funds raised as follows:

Mitsubishi Financial Service Corp.

(a) Working capital for existing and future planned projects(2) Borrowing amount(b) Carrying out of fundamental organizational restructuring to reduce costs¥60,000,000,000(c) Reinforcement of the construction abilities and investment in IT management(3) Borrowing rate

(Commencement of Lawsuit against Overseas Subsidiary)

1.50% (including the guarantee fee)(4) Date of borrowing
Planning to exercise the borrowing by March 2021

- 38 -

Chiyoda Corporation Consolidated Financial Statements FY2018

None existent(7) Notable special contracts and others

Existent40(5) Borrowing period

The Company's wholly owned subsidiary, Chiyoda International Corporation ("CIC"), a company
organized in the state of Washington, United States of America, has been sued in the District Court ofHarris County, Texas, United States of America.

- 39 -

41

Notes to Consolidated Financial Statements

1.

(3) Information about Sales, Profit, Assets, Liabilities, and Other Items

Filing date of the suit
June 11, 2019, Texas local time2.

Year Ended March 31, 2019

Outline of the plaintiff

Other*1

Total

Reconciliations*2

Sales:
Sales to external customers
Intersegment sales or transfers¥ 338,592
18¥ 3,360
6,208¥ 341,952
6,226¥ (6,226 )Total¥ 338,611¥ 9,568¥ 348,179¥ (6,226 )¥ 341,952

Segment profit (loss)
Segment assets
Segment liabilities
Other:
Depreciation
Amortization of goodwill
Investment in associatedcompanies
Increase in property, plantand equipment andintangible assets¥ (200,090 )
347,715
396,836

¥ 278
4,900
1,418

¥ (199,812 )
352,615
398,254¥¥ (199,795 )
352,341
411,495

2,781
11

34
29

2,816
41

2,816
41

2,837

2,837

2,480

2,480

(1) Number: One individual, former employee of CIC(2) Location: Texas, U.S.A.
3.

Content of the suit
The plaintiff seeks to compel CIC to make payment for alleged unpaid bonus(es), interest andrelated costs of approximately $10,050 thousand (equivalent to ¥1,115 million).

4.

Our position
The Company is to examine the content of the suit and properly respond to it in due course. There isa possibility of impact on our balance sheet, as well as on our financial results forecast, dependingon the progress of the lawsuit. However at the moment, the impact cannot be estimated in areasonable manner.

21.

SEGMENT INFORMATION
Under Japanese accounting standards, an entity is required to report financial and descriptive
information about its reportable segments. Reportable segments are operating segments or aggregationsof operating segments that meet specified criteria. Operating segments are components of an entity
about which separate financial information is available and for which such information is evaluatedregularly by the chief operating decision-maker in deciding how to allocate resources and in assessing
performance. Generally, segment information is required to be reported on the same basis as is usedinternally for evaluating operating segment performance and deciding how to allocate resources tooperating segments.

(2) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, Liabilities, andOther Items for Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2,"Summary of Significant Accounting Policies."
The profit in reporting segments is based on the operating income. Intersegment income andtransfers are measured at the quoted market price.

- 40 -

42

Chiyoda Corporation Consolidated Financial Statements FY2018

2,837
2,463

17

16
(274 )
13,240Consolidated*3¥ 341,952

Year Ended March 31, 2018
Millions of Yen

Reportable
Segment
Engineering

Other*1

Total

Reconciliations*2

Sales:
Sales to external customers
Intersegment sales or transfers¥ 507,573
27¥ 3,300
4,433¥ 510,873
4,460¥ (4,460 )Total¥ 507,600¥ 7,733¥ 515,334¥ (4,460 )¥ 510,873

Segment profit (loss)
Segment assets
Segment liabilities
Other:
Depreciation
Amortization of goodwill
Investment in associatedcompanies
Increase in property, plantand equipment andintangible assets¥ (12,478 )
415,322251,867

¥ 143
4,685
1,326

¥ (12,334 )
420,008
253,194¥¥ (12,330 )
420,704
261,286

3,522
297

23
29

3,545
327

3,545
327

3,561

3,561

2,400

2,400

(1) Description of Reportable Segments
The Group's reportable segments are those for which separate financial information is available andregular evaluation by the Company's management is performed in order to decide how resources
are allocated within the Group. The Group provides "Engineering" services globally, including
planning, engineering, construction, procurement, commissioning, and maintenance, adapting themost appropriate functions of each related company.

Millions of Yen

Reportable
Segment
Engineering

3,561
2,338

62

3
696
8,091

Consolidated*3¥ 510,873- 41 -

43

Notes to Consolidated Financial Statements

Year Ended March 31, 2019(2) Information about Geographical Areas
Reportable
Segment
Engineering

Thousands of U.S. Dollars
Other*1

Total

Reconciliations*2(a) Revenue
Consolidated*3

Sales:
Sales to external customers$ 3,050,386
Intersegment sales or transfers
166$ 30,270
55,929$ 3,080,657
56,096$ (56,096 )Total$ 3,050,553$ 86,199$ 3,136,753$ (56,096 ) $ 3,080,657

Segment profit (loss)
Segment assets
Segment liabilities
Other:
Depreciation
Amortization of goodwill
Investment in associatedcompanies
Increase in property, plantand equipment andintangible assets$ (1,802,621 ) $ 2,510
3,132,570
44,1483,575,100
12,782
25,059
102

309
270

25,56022,191159$ 3,080,657$ (1,800,110 ) $149 $ (1,799,960 )3,176,719(2,473 )3,174,246
3,587,882
119,282
3,707,165
25,369372

25,369372

25,56025,56022,35022,350Notes for the year ended March 31, 2019:*1 "Other" represents industry segments which are not included in the reportable segment,
consisting of temporary staffing services and travel services.
*2 Details of the reconciliations are as follows:(1) The reconciliation in segment profit of ¥16 million ($149 thousand) is the elimination ofintersegment trades.
(2) The reconciliation in segment assets of ¥(274) million ($(2,473) thousand) is the result of theelimination of intersegment trades of ¥(2,748) million ($(24,763) thousand) and the Group's
assets of ¥(2,474) million ($(22,290) thousand), which are not included in the reportablesegment.
(3) The reconciliation in segment liabilities of ¥13,240 million ($119,282 thousand) is the resultof the elimination of intersegment trades of ¥(2,748) million ($(24,763) thousand) and theGroup's liabilities of ¥15,989 million ($144,046 thousand), which are not included in thereportable segment.
*

3

Millions of Yen

Thousands of
U.S. Dollars

Japan
RussiaU.S.A.
Others¥ 120,400
116,961
35,465
69,125$ 1,084,692
1,053,703
319,506
622,754

Total¥ 341,952$ 3,080,657

Year Ended March 31, 2018
Millions of Yen
Japan
RussiaU.S.A.
Australia
Others¥ 109,795
100,943
112,105
114,854
73,175Total¥ 510,873

Note: Revenue is classified by country or region based on the location of construction sites.
(b) Property, plant and equipment
Year Ended March 31, 2019
Millions of Yen

Thousands of
U.S. Dollars

Japan
Asia
Others¥ 10,311
1,290
112$ 92,900
11,623
1,010

Total

¥ 11,714$ 105,534

Year Ended March 31, 2018

The calculation of segment profit (loss) is based on the operating income in the consolidated
statement of operations.

Related Information(1) Information about Products and Services
The engineering business represents more than 90% of the total sales of the Group. Accordingly,
the presentation of the information about each service is not required under Japanese GAAP.

- 42 -

44

Year Ended March 31, 2019

Chiyoda Corporation Consolidated Financial Statements FY2018

Millions of Yen
Japan
Asia
Others¥ 10,499
1,433
138

Total

¥ 12,071- 43 -

45

Notes to Consolidated Financial Statements(3) Information about Major Customers*2 Regarding the loan of funds, applicable interest rates are rationally determined upon taking into
account the market rate of interest.

Year Ended March 31, 2019Name
OJSC Yamal LNG

Related Segment

Millions of Yen
Revenue

Thousands of
U.S. Dollars
Revenue

Engineering¥ 116,918$ 1,053,315

Related Segment

Millions of Yen
Revenue

Engineering
Engineering
Engineering¥ 106,371
100,946
87,059There are no material balances with unconsolidated subsidiaries and associated companies as of March
31, 2018.

******

Year Ended March 31, 2018
Name
Ichthys Lng Pty Ltd.
OJSC Yamal LNG
Cameron LNG LLC(4) Information about Goodwill by Reportable Segment
The ending balance of goodwill as of March 31, 2019 and 2018, was as follows:
Millions of Yen
2019
2018

Thousands of
U.S. Dollars
2019

Engineering
Other*

¥ 112
314

¥ 123
344

$ 1,014
2,837

Total

¥ 427

¥ 468

$ 3,852* "Other" includes temporary staffing services.
22.

RELATED PARTY DISCLOSURES
There are no material transactions of the Group with unconsolidated subsidiaries and associatedcompanies for the year ended March 31, 2019.
There are no material balances with unconsolidated subsidiaries and associated companies as of March
31, 2019.
The material transactions of the Group with unconsolidated subsidiaries and associated companies forthe year ended March 31, 2018, were as follows:
Millions of Yen
Loan of funds*1,*2¥ 3,990*1 In accordance with Chapter 11 of the U.S. Bankruptcy Code, ECS submitted its restructuring plans,
and the U.S. Bankruptcy Court in the Southern District of Texas approved it on June 28, 2017.
Thus, the value of transactions during the term when ECS was a related party is presented, since
ECS is no longer a related party.

- 44 -

46

Chiyoda Corporation Consolidated Financial Statements FY2018- 45 -

47

Independent Auditor’s Report

48

Chiyoda Corporation Consolidated Financial Statements FY2018

Chiyoda Global Headquarters
Minatomirai Grand Central Tower, 4-6-2, Minatomirai, Nishi-ku,
Yokohama 220-8765, Japan
Phone: +81-45-225-7734 Fax: +81-45-225-7748

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