CHIYODA REPORT 2020
Energy and Environment in Harmony

Corporate Philosophy

CONTENTS
1	Corporate Philosophy and Business Vision
Realizing Sustainable Growth
4
6
8
10
12
14
16

Message from the CEO
Message from the COO
Chiyoda’s History
Value Creation Story
Realizing Our Vision for the Future
Message from the CFO
Financial and Non-Financial Highlights

A Business Foundation Underpinning
Sustainable Growth
20 Risk Management
22	Enhancing EPC Execution andManagement Capabilities
23	Reinforcing Human Resources(Talent Management)
Business Strategies

ESG Initiatives
40
41
42
44
52
54
55
56
58
60
61

Message from the CSO
CSR Values
Initiatives for Sustainability[G] Corporate Governance[G] Compliance[E] Environmental Initiatives[E] Projects for Harmonizing
with the Environment[E] Special Feature: Initiatives toward
Realizing a Hydrogen-Based Society[S] Safety Management[S] Health and Productivity Management[S] Social Contribution Activities

62 [S] Global Human Resource Development
Data Section

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 the use of our collective wisdom andpainstakingly developed technology.
Every Chiyoda Group employee engages in our corporate activities with this philosophy in mind
as we strive for corporate group management that earns the trust and empathy ofall of our stakeholders, including shareholders, customers, business partners, employees,
and local communities.

Business Vision
A Grand Opportunity for the Future
The Chiyoda Group is committed to beingan ‘Innovative’ Engineering Company,
shaping the future of energy and the global environment
with passion and cutting-edge technology.

66 Eleven-Year Summary
68 Key ESG Data
70 Corporate Information

26 Overview of the Chiyoda Group’s Business
28 Energy Business
30 Special Feature: The Cameron LNG Project32	Global Environment &Green Energy Business
34 Digital Transformation
36 Frontier Business

Editorial Policy

Disclaimer Regarding Forward-Looking Statements

CHIYODA REPORT 2020 is intended as a communication tool to comprehensively inform all stakeholders, including shareholders, investors, business partners, customers, directors, employees and society, of the Chiyoda Group’s
management policies, business strategies, financial status, corporate values,
growth potential, and activities toward realizing a sustainable global society.
We will strive to improve the quality of information contained in the report tostrengthen the awareness of the Chiyoda Group among all stakeholders andthe wider community.

Statements in CHIYODA REPORT 2020 are forward-looking, based on information available at the time of issuance. Readers should be aware that actual
results may differ materially from such statements due to a number of factors.

Please refer to the following website for information on the Chiyoda Group.

https://www.chiyodacorp.com/en/

1

Realizing Sustainable Growth

CONTENTS
4

Message from the CEO

6

Message from the COO

8

Chiyoda’s History

In this section, we describe Chiyoda Corporation’s vision for a sustainable

10

Value Creation Storysociety and our value creation story in pursuit of “Energy and Environment in

12

Realizing Our Vision for the Future

Harmony.” Messages from the Chairman & CEO, President & COO, and CFO

14

Message from the CFO

describe their views on our vision and strategies for revitalization and the16

Financial and Non-Financial Highlights

future based on our Medium-Term Management Plan.

2

Chiyoda Corporation CHIYODA REPORT 20203

Realizing Sustainable Growth

Realizing a sustainable society throughour commitment to company revitalizationand the future

Energy andEnvironment
in Harmony

Laying the Foundation for Sustained
Revitalization

Promoting Health and Productivity
Management

Fiscal 2019 was highlighted by the launch of our new MediumTerm Management Plan, “Chiyoda’s Revitalization Plan—
Initiatives for Revitalization and the Future,” which details astrengthened governance structure and balance sheet
improvements with a finance package that includes the issuance of preferred shares through third-party allotment to
Mitsubishi Corporation. Our revitalization initiatives include thethree pillars of 1. improved risk management, 2. enhanced
EPC* execution and management capabilities, and 3. reinforced
human resource management, while successfully completing
existing projects. We are committed to implementing themeasures required for successful revitalization.

The 2019 “Work Style Reform Bill” raised public interest in
health and productivity management. Chiyoda recognizes
that the health and welfare of its employees are key to fully
leveraging all of its abilities and realizing the Group’s corporate
philosophy. Chiyoda therefore published its “Declaration of
Health and Productivity Management” in April 2020, withmyself as Chief Wellness Officer (CWO), to promote healthand productivity management throughout the Chiyoda Group.
We will undertake strategic investment to ensure the health of
every employee as well as increase vitality and improve
productivity.

* Engineering, Procurement, and Construction

Renewing Our Corporate Culture
Chiyoda is renewing its corporate culture and revisiting thefollowing five basic principles that act as guidelines for all
employees when conducting business: 1. Accept responsibility and be proactive, 2. Improve awareness of the “chain of
responsibilities,” 3. Respect economic and social values when
conducting business, 4. Systematically manage risks to protect corporate value, and 5. Enhance the value of humanresources. Senior management, including myself, regularly
engage with employees to ensure we are all familiar withthese basic principles and, as a result, we are making steadyprogress toward successful revitalization.

A Shifting Business Environment
The effects of COVID-19 have exceeded all expectations andhave had a substantial impact on our lifestyles and businessenvironment alike. The changes in Chiyoda’s business environment have been extraordinary and the future remains
uncertain, with the prices of crude oil, gas and other energy
sources plummeting due to a stagnant global economy.
We conduct business with many of the world’s major oilcompanies and national oil companies, which are pursuing
new business portfolios in response to possible long-term
fluctuations in the energy supply—demand balance. Chiyoda
will continue to monitor the impact of these fluctuations
related to our customers’ investment decisions.
The significant changes in our business environment, suchas the paradigm shift toward a carbon recycling society andthe advancement of digital technology and artificial intelligence (AI) also represent opportunities for growth. To seize
these opportunities, we are expanding our business horizons
in line with the trend toward a carbon recycling society andreforming our business processes, including digital transformation. The implementation of this integrated strategy will
result in sustainable business growth.

Realizing Sustainable Growth

Message from the CEOContributing to the Future of the Global
Environment and the Development of a
Sustainable Society
Driven by a corporate philosophy of “Energy and Environment
in Harmony,” the Chiyoda Group has operated as a fully integrated engineering company for over 70 years. Through the
EPC of LNG, gas, petroleum, chemical, industrial, pharmaceutical and renewable energy facilities in Japan and overseas, the Chiyoda Group contributes to society through the
supply of optimized technologies and infrastructure tailored to
the requirements of each generation.
International environmental challenges are becoming more
complex. With the growing awareness of the urgency to combat climate change, Chiyoda constructs LNG plants (lowcarbon intensity), provides advanced technological solutions(including the supply of hydrogen and the provision of transportation worldwide to realize a hydrogen-based society), andpromotes renewable energy. We will continue to expand ourbusiness, based on our mission to continue contributing to
the future of the global environment and to developing a sustainable society through our expertise cultivated as a foremost
global integrated engineering company.
Through the dedication and hard work of all directors andemployees, the Chiyoda Group will continue to revitalize, andwe wish to express our sincere gratitude to all stakeholders
for their understanding and continuing support as we advance.

Kazushi Okawa
Representative Director,
Chairman of the Board, CEO & CWO

4Chiyoda Corporation CHIYODA REPORT 20205

Realizing Sustainable Growth
Realizing Sustainable Growth

Message from the COO
Executing Chiyoda’s Revitalization Plan in Response to Changes in theBusiness Environment

Shaping the future of energy andthe global environment through ourrevitalization plan and by redefining
the value of engineering

Our business environment is changing rapidly, including
plunging crude oil prices as a result of COVID-19, the acceleration of digital transformation, the shift to environmentallyfriendly energy to address the impacts of climate change, andthe drive toward a carbon-recycling society. The enhancement of technologies in the life science field can also be
regarded as a major transformation. Our Medium-Term
Management Plan, “Chiyoda’s Revitalization Plan—Initiatives
for Revitalization and the Future,” views these changes asopportunities for sustainable growth, and to this end, weestablished a “Digital Transformation Division” and a “Frontier
Business Division” in July and October 2019, respectively.
Our digital transformation initiatives include reforming
Companywide work processes utilizing AI and digital technologies, and developing digital products to support our EPC
execution capabilities and maximize client asset value. We
are also expanding our frontier business through “SPERA

Hydrogen,” our patented hydrogen supply chain technology,
developing a decentralized utility business in response to thenew data era, and establishing pharmaceutical and life science business as strategic fields for non-EPC business.
Chiyoda also implements a systematic approach to humanresource management to accelerate these initiatives.
Our business is anchored by the construction of LNG plants,
and we will strengthen our earnings foundation by selecting themost competitive projects with achievable goals and by engaging in activities to ensure securing orders and profitability.
We will pursue balanced growth between existing and new
businesses and aim to have EPC and non-EPC businesses
contributing equally to profits by 2030, while targeting thesame contribution balance between the “Energy Business”
and the “Global Environment Business.” As a result, we willtransform our business portfolio and revenue structure to realize a stable earnings foundation.

Redefining Engineering Value

Strengthening Project Risk Management
Effective risk management is essential to successfully completing projects as planned.
The Strategy & Risk Integration Division commenced activities in July 2019 and is responsible for managing Companywide operational risks. The Division implemented a newly
established integrated risk management system to strengthen
the project support structure and enhance human resource
management at every stage of a project, from securing orders
to completion and handover. For the Energy Business andthe Global Environment & Green Energy Business (which

underpin Chiyoda’s earnings), we have implemented aframework that integrates sales and project management.
Based on this framework and by prioritizing the steady execution of existing projects, we completed the Freeport LNG
and Cameron LNG projects in May and July 2020, respectively. Chiyoda demonstrated its technical expertise in both ofthese large-scale LNG plants, overcoming challenges to provide a stable natural gas supply across the globe. We willcontinue to improve our risk management capabilities in future
projects using our accumulated project execution experience.

Since its founding in 1948 as a company that contributes tosociety through engineering, the Chiyoda Group has facilitated the growth of society through the EPC of petroleum,gas, and industrial facilities. The essential value of engineering
is its contribution to social development by delivering innovative solutions. The general perception, however, is that largescale projects, which continue to increase in complexity due
to intensifying competition and the maturation of the plant
market, are executed by engineering companies on an EPC
lump-sum contract* basis involving substantial risk. To change
this perception, Chiyoda aims to redefine the value of engineering and create a new business model based on its original value, delivered through its frontier businesses and digitaltransformation. Chiyoda meets the needs of society by applying its wide-ranging engineering expertise and integrating
pioneering technology in response to industry and customer
requirements.
We will continue to advance our revitalization initiatives andimplement our growth strategies while accelerating ourendeavors to redefine engineering value, to shape the futureof energy and realize a sustainable global environment throughour engineering capabilities.
We sincerely appreciate the continuing invaluable supportof all of our stakeholders.
*A contracting agreement in which the duties stipulated in the contract are
fulfilled for a fixed monetary amount

Masaji Santo
Representative Director,
President, COO & CSO

6

Chiyoda Corporation CHIYODA REPORT 20207

Realizing Sustainable Growth

As Japan recovered from World War II, the Chiyoda Group emerged as an engineering industry pioneer,contributing to develop energy and chemical industries in over 60 countries worldwide. Since its
founding, the Chiyoda Group has responded to the needs of each generation by pursuing “Energy andEnvironment in Harmony.” The Chiyoda Group will continue to shape the future through engineering
to realize the sustainable development of society and the global environment.

Chiyoda’s Vision for the Future

Period of Transition
Social trends

Period of Rapid Growth

The Chiyoda Group’s initiatives

Period of Resurgence
Period of Growth
The Dawn of Chiyoda

1948–1970
Growing demand for oil

1971–1990
 arket changes resulting from theM
two oil crises
 ccelerating overseas productionA
as a result of the Plaza Accord(period of strong Japanese yen)

Period of high economic growth ounded in 1948 under the mission
F“Serving Society throughTechnology”
 ontributing to industrial reconC
struction through engineering

1991–2000
 ollapse of bubble economy andC
surging price of oil
Asian financial crisis
 ull-scale participation in LNG
F
projects

Realizing Sustainable Growth

Chiyoda’s History

2001–20102011–2020
Adoption of Paris Agreement
 apid development of shale oil andR
gas in the U.S.

Growth in LNG demand worldwideIncreasing need to address climatechange and environmental conservation issues
 xecuting large-scale LNG projects
E(Qatar, Oman, Russia, and Papua
New Guinea)
 xpanding flue gas desulfurizationE
technology licensing overseas

 ntered the renewable energy field,
E
including solar power generation

Engineeringthat shapes the
future of energy
and the global
environment

 stablishing technology for massE
storage and long distance ofhydrogen at normal temperatureand pressure xecuted large-scale LNG projectEin the U.S.

 xpanding into fields of generalEindustrial facilities and non-ferrous
metals romoting “Companywide
Pinternationalization”
 xecuting large-scale petroleum/E
petrifaction projects

2011 ommenced full-scale environmenC
tal conservation

2004

Secured order for Nagasaki Solar EnergyCo., Ltd.

Secured orders for LNG plants for Qatargas
Operating Company Limited (Plants 3 & 4)

1994
Crown Prince and Princess visit LNG plant
construction site in Ras Laffan Industrial
City, Qatar

1960

1977

2013

Mitsubishi Oil Co., Ltd.

Secured the Kaduna Refinery order for
NNPC (Nigeria)

Conducted SPERA Hydrogendemonstration

Secured an order for Mizushima grassroots refinery8

Chiyoda Corporation CHIYODA REPORT 20209

Realizing Sustainable Growth

Realize Our Corporate
Philosophy

The Chiyoda Group will leverage its innovative engineering expertise and cutting-edge technologies tocontinue creating value for society.
Driven by our corporate philosophy of “Energy and Environment in Harmony,” we promote our businessbased on our CSR values (shared values).
While drawing on our cultivated strengths to advance our Medium-Term Management Plan, “Chiyoda’s
Revitalization Plan—Initiatives for Revitalization and the Future,” released in May 2019, we will harness
our engineering capabilities to continue contributing to the development of a sustainable society.

• Optimization and digitalization of business assets• The contrast between
population growth andincreased demand forenergy vs. resource limitations and climate change(decarbonization)• ISO 26000• United Nations Global
Compact—Our Mission to Accomplish—

Chiyoda’s Vision
for the Future—Shaping the Future of Energy and
the Global Environment—• SDGs*• Paris Agreement• United Nations
Convention on Biological
Diversity

Realizing Sustainable Growth

Value Creation Story“Project Life Cycle Partner”

Enhance our business in aiming
for harmony between energy andthe environment and contribute to
the sustainable development ofsociety as an integrated engineering company through the use of
our collective wisdom and painstakingly developed technology

Maximizing customer asset value• Strengthening disasterresponse capabilities“Integration Partner” ofWide-Ranging Technologies
Global Standards

Medium-Term
Management Plan

Social andCustomer Issues
Facing the
Chiyoda Group(Chiyoda’s Revitalization Plan)—Initiatives for Revitalization andthe Future—

2. Environmental initiatives
4. Respect for human rights“Incubation Partner” for theDevelopment of Future Technologies
Resolving challenges in energy andthe global environment

Cultivated Strengths

1. A reliable company
3. Social contributions

Providing optimal compound systems forcomplex energy constraints

EPC Execution Capability
	Optimize design and deliver
superior quality

5. Commitment to fairness

Integration & Optimization
	Provide optimal solutions forcomplex issues and challenges

Realizing Our Vision for the Future(P.12–13)

 ommercialization of New
C
Technologies

The Chiyoda
Group’s CSR Values(Shared Values)	Integrate research capabilities
with EPC expertise* S ustainable Development Goals: A set of international goals and targets
adopted at the United Nations Sustainable Development Summit in
September 2015 to be realized by 2030

10

Chiyoda Corporation CHIYODA REPORT 202011

Realizing Sustainable Growth
Realizing Sustainable Growth

Realizing Our Vision for the Future
The Chiyoda Group will realize its vision for the future by advancing growth strategies that seize on theopportunities presented by the changing business environment and by transforming its businessportfolio under the Medium-Term Management Plan, “Chiyoda’s Revitalization Plan—Initiatives for
Revitalization and the Future.”

Business Environment

Changes in theBusiness Environment
 lobal economic recession
Gfrom the spread of COVID-19

Medium-Term Management Plan (Chiyoda’s Revitalization Plan)

Growth Foundation

Risk Management (P.20–21)

Energy Business (P.28–29)

By transforming the business portfolio, we will pursue 50% contributions from each of our EPC and non-EPC
businesses (business model) and from our Energy Business and Global Environment & Green Energy Business(business segment)* by 2030.
* Based on revenues in each business segment

Business ModelGlobal Environment & Green
Energy Business (P.32–33)

 otential long-term fluctuaP
tions in energy supply–
demand balance

Growth Opportunities

Growth Strategies

Strengthening Risk
Strengthening the EPC
Management Structure ​ Business​Plunging oil and gas prices

 hift from growth stage toSmaturity stage of LNG
marketFuture Business Portfolio (~ 2030)

Initiatives for Revitalization and the Future

EPC
NearlyEnhancing EPC
Execution andManagement
Capabilities ​~2030

Current

100%

Digital Transformation​

Services andoperations /Maintenancethrough project
life cycle (recurring business)

Incubation businessfor future technology

EPC
Integration
business forcompoundenergy system(P.34–35)(P.22)

Business Segment
 aradigm shift to carbonP
recycling society
 igital revolution andDtransformation
 rowing health consciousG
ness and enhancement oflife science technology

Reinforcing Human
Resources ​(P.23)

Redefining Engineering
Value​LNG
Gas chemicals

Chiyoda Corporation CHIYODA REPORT 2020

Renewable energy
New energy
Carbon management
and circulation
technology
Life science
Compound energy
systemFrontier Business (P.36–37)

Energy Business

12

~2030

Current

Global Environment & Green Energy Business

Energy Business

Global Environment & Green Energy Business13

Realizing Sustainable Growth

Adapting to the Changing Business Environment

Adapting to the changing businessenvironment by strengthening ourfinancial foundation andrestructuring our organization

While our business environment continues to undergo significant changes and the future remains uncertain, we are
improving project finance estimation and cash flow management to secure revitalization and to promptly implement
growth strategies. We are also enhancing dialogue withstakeholders and diversifying procurement of cash flow.

Through such measures, we will secure adequate levels of
cash flow to meet liquidity criteria. We are also strengthening
financial due diligence, increasing commercial support for
projects, and implementing other solutions geared toward
maintaining project revenue and preventing the impairment ofour corporate value.

Realizing Sustainable Growth

Message from the CFO

Enhancing Awareness of Economic Value Added

to accelerate revitalization

We have adopted the principle of “pursuing economic valueadded business activities” toward Chiyoda’s revitalization andare working to improve the financial literacy of officers andemployees through a corporate culture that promotes greater

fiscal awareness. As such, we have implemented a management accounting system that visualizes the revenue structureof business departments and operates in step with the progress of projects.

Capital Allocation and Efficiency
Our capital allocation centers on investments to reinforce ourmain business and promote growth strategies. We are investing
to reform EPC work processes, bolstering our execution
capabilities through digital transformation, and increasing theallocation of capital in pursuit of our corporate philosophy,“Energy and Environment in Harmony,” such as in our global
environmental business, which includes the fields of newenergy, pharmaceuticals and life sciences, carbon recycling,and hydrogen.

Current Business Environment and Role of the CFO
The spread of COVID-19 has drastically changed Chiyoda’sbusiness environment, evidenced by a stagnant global economy and the drop in crude oil and gas prices. As CFO, it is my
responsibility to adapt to this changing business environment
and promptly orchestrate stable financial strategies under our

Medium-Term Management Plan, “Chiyoda’s Revitaliza­
tion
Plan—Initiatives for Revitalization and the Future,” in ourefforts to transform our corporate culture and enable Chiyoda
to grow.

Strengthening Our Financial Health
Chiyoda’s financial strengthening plan in 2019 included athird-party allotment of shares valued at ¥70.0 billion to
Mitsubishi Corporation and subordinated loans of ¥20.0 billion from Mitsubishi UFJ Bank Ltd. to restore our financial
health. Through a resolution of the Ordinary General Meetingof Shareholders in June 2020, we conducted a capital reduction in August to eliminate the cumulative loss for retained
earnings. As we move ahead, we will gradually accumulate
profits, thereby improving shareholders’ equity and our financial position.

As our industry continues to face the challenge of unstableand fluctuating revenue, we will focus on enhancing our project portfolio and developing our global environmental business as a stable source of revenue, while expanding ourrevenue base as a way to respond to changes in the external
environment.
Although we have yet to announce our ROE and othertarget figures due to the increase in shareholders’ equity, we
are aiming for an 8%–10% gross profit margin from eachproject to enhance capital efficiency.

Returns to Shareholders
As a listed company, we are striving to restore our dividend assoon as possible in our commitment to fulfilling shareholder
expectations, by reorganizing business and revenue structures and increasing profits to secure the required funds. We
will continue to dedicate our efforts to providing our shareholders with stable dividends at the earliest opportunity. As
we proceed, I look forward to the continued understanding
and support of all of our stakeholders.

Koji Tarutani
Representative Director,
Executive Vice President & CFO

14

Chiyoda Corporation CHIYODA REPORT 202015

Realizing Sustainable Growth

Non-Financial Highlights

Financial Highlights
Revenue and Gross Profit (Loss) Margin

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

Billions of Yen
900

11.1

611.5
6.8

600

603.7
6.3

Tons

Billions of Yen%Tons-CO2

40

12

6,000

4

16.0

15.7

2.6

2.6

6

25,0005,665*

5,000

26.8
6.9

385.9

300

Industrial Waste Disposal Quantity*

%

20

342.0

CO2 Emissions Generated at Domestic Construction Sites

12

8

510.9

22,2234,642*

20,00017,1384,000
15,000

3,364
3,000
0

0

10,000

7,670

2,000

–2.4

0

1,146

1,000

–53.0
–300

2016/32017/3

2018/3

2019/3–60

2020/3

Revenue
Gross profit (loss) margin (right)

–12.3
–20

2016/32017/3

2018/3–58.4

2019/3

Total Assets and Return on Assets (ROA)

Billions of Yen

Billions of Yen

%

12

12.2

4

528.2

3.2

3.1

500

6.4
2

–0.6

–2.3

10

2018/3

2019/3352.3–214.90

2020/3

%
100

87.8

40

92.8

91.5

33

76.8

30

25
–20

25

27

60
20

200

2019/3

%

–10

–30

–41.1

2018/3

Ratio of Female Employees among New Recruits*

300

0.6

2017/3

Industrial Waste Recycling Rate*

80

385.1

2016/32020/3* At domestic construction sites, excluding sludge

0

420.3

400

2017/3* CO2 emissions increased in 2019/3 and 2020/3 due to a rise in domestic
construction.

89.5

461.3

1.3

3.4

0

5.1

0

2016/3

%

600

5,000

901

0

–60

2020/3Operating income (loss)
Operating income (loss) to revenue (right)

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

6–199.812,242

10,936

1.7
0Realizing Sustainable Growth

Financial and Non-Financial Highlights

19

40

–40
10

100

–6.8

–50

20

–50.0
−25

–62.9
2016/32017/3

2018/3

2019/32020/3−70

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

%

300

200

90

200.2
37.9

60

155.3
33.7

–60

2016/32017/3

2018/3

2019/3

–60.1

24.4
6.3

0

2017/3

Shareholders’ equity
Shareholders’ equity ratio (right)

16–441.2

2019/3Return on equity (ROE) (right)

Chiyoda Corporation CHIYODA REPORT 20202018/3

2019/3

Billions of Yen

Persons

Persons

100

6

1,600

1,200

82

80

1,165.0

71

400

63

4

811.8

301.2

20

New orders
Backlog of contracts

4

2018/3

2019/32020/32017/3

2018/32020/32

10

2017/34

340

0

2016/3

2019/3

73

71

2

351.8

5

60

771.6

800

403.6

2020/3

5

5

179.8
–450

2020/32017/3

Number of Outside Directors*–68.2
2018/3

2016/32020/3

Number of Non-Japanese Employees*

876.8

–23.1
2016/3

2019/3

New Orders and Backlog of Contracts

–17.1
–100

2018/3* Chiyoda Corporation, non-consolidated basis

653.5
0

2017/3

1,016.430

4.1

0

2016/3* At domestic construction sites, excluding sludge

157.6
37.5

100

1.7

0

2020/3

Total assets
Return on assets (ROA) (right)

Shareholders’ Equity, Shareholders’ Equity Ratio,
and Return on Equity (ROE)
Billions of Yen00

2016/32017/3

2018/3

2019/3* Chiyoda Corporation, non-consolidated basis

2020/3FY

2016/3* Chiyoda Corporation, non-consolidated basis

17

A Business Foundation
Underpinning Sustainable Growth

CONTENTS
20

Risk Management

22	Enhancing EPC Execution and Management Capabilities
23

Reinforcing Human Resources (Talent Management)

In this section, we describe how Chiyoda is strengthening its businessfoundation to facilitate sustainable growth based on the Medium-Term
Management Plan.

Photo provided by Qatargas
Operating Company Limited

18

Chiyoda Corporation CHIYODA REPORT 2020

19

A Business Foundation Underpinning Sustainable Growth

Ensuring the Future: Enhanced Risk Management
In fiscal 2019, the Chiyoda Group established its Strategy & Risk Integration (SRI) Division to

Project Risk Management Flow
Enforcing stringent risk management by actively addressing risks throughout every stage of a project’s life cycle.

strengthen risk management and support revitalization. We will further consolidate our risk
management capabilities this fiscal year, enhancing employee risk awareness while adapting
to the changing business environment and turning challenges into opportunities for growth to

Risk Profiling

Key Project-Related Risks(at the time of estimation andbefore securing orders)preserve corporate value and secure the future of the Chiyoda Group.
Technology risk

Fuminori Hasegawa

Step 1

Step 2

PolicyKey measures

1. Prevent

Share risks withcustomers and/or
partners

Labor shortage and wage risk
Geopolitical risk
Anticipate
and identify
risk items

Regulatory risk

with the development of the SRI Division. The Division sup-pleting projects according to plan. Improving the manage-

ports management by controlling risk strategy and provides ament of project risks as a foundation to achieving theframework for seamlessly integrating managed risks through-Medium-Term Management Plan (Chiyoda’s Revitalizationout a project’s life cycle, from securing orders to executionPlan), Chiyoda fortified the Project Management, Projectand handover.

Minimize local
construction (modular
construction
method, etc.)

Quantitatively
and qualitatively assess
risk items
3. Mitigate

Disaster risk

Effective risk management is essential to executing and com-

Decentralize vendors
and subcontractors

2. Transfer

Foreign exchange risk

Risk Management Structure

Monitoring(from execution
to completion)

Modify to contract terms

Material procurement risk

Senior Vice President,
Director of Strategy & Risk Integration(SRI) Division,
Chief Risk Management Officer (CRO)Countermeasures(at the time of estimation and before
securing orders)

Risk of diminished confidence among
business partners, vendors, andsubcontractors

4. Accept

Assess risks and monitor the status of control
measures regularly fromthe execution of projects
to their completion, andpractice the PDCA cycle
systematically

A Business Foundation Underpinning Sustainable Growth

Risk Management

Hedge risks throughinsurance
Utilize foreign exchange
contracts(costeffects)

Allocate reserve funds

Initiatives to Further Enhance Risk Management

Legal, and Corporate Planning departments, among others,

Chiyoda is progressing with the measures required to continue enhancing its project execution and risk management
capabilities.

Project Risk Management Structure

Relevant Divisions

Strategy & Risk Integration Division(Integrated risk management)
Management Support

Project Risk Management

Energy Project
Operations / Business
Development• Reinforce business foundation• Determine order-securing strategies
supported by financial and human resource
capabilities• Implement strategic human resource
management• Promptly identify areas requiring improvement
through joint efforts with relevant divisions• Develop a framework that facilitates the timely
reporting of areas in need of improvement
to management• Assess projects from take-up and identify,
analyze, evaluate, and formulate measures forrisk management at the proposal submission
stage• Develop an execution structure for projects
upon securing their orders• Monitor, analyze, evaluate, formulate measures, and visualize the profitability anddevelopment process of ongoing projects• Establish best practices and utilize lessons
learned from completed projects

Global Environment &Green Energy Project
Operations / Business
Development

Align
Cooperate

Technology &Engineering

Main Goals

Measures

Improve project management through the use of
AI and digital technologies

Utilizing AI and digital technologies, we will expand the use of platforms to ensure the rigorous management of costs, schedules, and quality throughout engineering, procurement, and construction,enhancing project management to improve profitability.

Strengthen contract
management capabilities

We will establish a specialized department that underpins profits and improves our risk awarenessfrom commercial and contractual perspectives to reinforce our contract management capabilities
during all project stages.

Introduce management
accounting

We will introduce a management accounting system that fosters a high level of risk awarenessamong all employees and promotes more efficient responses to project issues by each department.

Project Procurement& Logistics
Construction
HR & General Affairs
Finance & Accounting
Frontier Business
Digital Transformation

Refined Data Management

20

Chiyoda Corporation CHIYODA REPORT 2020

21

A Business Foundation Underpinning Sustainable Growth

Enhancing EPC Execution and Management
Capabilities

Reinforcing Human Resources (Talent Management)

Chiyoda is implementing the following initiatives to enhance its EPC execution and management capabilities, crucial to successfully completing increasingly large and complex projects.

The most valuable asset in any company is its employees. The Chiyoda Group expands and advances its
human resources by promoting diversity of age, gender, nationality, etc., to support revitalization and thefuture as detailed in the Medium-Term Management Plan (Chiyoda’s Revitalization Plan).

Human Resource Development

Strengthening Construction Capabilities
To strengthen its construction capabilities, which significantly

Construction Management Officer (CCMO) in August of the

impact the Company’s profitability through the EPC of proj-

same year. The Construction Division was established in Aprilects, Chiyoda established the Construction Work Execution

2020 by integrating construction-related organizations.

Reinforcement Committee in July 2019 and appointed a Chief

Key Strategies

Human Resource Development Goals
Chiyoda’s human resource development goals are to enhance

By implementing human resource development initiatives, webusiness execution capabilities and to develop organizational

will pursue an optimal balance between our business execu-

management capabilities to sustainably grow the Company

tion capabilities and organizational management competenceover the medium to long term.

while strengthening our human resource foundations.
Personnel Changes: Chiyoda develops its employees toBusiness Execution Capabilities

Chiyoda is embracing AI and digital technologies, reforming its business processes utilizing sophisticated data management,
and strengthening its human resources.

Human Resource Development Initiatives

A Business Foundation Underpinning Sustainable Growth

A Business Foundation Underpinning Sustainable Growth• Execution capabilities + Specific knowledge and experience

provide value by keeping Chiyoda one step ahead as an engi-+ Unique strengths and competitive advantage

neering company. We give employees diverse experience• Leverage expertise to continue generating profit

through systematic, varied and challenging personnel assignments, providing a multifaceted view of the business so

Key Strategies

Chiyoda’s AWP

Initiatives• Implement Chiyoda’s Advanced Work Packaging (AWP), advocated by the Construction
Industry Institute in the United States, which incorporates Chiyoda’s expertise and effectively applies disciplined and focused planning to support project execution• AWP is a project management tool using digital technology whereby construction work is“packaged” through integrated management to optimize the EPC process from engineering and procurement to commissioning, completion and handover•E fficiently manage materials through radio frequency identification (RFID)•U se beacons to enhance labor and safety management

Strengthen project data
management•C ollect and visualize ongoing project data in real time•U tilize real-time data to manage budgets, results, and forecasts•P roject partners, major subcontractors, home offices, and construction sites utilizing thesame data platform to execute projects•M ore efficient project planning by utilizing data accumulated in previous projects

Strengthen engineering
competitiveness• Partially automate engineering activities by utilizing AI and digital technologies•E nhance major vendor capability assessments•M ore robust implementation of quality procedures for materials, welding and manufacturStrengthen procurement
capabilities
ing, and improved forecasting of quality issues•R emote operation, inspection, and communication through AI and digital technologies•E stablish systems and procedures that involve legal departments from a project’s planning
Strengthen preventive legal
functionsstage to reduce risks
Enhance subcontract management • Improve subcontract management systems
structure•E nsure “Plan, Do, Check, Act” (PDCA) cycle within subcontract procedures
Develop and strengthen construction • Identify and assign appropriate construction personnel
dedicated personnel• Implement human resource development guidelines, including employee rotationthat they can gain a comprehensive understanding of theCompany’s earnings structure and accumulate the broad• Strengthen the organization by cultivating human resources

experience required for organizational management.

to achieve organizational goals
Human Resource Development: Chiyoda’s human resource
development is divided into the following four disciplines tostrengthen business execution capabilities. A Human
Chiyoda’s Sustainable GrowthBusiness execution
capabilities

Internet of Things (IoT): workplacesafety and work management
systemOrganizational Management Capabilities• Innovation + Leadership + Broad perspective + Commitment

Business Execution
Capabilities
Execution capabilities+
Specific knowledge andexperience+
Unique strengths that differentiate Chiyoda from competitors

Resources Officer is assigned to each discipline, and we
implement the required initiatives and systems to optimize

Organizational Management
Capabilities
Innovation+
Leadership+
Broad perspective+
Commitment

human resource development standards.
Four Disciplines
Engineering
Project Management
Business Incubation

Organizational management capabilities

Other Corporate Professionals

Transforming Our Human Resources Portfolio
To advance the growth strategies detailed in the MediumTerm Management Plan, the Chiyoda Group is transforming
its business portfolio, promoting its Global Environment &Green Energy Business Operations, embracing digital transformation, and redefining Chiyoda’s engineering value. We arealso appraising our range of human resources and evaluating

our deployment strategies to ensure an optimal balance
between the execution and development of existing and new
businesses, respectively. Successful identification of key staff
for strategic roles and establishing effective career development plans are essential to systematically developing suitablepersonnel to fulfill appropriate positions.

Please refer to the following website for details regarding Chiyoda’s career development initiatives (Japanese only).

https://www.chiyodacorp.com/jp/recruit/graduate/career/

22

Chiyoda Corporation CHIYODA REPORT 202023

Business Strategies

CONTENTS
26

Overview of the Chiyoda Group’s Business

28

Energy Business

30

Special Feature: The Cameron LNG ProjectIn this section, we provide an overview of Chiyoda Group’s business and32

Global Environment & Green Energy Businessoutline the strategies and business model of each business segment.

34

Digital Transformation

36

Frontier Business

INPEX—Operated Ichthys LNG onshore processing facilities, Darwin, Australia
Courtesy of INPEX Operations Australia Pty Ltd.

24

Chiyoda Corporation CHIYODA REPORT 202025

Business Strategies

New Businesses

Project Life Cycle Engineering
Since its establishment in 1948, the Chiyoda GroupEPC

has completed EPC projects in over 60 countries in
global environment engineering, the energy value
Procurement

chain, and many other fields.
We will continue contributing to society by meet-

Construction

Engineering

ing customer requirements throughout the entire

Commissioning(FEED) and EPC (including commissioning), to

Digital Transformation

Frontier BusinessOur new Digital Transformation Business will establish non-

Our new Frontier Business will develop, connect, and com-

EPC business by combining AI and digital technologies withmercialize a wide range of potential technologies to resolve

our engineering expertise accumulated over many years. We

issues in the areas of environment and energy, society, busi-

will deliver innovative solutions to improve plant efficiency andness succession and life science to meet society’s needs andmaximize customer asset value, such as the optimization andcustomer requirements.

autonomy of plant operation and maintenance.

project life cycle, supporting clients from the planning stage, through Front End Engineering Design

Business Strategies

Overview of the Chiyoda Group’s BusinessOur goal is to redefine Chiyoda’s engineering value andWe will also promote Companywide digitalization, health
FEED*

FEED / Basicengineering

handover and operation and maintenance (O&M).

Revamping /Expansion

R&D support

and productivity management, and workstyle reforms.

O&M

Project Life Cycle
Engineering

O&M

Business Execution System

De-commissioning

Planning

Feasibility study

establish our non-EPC businesses.

Business Execution System

Engineeringdata
warehouse* FEED: B asic plant engineering including planning and feasibility studies

Business Fields

Energy Project
Operations Division

Global Environment &Green Energy Project
Operations Division

Energy Business

Global Environment& Green Energy
Business

DigitalTransformation
Division

Frontier
Business Division

Energy Business
Strategy &Gas Value Chain

Petroleum Refining• Gas processing• LNG-Liquefaction-Regasification

Petrochemicals & Chemicals• Clean fuel• Refinery / Chemical refinery integration• Heavy oil upgrading• Olefins• Aromatics• Synthetic gas / Fertilizers• Methanol• Specialty chemicals

Environment• Solar power• Wind power• Biomass energy• Storage / power
management systems(EMS)• Hydrogen value chain• Flue gas desulfurization facilities• Acid gas / CO2 capture and storage• Industrial water-Wastewater treatment

centeredTechnology &Engineering Division

Logistics Division
Pharmaceuticals

Metals andNon-Ferrous Metals• Metallurgical refining•P harmaceuticals /and smelting
Formulation•T issue engineering /Regenerative medicine(iPS cells)• Laboratories

Integrated risk management to support projectthroughout its entire life cycle

Function-

Project Procurement &Global Environment & Green Energy Business
Renewable Energy

Risk Integration Division

Engineering

Procurement

General Industries• Electronic materials• Food manufacturing• Vegetable factories

Construction Division

Construction

Track Record~40%of the world’s LNG
project capacity

26

Over

800

refinery units
constructed

Chiyoda Corporation CHIYODA REPORT 2020

Over

600

petrochemical andchemical plants
constructed76
LNG receiving terminal
projects constructed

Over

1,800

plants constructed in
the Global Environment& Green Energy
Business fields

27

Business Strategies

Underpinning Group Earnings Foundation andContributing to the Stable Supply of Energy by
Enhancing Our EPC Capabilities

Business Strategies

Energy Business
Major Ongoing Projects
Construction of Freeport LNG Plant in the U.S.
Commenced commercial operations

Chiyoda Corporation’s operating environment has undergone significant changes in recent
years, requiring flexible strategies that can adapt to new challenges.
Hiroyuki Shimizu
Senior Vice President, Energy
Business Operations
Operations Director, Energy Project
Operations Division

To underpin the earnings foundation set out in our Medium-Term Management Plan
(Revitalization Plan), we will implement measures to minimize risks, effectively utilize AI anddigital technologies and improve the standard of our services in response to the changes in ouroperating environment.

Strategy• Market Trends
Our operating environment is currently dominated by COVID-19 and is characterized by a subdued global economy and aprolonged period of inactivity in energy demand resulting from shifts in the industrial structure and the diversification of energy
resources. Energy demand is expected to grow, however, centered on the use of electricity for LNG and other resources thatgenerate environmentally friendly energy.

The Freeport LNG Plant comprises threeliquefaction trains, producing approximately
15 mtpa of LNG using the most advanced
electric motor cooling system in the world.
The determination of all project participants
overcame every challenge during the EPC
phase, including torrential rain, Hurricane
Harvey, and a severe shortage of skilledlabor, to commence commercial operationof all trains in May 2020.
The completion of this large-scale LNG
plant will increase the energy export capacity of North America and diversify Japan’s
energy suppliers.

Courtesy of Freeport LNG Development, LP

ClientTrain 1 and Train 2: FLNG Liquefaction, LLC and FLNG Liquefaction 2, LLC
Train 3: FLNG Liquefaction 3, LLC

Production Capacity

4.64 mtpa x 3 trains

Location

Texas, USA

Scope of Business

EPC

Promotion of Energy Business
Key Initiatives

Measures

Ensure steady progress ofprojects• Secure profits by advancing large-scale projects in accordance with client requirements,
including the Tangguh LNG Project in Indonesia and the Ethylene Project and Golden Pass
LNG Project in the United States• Collaborate with customers, joint venture partners, suppliers, and subcontractors in the pursuitof solutions that benefit all stakeholders

LNG and other gases as corebusinesses• Continue with LNG and other gases as core businesses in Energy Business Operations in linewith market trends• Utilize the expertise accumulated from the successful completion of LNG plants around theworld to secure orders for future large-scale LNG EPC projects• Continue to meet LNG supplier expectations as a leading global LNG integrated engineering
contractor

Strengthen risk, schedule, andcost management• Further improve risk, schedule, and cost management on ongoing and new projects

Construction of a Large-Scale Ethane Cracking Complex
EPC work in progress

Strengthen our EPC capabili• Enhance EPC efficiency and strengthen competitiveness by leveraging our innovative engineerties through AI and digital teching expertise, utilizing cutting-edge AI and digital technologies, embracing challenges andnologies and diversify ourinnovation, and diversifying our project-related service portfolio
service portfolio

This project is notably unique in that the plantfacilities are modularized to minimize on-site
construction work. A consortium between
Chiyoda International Corporation, Chiyoda’s
subsidiary in the U.S., and Kiewit Energy
Group Inc., a construction contractor withextensive experience in the U.S., has provided
Front End Engineering Design (FEED) work
since the project commenced in July 2017.
As a global leader in EPC execution,
Chiyoda is working closely with Kiewit toleverage the two companies’ worldwide
experience in petrochemical and downstream
plant construction and successfully complete
the project.

Overview of ongoing module fabrication

28

Chiyoda Corporation CHIYODA REPORT 2020

ClientGulf Coast Growth Ventures LLC (ExxonMobil / Saudi Arabia Basic Industries Corporation (SABIC) JV)

Production Capacity

1.8 mtpa

Location

Texas, USA

Scope of Business

EPC

29

Business Strategies

The Cameron LNG Project— Undertaking the Challenge of a Large-Scale LNG Project in the U.S. —Overview of Cameron LNG

The Cameron LNG Project involved the engineering and construction of a new natural gas liquefaction plant with a total

ClientBusiness Strategies

SpecialFeatureCameron LNG, LLC

annual capacity of 13.5 million tons. As a leading global integrated engineering contractor, Chiyoda won the EPC contract

Annual
Production
Capacity

4.5 million tons x 3 trains

Location

Louisiana, USA

for the project.
Liquefied natural gas from Cameron LNG has been

Scope ofBusiness

EPC

Project
StatusCommenced commercial operations

exported to Japan and emerging markets in Asia for 20 years.
While Japan currently imports a significant volume of its LNG
from the Middle East, Southeast Asia and Australia, the U.S.
has now been added to this list of suppliers. Chiyoda will continue to leverage its engineering capabilities to ensure a stablesupply of energy in Japan.

Confronting a Series of Challenges
Immediately upon commencement, Chiyoda relocatedfollowing Hurricane Harvey. By 2018 a shortage of skilled

key personnel to McDermott’s office in Houston, Texas.

labor, coupled with a rise in labor costs and reduced pro-

The development of shale gas gained momentum follow-

ductivity of local workers, exceeded all expectations.

ing the gradual recovery of crude oil prices from rock bottom in 2016.
Also in 2016, two years after project commencement,
unprecedented adverse weather conditions across Texas

As a result, construction costs increased immeasurably and construction schedules were delayed considerably, the consequences of which greatly affected both JV
partners in meeting their contractual obligations.

and Louisiana delayed construction. Further, in August
2017, a state of emergency was declared across Louisiana

The North American Shale Gas Revolution as a Turning Point
The Shale Gas Revolution in North America transformed

Leveraging its global experience in LNG liquefaction

the global energy industry in the 21st century throughplant engineering and construction, Chiyoda formed atechnological advancements that enabled natural gas,

joint venture with McDermott International, Ltd. in 2014

known to be trapped in shale formations, to be extracted(formerly known as Chicago Bridge & Iron Company N.V.

and commercialized.

(CB&I)), to execute the Cameron LNG EPC Project inInnovations introduced in the U.S., such as hydraulicLouisiana on the Gulf of Mexico.

fracturing, have facilitated the extraction of petroleum andCameron LNG is a large-scale project comprising thenatural gas from shale formations widely distributed

engineering and construction of three LNG trains with an

throughout North America. Such technological advance-

annual production capacity of 4.5 million tons each. The

ments have resulted in the excavation of shale oil and gas

project owner, Cameron LNG, LLC, partners with leading

across the continent. Construction of petrochemical andenergy companies in the U.S., France and Japan, in oper-liquefaction plants to export LNG from the U.S. has

ating natural gas liquefaction facilities.

expanded in the region surrounding the Gulf of Mexico, in

President Trump observing the construction site

particular.

Overcoming a Multitude of Obstacles
Chiyoda’s contractual and moral obligations to valued

Although the project involved many overwhelming andclients remained a priority under such extraordinary chal-

unforeseeable challenges, Chiyoda’s unwavering commit-

lenges, and mitigation efforts, including increasing the num-

ment to its clients resulted in our completing the largest

ber of employees assigned to the U.S., were undertaken,

such project ever undertaken in Louisiana. The project

leading to the successful production of LNG by the firstprovided valuable lessons learned and equipped us withtrain in May 2019. President Donald Trump visited the proj-

the essential skills required to successfully overcome theect on the first day of LNG production and congratulated

challenges we will face going forward while contributing to

all those involved in the project for achieving this milestone.

the stable supply of energy worldwide.

Production of LNG from the second and third trainscommenced in December 2019 and May 2020, respectively, with final completion in July 2020.
Courtesy of Cameron LNG, LLC

30

Chiyoda Corporation CHIYODA REPORT 202031

Business Strategies

Realizing a Sustainable Global Environment as a
Leading Integrated Engineering Company

Completion of One of the World’s Largest Facilities for
Manufacturing Non-Standard Peptide Therapeutics

Developing the engineering industry and contributing to the global environment have been

In July 2019, PeptiStar Inc., in which Chiyoda is an investor,

Chiyoda missions since its founding. Concerns for the global environment continue to grow,completed construction of one of the largest facilities for the

exemplified by international efforts to promote carbon recycling. In fiscal 2020, Chiyoda will

manufacture of non-standard peptide therapeutics in theadvance ongoing projects while shifting its efforts to new EPC projects in the global environTerunobu Iio

world. The facility focuses primarily on the production of non-mental field, seizing upon the expansion of renewable and other forms of clean energy and the

Director of Global Environment &Green Energy Business Operationsand Global Environment & Green
Energy Project Operations Division
Senior Vice President

standard peptide therapeutics, a middle molecule drug con-growing trend toward the pharmaceutical and life science field.

sisting of exceptional features found in low molecule andBusiness Strategies

Global Environment & Green Energy Business

antibody drugs mostly used today.
With an annual production capacity of over 100 kilogramsof non-standard peptide therapeutics, the manufacturing
plant, engineered by Chiyoda, is the largest in Japan and oneof the leading drug manufacturing facilities in the world.

Strategy

Chiyoda utilized the technologies of Japanese business
partners on the project, which is critical to the growth of our

Expansion of the Global Environment & Green Energy Business
Key Strategies

PeptiStar’s manufacturing facility for non-standard peptide therapeutics

life sciences business and has generated interest throughout
Measuresthe industry for its large-scale, significant potential and revo-

Business expansion

Expand the EPC business into new energy; pharmaceuticals and life sciences; carbon recycling;
domestic petroleum, gas, and chemicals; and metals and resources

lutionary impact.

Strengthen our ability to meetcustomer requirements andresolve social issues

Strengthen our ability to provide solutions that meet customer requirements and resolve social
issues by utilizing our engineering expertise and experience, leveraging digital innovative technology, using external expertise, and promoting collaboration between our Frontier Business andDigital Transformation Divisions

Please refer to the following websites for details on our pharmaceutical engineering.

Improve profitability by
optimizing Group management

Improve project profitability by optimizing the management of resources throughout the Group
via more stringent alignment between our three major domestic subsidiaries* while reinforcing
EPC execution capabilities

Improve work quality

Eliminate workplace accidents and enhance work quality by strengthening governance andensuring safety awareness throughout the Group, including our three major domestic
subsidiaries* Chiyoda Kosho Co., Ltd., Chiyoda TechnoAce Co., Ltd., and Chiyoda System Technologies Corporation

	https://www.chiyodacorp.com/en/service/medicine/
https://www.chiyodacorp.com/media/Pharmaceutical_201706.pdf

Construction of CCS Demonstration Plant
Chiyoda has constructed a large-scale demonstration plant

Chiyoda will continue to draw on our major project execu-

that captures and stores CO2 from flue gas emitted from coal-tion expertise, cultivated in Japan and overseas, and utilize ourfired thermal power plants.

state-of-the-art gas processing technologies for the projects

The plant captures and stores over 500 tons of CO2

successful launch.

per day (approximately 50% of CO2 emitted by the Mikawa
Specific Measures

Power Plant of SIGMA POWER Ariake Corporation [Omuta City,• Expand renewable energy projects (solar, biomass, and wind power generation)• Expand battery storage system projects• Demonstrate technologies for energy management systems• Realize a business plan for the supply of utilities to industrial complexes and urban developments

Fukuoka Prefecture; output of 50,000 kW], a subsidiary ofStrategic Fields

New energy

Pharmaceuticals and life
sciences• Execute middle and high molecule drug projects• Engage in regenerative medicine projects• Construct large-scale plant facilities incorporating AI and digital technologies• Reduce costs, minimize lead times, increase quality, and enhance production efficiency

Carbon recycling• Commence EPC activities in CCS*1 and CCUS*2• Engage in various master plans

Domestic petroleum, gas, andchemicals• Maintain existing facilities• Shift to renewable energy plants• Restore aging plants

Metals and resources• Secure orders for, and steadily execute, EPC projects in Japan and overseas

Toshiba Energy Systems & Solutions Corporation [Toshiba ESS]).
Based on the technical requirements of Toshiba ESS,
Chiyoda is performing the EPC and test operation. The project,
led by Toshiba ESS, was authorized as a “Demonstration of
Sustainable CCS Technology Projects,” sponsored by the
Ministry of the Environment in fiscal 2016 and will commence
operations in 2020. The “Demonstration of Sustainable CCS
Technology Projects” reflects the vision of the Japanese
government to implement CCS by 2030 and reduce CO2 emissions from thermal power plants.

Construction of CCS demonstration plant*1 Carbon dioxide capture and storage*2 Carbon dioxide capture, utilization, and storage

32

Chiyoda Corporation CHIYODA REPORT 202033

Business Strategies

Implementing Chiyoda’s Revitalization Plan Centered on AI
and Digital Technologies and Promoting Digital Transformation

Toshiya Momose
Chief Digital Officer (CDO)
Director of Digital Transformation Division
Senior Vice President

Digital EPC Road Map
We will enhance EPC competitiveness through Chiyoda AWP and boost our EPC execution capabilities while improving work
efficiency.
Digital EPC Road Map
Enhancing EPC Execution Capabilities

Expanding and Strengthening
EPC Management Functions• Launch of Innovative Digital Products
We will deliver innovative solutions that maximize customer asset
value by combining AI and digital technologies with engineering andproject execution expertise cultivated over many years.

Launch of
Innovative
Digital Products• Promotion of Digital EPC
We will incorporate the latest digital technologies into our core EPC
business to improve our competitiveness.

Promotion of
Digital EPC(Strengthen EPC
Execution Capabilities)

Innovation of Work
Processes

Achieve a 20% Improvementin Work Efficiency throughTarget 20• Innovation of Work Processes
We will digitalize our work processes to advance workstyle reforms
and health and productivity management.

The three initiatives outlined above are our digital transformation goals. We will be aggressive in our approach tosimultaneously promote and integrate these initiatives
toward realizing our Medium-Term Management Plan
(Chiyoda’s Revitalization Plan).

Initiatives to Fast-Track Digital Transformation
Strategies

Specific Measures

Launch Innovative Digital
Products• Develop products that facilitate the optimization and autonomy of plant operation and maintenance• Tap into new markets and customers with the EFEXISTM brand• Expedite the profitability of proven products

Promote Digital EPC(Strengthen EPC execution
capabilities)• Upgrade construction execution capabilities through Chiyoda AWP*1• Realize a 20% improvement in work efficiency through the digitalization of engineering, procurement, and construction and by implementing RPA*2• Automate selected engineering activities• Optimize work processes on construction sites through the use of drones and beacons• Improve safety and work quality

Innovate Work Processes• Reinforce IT infrastructure through a new joint venture company (established in October 2020) with
IT giant TIS Inc.
• Implement Companywide digitalization and RPA*2 to achieve a 20% improvement in work efficiency• Promote workstyle reforms*1 Advanced Work Packaging: A project management tool using digital technology whereby construction work is “packaged” through integrated management to
optimize the EPC process from engineering and procurement to commissioning, completion, and handover*2 Robotic Process Automation

34

Chiyoda Corporation CHIYODA REPORT 2020

Document/CorrespondenceManagement System

Project DataManagement

Project Budget
Management System

Digital EPC

Worksite Safety andOperation Management
SystemTag Data Integration via
Plant Matrix

Workface Planning

AWP (Strengthen Construction
Execution Capabilities)
Target 20

Project IT
Road Map

Chiyoda’s Digital Transformation

Procurement Portal
Target 20

Digital EPC Application• Supplier/vendor management• Construction site work management• Construction cost management• Workface planning tools• IoT in construction

Strategy

Engineering Automation
Target 20• Efficient document and correspondence management• Cloud-based digital EPC/AWP execution platform• Project data collaboration software

Strengthen EPC Execution Capabilities

As our business and social environments continue to undergo significant changes, accelerating digital transformation is imperative to realizing “initiatives for revitalization and thefuture,” as detailed in our Medium-Term Management Plan (Chiyoda’s Revitalization Plan).
Our aim for digital transformation is improved work efficiency, extended global reach, andincreased use of AI and digital technologies, which have dramatically evolved in recent
years, to expand our new businesses in order to provide optimal solutions that maximize
customer asset value (industrial facilities). We will also advance our new workflow from theconcept stage to the implementation stage, creating new value and improving results, bycultivating a culture and mindset unbound by conventional beliefs.

Business Strategies

Digital Transformation

Launching Innovative Digital Products with the EFEXISTM Brand
Engineering × Digital = EFEXISTM
Creating a new standard to unleash untapped potential“EFEXISTM” is an abbreviation for EFFICIENCY and EXPERTISE.

facilities through EFEXISTM, we will provide optimal labor sav-

Chiyoda launches digital products that optimize the operationing, automation, remote operation, and safety solutions thatand maintenance of industrial facilities utilizing EFEXISTM.

enhance customer asset value.

By streamlining the operation and maintenance of industrial

Product Portfolio
Enhance Operation &MaintenanceImprove Performance

Improve Availability• LNG Plant AI OptimizerTM• Refinery Process Unit Optimizer• Distillation Column Operation Optimizer• Fired Heater Optimizer• Anomaly Prediction• Failure Prediction• Intelligent Furnace• Furnace Coking Prediction

Improve yield, efficiency, and output by optimizing
the performance of plants and facilities, thereby
increasing revenue

Improve availability through the prediction of plantfailure and damage, enabling rapid intervention,and ultimately increasing revenue and margins• Tank Corrosion Monitoring• Gas Leak Detection• SDM Control Tool
• Inspection Work Support and Automation
Tool
Enhance operation and maintenance by improving
the efficiency of daily maintenance and shutdown
maintenance, and reducing operational risk and waste

Expediting the Profitability of Proven Products

LNG Plant AI OptimizerTM, part of our EFEXISTM product portfolio, was adopted at an LNG plant in Indonesia and led to
improved production efficiency and increased LNG output, demonstrating how Chiyoda products are improving customer
industrial facilities worldwide.
Please refer to the website below for details on our digital transformation and EFEXISTM.

https://www.efexis.com/en

35

Business Strategies
Business Strategies

Frontier Business
Value We Aim to Provide

Redefining Engineering Value
Our world is facing challenges from social and business sustainability risks, such as the paradigm shift to a circular economy (including carbon recycling), incurable diseases, a changing
business environment, and technological know-how shifting toward younger generations. We
will ambitiously pursue new systems and solutions to address these issues by redefining ourengineering value.

Chiyoda will leverage its engineering expertise to resolve issues related to the environment and energy, the s­ ustainability ofbusiness and society, and life science.
Society’s Needs andCustomer Requirements
Environment and Energy

Tomonori Hirata• Energy demand growth• Climate issues• Diversification

Division Director,
Frontier Business Division

Society and BusinessContinuity• Aging population• Technology shift• Regional stagnation• Ensuing resilience againstchanges

Strategy
Our strategic fields are hydrogen and carbon recycling, theCO2 as a valuable resource, establish an international hydro-

diversified compound utility business, which is aimed at meet-

gen supply chain, integrate engineering expertise with AI anding the demands of the new data-driven era, and pharmaceu-

digital technologies to optimize energy efficiency, and commer-

ticals and life science. Specifically, we will strive to develop

cialize cell culture technology toward regenerative medicine.

Business Model

Life Science• Sustainability of insurance
system• Incurable diseases

Value We Provide

Initiatives• Engage in technology and business to realize acarbon-recycling society

A net zero-emission society• Develop an ecosystem in collaboration withenvironmentally conscious companies• Ambitiously pursue a diversified compound utility
business to realize an autonomous system forrenewable energy

A diversified and resilient
recycling-oriented society• Develop a solution-oriented business to realize thesustainability of social and customer assets

A society with continuously
growing industries andregions• Engage in technology and business to accelerate thedevelopment of pharmaceutical products, reduce raw
material costs, and develop cures for “incurable”
diseases

A healthy and sustainable
society

Contributing to a Sustainable Society

We will contribute to society by integrating technologies to deliver innovative solutions that meet society’s needs and customer
requirements.

Providing Value at Every Stage of Business Development

Concept Stage

Research and Development

Our initiatives in the strategic fields of hydrogen and carbon

By com­bining our expertise, networks and technology withrecycling and the diversified compound utility business, which ispartners, we will develop a business that provides stable com-

aimed at meeting the demands of the new data-driven era, arepany profits and supports a sustainable society.

organically linked, centered on Chiyoda’s hydrogen technology.
Demonstration

Commercialization

Diversified Utility System

Supply Side
Large-Scale
Renewable Energy

Industrial Facilities

Value weprovideResearch and development of
new problem-solving technologies that contribute to society

Accelerating the commercialization of new problemsolving technologies that
contribute to society

Integration and project management of new problemsolving technologies that
contribute to society• Refineries• Gas / LNG plants• Power generators• Solar power• Wind power• Biomass / Geothermal• Solar power• Wind power

Integrate Chiyoda’s engineering expertise and technologies with those of other companies at every stage
CO2

Renewable Energy

H2

Hydrogenbusiness

Energy Integration Hub
Energy Conversion

Business Model

Society’s needs
and customer
requirements

36

Chiyoda’s expertiseand technologies

Expertise and technologies of othercompanies

Chiyoda Corporation CHIYODA REPORT 2020

Commercializing
systems and technologies that resolve
social issues andmeet customer
requirements• Technology that utilizes CO2 as a valuable
resource• Technology for the production, storage,transportation, and use of hydrogen• Diversified and optimized energy systems• Secure and efficient cell culture process

Systems and solutions• Services• Licenses

Society

Customers

Carbon-recycling
technology

LOHC(Liquid organichydrogen carrier)

LOHC

H2

• Cogeneration facilities• Water electrolyzers• Heat pumps• Carbon-recycling
systems

Diversified
compound utility
business for the new
data-driven era• Electricity• Heat• Hydrogen

Customers• Industries• Commercial
and individual• Mobility

Storage

Chemicals• Batteries• LOHC• Heat storagee-fuels
Carbon-recycling
business

37

ESG Initiatives

CONTENTS
40

Message from the CSO

41

CSR Values

42

Initiatives for Sustainability

In this section, we describe the Chiyoda Group’s management structure for

44[G] Corporate Governancefacilitating sustainable growth and the key issues and specific initiatives to52[G] Compliancerealizing a sustainable society.

54[E] Environmental Initiatives

55[E] Projects for Harmonizing with the Environment

56[E] Special Feature: Initiatives toward Realizinga Hydrogen-Based Society

38

Chiyoda Corporation CHIYODA REPORT 2020

58

[S] Safety Management

60[S] Health and Productivity Management

61[S] Social Contribution Activities

62[S] Global Human Resource Development

39

ESG Initiatives

CSR Values

Realizing a Sustainable Society

The Chiyoda Group strives to be invaluable to society and trusted by its customers and other stakeholders.
Our CSR serves as a set of shared values to promote harmony between the global environment and economic
and social activities.

Founded in 1948 with the ideology of “serving society throughtechnology,” the Chiyoda Group contributes to resolving global
issues based on a corporate philosophy of “Energy andEnvironment in Harmony.”
Innovative solutions are required to meet the significant
changes taking place in our social environment and resolve theissues highlighted by the United Nations SDGs*1 in 2015,
among which climate change is the highest priority. Chiyoda
announced its support for the TCFD*2 recommendations in2019 and launched a scenario analysis according to the TCFD
framework. While society undergoes a paradigm shift to lowcarbon energy, the scenario analysis confirmed the impact ofour contributions to resolving social issues through technology
and creating new businesses while growing our Environmental
Business and Energy Business.
Of the 17 SDGs, Chiyoda designated “affordable and clean
energy,” “industry, innovation and infrastructure,” and “climate
action” as goals closely related to our business and as priority
issues to enhance our corporate value.
Seizing upon the drastic changes taking place in its social andbusiness environments, Chiyoda will redefine engineering value
and apply digital innovation technology in its mission to realize asustainable society that balances social and economic value.

The Company’s day-to-day business activities, including Environmental, Social and Corporate Governance (ESG), areconducted transparently through open dialogue for the benefit of all stakeholders.
CSR Values: Our Shared Values
ESG

Society’s Needs and Customer
Requirements

Initiatives

1. A Reliable Company
We strive to be a reliable company forour customers and stakeholders byproviding world-class technologies andexpertise.

2. Environmental Initiatives
We strive to remain invaluable to society
by utilizing technologies that promoteharmony between the global environment and economic and social activities.

3. Social Contributions
Through our engineering expertise, we
contribute to local communities andaddress global issues, including humanresource development, technology
transfer, and environmental protection.

Striving for Fair Corporate
Management and Becoming a
Reliable Company
Ensuring transparent corporate management based on fairterms and conditions is essential as we advance our business.
Chiyoda became a signatory to the UN Global Compact*3 in2012, and develops its business in accordance with principles
related to human rights, labor, the environment, and anti-corruption. Compliance is our top priority and we have appointed
a new Chief Compliance Officer (CCO), to ensure we adhere tofair business practices in our operations and that business partners and suppliers similarly comply with laws and regulations.
Through our EPC execution expertise, commercialization of
new technology, with a broad-minded approach, the Chiyoda
Group will continue to earn the trust of stakeholders and society as an integrated engineering company that shapes the
future of energy and the global environment.

ESG Initiatives

Message from the CSO——

Climate change
Biodiversity
Pollution and resources
Supply chain / Greenprocurement

Environmental Initiatives• TCFD initiatives • Projects for harmonizing
with the environment • Initiatives toward realizing
a hydrogen-based society 

P.56–57

Responsibility to customers
Safety and quality
Trust
Contributing to local
communities

Social Initiatives• Safety management • Social contribution activities 

P.58–59
P.61

HealthHuman rights
Labor standards

Social Initiatives• Employee health andproductivity management• Global human resource
development

P.62–63

Governance Initiatives• Corporate governance • Compliance

P.44–51
P.52–53

P.54
P.55

4. Respect for Human Rights

Masaji Santo
Representative Director,
President, COO & CSO

We are dedicated to respecting humanrights through a corporate culture that
respects employee diversity, individuality and character, where people are
motivated to do their best and of which
employees and their families are proud.

P.60

5. Commitment to Fairness
We are dedicated to achieving evengreater transparency and stability by conducting our operations in accordancewith the highest ethical standards.

ComplianceCorporate governanceRisk management

Please refer to the website below for details on CSR Values 1–5.
*1 SDGs (Sustainable Development Goals): A set of international goals adopted
at the UN Summit in September 2015 to be realized by 2030

	https://www.chiyodacorp.com/en/csr/csr/value/value1/*2 TCFD (The Task Force on Climate-related Financial Disclosures): An international organization created by the Financial Stability Board (FSB) in 2016 to
improve and increase reporting of climate-related financial information*3 UN Global Compact: An initiative proposed by Kofi Annan, then UN SecretaryGeneral, at the 1999 World Economic Forum, requesting company adherence to 10 principles related to human rights, labor, the environment, andanti-corruption

40

Chiyoda Corporation CHIYODA REPORT 2020

41

ESG Initiatives
ESG Initiatives

Initiatives for Sustainability
Priority Issues (Materiality) and Selected SDGs

VisionTo realize medium- to long-term growth, a company’s business must be sustainable. As the circumstances surrounding
global society increase in complexity, we must quickly identify the changes in our business environment and adapt
appropriately. The Chiyoda Group will draw on its engineering capabilities to contribute to resolving the global issues
identified by the Paris Agreement, the Sustainable Development Goals (SDGs), and the Task Force on Climate-related

The Company has identified “affordable and clean energy,”

universally shared global targets. These priorities are closely“industry, innovation and infrastructure,” and “climate action”

tied to our business and are therefore determined material toas its three issues of priority (materiality) and selected SDGs

enhancing corporate value and contributing to a sustainablefrom the 17 adopted by the United Nations in 2015 as a set ofsociety.

Financial Disclosures (TCFD) and provide social and economic value in the pursuit of a sustainable society.

Promotion Structure

Affordable andclean energy

Through a resolution of the July 2019 Board of Directors’

promote sustainability throughout the Group. The Group

meeting, the Company appointed the President & COO as

Liaison Meeting on CSR discusses sustainability and CSR

Chief Sustainability Officer (CSO). The IR, PR & CSR

issues. Through such efforts, we are promoting Groupwide

Department of the Company is responsible for all CSR-related

CSR activities. CSR policies and other significant matters areactivities. We have established a Group Liaison Meeting on

proposed to the CSO, who reports to the Board of Directors.

CSR,* which includes the participation of the Division Director* A meeting held to exchange internal and external information on CSR activities
at the Company and domestic Group companies and to discuss CSR-related
themes. The IR, PR & CSR Department serves as the secretariat of the liaison
meeting.

of the Corporate Management Division and those responsible
for sustainability in each division and Group company, toIndustry, innovationand infrastructure

Climate action

Identifying Priority Issues
STEP 1

Selecting business fields and issues

We identified the SDGs that are achievable by the Company
through HSE*/CSR target sheets, questionnaires, and workshops
at Group companies.

Appoint

Board of Directors
ReportPresident & COO
Chief Sustainability Officer (CSO)

STEP 2

Instruct / Approve

We compiled an extensive list of issues identified in STEP 1 andRequest for approval / Report

Narrowing down key performanceindicators (KPIs) and materiality

mirrored them with our Medium-Term Management Plan. Upon
HR & General Affairs Division
IR, PR & CSR Department

Report / Propose

Group Liaison Meeting on CSR
Information sharing /Discussion

Overseas Group
companies

42

Report / Propose

Chiyoda Corporation CHIYODA REPORT 2020

Domestic Group
companies

Divisions of Chiyoda
Corporation

Promotion ofaction plans

assessing their degree of impact on society and our business, we
identified the issues of highest priority.

STEP 3

Determining priority issues for sustainability

The priority issues identified in STEP 2 were discussed andassessed by the Group Liaison Meeting on CSR, and the results
were approved by the CSO.
* Health, Safety, Environment

43

ESG Initiatives
ESG Initiatives

Corporate Governance
Basic Principles

Overview of Corporate Governance Structure

Chiyoda envisions a management that maintains the trust andempathy of all its stakeholders, including shareholders, customers, business partners, creditors, employees and local
communities. This philosophy is the basis of our corporate
activities and we are working to continue strengthening
Chiyoda’s business foundations, ensuring sound andtransparent operations with the objective of realizing sustainable growth over the medium to long term. We uphold thecontinued strengthening of corporate governance and thedevelopment and reinforcement of an internal control system
as material issues and strive to put these into practice.

During the Ordinary General Meeting of Shareholders held on

which the Directors who are Audit & Supervisory Committee

June 23, 2016, the Company transferred its corporate gover-Members have voting rights to be exercised at the Board ofnance structure from the previous Company with an Audit &Directors’ meetings and are involved in the nomination ofSupervisory Board to a Company with an Audit & Supervisory

Representative Directors and decision-making on overall

Committee composed of a majority of Outside Directors.

business execution (excluding decision-making responsibili-

Based on this change, Chiyoda now operates a system underties delegated to the Directors).

Governance Structure (As of June 25, 2020)
Company with Audit & Supervisory Committee

Organizational Structure
Executive Officer System

Yes

Number of Directors
Of Whom, Outside Directors (Independent Directors)

10
4 (4 Independent Directors)

Term of Office(Excluding Members of the Audit & Supervisory Committee)

One year

Number of Audit & Supervisory Committee Members
Of Whom, Outside Directors

3
2

Number of Board of Directors’ Meetings Held (Fiscal 2019)17

Number of Audit & Supervisory Committee Meetings Held
(Fiscal 2019)14

Remuneration System for Directors and Audit & Supervisory
Committee Members•D irectors (excluding those who are Audit & Supervisory Committee Members): Base remuneration (according to roles and responsibilities), performance-linked remuneration (reflecting
the Company’s business performance in each term), and remuneration for the purpose ofpurchasing treasury stock (linked to improvements in the Company’s business performanceover the long term)•D irectors who are Audit & Supervisory Committee Members: Base remuneration (according
to roles and responsibilities)• Chiyoda has appointed four Outside Directors to ensure that its management monitoring function is conducted from an­objective and neutral standpoint.
• Chiyoda has enhanced objectivity and transparency and ensured the appropriateness of its processes for appointing anddetermining the remuneration of Directors through the participation of Independent Outside Directors and Full-Time Audit &Supervisory Committee Members in their decision-making, fulfilling a similar role to that of a voluntary nomination and remuneration committee.

Committee

Board of Directors

Note: Remuneration for outside directors is only base remuneration.

Strengthening Corporate Governance
Chiyoda will continue to strengthen its corporate governance.
External monitoring functions

Executive Advisory Committee

Forty percent of Independent Outside Directors are responsible for monitoring the Company’s
operations from an external perspective.

Separation of management supervi- Restriction of Directors who concurrently serve as Executive Officers to the President andsion and business execution
CFO to further ensure separation of management supervision and business execution
Audit & Supervisory Committee
Directors (10 members)
Audit & Supervisory
Committee Members

Composition and Roles/Responsibilities•1
 0 Directors, including those who are Audit & Supervisory Committee Members. The Board
meeting is held on a monthly basis.
• Important management matters are determined and business execution is monitored.
Appropriate decision-making and management supervision is ensured based on the objective and neutral perspectives of the Outside Directors.
•M atters to be decided include management plans, important matters regarding the organization’s human resources, and major investments and loans.
•T hrough a resolution of the Board of Directors, the Company has established the Executive
Advisory Committee, composed of Representative Directors who concurrently serve as
Executive Officers, the Senior Vice President, and other members of management at ahigher level. The Company stipulates the participation of the majority of those members as
an advisory body to the President & COO, responsible for business execution of theCompany, to enable prompt decision-making on matters related to business execution.
•T he Committee conducts decision-making on matters concerning business execution
adopted by a resolution of the Board of Directors and prior deliberation of matters to be
decided by the Board of Directors and reports to the President & COO, responsible for theCompany’s business execution.
•T hree members (one full time) consisting of two independent officers and one member who
has extensive insight into finance and accounting.
•T he Committee conducts audits on the overall business execution of Directors.
•T o strengthen its auditing activities, a dedicated staff member has been assigned to assist
the Audit & Supervisory Committee with its duties.

OutsideDevelopment and Management of the Internal Control System
In accordance with laws and regulations, Chiyoda has developed and manages an internal control system to ensure appropriate
execution of operations.
• Chiyoda has established an Internal Control Committee that coordinates and summarizes the opinions and proposals of its
members.

Executive Officers
Independent Outside
Directors

44

Directors who concurrently
serve as Executive Officers• At the end of the term or whenever necessary, the Internal Control Committee proposes improvements to internal controls to
the President & COO.
• The President & COO, through the Executive Advisory Committee, reviews proposals from the Internal Control Committee, andthe Board of Directors makes the necessary decisions on the internal control system.
• To enhance the framework of compliance with laws and regulations, the Company has established the position of Chief
Compliance Officer (CCO) and the Compliance Committee.

Chiyoda Corporation CHIYODA REPORT 2020

45

ESG Initiatives
ESG Initiatives

Corporate GovernanceEvaluation of the Effectiveness of the Board of Directors

Corporate Governance and Internal Control System

Chiyoda analyzes and evaluates the effectiveness of the Board of Directors every year. Progress on improvements is confirmed
General Meeting of Shareholders
Appoint / Dismiss

Submit / Report

Appoint / Dismiss
Audit / Reportand issues identified are discussed at meetings of the Board of Directors toward further enhancing its effectiveness.

Report / Statement of opinions

Cooperate

Audit & Supervisory Committee

Board of Directors

Appoint / Dismiss

Initiatives in Fiscal 2019 toward Enhancing the Effectiveness of the Board

Accounting Auditors

Process

ReportAppoint

ReportAppoint

Submit / Report

Cooperate /ReportCooperate

Chief Compliance Officer(CCO)
Compliance Committee
Internal Control
Committee

Instruct

Consult / Report

President & COO
ReportInstruct

ReportInstruct

Questionnaires

Internal Audit
Division

Executive Advisory
Committee
Submit / Report

Audit

Internal
audit

Financial
audit

Business Execution Divisions
Control / Supervise

Group Companies

Board of Directors• As of fiscal 2020, Chiyoda’s Board of Directors is com-• One of the three Directors who are Audit & Supervisory

posed of seven Directors and three Directors who are Audit

Committee Members possesses knowledge in finance && Supervisory Committee Members. Through the combina-

accounting.

fields of expertise and Directors with specialized skills andknowledge in the areas of corporate planning, humanresources and corporate affairs, finance & accounting,sales, technology & engineering, legal affairs and project
operations, the Board of Directors ensures diversity andbalance of knowledge, experience, and ability.

Fiscal 2019 Evaluation of the Board of Directors
A new corporate governance system was introduced, through which the ratio of Outside Directors increased
and the selection criteria for proposals to be discussed at meetings of the Board of Directors were revised.
As a result, declines in profitability on projects will be controlled at an earlier stage and the risks involved withpotential new projects will be managed in a timely and more effective manner.
Issues to be Addressed in Fiscal 2020
The business environment is undergoing significant changes, characterized by the stagnant global economy
due to the spread of COVID-19 and the drop in gas and crude oil prices as a result of the reduced demand forenergy. To address these changes, sufficient information will be provided in a timely manner with the aim ofraising the level of information provision to Directors and enabling smooth and prompt decision-making. In
these ways, the Company seeks to enhance the discussions at Board meetings from a variety of perspectives.

Compliance with the Corporate Governance CodePrinciples on Diversity of the Board of Directors

tion of Outside Directors with experience in their respective

Evaluation of theeffectiveness andinitiatives going
forward•A questionnaire on the effectiveness of the Board of Directors was provided to all Directors (including those
who are Audit & Supervisory Committee Members).
•P rogress on improvements in the issues identified in the previous evaluation was confirmed.
•O pinions on the current year’s evaluation and on further improvements to the Board’s effectiveness were
exchanged.
• Results and issues going forward were confirmed by the Board of Directors.
Main Items
1. Composition of the Board of Directors
2. Frequency and length of meetings of the Board of Directors
3. Matters for resolution by the Board of Directors and relevant materials
4. Agenda and management of meetings

In compliance with the Corporate Governance Code of theon corporate governance and is steadily promoting initiatives

Tokyo Stock Exchange, Chiyoda has formulated a Corporate

to strengthen its corporate governance.

Governance Policy that details its basic views and guidelines

Please refer to the following for details on our corporate governance practices.
Corporate Governance Policy

https://www.chiyodacorp.com/about/181227_GCPE.pdf
Corporate Governance Reporthttps://www.chiyodacorp.com/about/20190801_CGR_E.pdf
Basic Policy on Internal Control System (Japanese only)

https://www.chiyodacorp.com/about/20200401_internal_control.pdf

46

Chiyoda Corporation CHIYODA REPORT 2020

47

ESG Initiatives
ESG Initiatives

Corporate GovernanceStatus of Audits
Audits by Audit & Supervisory Committee• In addition to the monthly Audit & Supervisory Committee
meetings, Audit & Supervisory Committee Members attend
other important meetings including meetings of the Boardof Directors, Executive Advisory Committee, Internal Control
Committee, and Compliance Committee. Members provide
opinions on their assessment of any unlawful behavior by
Directors regarding the execution of their duties, legal violations, articles of incorporation, or any breaches of due diligence in making decisions.
• Audit & Supervisory Committee Members of the Company’s
three main domestic subsidiaries coordinate with Audit &Supervisory Committee Members of Group companies
through biannual meetings.

Directors and Audit & Supervisory Committee Members
Alignment between the Supervision and Audits
by Outside Directors and Outside Audit &Supervisory Committee Members, Internal
Audits, Audits by the Audit & Supervisory
Committee and Accounting Audits, andRelationship with the Internal Control Division• Outside Directors (excluding those who are Audit & Supervisory
Committee Members)
Outside Directors attended all 17 meetings of the Board ofRepresentative Director,
Chairman of the Board,
CEO & CWO*1

Masaji Santo
Representative Director,
President, COO*2 & CSO*3

Directors in fiscal 2019. Drawing on their experience andinsight in their respective fields of expertise, Outside Directors
provided their opinions and recommendations when required,received reports on the status of business execution, including the results of audits by the Audit & Supervisory Committee

Internal Audit

and accounting audits, and supervised Company operations.

An Internal Audit Division has been established to conduct• Outside Audit & Supervisory Committee Members

Group company internal audits.

Through attendance at Audit & Supervisory Committee and
Board of Directors’ meetings and reports from accounting

Alignment between Internal Audits, Audits by
the Audit & Supervisory Committee andAccounting Audits, and Relationship with theInternal Control Division

auditors, Outside Audit & Supervisory Committee Members•To ensure Audit & Supervisory Committee effectiveness,

ing the effectiveness of audits. Outside Audit & Supervisory

members interview each internal division regarding opera-

Committee Members also ensure appropriate business exe-

tions. Meetings are held on a regular basis with the Internal

cution by providing opinions and recommendations on

Audit Division and accounting auditors to share information

reports by the Internal Control Divisions at meetings of theand ensure mutual alignment. Meetings are also held on a

Board of Directors.

regular basis between the Audit & Supervisory Committee,

Kazushi Okawa

1980:	Joined Mitsubishi Corporation
2007:	Assistant Manager to Plant and Industrial
Machinery Division of Mitsubishi Corporation
2008:	Assistant to Corporate Plan Implementation
Office of the Company
2010:	Senior Vice President, Division COO of
Infrastructure Project Division of Mitsubishi
Corporation
2012:	Senior Vice President, Division COO of Plant
Engineering Division of Mitsubishi Corporation
2014:	Executive Vice President, Group COO of
Machinery Group of Mitsubishi Corporation
2016:	Executive Vice President, Group CEO of
Machinery Group of Mitsubishi Corporation
2019:	Corporate Advisor of Mitsubishi Corporation
Representative Director, Chairman of the Board& CEO of the Company
2020:	Representative Director, Chairman of the Board,
CEO & CWO of the Company (current position)

contribute to the audit reports of the Audit & Supervisory

Koji Tarutani
Representative Director,
Executive Vice President &CFO,*4 Division Director,
Finance & Accounting
Division

Committee, both directly and indirectly, by receiving reports
on accounting audits and internal audits. They provide opinions and recommendations when required, thereby enhanc-

Aiichiro Matsunaga
Director

the Internal Audit Division, and accounting auditors.

1986:	Joined The Mitsubishi Bank, Ltd.
2012:	General Manager of Corporate Business Risk
Management Division and General Manager(Special Assignment) of Global Compliance
Division of The Bank of Tokyo-Mitsubishi UFJ, Ltd.
2014:	General Manager of Credit Examination Office ofInternal Audit Division of The Bank of TokyoMitsubishi UFJ, Ltd.
2016:	General Manager (Special Assignment) ofInternal Audit Division of Mitsubishi UFJ Financial
Group and General Manager of Credit
Examination Office of Internal Audit Division of
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
General Manager of Legal Division of Mitsubishi
UFJ Financial Group and General Manager ofLegal Division of The Bank of Tokyo-Mitsubishi
UFJ, Ltd.
2019:	Senior Advisor of the Company
Representative Director, Executive Vice
President, CFO and Division Director of Finance& Accounting Division of the Company (current
position)
1986:	Joined Mitsubishi Corporation
2013:	General Manager of Power Systems International
Dept., New Energy & Power Generation Divisionof Mitsubishi Corporation
2014:	President of Mitsubishi Corporation do Brasil
S.A., Sao Paulo (concurrently), Deputy Regional
CEO of Latin America and the Caribbean of
Mitsubishi Corporation
2017:	Senior Vice President of Mitsubishi Corporation,
Regional CEO of Latin America and the
Caribbean, Sao Paulo (concurrently), Presidentof Mitsubishi Corporation do Brasil S.A.
2018:	Senior Vice President, Regional CEO of Latin
America and the Caribbean of Mitsubishi
Corporation (concurrently), President of
Mitsubishi Corporation do Brasil S.A.
2019:	Executive Vice President, Group CEO of
Industrial Infrastructure Group of Mitsubishi
Corporation (current position)
Director of the Company (current position)

1976:	Joined the Company
2005:	Project Manager for RGX6 Team of the Company
2014:	Project Sponsor for Jangkrik FPU Project of theCompany
2016:	Project Sponsor for Yamal LNG Project of theCompany
2018:	Project Director for Tangguh LNG Project of theCompany
2019:	Strategic Project Development Department,
Energy Project Operations Division of theCompany
Director of the Company (current position)

Tsunenori Kazama
Director

Nobuo Tanaka
Outside Director*5• Members of the Audit & Supervisory Committee align withaccounting auditors and meet regularly for debriefing byaccounting auditors, including the annual audit plan debriefing, the quarterly review debriefing, and the year-end audit
debriefing.

Hiroshi Yamaguchi
Outside Director*548

Chiyoda Corporation CHIYODA REPORT 2020

1975:	Joined Tokyo Electric Power Company
2005:	Executive Officer, General Manager of Engineering
Department, Electric Power Distribution Divisionof Tokyo Electric Power Company
2006:	Executive Officer, Deputy General Manager ofElectric Power Distribution Division of Tokyo
Electric Power Company
2007:	Managing Director, Deputy General Manager ofElectric Power Distribution Division of Tokyo
Electric Power Company
2012:	Director, Representative Executive Vice President
and General Manager of Electric PowerDistribution Division of Tokyo Electric Power
Company
2013:	Director, Representative Executive Vice Presidentof Tokyo Electric Power Company
2014:	Representative Executive Vice President andChief Engineer of Tokyo Electric Power Company
2016:	Representative Executive Vice President andChief Engineer, Safety Management of Tokyo
Electric Power Company Holdings, Inc.
2017:	Chairman of Kanto Electrical Safety Services
Foundation (current position)
2018:	Director, Audit & Supervisory Committee
Member of the Company
2019:	Director of the Company (current position)

1981:	Joined Mitsubishi Corporation
2009:	President of Mitsubishi Chile Ltda. (Santiago)
2012:	Senior Vice President, Division COO of
Environment & Infrastructure Business Division of
Mitsubishi Corporation
President of Mitsubishi Chile Ltda. (Santiago)
2013:	Director of the Company (retired in June 2016)
Senior Vice President, Division COO of
Infrastructure Business Division and Division
COO of Environmental Business Division of
Mitsubishi Corporation
2015:	Senior Vice President, Division COO of
Infrastructure Business Division of Mitsubishi
Corporation
2016:	Senior Vice President, Regional CEO for Latin
America & the Caribbean of Mitsubishi
Corporation
2017:	Senior Executive Vice President of the Company
Representative Director, President & CEO of theCompany
2019:	Representative Director, President, COO & CSO
of the Company (current position)

Takahiro Kitamoto
Full-Time Audit &Supervisory Committee
Member1973:	Joined Ministry of International Trade andIndustry (currently Ministry of Economy, Tradeand Industry)
1991:	Director of Directorate for Science, Technology
and Engineering of Organisation for Economic
Cooperation and Development (OECD)
1995:	Director, Industrial Finance Division of Industrial
Policy Bureau of Ministry of International Tradeand Industry
1998:	Minister of Embassy of Japan in the United Statesof America, Ministry of Foreign Affairs of Japan
2000:	Vice President of Research Institute of Economy,
Trade and Industry
2002:	Director-General, Multilateral Trade System
Department of Trade Policy Bureau of Ministry of
Economy, Trade and Industry
2004:	Director of Directorate for Science, Technology
and Industry of OECD
2007:	Executive Director of International Energy Agency
2012:	Outside Audit & Supervisory Board Member of
TEIJIN LIMITED (current position)
2013:	Outside Audit & Supervisory Board Member of
INNOTECH CORPORATION (current position)
2015:	President of The Sasakawa Peace Foundation
Director of the Company (current position)
2016:	Chairman of The Sasakawa Peace Foundation(current position)

1982:	Joined Mitsubishi Corporation
2000:	Risk Management Dept. of Mitsubishi
Corporation
2008:	CFO of Mitsubishi Corporation China Co., Ltd.
and CFO of Mitsubishi Corporation (Shanghai)Ltd.
2011:	General Manager of Administration Dept.,
Industrial Finance, Logistics & Development
Group of Mitsubishi Corporation
2013:	Planning Manager of Business Development andPromotion Division of JAPAN POST Co., Ltd.
2014:	Assistant Manager of Corporate Staff Section of
Mitsubishi Corporation
2015:	Deputy General Manager of Mitsubishi
Corporation (Taiwan) Ltd.
2018:	Senior Advisor of the Company
Director of the Company (Full-Time Audit &Supervisory Committee Member) (current
position)49

ESG Initiatives
ESG Initiatives

Corporate Governance

2000:	Registered as a lawyer (Tokyo Bar Association)
2003:	Joined Anderson Mori & Tomotsune
2007:	Joined Investment Banking Division of Deutsche
Securities Inc.
2009:	Joined American Life Insurance Company(currently MetLife, Inc.)	Senior Manager of Legal Affairs Department ofAmerican Life Insurance Company
2015:	Joined AIG American Home Assurance
Company, Ltd.
Head of Legal Affairs Office of AIG American
Home Assurance Company, Ltd.
2017:	Senior Partner of TH Law Office (current position)
2018:	Director of the Company (Audit & Supervisory
Committee Member) (current position)

Mika Narahashi
Outside Audit & Supervisory
Committee Member*5

Hisashi Ito
Outside Audit & Supervisory
Committee Member*5

1983:	Joined The Mitsubishi Trust and Banking
Corporation
2005:	General Manager, Money Market Activities
Division, Mitsubishi Trust and Banking Corporation
2010:	General Manager, London Branch, Mitsubishi
UFJ Trust and Banking Corporation
Executive Officer, General Manager, London
Branch, Mitsubishi UFJ Trust and Banking
Corporation
2012:	Managing Executive Officer, Mitsubishi UFJ Trustand Banking Corporation
2013:	Managing Director, Mitsubishi UFJ Trust andBanking Corporation
2015:	Senior Managing Director and CIO, Mitsubishi
UFJ Trust and Banking Corporation
2016:	Director, Senior Managing Executive Officer and CIO
2017:	Representative Director, President, The Master
Trust Bank of Japan, Ltd.
2019:	Representative Director and Chairman, Mitsubishi
UFJ Trust Systems Co., Ltd. (current position)

Director Remuneration System
Basic policy and approval at theGeneral Meeting of Shareholders

The Company’s Director remuneration system aims to strengthen the link with the Company’s business performance, share value with shareholders, and enhance motivation and morale toward improving business results.
The system was approved by resolution at fiscal 2015 Ordinary General Meeting of Shareholders held on June23, 2016.

Composition of remuneration
systemDirector remuneration consists of the following three types:• Base remuneration (according to roles and responsibilities)• Performance-linked remuneration (reflecting the Company’s business performance in each term)
The Company has adopted short-term performance indicators, such as net income attributable to owners of
the parent and dividends, to strengthen incentives for enhancing the Company’s business performance in the
short term.
• Remuneration for the purpose of purchasing treasury stock (linked to improvements in long-term corporate
value)The Company has adopted remuneration linked to improvements in the Company’s share price to strengthen
incentives for enhancing the Company’s business performance over the long term.

Process• Remuneration for individual Directors is decided by the Board of Directors based on remuneration criteria
resolved at meetings of the Board of Directors each year within the framework of total remuneration determinedat the General Meeting of Shareholders and following discussion among Representative Directors regarding
management content and economic conditions as well as each individual’s annual evaluation.
• To enhance the objectivity and transparency and ensure the appropriateness of decision-making processes, theopinions of Independent Outside Directors and Full-Time Audit & Supervisory Committee Members are heard
through their participation in discussions. In addition, the structure of the remuneration system is reviewed asnecessary by the Board of Directors.

*1 Chief Wellness Officer*2 Chief Operating Officer*3 Chief Sustainability Officer*4 Chief Financial Officer*5 Outside Director as stipulated in Article 2, Item 15 of the Companies Act

Executive Officers
Masaji Santo

Setsuo Iuchi

Masaki Kadono

Masaaki Oishi

President (COO & CSO)

Senior Vice President

Vice President

Vice President

Koji Tarutani

Terunobu Iio

Masakazu Fujiwara

Tetsuya Konno

Executive Vice President (CFO)

Senior Vice President

Vice President

Vice President

Fuminori Hasegawa

Hiroyuki Shimizu

Munetaka Horiguchi

Masaki Kumagai

Executive Vice President (CRO*1)

Senior Vice President

Vice President

Vice President

Masao Ishikawa

Hideo Matsui

Yasuyuki Maeda

Executive Vice President

Senior Vice President

Vice President

Yasumitsu Abe

Toshiya Momose

Junichi Kunihiro

Senior Vice President (CCMO*2)

Senior Vice President(CDO*5)Vice President

Shuichi Wada
Senior Vice President (CCO*3 & CHRO*4)

Masao Fujiwara

Nobuyuki Uchida
Vice President

Toshiaki Furugori

Senior Vice President

Vice President

Kenichi Ishiguro
Vice President

Directors (excluding
those who are Audit& Supervisory
Committee
Members)

Classification

Remuneration
principles

Base remuneration

According to roles
and responsibilities

Vice President

No more than ¥300 million per annum

An amount equivalent to no more than 1% of net income
attributable to owners of the parent and up to ¥200 million per
Performance-linked
annum, taking into account qualitative factors such as levels
remunerationof net income attributable to owners of the parent and dividends and progress toward the achievement of management
objectives.
Linked to improveAn amount equivalent to no more than ¥90 million per annum
Remuneration for the ments in theis paid to Directors who are not Audit & Supervisory
purpose of purchas- Company’s business Committee Members (excluding Outside Directors) who can
ing treasury stock
performance over the acquire the Company’s treasury stock through the Directors’
long termshareholding association.

Directors who are
Audit & Supervisory Base remuneration
Committee Members

Norimasa Matsuoka

Overview of remuneration system

Reflecting theCompany’s businessperformance in eachterm

According to roles
and responsibilities

Up to ¥84 million per annum*1 Chief Risk Management Officer*2 Chief Construction Management Officer*3 Chief Compliance Officer

Total Amount of Remuneration by Director Classification, Total Amount of Remuneration by Type, and Number of Directors Eligible*4 Chief Human Resources Officer*5 Chief Digital Officer

Reason for Appointing Outside Director
Name

50

Reason for Appointment

Nobuo Tanaka

Mr. Tanaka is expected to perform his duties appropriately as an Outside Director by drawing
on his extensive experience and knowledge gained from his service at the International
Energy Agency and other international organizations.

Hiroshi Yamaguchi

Mr. Yamaguchi is expected to perform his duties appropriately as an Outside Director byleveraging his extensive knowledge of the energy industry and experience as a Director,
Representative Executive Vice President, and General Manager of the Electric PowerDistribution Division of Tokyo Electric Power Company.

Mika Narahashi

Ms. Narahashi is expected to contribute to ensuring effective management by conducting
audits from a specialized and objective standpoint as a lawyer and an expert in corporate
law.

Hisashi Ito

Mr. Ito is expected to utilize his experience as Director and Senior Managing Executive
Officer of Mitsubishi UFJ Trust and Banking Corporation, President and Representative
Director of The Master Trust Bank of Japan, Ltd., and Representative Director and Chairmanof Mitsubishi UFJ Trust System Co., Ltd. in the auditing of management.

Chiyoda Corporation CHIYODA REPORT 2020

Reason for Designation as
Independent Officer

They are not involved in matters that arelikely to result in a conflict of interest withgeneral shareholders and are deemed
Outside Directors with no conflict ofinterest with general shareholders.

Directors (excluding those who are
Audit & Supervisory Committee
Members)
Directors who are Audit &Supervisory Committee Members

Remuneration for the
Performance-linked
purpose of purchasing
remuneration (millions
treasury stock (millionsof yen)of yen)No. of persons

Base remuneration(millions of yen)

12

115

13

28

4

56

(not applicable)(not applicable)

Notes: 1. Total remuneration for Directors who are not Audit & Supervisory Committee Members is ¥156 million and for Directors who are Audit & Supervisory
Committee Members is ¥56 million. Total remuneration for Outside Directors and Outside Audit & Supervisory Committee Members (two Outside
Directors, three Outside Audit & Supervisory Committee Members) is ¥51 million.
2. T he above numbers of persons represent the number of Directors and Audit & Supervisory Committee Members to whom remuneration was paid during
the fiscal year under review, including seven Directors (including Directors who are Audit & Supervisory Committee Members) who retired as of theconclusion of the 91st Ordinary General Meeting of Shareholders held on June 25, 2019.
3. O
 ne of the Directors is receiving remuneration, etc., from a subsidiary.

51

ESG Initiatives
ESG Initiatives

Compliance
Based on our conviction that a company’s business activities are underpinned by the trust of society andits customers, the Chiyoda Group has positioned compliance as a core value. We are proactively enhancing our compliance education and training programs to prevent unlawful and fraudulent acts, while continuing to reinforce our compliance systems to ensure early detection and facilitate a swift response. We
are working to further strengthen compliance initiatives throughout the Group.

The Group’s Compliance System

Consultations Provided and Whistleblowing Reports Received in Fiscal 2019
By points of contact for consultations and whistleblowing

Points of contact

Points of contact for consultations and whistleblowing common
to Headquarters and Group companies (external points of contact: including lawyers)
Group companies’ points of contact for consultations andwhistleblowing

Number of consultations provided andwhistleblowing reports received in fiscal
2019

77
8

External points of contact (external specialists) in Group companies

13

Total

98

• Organizational Structure• Code of Conduct

The Chief Compliance Officer (CCO), appointed by the Board

We have formulated the Chiyoda Group Code of Conductof Directors, is responsible for overseeing compliance in all

and Conduct Guidelines to ensure that our business activities

divisions. Division Directors serve as Compliance Officers andconform to social standards. We have also established a writ-

are responsible for policies and implementing measures related

ten declaration pledging our commitment that all officers andto compliance in their respective division. A Group company

employees will adhere to the code and will comply withrepresentative serves as the Group Company Compliancenational and international laws and regulations and our own

Legal violations and bribery (including cartel and concerns)

0

Officer and is responsible for policies and implementing mea-

internal rules.

Violation of internal rules

5Power harassment(including consultations, canceled items, and concerns)

5

Sexual harassment and pregnancy discrimination

15

Workplace environment

33

Other consultations

40

Total

98

sures related to compliance throughout the Group.

Enhancing Compliance Awareness and Knowledge
We implement initiatives to prevent unlawful and fraudulent acts and work to enhance executive and employee complianceknowledge and awareness.

By content (number of whistleblowing reports received by the Group’s points of contact)

Category

Number of consultations provided andwhistleblowing reports received in fiscal
2019

Please refer to the following for details on Group compliance.

https://www.chiyodacorp.com/en/csr/risk-management/compliance/initiatives.html

Main Initiatives
Details of initiatives

Number of times held

E-learning

One time (fiscal 2019)

Issuance of email newsletter

Once every month (news, topics, trivia, etc., related to compliance)

SeminarSeven times (fiscal 2019, theme: Bribery prevention and harassment)

Distribution of “Chiyoda Compliance Handbook”

Distributed to executives and employees, including to those at domestic Group
companies

Internal Whistleblowing System
We have implemented a whistleblowing system within the

distributed “internal whistleblowing cards,” in English andGroup and have established external hotlines in Group com-

Japanese, to raise awareness of the internal whistleblowing

panies (to lawyers, external specialists) to serve as a point ofsystem and indicate the points of contact inside and outsidecontact to report unlawful and fraudulent acts, enabling

the Group for executives and employees.

early resolution and preventing recurrence. We have also

Discussion held in a harassment-prevention seminar

52

Chiyoda Corporation CHIYODA REPORT 2020

53

ESG Initiatives
ESG Initiatives

Environmental Initiatives
In keeping with our corporate philosophy of “Energy and Environment in Harmony,” the Chiyoda Group
actively pursues climate change solutions. As an integrated engineering company, we deliver innovativetechnology and proactively engage in initiatives to reduce CO2 emissions. In this section, we provide an
overview of our environmental activities.

TCFD Initiatives

Projects for Harmonizing with the Environment
Construction of the Largest Mega Solar Power Plant in Tokai Region• Contributing to Reductions in CO2 Emissions

In 2019, the Company declared its support for the Task Forcein Accordance with TCFD” and conducted scenario analysis on

on Climate-related Financial Disclosures (TCFD) recommenda-

climate change. As we proceed, we will enhance our analysis

tions. We participated in the Ministry of the Environment’s

for use in our management strategies while disclosing informa-“Project to Analyze Scenarios of Climate Risks and Opportunities

tion in line with TCFD recommendations.

Please refer to the following for our scenario analysis.
“Practical Guide for Scenario Analysis in Line with the TCFD Recommendations Ver. 2.0” (3-29–3-36) (Japanese only)

We completed construction of Pacifico Energy’s Toyota Mega Solar Power Plant inToyota City, Aichi Prefecture, in March 2020, nearly two and a half years after breaking
ground in October 2017. With an annual projected power output of 74 million kWh andthe ability to generate electricity for approximately 21,000 households, this mega solar
power plant is the largest of its kind in the Tokai region spanning Gifu, Aichi, and Mie
prefectures. Through the use of cleaner energy in the form of solar power, we will contribute to reducing CO2 emissions by approximately 40,000 tons* per year.

• Preserving the Landscape of Local Communities

	http://www.env.go.jp/policy/tcfd.html
Assumptions under Scenario Analysis
Analytical assumptions

TargetTarget year

2040

Scenario

2°C scenario: Promote countermeasures against climate change (example: introduction of carbon tax)
4°C scenario: Without countermeasures (example: no carbon tax)

Reference data

WEO*1 2019 data (unless it does not cover the necessary data)

Sectors

LNG / Green Energy EPC / Non-EPC, such as hydrogen, CCU,*2 and distributed composite utilities

Financial data

Extension of data to 2040, based on business plan disclosed in Medium-Term Management Plan
(Revitalization Plan) up to 2023

In constructing the Toyota Mega Solar Power Plant by the Yahagi River, we worked withlocal companies to preserve the pristine landscape of the river’s watershed while ensuring the safety of the local community by installing a resilient disaster-prevention facility.
As the land consisted of slopes of 20° or greater, we utilized 3D design to ensure that
there were no shadows or gaps when installing the solar panels. The project came tofruition through our technological expertise combined with the united efforts of customers, local affiliates, and government agencies.
The Company will continue to work with customers on renewable energy projects
in the future to support the goal of a decarbonized society.
* Source: Pacifico Energy’s news release

Pacifico Energy’s Toyota Mega Solar Power Plant

For related content, please refer to “Global
Environment & Green Energy Business”
on P.32–33.

*1 World Energy Outlook (WEO), announced by the International Energy Agency (IEA) each fall
*2 CO2 Capture and Utilization (CCU)

Establishment of the World’s Largest and Most Advanced Storage Batteries

Chiyoda’s Worldview• Stable Supply of Renewable Energy

Scenario

Worldview in 2040

4ºC scenario

No promotion of carbon taxes or carbon cycles, and continued dependence on fossil fuels

2ºC scenario

Promotion of low carbon and carbon cycles, greater demand for green energy facilities, and accelerated
implementation of hydrogen and CCU

Impact Calculations
A countermeasure policy, based on impact calculations implemented in our business strategies (global environment, digitaltransformation, redefining Chiyoda’s engineering value)
Items (Impact on the Company)

2ºC

Policy for countermeasures

Provision of services that address changes in business structure

Petroleum/fossil fuel plant

Optimization of customer assets through the use of AI and digitaltechnologies

Hydrogen

—

CCU

—

Green energy plant

54

4ºC

LNG

Chiyoda Corporation CHIYODA REPORT 2020

Early entry into markets and securing of market share due toincreasing demand for low carbon and carbon cycles
Promotion of utility business based on future trends

The use of renewable energy generated through solar and wind power is increasing inline with the growing drive toward a decarbonized society. Storage batteries, connected
to power systems controlling power generation, energy transmission and distribution,
store excess energy for discharge when required and resolve the issue of unfavorable
weather conditions and the natural environment adversely affecting the stability ofenergy supply.
Continuing with this initiative, we are constructing the North Toyotomi Transformer
Station Storage Battery System in Toyotomi, Teshio District, Hokkaido, the largest andmost advanced energy storage battery system in the world, supplying energy throughwind power.

Construction of North Hokkaido Wind Energy
Transmission Corporation’s storage battery system• Providing Safety and Security to Local Communities
For this project, we actively participated in festivals and events and worked together
with local communities to ensure the safety and security of the area. For example, following the Hokkaido Eastern Iburi earthquake in September 2018, which resulted in theentire region of Hokkaido Prefecture losing power for several days, the site manager
acknowledged an urgent request from local dairy farmers and used the generator fromthe project to provide power, which enabled them to continue working without sustaining too much damage.
As we proceed, we will continue to devote our attention to safety and the environment to support the realization of a sustainable society, while striving to meet customer
and community requirements.

For related content, please refer to “Global
Environment & Green Energy Business”
on P.32–33.

55

ESG Initiatives

Initiatives toward Realizinga Hydrogen-Based Society

ESG Initiatives

SpecialFeature— Achieving a Zero-Emission Society with SPERA Hydrogen® —Chiyoda has successfully overcome the challenges
of safely storing and transporting large quantities ofhydrogen over long distances through the development of a high-performance dehydrogenation catalyst that acquires hydrogen from methylcyclohexane(MCH)*1 and has registered the technology as“SPERA*2 Hydrogen®.”
To meet the Paris Agreement target of zero greenhouse gas emissions within the latter half of the
21st century, we have joined forces with business
partners from around the world to effectively commercialize technologies producing green hydrogenfrom renewable energy through our hydrogen supply chain, SPERA Hydrogen®.
Please scan the QR code on the left to watch ourshort movie on SPERA Hydrogen® technology.

Joint Efforts toward Realizing a Sustainable Hydrogen-Based Economy in Singapore
Use of city gas

Realization of a Sustainable
Hydrogen-Based Economy
in Singapore

Chiyoda, Mitsubishi Corporation, and five privately owned
Hydrogenstorageinfrastructure

standing (MoU) in March 2020 to realize a sustainable hydrogen-based

economyin

Singapore.

The

Singaporean

government is aiming for zero CO2 emissions by the latter half

Application ofhydrogen in
port vehicles

Bunkeringof the 21st century and is actively promoting hydrogen technology and other forms of carbon-reduction technology, withthe aim of transitioning to a more environmentally friendly

Hydrogensupply
infrastructureWith emphasis on Chiyoda’s safe
technologies
Promotes and supports

Incorporationof hydrogen into
natural gas
pipelines

clean energy system. Chiyoda’s SPERA Hydrogen® storage
and transportation technology will play a major role in
implementing this initiative.
Chiyoda will work collectively with the other companies toassess technologies and business practices toward realizing

Singaporean government

this aim.

The World’s First Technical Verification for the Low-Cost Production of CO2-Free Hydrogen
Australia

Transport

Japan

Queensland University of Technology succeeded in theworld’s first technical verification for the low-cost production

Participating in a demonstration project*3 funded by the New Energyof MCH in Australia, based on the electrochemical synthesis

and Industrial Technology Development Organization (NEDO), Chiyoda,
as a member of the Advanced Hydrogen Energy Chain Association forTechnology Development (AHEAD), commenced transporting hydrogen from Brunei to a dehydrogenation plant at TOA Oil Co., Ltd.’s
Keihin Refinery in Kawasaki, Kanagawa Prefecture, to be used at the

In March 2019, Chiyoda, JXTG Oil & Energy Corporation (currently ENEOS Corporation), the University of Tokyo, andLaunch of the World’s First Global Hydrogen Supply Chain

method and the separation of gaseous hydrogen in Japan.
Queensland
University ofTechnology
Solar power

JXTG Oil & Energy
Corporation(currently ENEOS
Corporation)

Transport of
MCH

Organic hydride
electrolytic synthesis

Mizue Thermal Power Plant. This is the first time that hydrogen has

ChiyodaCorporation

The verification featured a simplified MCH production process

Separation ofhydrogen fromMCH

In the future, we will be able to achieve substantial reductions

to lower the cost of hydrogen, essential to expanding its use.
in facility costs for MCH production.
We also utilized solar power for MCH production to gener-

been transported from overseas to Japan for the purpose of generating

ate CO2-free hydrogen, which does not emit CO2 during thepower and represents a significant step toward achieving a hydrogenHydrogenation plant in Brunei Darussalam

Singaporean enterprises signed a Memorandum of Under­

production process.

based society.
We have incorporated hydrogen, as a power generation fuel, into a
global supply chain by transporting MCH from Brunei and separating
the hydrogen for energy use in Japan. This may generate large-scale
future demand. A hydrogen global supply chain brings us one step

Commercial Development of HAZER® Process for High-Efficiency Production of Hydrogen
and Graphite from Methane

closer to commercializing hydrogen energy.

In December 2019, Chiyoda entered into an MoU with Hazer
Waste

Landfill waste

Group Limited in Australia to commercialize the HAZER®
Process. Developed by the Hazer Group, the HAZER® Process

Biogasutilizes methane to efficiently produce hydrogen and graphite.
Sewagetreatment plant

Chiyoda and Hazer collaborate on the development of hydrogen and graphite using the HAZER® Process, based on

Hazer plantunused biomass and other methane resources, and establish

Dehydrogenation plant in the coastal area of Kawasaki Citya hydrogen supply chain of local production for a local con*1 Produced from toluene and hydrogen and transportable in a liquid state at ambient temperature and pressure*2 Latin for “hope”*3 NEDO-funded project: Development of Technologies for Realizing a Hydrogen Society/Development of Large-Scale Hydrogen-Energy Utilization Technology

56

Chiyoda Corporation CHIYODA REPORT 2020

Fuel-cell vehicle(FCV)

EnergyH2Graphitesumption business model.

Hydrogen57

ESG Initiatives
ESG Initiatives

Safety Management
Safety Is Our Core Value

Companywide Educational Activity “SQEI Convention”

With the adoption of our Safety, Quality, and Environmental (SQE) policy and Information Security (IS) policy, the Chiyoda GroupThe strengthening of technological capabilities, enhancement

is committed to becoming the most reliable engineering company in the world through its SQEI activities.

of quality and productivity, and improvement of safety are all• For its SQEI activities, an SQEI Management Review Committee is held by the Management Advisory Committee and a PDCA
cycle is implemented annually.
• To promote the activities of our occupational safety and health management and environmental management, we have established various committees under the leadership of our management team as well as committees below these committees
tailored to each business site and its activities. We voluntarily promote activities at our various offices as well as in research anddevelopment and EPC business.
• These activities have helped foster a safety culture throughout Chiyoda by instilling in each officer and employee the awarenessthat safety represents the core value of the Company and is of the utmost priority in all aspects of their daily work.

essential to our business. We at Chiyoda hold a Companywide
SQEI Convention each year to educate all officers andemployees on the significance of these measures in our business activities.
The SQEI Convention held in February 2020 was themed

SAFETY

on “Safety, Quality, and Productivity (SQP): Safety is the prior-is the PRIORITY

ity, quality is the standard, and productivity is the prime mover.”For a global business like Chiyoda, diversity is the key toembedding and continuously upgrading this SQP philosophy.
We will create a supportive, respectful, and cooperative environment in which each officer and employee understands and

C-SAFE Program

respects the views of one another and perceives differences as

In an effort to comprehensively realize safety, quality, and pro-takes responsibility and actions, to an “interdependent” stage,ductivity, we at Chiyoda promote our original C-SAFE Program,where the team takes responsibility and is proactive for safety.

embrace the “Building Responsibly” and “Human Performance”

From the perspective of the Bradley CurveTM created byprinciples advocated by the engineering industry, and remain

DuPont, a leading provider of safety culture, Chiyoda’s efforts

dedicated to the traditional Japanese mindset of striving forare diagrammed in the shift from Stage 3 to Stage 4 of safety

the highest quality possible.

culture maturity. Further, we believe that DuPont’s vision of

Our C-SAFE Program is designed to evolve safety initiatives from an “independent” stage, where each employee

With an eye to advancing our SQEI activities even further, wean accident at our overseas sites, our longest-ever period

established our new Project SQEI Section in July 2019. The

without an accident.

Project SQEI Section dispatches a dedicated support unit to

The face-to-face interaction between the dedicated sup-project sites around the world to improve the safety perfor-

port unit and our global project sites has fueled the creation ofmance of each project. These efforts have resulted in suchopportunities to constantly improve our safety initiatives andachievements as 81 million consecutive work hours without

the continuous evolution of our C-SAFE Program.

Consecutive Work Hours without Accidents and Disasters

Construction and safety-related issues

1,300

2020

1

Tangguh Expansion*

6,200

2020

Cameron LNG*1

8,100

2017

Ichthys Onshore LNG

2,900

2016

Yamal LNG-MFY

1,300

2015

Laffan Refinery Phase 2

2,000

2014

PNG LNG

6,600

2014

Tokuyama Malaysia Polycrystalline Silicon Phase 2

2,100

2014

Tokuyama Malaysia Polycrystalline Silicon Phase 1

2,000

Act with consideration for
one’s peers

2013

Jubail Export Refinery, Package 4

2,900

2013

Taganito HPAL

2,000

Interdependent stage

2009

QatarGas 3 & 4 LNG

2,900

2008

2

RasGas Onshore Expansion Phase 2*

2,900

2007

QatarGas 2 LNG Development

2,400

2007

Sakhalin LNG Train 1 & 2Team-centeredapproach

Dependent stage

Independent stage

Source: DuPont Bradley CurveTM

Please refer to the following website for details on our C-SAFE Program.

https://www.chiyodacorp.com/en/csr/safety/c-safe.html
Chiyoda Corporation CHIYODA REPORT 2020

Consecutive accident- and disaster-free work hours (thousand hours)
GYO-MFY*1

Individual-centeredapproach

Act voluntarily basedon one’s knowledge
and experience

Project

2020
Directions ofsupervisors

Adhere only to laws
and regulations and the
directions of supervisors

is the PRIME MOVER

Our Commitment to Improvement

Year

Respond only toaccidents that haveoccurred

PRODUCTIVITY“every incident is preventable,” derive from the same root.

 esponsibility for safety is not assumed and accidents are perceived as something
R
that will eventually occur
Dependent stage:
Safety is expected as long as rules are followed
Independent stage:
Responsibility for safety is assumed and the actions of each individual are believed
to make a difference
Interdependent stage:	Accept responsibility and be proactive for realizing a safety culture is assumed by
the team

Reactive stage

58

ness activities to continue to build customer confidence.

QUALITY
is the STANDARD“zero injuries is an attainable goal” and Chiyoda’s SQE policy,

Reactive stage:

Natural instinct

a form of value, and embraces our SQP philosophy in our busi-*1 Ongoing project*2 Includes AKG-2

2,000
LNG plant construction site
Other than LNG plant construction site

59

ESG Initiatives

Social Contribution
Activities

As a part of its proactive initiative to improve the health of employees, Chiyoda Corporation formulated a
Declaration of Health and Productivity Management in April 2020, with the Chairman of the Board andCEO serving as Chief Wellness Officer (CWO).

ESG Initiatives

Health and Productivity Management

Initiatives in Fiscal 2019
Support for People with Special Needs

Declaration of Health and Productivity Management
Chiyoda Corporation believes that maintaining employees’ physical and mental health and maximizing their abilities isessential to achieving the Group’s management philosophy and improving competitiveness. To achieve this, we will work
to support the health and productivity management of employees.
The Company, labor associations, health insurance association, employees and their families will work together to promote good health so that employees can enjoy a healthy and fulfilling life at and outside work.
We will contribute to society through our business by linking the health and welfare of our employees to the vitality of theworkplace.

Promotion Structure

CWO (Chief Wellness Officer)

motion Committee, with a Human(incorporates health and productivity
management into management strategies)

Resources officer as Chairman who

Delegate

is responsible to the CWO to evaluate, verify, and approve health man-

Proposal / ReportManagement Center also cooperatelabor unions, and the HSE* Management Com­mittee to formulate and exe-

Labor Union
HSE*
Management
Committee

Human Resources Department /Health Management Center

Cooperate

Chiyoda held 20 in-house sales events
for products made by disabled people
in Yokohama.

Contribution to Health and Welfare
TABLE FOR TWO* (Chiyoda Group in Japan)

Eco Cap Program* (Chiyoda Group in Japan)

Chiyoda provided 1,557
school lunches to children
in developing countries.

Chiyoda collected 239,381 plastic bottle caps in-house, contributing to vaccine doses for 278
children in developing countries.

Blood Drive (Chiyoda
Philippines Corporation)
110 Chiyoda employees donatedblood in the Philippines.

*A pproximately 860 plastic bottle
caps are required to provide vaccine doses for one child.
© TABLE FOR TWO

Company Visits and Visiting Lectures(Chiyoda Global Headquarters)

Approve / Instruct(formulates and executes health management
measures)“Heart Made Sale” (Chiyoda Group in Japan)

Educational Support and Human Resource Development(evaluates, verifies, and approves
health management measures)

Resources Department and the Healthwith health insurance associations,

Report

Health and Productivity
Management Promotion Committee

agement measures. The Human

Chiyoda has supported Japan’s
Philharmonic Orchestra of Beethoven’s
Ninth Symphony since 2011 and provides 25 pairs of tickets annually tovisually impaired people in Yokohama.

*F or every order madethrough the TFT menu in
Chiyoda’s company cafeteria, ¥20 is donated to school
lunches in developing
countries, enough to provide
one meal.

Chiyoda has established the Healthand Productivity Management Pro-

Japan’s Philharmonic Orchestra of Beethoven’s Ninth Symphony(Chiyoda Global Headquarters)

Collaborate

The Mitsubishi
HealthInsurance
Association

Chiyoda held a company visit and a visiting
lecture to facilitate high school student careerdevelopment.

Acceptance of Internship Students(Chiyoda Group Headquarters, Chiyoda
Philippines Corporation, and Chiyoda Almana
Engineering LLC)
Chiyoda accepts university students to work
as interns alongside employees.

“School Supply Drive”(Chiyoda Philippines Corporation)
Chiyoda donated school supplies to 700
elementary school students and 43 teachers
in the Philippines.

cute health management measures.
* Health, Safety, Environment

Key Measures

Support for Disaster-Stricken Areas

MeasureMain points

Health checkups

100% health checkup rate, strengthening specific health guidance and promoting cancer
screening

Mental health

Promoting stress check and fatigue assessments and mental health training

Reduction of presenteeism*

Measures to improve eating and sleeping habits and implementing a health-keeper system

Women’s health
Smoking cessation
Health promotion

Incorporating gynecological screening into examinations for lifestyle-related diseases andproviding special paid leave for the female workforce
Limiting the use of smoking areas on Company premises and implementing smoking
cessation support programs
Providing exercise opportunities for employees and subsidizing in-house sports club activity costs* An index to measure the outcome of investments in employee health. Presenteeism refers to a state in which work productivity is declining due to physical andmental health problems. Presenteeism can lead to approximately 70% of costs associated with work loss in Japanese companies and is a priority issue.
Please refer to the following website for details on other measures related to health and productivity management.

	https://www.chiyodacorp.com/en/csr/csr/value/value4/approach.html

60

Chiyoda Corporation CHIYODA REPORT 2020

Volunteer Activities by Company Employees
in Support of the Great East
Japan Earthquake(Chiyoda Group in Japan)
Nine Chiyoda employees volunteered to engage in activities in Otsuchi in Kamaishi
City, Iwate Prefecture.

Fundraising for Taal Volcano in the Philippines(Chiyoda Philippines Corporation)“Yubeshi no Kai”
(Chiyoda Group in Japan)

Chiyoda donated 65,000 Philippine
pesos, ¥170,400 and 1,000 sets of
N95 masks to the Shell Foundation.

Chiyoda held nine in-house
events for the sale of products from disaster-stricken
areas.

Environmental Conservation
Community Cleanup Activities(Chiyoda Group in Japan)

Tree-Planting Activities(Chiyoda Philippines Corporation)

120 Chiyoda employees participated in community cleanup activities in the Minatomirai
and Koyasu districts of Yokohama.

96 Chiyoda employees helped
plant 230 trees in the Philippines.

61

ESG Initiatives
ESG Initiatives

Global Human Resource
Development
Leveraging Chiyoda’s Engineering Expertise to Develop
Human Resources and Train Overseas Customers

Project Management Courses at Yokohama National University andKyushu University, and Global Human Resource Training Courses at
Sophia University

Chiyoda Corporation is committed to developing global human resources

Commissioned by the Engineering Advancement Association of Japan, Chiyoda

and conducted training sessions for 81 overseas company employees in four

conducts project management courses at Yokohama National University andcountries in fiscal 2019. Overseas customers either travel to Japan for train-

Kyushu University every spring to enhance student awareness of the engineering

ing or instructors are dispatched to their home offices. Communication isindustry and promote human resource development through industry–academia

imperative to identify customer requirements and to ensure training programs

collaboration. The courses, led by instructors dispatched from Chiyoda, contin-

meet their expectations by matching their technical and cultural needs withued in fiscal 2019.

Chiyoda-driven solutions.

Chiyoda has also conducted human resource training courses at Sophia

Our engineering training contributes to developing human resources andUniversity since 2018 and has supported students through to final presentation

establishing sustainable industrial infrastructure in countries where Chiyoda
operates.

ceremonies at Keidanren Kaikan.
Engineering training at Chiyoda Global Headquarters

Number of Overseas Company Employees in Fiscal 2019
Participating Country

and a wealth of knowledge,” thus contributing to greater recognition of the

Number of ParticipantsMethod16

Instructor dispatched from Japan

11

Training held in Japan

Qatar

28

Training held in Japan

Mozambique17

Instructor dispatched from Japan

Saudi Arabia

9

Training held in Japan

RussiaThe courses have been praised by the universities as “informative learning
opportunities provided by current professionals based on personal experience
Chiyoda brand and increased awareness of our business activities.
Chiyoda conducts engineering-related courses to nurture its diverse humanresources and develops interest in the unlimited potential of engineering in contributing to resolving new challenges in the support of a sustainable society.

Norimitsu Yanagimachi, a Company employee andinstructor global human resource training course being
held at Sophia University

Establishing Industrial Infrastructure throughthe Transfer of Technical Expertise
Chiyoda Almana Engineering LLC and Chiyoda Corporation

and Qatar Petroleum. The program covered a wide range of

have combined to develop human resources to support

fields, from engineering-related knowledge essential to operate

Qatar’s National Vision 2030 of “evolving Qatar into an

LNG plants to innovative technologies such as AI and big dataadvanced society capable of achieving sustainable develop-

relating to energy plant operation. By providing human resource

ment by the year 2030.”

development programs for technical employees, project man-Chiyoda has supported the development of young engi-

agers, and project leaders, Chiyoda will continue to grow whileneers through the transfer of technical expertise for sevencontributing to the development of industrial and technologi-

years and in fiscal 2019 conducted technical training programs

cally innovative infrastructure in the countries where it operates.

Kyushu University students who took part in the coursefor 21 engineers from Qatargas Operating Company Limited

Project management course being held at Yokohama National University

Message from the Instructor
Following training course participation, students who have never encountered the term
“engineering” commonly develop an interest in the energy industry and pursue a careerwith Chiyoda or with other engineering companies. We will continue these initiatives toincrease awareness of the engineering industry and cultivate human resources.
Norimitsu Yanagimachi
Energy Project Business Division

With Qatargas Operating Company Limited and Qatar Petroleum participating engineers

62

Chiyoda Corporation CHIYODA REPORT 2020

63

Data Section

CONTENTS
66

Eleven-Year Summary

68

Key ESG Data

70

Corporate Information

In this section, we provide key data on the Chiyoda Group, financial resultsover the past 11 years, and ESG initiatives.

64

Chiyoda Corporation CHIYODA REPORT 2020

65

Data Section
Data Section

Eleven-Year Summary
Chiyoda Corporation and Consolidated Subsidiaries

Millions of yen (excluding key ratios)

2010/3

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/3

Revenue

312,985

247,082

254,675

398,918

446,147

480,979

611,548603,745

510,873

341,952

385,925

Gross Profit (Loss)

14,21931,51938,891

42,51541,46245,651

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

42,823

SG&A Expenses

12,517

13,974

14,693

17,402

20,38324,18525,50522,543

20,94818,647

16,033Operating Income (Loss)

1,702

17,54424,197

25,11321,07921,466

16,015

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

26,789Ordinary Income (Loss)

4,837

15,732

23,79325,51822,837

22,271

16,205(3,080)(10,100)(192,998)

18,644Net Income (Loss) Attributable to Owners of the Parent

2,953

7,979

14,364

16,077

13,447

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

12,177

Current Assets

290,719

316,196

320,478

383,206

409,096444,578455,030

425,244374,470

326,929

360,387

Current Liabilities

165,960

181,887

193,687

230,431

261,679

294,339

311,106

301,182

247,847

392,505

319,878

Total Assets

328,174

353,392

365,795

435,379475,288515,839528,219

461,331420,337

352,341

385,051

Interest-Bearing Debt

10,004

10,208

10,198

10,22011,305

11,01010,348

10,211

10,00015,98935,871Net Assets

149,253

155,758

168,737

189,356

198,031

208,405

202,128

157,125

159,418(59,154)

24,943

Shareholders’ Equity

148,683

155,242

168,120

188,386

196,411

206,395

200,166

155,339

157,557(60,114)

24,423

Cash Flows from Operating Activities

8,613(5,229)55,61514,147(17,177)(24,145)

55,526(4,375)(34,115)(37,941)(32,217)

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

10,433(1,428)778(7,828)Cash Flows from Financing Activities(2,079)(805)(2,899)(4,432)(5,249)(4,569)(3,942)(2,693)(1,468)4,020

89,200139,790

130,618

173,769

180,229

145,303113,246

136,919

138,889

101,767

68,306

115,932

Gross Profit (Loss) Margin (%)

4.5

12.8

15.3

10.7

9.3

9.5

6.8

6.3

1.7

(53.0)

11.1

Return on Assets (ROA) (%)

1.4

4.6

6.6

6.4

5.0

4.5

3.1

(0.6)

(2.3)

(50.0)

5.1

Return on Equity (ROE) (%)

2.0

5.3

8.9

9.0

7.0

5.5

1.7

(23.1)

4.1(441.2)(68.2)

Shareholders’ Equity Ratio (%)

45.3

43.9

46.0

43.3

41.3

40.0

37.9

33.7

37.5

(17.1)

6.3

Current Ratio (%)

175.2

173.8

165.5

166.3

156.3

151.0

146.3

141.2

153.0

83.3

112.7

Debt Equity Ratio (DER) (Times)

0.07

0.07

0.06

0.05

0.06

0.05

0.05

0.07

0.06

(0.27)

1.47

Earnings Per Share (EPS) (Yen)  11.39  30.79  55.44  62.06  51.91  42.58  13.03(158.76)  24.89(830.02)  40.94

Book-value Per Share (BPS) (Yen)573.61599.15648.95727.24758.31796.89772.89599.83608.41(232.13)(182.07)

Dividend Per Share (Yen)

3.5

11

17

19

16

13

10

6

7.5

–

–

Dividend Payout Ratio (%)

30.8

35.7

30.7

30.6

30.8

30.5

76.7

38.7

30.1

–

–

Price Earning Ratio (PER) (%)

81.5

24.7

19.0

16.9

25.6

24.1

63.3

(4.5)

40.3

(0.31)

5.2

Results for the Year

Financial Position at Year-End

Cash Flows

Cash and Cash Equivalents, at End of Year
Key Ratios

66

Chiyoda Corporation CHIYODA REPORT 2020

67

Data Section
Data Section

Key ESG Data
Environmental Initiatives

Social Initiatives

The Chiyoda Group strives to realize its corporate philosophy of “Energy and Environment in Harmony”
and further contribute to the sustainable development of society through its business activities.

The Chiyoda Group contributes to local communities in a number of ways through its business, suchas in the form of human resource development, human rights and labor initiatives, and social contributions. We will also cultivate a corporate culture that embraces diversity and individuality, as well as
the uniqueness of each director and employee, and strive to boost employee morale through ourrespect for each individual and their families.

KPI
Environmental Data of Domestic Construction Sites

Unit

Industrial waste disposal quantity (excluding sludge)

Tons

10,936

7,670

12,242

17,13822,223

Final landfill disposal quantity (excluding sludge and incinerated ash)

Tons

1,065

783

614

1,059

1,464

Tons-CO2

3,364

1,146

901

5,665

4,642

Turnover rate excluding retirement

%

89.5

87.8

91.5

76.8

92.8

Employee Diversity

Electronic manifest penetration rate

%

93.5

95.8

93.2

94.6

90.8

Ratio of female employees among new recruits

Adoption of environmental proposals

Cases

206

222

197

347

236

Number of female employees among new recruits

CO2 emissions
Industrial waste recycling rate (excluding sludge)

2016/32017/3

2018/3

2019/32020/3

Environmental Data of Overseas Construction Sites (Released from March 2020)
Industrial waste disposal quantity
Final landfill disposal quantity (excluding recyclable resources and incinerated ash)
CO2 emissions
Industrial waste recycling rate
Adoption of environmental proposals

KPI

Unit

2016/32017/3

2018/3

2019/32020/3

Average years of service

Years

12.9

12.9

13.2

12.3

12.7

Average age of employees

Years

40.8

40.9

41.6

41.0

41.3

%

1.9

2.4

4.5

2.5

4.7

Employee Status

%

19

25

33

25

27

Persons

13

18

19

12

14

%

13

14

19

16

16

Average years of service of female employees

Years

7.5

8.0

7.6

8.1

9.0

Persons

23

23

24

25

28

%

2.6

2.6

3.2

3.5

3.8

Ratio of women among all employees
Tons

–

–

–

–

6,868

Tons

–

–

–

–

4,624

Number of women in management positions

Tons-CO2

–

–

–

–

56,970

Ratio of women in management positions

%

–

–

–

–

17.0

Ratio of employment of persons with disabilities

Cases

–

–

–

–

111

Number of non-Japanese employees

Environmental Data of Chiyoda Group Company Offices

%

1.7

1.5

1.5

1.6

1.7

Persons

71

82

71

63

73

Employee Support

Power consumption

1,000 kWh

11,635

12,526

11,12910,331

9,313

Number of employees taking childcare leave

Persons

15

22

27

26

28

Energy consumption

kl

3,624

3,826

3,430

3,295

3,018

Number of employees taking sick/injured childcare leave

Persons

2

1

7

11

23

CO2 emissions

Tons-CO2

6,886

7,287

6,367

6,083

5,685

Number of employees taking nursing care leave

Persons

8

4

9

9

10

Chilled water consumption

1,000 m3

13.7

17.5

15.5

17.5

15.2

Number of employees taking temporary retirement for nursing care

Persons

0

0

0

0

1

GJ

5,840

5,914

5,168

4,541

4,633

Number of employees working reduced hours for childcare

Persons

14

19

14

12

27

Cold water consumption

GJ

12,453

11,776

11,306

14,201

13,785

Number of employees dispatched for on-site training/on-site instruction

Persons

64

70

54

42

47

Waste disposal volume

Tons

264

262

233

241

281

Volunteer Activities

Waste recycling rate

%

94.6

92.3

93.8

95.4

96.5

Number of employees participating in reconstruction assistance

Persons

62

70

54

53

9

Printing paper consumed

Tons

106

88

66

80

70

Number of employees participating in cleanup activities (around Chiyoda
Global Headquarters and Koyasu Office)

Persons

95

127

157

110

120

Donation of vaccines through the collection of plastic bottle caps under
ECOCAP Program

Vaccines

267

228

231

292

278

Donation of school lunches through TABLE FOR TWO

Lunches

1,782

1,860

1,581

1,561

1,557

Steam consumption

Governance Initiatives
The Chiyoda Group is dedicated to achieving high levels of transparency and stability by conducting its operations fairly and in accordance with the highest ethical standards.

KPI

Unit

2016/32017/3

2018/3

2019/32020/3

Number of employees receiving compliance training (new recruits,
mid-career hires, and executives and associate executives)

Persons

156

166

150

112

114

Number of employees receiving compliance training (overseas assignment,site managers at field offices, export control, and bribery prevention)

Persons

512

523

314

168

248

Number of employees attending compliance seminars held by external
instructors

Persons

389

717

662

172

711

Number of employees receiving compliance training via e-learning

Persons

2,849

2,841

5,213

4,669

5,704

Number of reports submitted under the Compliance Consultation andWhistleblowing System

Cases

15

24

25

36

98

Times

1

2

2

2

0

Cases

0

0

0

0

0

Persons

2

4

4

5

5

Actions for Compliance

Initiatives for Business Continuity
Business continuity plan (BCP) training
Actions for Information Security
Number of serious information security-related incidents
Governance-Related Data
Number of outside directors

68

Chiyoda Corporation CHIYODA REPORT 2020

69

Data Section
Data Section

Corporate Information(As of March 31, 2020)

Company Profile

Stock Information

Company Name

Chiyoda Corporation

Fiscal Year

April 1 to March 31 of the following year

Established

January 20, 1948

Paid-In Capital¥15,014 million (as of August 7, 2020)

June

Number of
Employees

5,649(consolidated and equity-method affiliates)

Ordinary General
Meeting of
Shareholders

Business Activities

Integrated engineering business

Number of
Authorized Shares

Common Stock
Type A Preferred Shares

Main Offices

Chiyoda Global Headquarters
Koyasu Office & Research Park

Number of Issued
and Outstanding
Shares

Project Experience

In over 60 countries

Common Stock
260,324,529
(1 unit = 100 shares)
Type A Preferred Shares:
175,000,000
(1 unit = 1 share)

Number of
Shareholders

Common Stock
Type A Preferred Shares

Listing of Shares

Tokyo Stock Exchange, Second Section

Stock Transaction
Unit

Sales base34,7441

Procurement center

Chiyoda & Public Works Co., Ltd.

Operation support base

The Netherlands
Italy
Chiyoda Petrostar Ltd.

China

Saudi Arabia
Qatar UAE

Japan
Chiyoda Global Headquarters

India
Philippines

L&T-Chiyoda Limited

Singapore
Indonesia

PT. Chiyoda International Indonesia

Number of
SharesOwned(Thousandsof Shares)
86,931Chiyoda Oceania Pty. Ltd.

Ratio of
SharesOwned(%)

Individuals
and others

Financial
institutions

40.1%

7.2%
Number of Issued andOutstanding Shares(Common Stock)33.57

 hiyoda Human Resources International Pte. LimitedCChiyoda Singapore Pte. Limited
Chiyoda Malaysia Sdn. Bhd.

Securities
companies

1.6%

9,033

3.49

NORTHERN TRUST CO. (AVFC) RE SILCHESTERINTERNATIONAL INVESTORS INTERNATIONALALUE EQUITY TRUST

7,326

2.83

The Mitsubishi UFJ Trust & Banking Corporation

4,274

1.65

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

3,906

1.51

Chiyoda Employee Shareholding Association

3,217

1.24

NORTHERN TRUST CO. (AVFC) SUB A/C NONTREATY

2,579

1.00

STATE STREET BANK AND TRUST COMPANY
505001

2,275

0.88

Meiji Yasuda Life Insurance Company

2,265

0.87

Chiyoda System Technologies Corporation

JP MORGAN CHASE BANK 385151

2,071

0.80

Engineering, procurement, construction, and maintenance of electrical and instrumentation facilities and social infrastructure. Consulting,development, and operation of integrated IT systems. Supply of
spare parts and materials

2. Type A Preferred Shares

Mitsubishi CorporationUSAChiyoda Philippines Corporation

Myanmar
Malaysia

 hiyoda International
C
Corporation

 eijing OfficeB
Chiyoda Corporation Shanghai

MUFG Bank, Ltd.

Shareholder

Project execution baseAbu Dhabi Office iddle EastM
Headquarters
Doha OfficeChiyoda Almana
Engineering LLC

100 shares

Engineering center hiyoda Corporation
C
Netherlands B.V.

1,000,000,000
175,000,000

Australia

1. Common Stock (10 Largest Shareholders)

Mitsubishi Corporation

Milan Representative Office

Breakdown of Shareholders

Major Shareholders

Shareholder

Chiyoda’s Global Network (Major Overseas Subsidiaries and Offices)

Number of
SharesOwned(Thousandsof Shares)
175,000

Ratio of
SharesOwned(%)

260,324,529
Foreigninvestors

Other
corporations

13.7%

37.4%

Engineering

Business Support

Chiyoda Kosho Co., Ltd.

Arrow Business Consulting Corporation

Design, construction, and maintenance of industrial facilities

Finance and accounting consulting

https://www.cks-ykh.co.jp/ (Japanese only)

Chiyoda U-Tech Co., Ltd.

Chiyoda TechnoAce Co., Ltd.
Design and construction of pharmaceutical facilities

Technical consultation on energy and the environment,
engineer staffing service, and outsourcing services

http://www.cta.chiyoda.co.jp/en_corporate/

https://www.utc-yokohama.com/english

http://www.cst.chiyoda.co.jp/english/index.html
Chiyoda Corporation joined the UN Global Compact in2012, declaring its commitment to 10 universal principles
in the following four areas: human rights, labor, the environment, and anti-corruption. Guided also by the spirit of
CSR Value, we are promoting initiatives in each of thesefour areas.

100

Inquiries
Chiyoda Corporation
IR, PR & CSR Department
Minatomirai Grand Central Tower
4-6-2, Minatomirai, Nishi-ku, Yokohama 220-8765, Japan

70

Chiyoda Corporation CHIYODA REPORT 2020

Inquiries	https://www.chiyodacorp.com/en/contact/index.php

71

Chiyoda Global Headquarters
Minatomirai Grand Central Tower, 4-6-2, Minatomirai, Nishi-ku,
Yokohama 220-8765, Japan
https://www.chiyodacorp.com/en/

Printed in Japan

Consolidated Financial Statements FY 2019
For the year ended March 31, 2020

Energy and Environment in Harmony

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 for cor-10   Consolidated Statement of Cash Flows

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

tomers, business partners, employees, and local communities.

43   Independent Auditor’s Report01Consolidated
Balance
Sheet
Chiyoda Corporation
andConsolidated
Subsidiaries
ChiyodaCorporation
andConsolidated Subsidiaries
March 31, 2020

Consolidated Balance
Sheet
Consolidated
Balance Sheet
March 31, 2020 March 31, 2020

ASSETSASSETS

Thousands of
U.S. Dollars
Millions of Yen
1)
Millions(Noteof Yen2020
20192020
2020
2019

CURRENT ASSETS:
CURRENT ASSETS:
Cash and cash equivalents¥ 115,932
Cash and(Notecash15)equivalents (Note 15)
Short-term investments(Note 15)
8,471
Short-term
investments (Note 15)
Notes and accountsNotes
receivable—trade15)
30,671and accounts(Notereceivable—trade(Note 15)
Costs and estimatedearnings
on long-term
construction
Costsand estimatedearnings
on long-term construction
contracts (Notes 4 and15) (Notes 4 and 15)
30,510contracts
Costs of construction
contracts
in processcontracts in process
5,261
Costs
of construction
Accounts receivable—other15)
68,712
Accounts(Notereceivable—other(Note 15)
Jointly controlled assets
joint venture(Note15) venture (Note 15)
96,028
Jointlyofcontrolled
assetsof joint
Prepaid expenses andotherexpenses and other
6,041
Prepaid
Allowance for doubtful
accounts(1,243 )Allowancefor doubtful accounts
Total current assetsTotal current assets
PROPERTY, PLANT
AND EQUIPMENT:PROPERTY,
PLANT AND EQUIPMENT:Land (Note 8)
Land (Note 8)
Buildings and structures(Note8) structures (Note 8)
Buildings
andMachinery and equipment
Machinery and equipment
Tools, furniture andTools,
fixtures(Note 8)
furnitureand fixtures (Note 8)
Construction in progress
Construction in progress
Total
Total
Accumulated depreciation
Accumulated depreciation
Net property, plant Net
and property,
equipment
plant and equipment
INVESTMENTS AND
OTHER ASSETS:
INVESTMENTS
AND OTHER ASSETS:
Investment securities(Notes 5 securities
and 15) (Notes 5 and 15)
Investment
Investments in andInvestments
advances toin
unconsolidated
and advances to unconsolidated
subsidiaries and associatedcompanies(Note 7)companies (Note 7)
subsidiaries
and associatedGoodwill
Goodwill
Software
SoftwareAsset for retirementAssetbenefits(Note 10) benefits (Note 10)
for retirement
Deferred tax assetsDeferred(Note 12)
tax assets (Note 12)
Other assets
Other assets
Allowance for doubtful
accounts
Allowancefor doubtful accounts
Total investments andotherassets and other assets
Total
investments¥ 68,306¥ 115,932 $ 1,063,604¥ 68,306
1,150
77,7188,471
1,150
44,449281,393
30,67144,44924,16230,5107,494
5,261
65,94568,712110,967
96,0285,707
6,041(1,254)(1,243)279,914
24,162
48,267
7,494
630,391
65,945880,995
110,967
55,427
5,707(11,405) )(1,254360,387

326,929
360,387 3,306,306
326,929

5,085
15,035
748
6,073
137
27,081(14,627 )4,952
46,658
5,085
4,952
13,524
137,938
15,035
13,524512 748
6,869512
6,404
55,7196,073
6,404
272 137
1,265272
25,666248,451
27,081
25,666(13,952)) )(14,627) (134,193(13,952

12,454

11,714
12,454

114,257
11,714

1,540

1,603
1,540

14,131
1,603

4,058
319
4,539
599
1,325
(172 )

4,789
4,058
427 319
4,816
4,539
5
701 599
1,528
1,325(174(172))

37,2304,789
2,930427
41,6474,816
55,503701
12,156
1,528(1,584) )(174

12,20913,697
12,209112,016
13,697

Thousands of
U.S. Dollars(Note 1)(CAPITALDEFICIENCY)
2020LIABILITIES AND EQUITY
LIABILITIESAND EQUITY(CAPITAL DEFICIENCY)

CURRENT LIABILITIES:CURRENT LIABILITIES:Current portion of long-term
debt (Notes
8, 9 and
15)(Notes 8, 9 and 15)¥542$ 1,063,604
Current portionof long-term
debt
Notes and accountsNotes
payable—trade
(Note
15)
137,546
77,718and accounts
payable—trade(Note 15)
Advance receipts on
construction
contracts
119,911
281,393
Advancereceipts
on construction contracts
Income taxes payable(Notetaxes15) payable (Note 15)
1,212
IncomeDeposits received Deposits received
6,865
279,914
Allowance for warranty
costs forworks
860
48,267
Allowance
for completed
warranty costs
for completed works
Allowance for losses
on construction
contracts
34,871
630,391
Allowance
for losses
on construction contracts
Provision for businessstructure(Noteimprovement
18)
880,995
Provisionfor improvementbusiness structure(Note 18) 401
Accrued expenses Accruedand otherexpenses and other
17,66755,427(11,405 )Total current liabilities
319,878
Total current liabilities
3,306,306
LONG-TERM LIABILITIES:LONG-TERM LIABILITIES:Long-term debt (Notes
8, 9 and
15)(Notes 8, 9 and 15)
36,458Long-term
debt
Liability for retirement
benefits(Note 10) benefits (Note 10)
1,986
46,658
Liability
for retirement
Provision for treatmentof PCB
239
137,938
Provision
forwastetreatment of PCB waste
Asset retirement obligations
1,502
6,869
Asset retirement obligations
Other
42
55,719
Other
1,265
Total long-term liabilities
40,229248,451
Total long-term liabilities(134,193 )COMMITMENTS AND
CONTINGENT
LIABILITIESCOMMITMENTS
AND
CONTINGENT LIABILITIES(Notes 14, 16 and 17)
114,257(Notes 14, 16 and 17)
EQUITY (CAPITALEQUITY
DEFICIENCY)
(Note
11):
(CAPITALDEFICIENCY)(Note 11):
Common stock—authorized,
570,000 thousand shares;
Common stock—authorized,
570,000 thousand shares;
14,131
issued, 260,324 thousand
2020 andshares2019 in 2020 and 2019 43,396
issued, shares
260,324inthousand
Preferred stock—authorized,
175,000 thousand shares;
Preferred stock—authorized,
175,000 thousand shares;
37,2302020
35,000issued, shares
175,000inthousand
shares in 2020
2,930 issued, 175,000 thousand
Capital surplus
72,128
Capital surplus
41,647
Accumulated deficitAccumulated deficit(127,778 )Treasury stock—atTreasury
cost, 1,357
thousandsharesstock—atcost,
1,357inthousand shares in
5,503(1,435 )2020 and 201912,156 2020 and 2019
Accumulated
other Accumulatedcomprehensive
income(loss):
othercomprehensive
income (loss):(1,584)
Unrealized gain (loss)
on available-for-saleUnrealized
gain (loss) onsecurities
available-for-sale securities 58
on derivatives
underaccounting
6
gain (loss)
onhedgederivatives
under hedge accounting
112,016 Deferred gain (loss)Deferred
Foreign currency translation
adjustments
3,033
Foreign currencytranslation adjustments
Defined retirement Defined
benefit plans
13
retirement benefit plans
Total
24,423
Total
Noncontrolling interests
519
Noncontrolling interests
Total equity (capitalTotal
deficiency)
equity (capital deficiency)

TOTAL

TOTAL

¥ 385,051¥ 352,341¥ 385,051 $ 3,532,580¥ 352,341

Thousands of
U.S. Dollars
Millions of Yen
1)
Millions(Noteof Yen2020
20192020
2020
2019

TOTAL
$ 3,532,580

TOTAL

24,943¥ 385,051¥¥ 121 542 $ ¥ 4,976121
175,277
137,546 1,261,892
175,277
122,252
119,911 1,100,106
122,252708
11,120708
1,212
1,329
62,9856,865
1,329
372 860
7,890372
67,637
319,923
34,871
67,637
1,825 401
3,681
1,825
22,979162,085
17,66722,979392,505
319,878 2,934,663
392,505

Thousands of
U.S. Dollars(Note 1)
2020
$

4,976
1,261,892
1,100,106
11,12062,985
7,890
319,923
3,681
162,085
2,934,663

15,88936,4581,546
1,986
267 2391,022
1,502
264 42

334,477
15,88918,226
1,546
2,193267
13,7881,022
392264334,477
18,226
2,193
13,788392

18,98940,229369,078
18,989369,078

43,39643,396398,132
43,396398,132

321,100
35,00037,112
661,730
72,12837,112(139,956)) )(127,778) (1,172,282(139,956

321,100
661,730(1,172,282 )(1,435)(1,435)(13,167) )(1,435(13,167 )(5 ) 58(50 ) 6
(102
)
3,033
926 13(60,114)
24,423960 519541 (5 )57(50 )
27,834(102 )
125926224,071(60,114 )
4,767960

541
57
27,834125
224,071
4,767(59,154)
24,943228,838(59,154 )

228,838¥ 352,341¥ 385,051 $ 3,532,580¥ 352,341$ 3,532,580

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

02

Chiyoda Corporation Consolidated Financial Statements FY201903

ConsolidatedofSubsidiaries
Operations
Chiyoda Corporation Statement
and Consolidated

Chiyoda Corporation and Consolidated Subsidiaries

Consolidated Statement of Income
Year Ended March 31, 2020

Consolidated Statement of Income
Year Ended March 31, 2020

Year Ended March 31, 2020

Millions of Yen
2020
2019
REVENUE

Thousands of
U.S. Dollars(Note 1)2020

¥ 385,925¥ 341,952$ 3,540,596

343,101

523,101

3,147,721

Gross profit (loss)

42,823(181,148 )

392,874

SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES (Note 13)

16,03318,647147,096

26,789(199,795 )

245,777

2,851
361

3,303
194

26,1593,316

COST OF REVENUE

Operating income (loss)
OTHER INCOME (EXPENSES):Interest and dividend income
Equity in earnings of associated companies
Reversal of provision for business structure improvement(Note 18)
Gain on sales of shares of subsidiaries
and associated companies
Interest expense
Foreign exchange (loss) gain
Provision for business structure improvement (Note 18)
Impairment loss (Note 6)
Loss on valuation of investment securities (Note 5)
Loss on disposal of fixed assets
Other—net

232
363(727 )(10,192 )(67 )(122 )

979(238 )
3,638(1,825 )Other (expenses) income—net(7,739 )5,614(71,002 )INCOME (LOSS) BEFORE INCOME TAXES

19,050(194,181 )

174,775

INCOME TAXES (Note 12):Current
Deferred

7,120(105 )

11,090
10,58065,329(963 )

7,015

21,67064,366

12,034(215,852 )

110,409

NET LOSS ATTRIBUTABLE TO NONCONTROLLINGINTERESTS(142 )(903 )(1,310 )NET INCOME (LOSS) ATTRIBUTABLE TO OWNERS
OF THE PARENT¥ 12,177¥ (214,948 )$ 111,719

Chiyoda Corporation Consolidated Financial Statements FY2019¥ (830.02 )U.S. Dollars
2020$ 0.38$ 0.14

See notes to consolidated financial statements.

(619 )(1,126 )(4,016 )(Continued)04¥ 40.94
15.51

2019

3,337
(6,675 )(93,507 )(335 )(100 )NET INCOME (LOSS)PER SHARE OF COMMON STOCK (Notes 2.aa and 20):
Basic net income (loss)
Diluted net income
Cash dividends applicable to the year

Yen

2,129

(437 )

Total income taxes

2020(Concluded)05

ConsolidatedofSubsidiaries
Comprehensive Income
Chiyoda CorporationStatement
and Consolidated
Year Ended March 31, 2020

Consolidated Statement of Comprehensive Income
Year Ended March 31, 2020

Millions of Yen
2020
2019
NET INCOME (LOSS)

Thousands of
U.S. Dollars(Note 1)2020

¥ 12,034¥ (215,852 )$ 110,409

64
56
3,197
(912 )
(66 )

(69 )
1,719
(1,348 )(87 )(850 )

592
516
29,337(8,371 )(611 )

2,339(636 )

21,463COMPREHENSIVE INCOME (LOSS)¥ 14,374¥ (216,488 )$ 131,872

TOTAL COMPREHENSIVE INCOME (LOSS)ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests¥ 14,522(148 )¥ (215,638 )(849 )$ 133,231(1,359 )OTHER COMPREHENSIVE INCOME (LOSS) (Note 19):
Unrealized gain (loss) on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive loss of associates
Total other comprehensive income (loss)

See notes to consolidated financial statements.

06

Chiyoda Corporation Consolidated Financial Statements FY201907

Consolidated Statement of Changes in Equity (Capital Deficiency)

ChiyodaChiyodaCorporation
ChiyodaCorporation
Corporation
and Consolidated
and and
Consolidated
andConsolidated
Consolidated
Subsidiaries
Subsidiaries
Subsidiaries
ChiyodaCorporation
Subsidiaries
Year Ended March 31, 2020

Consolidated
Consolidated
StatementofStatement
ChangesinChanges
EquityChanges
EquityConsolidated
Statementof Changes
in Equity
Consolidated
Statement
ofof
ininEquity
Year Ended
YearYear
Year
Ended
March
Ended
March
31, 2020March
31, 2020
31,2020
2020
Ended
March
31,
Thousands
Thousands
Thousands
Thousands

Millionsof YenMillions
Yen
Millionsof
Yen ofofYen
Millions
Accumulated
Accumulated
Accumulated
Other
Other
Comprehensive
Comprehensive
OtherComprehensive
Comprehensive
IncomeIncome(Loss)(Loss)
Income(Loss)(Loss)
Accumulated
Other
IncomeOutstanding
Outstanding
Outstanding
Outstanding
Unrealized
Unrealized
DeferredDeferred
Outstanding
Outstanding
Unrealized
DeferredDeferred
Outstanding
Outstanding
Unrealized
Numberof Number
NumberNumberNumber
(Accumulated(Accumulated GainGain(Loss)
Gain
Gain(Loss)(Loss)
Gain(Loss)
Foreign(Loss)
ForeignDefinedDefined
Total
Total
Numberof
Numberof(Accumulated(Loss)
Gain(Loss)
Foreign Foreign
Defined DefinedTotal
ofofof Number
ofof(Accumulated
Gain(Loss)
Gain
Total
SharesSharesof Shares
SharesofSharesSharesofof Shares
Sharesof
Deficit)
Deficit) Deficit)
Deficit)on Availableon AvailableonAvailableon
AvailableDerivatives
on Derivatives
onDerivatives
Derivatives
Currency
CurrencyCurrency
Retirement
Retirement
Retirement
EquityEquityCurrency
Equity
of
ofof
on
on
Retirement
EquityCommonCommonCommonPreferredPreferredPreferred
CommonCommonPreferred
CommonPreferred
CapitalPreferred
Capital Capital
Retained
CapitalRetained
Retained
Treasury
TreasuryTreasury
Treasury
for-Sale
for-Sale for-Sale
for-Sale
under
under
Hedge
Hedge
under
Translation
Hedge
Translation
Benefit
Benefit Benefit
Benefit
Noncontrolling
Noncontrolling
Noncontrolling(Capital(Capital (Capital
Translation(Capital
CommonPreferred
CommonPreferred
Retained
under
Hedge
Translation
Noncontrolling
Stock Stock Stock
Stock
Stock Stock Stock
Stock
StockStock Stock
Stock
Stock
Surplus
Earnings
Earnings
Stock
Stock
Securities
Accounting
Accounting
Adjustments
Adjustments
Plans
Plans
Total
Interests
Total
Interests
Deficiency)
Deficiency)
StockSurplus
SurplusSurplus
Earnings
Stock Securities
Securities
Accounting
Adjustments
Plans
Total
Interests Interests
Deficiency)Deficiency)
Stock
Earnings
Stock
Securities
Accounting
Adjustments
Plans
Total
BALANCE,APRILBALANCE,
1,
2018
APRIL
2018
BALANCE,APRIL
1, 2018
BALANCE,
APRIL
1,1,2018

258,967
258,967
258,967
258,967

Cumulative
effects
Cumulativeof changes
effectsinchangesCumulative
effectsof changes
inCumulative
effects
ofofchanges
ininaccounting
policies
accounting
policies
accounting
policies
accounting
policies
Restated
Restatedbalance
Restatedbalancebalance258,967
258,967
258,967
Restatedbalance258,967
Net lossNet
attributable
Netloss
lossattributable
toattributableownersoftototheownersparenttheparent
parentloss
attributableto ownersof theofof
parentNet
ownerstheCash dividends,
Cash
¥7.50
dividends,
per
share
¥7.50
pershareshare
CashCashdividends,¥7.50
per share
dividends,
¥7.50
per
Purchase
PurchaseofPurchasetreasury
Purchaseof treasurystock
treasurystockstock
stock
ofoftreasury
Net change
inNet
the
changeyear
theyearyear
Net change
in theininyearNetchangethe
BALANCE,BALANCE,MARCHBALANCE,
MARCH
31,MARCH
2019
MARCH
31, 2019
31,2019
2019
BALANCE,31,

258,967
258,967
258,967
258,967

Net income
attributable
Netincomeincometoattributableownersoftotoowners
owners
Net income
attributableto ownersof ofofNet
attributable
the parent
the parent
theparent
parenttheIssuance
Issuanceof Issuancenew
Issuance
sharesof newshares(Notenewshares
shares11)(Note(Note(Note11) 11)11)
ofofnew
PurchaseofPurchasetreasury
Purchasestock
treasurystock
Purchaseof treasury
stockstock
ofoftreasury
Purchase
PurchaseofPurchasesharesPurchaseof shares
ofof
consolidated
ofsharessharesof consolidated
consolidated
ofofconsolidated
subsidiaries
subsidiaries
subsidiaries
subsidiaries
Net change
inNet
the
changeyear
theyearyear
Net change
in theininyearNetchangethe
BALANCE,BALANCE,MARCHBALANCE,
MARCH
31,MARCH
2020
MARCH
31, 2020
31,2020
2020
BALANCE,31,¥ 43,396
43,396 ¥ 37,112
37,11277,02477,024(1,434) ¥) ¥(1,434(1,434¥ 64¥)64)¥ 43,396¥ 37,112¥ 77,024¥ (1,434¥¥43,396¥¥¥37,112¥¥ ¥77,024

43,39643,39643,396
43,39643,39643,39643,396
43,396

175,000
175,000
175,000
175,000(90 ) (90 )(90) )(90
37,112
37,112 37,112
37,112
76,93476,934 76,934
76,934(1,434(1,434) ) (1,434(1,43464 )64)(214,948) (214,948(214,948(214,948)))(1,942)(1,942) )(1,942) (1,942¥64(1,778) )¥¥(1,778(1,778¥ 2,159
)
¥
2,159
1,013
157,557¥ 1,861¥ (1,778¥)2,159¥ 1,013 ¥¥¥157,557¥1,013
157,557 ¥¥157,557¥ 1,861¥¥64¥¥2,159
1,013¥1,861
159,418¥159,418
159,418 ¥¥159,418¥¥1,861(90) )(90) )(90(90
157,466
1,013
157,466 157,466
157,466
1,861
1,861
1,013
(214,948) ) (214,948(214,948) )(214,948(1,942) ) (1,942(1,942) )(1,942(90(90) )(90) )(90
1,861
159,328
159,328 159,328
159,328
1,861(214,948(214,948) )(214,948) ) (214,948(1,942(1,942) )(1,942) )(1,94264(1,778(1,778) ) (1,778(1,7782,159)
64)2,159(69 )(69 )(69)1,728) 1,728(69

37,112
37,112 37,112(139,956
37,112(139,956) (139,956(139,956) (1,435(1,435(1,435(5 )) (5) )))) ) (1,435) )(5(5) ) (50(50

2,159
1,013
1,013
2,159

1,728
(2,261) ) (2,261(2,261(87) )(2,261
1,728) )(87
(50
(102
) )
(50
) )(102

(102
926
)
(102
) 926

12,177
12,177 12,177
12,177¥ 35,000¥ 35,000
35,00035,00035,000 35,000
35,000¥¥35,000
15 15

15
15

64 64

258,967
258,967
258,967
175,000
175,000¥
175,000
43,396¥ 43,396¥¥35,000
43,396¥ 35,000¥¥¥
72,12835,000¥ 72,128(127,778
72,128¥ (127,778) ¥¥(127,778(127,778)¥ (1,435¥ (1,435(1,435¥ 58¥)58)
258,967
175,000
43,39635,000¥¥¥72,128))) ¥) ¥(1,435

3,136
563,136
56

3,136
(912
) )
(912
3,136

(87
(690
(690
(87
)) ) )Net income
Net income
attributable
Netincomeincomeattributabletoattributableownersto owners
oftotoowners
ownersof ofofNet
attributable
the parent
theparent
parentthe parent
theIssuance
Issuanceof Issuancenew
Issuance
sharesof newshares(Notenewshares
shares11)(Note(Note(Note11) 11)11)
ofofnew
Purchase
PurchaseofPurchasetreasury
Purchaseof treasurystock
treasurystockstock
stock
ofoftreasury
PurchaseofPurchasesharesPurchase
ofof
consolidated
ofsharessharesconsolidated
Purchaseof sharesof consolidated
ofofconsolidated
subsidiaries
subsidiaries
subsidiaries
subsidiaries
Net change
Net change
inNet
the
changeyear
in theinin
year
theyearyear
Netchangethe12,177
12,17770,00070,00012,177
12,17770,00070,00012,177
12,17770,00070,00012,177
12,17770,00070,000

1515
(912
2,344
2,344
(912
))

15
15
2,344
(440
))
(440
2,344

15
15
(440
1,904
)
(440
)1,904

15
15
1,904
1,904

56 56

¥58 ¥
¥¥58

6 6 ¥¥ ¥ 3,033¥
3,033¥ 1313 ¥¥¥¥24,423
24,423
13
24,423¥ ¥ 519519
6¥63,033 ¥¥3,033
13¥¥ 24,423

BALANCE,MARCHBALANCE,
31,MARCH
2020
MARCH
31,2020
2020
BALANCE,
MARCH
31, 2020
BALANCE,
31,

146
146

111,719
111,719
111,719 111,719
642,201
642,201 642,201
642,201592592592516516
592$ 398,132
321,000
398,132
661,730
321,000(1,172,282
661,730(1,172,282$ (13,167(13,167$ 541$ 398,132$ 321,000$ 661,730$ (1,172,282) $ (13,167$ 541$$$398,132$$$321,000$$$661,730$)$(1,172,282) ) $$)(13,167))541$ $57 57$$541

516
28,774
28,774516

28,774(8,371(8,371) )28,774146
146(8,371
21,512
21,512(8,371))519
24,94324,943 ¥¥ 24,943
24,943
¥¥¥ ¥
519

Total
Total
Total
Total
EquityEquityEquityEquityNoncontrolling
Noncontrolling(Capital
Noncontrolling(Capital (Capital(Capital
Noncontrolling
Total
Interests
Interests Interests
Interests
Deficiency)
Deficiency)Deficiency)
Deficiency)
Total$ 398,132
398,132 $ 340,482(1,284,002
340,482(1,284,002$ (13,166(13,166$ (51) ) $$(51(51$ )(458)$ (458) ) $$(458(458$ $)(940) (940) )$$ $(940
8,496
(940
$$$8,496(551,508) $)$(551,508(551,508$ 8,810$ 398,132$ 340,482$ (1,284,002) $ (13,166$ ))(51$ 8,496$8,496(551,508$ 8,810$$398,132$$$340,482$)$(1,284,002) ) $$)(13,166))))

146 146(1,591) )(1,591(59,154960(59,154) ) (59,154(59,154) )
960

64
64

111,719
111,719
111,719111,719$ 321,000$ 321,000
321,100
321,000
321,100321,100
321,100$$321,000(901(1,591(1,591(901)) ))(60,114(60,114926 ) ) (60,114(60,114
960
960
926
))

Thousands
ThousandsofThousands
U.S.
of U.S.
Dollars
Dollars
(Note
U.S.
(Note
Dollars1) 1) (Note(Note1)1)
Thousands
ofofU.S.
Dollars
Accumulated
Accumulated
Other
Comprehensive
OtherComprehensive
Comprehensive
Income(Loss)
Income(Loss)(Loss)
Accumulated
Other
Comprehensive
Income(Loss)
Accumulated
Other
IncomeUnrealized
Unrealized
DeferredDeferred
Unrealized
DeferredDeferred
Unrealized
GainGain(Loss)
Gain
Gain(Loss)(Loss)
Gain(Loss)
Foreign(Loss)
ForeignDefinedDefined(Loss)
Gain(Loss)
Foreign Foreign
Defined Defined
Gain(Loss)Gain
on Availableon AvailableonAvailableon
AvailableDerivatives
on Derivatives
onDerivatives
Derivatives
Currency
CurrencyCurrency
Retirement
Retirement
Retirement
Currencyonon
Retirement
CommonPreferred
CommonPreferred
CapitalCapitalAccumulated
Treasury
Treasury
for-Sale
for-Sale
under
Hedge
under
Translation
Hedge
Benefit
BenefitCommonPreferred
CapitalAccumulated
Accumulated
TreasuryTreasury
for-Sale for-Sale
under
Hedge
Translation
Benefit Benefit
Translation
CommonPreferred
CapitalAccumulated
under
Hedge
Translation
StockStock Stock
Stock
StockStock Surplus
Stock
SurplusSurplus
Surplus
Deficit
Deficit Deficit
Deficit
Stock
Stock Securities
Stock
Securities
Securities
Accounting
Accounting
Accounting
Adjustments
Adjustments
Adjustments
Plans
Plans
Plans
Total
Total
Stock
Stock
Securities
Accounting
Adjustments
Plans
BALANCE,MARCHBALANCE,
31,MARCH
2019
MARCH
31,2019
2019
BALANCE,
MARCH
31, 2019
BALANCE,
31,

(690
(901
(901
(690
) )) )

146
146
21,512(4,042(4,042))
21,512

27,83457
27,834$ $125125
224,071$ 4,767$ 27,834 $$27,834
125 $$$$224,071
224,071$$ 224,071$ 4,767$$ $57125$8,810(542,697) )$(542,697(542,697) $) $(542,697$$8,810
111,719
111,719642,201
642,201

111,719
111,719642,201
642,201

146
146(4,042
17,46917,469(4,042))

146
146
17,46917,469$4,767
228,838$228,838
228,838$$ 228,838$$4,767

See notes
SeetoSeenotes
See
consolidated
notes
to consolidated
consolidated
financialfinancialstatements.
financialstatements.
statements.
notes
totoconsolidated
financialstatements.

08

Chiyoda Corporation Consolidated Financial Statements FY201909

ConsolidatedofSubsidiaries
Cash Flows
Chiyoda CorporationStatement
and Consolidated

Chiyoda Corporation and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
Year Ended March 31, 2020

Consolidated Statement of Cash Flows
Year Ended March 31, 2020

Year Ended March 31, 2020

Thousands of
U.S. Dollars(Note 1)
2020

Millions of Yen
2020
2019
OPERATING ACTIVITIES:
Income (loss) before income taxes
Adjustments for:
Income taxes paid
Depreciation
Impairment loss
Amortization of goodwill(Decrease) increase in allowance for doubtful accounts
Increase (decrease) in allowance for warranty costs forcompleted works(Decrease) increase in allowance for losses on
construction contracts(Decrease) increase in liability for retirement benefits
Foreign exchange gain—net(Decrease) increase in provision for business structure
improvement
Gain on sales of shares of subsidiaries and associatedcompanies
Equity in earnings of associated companies
Loss on valuation of investment securities
Loss on disposal of fixed assets
Changes in operating assets and liabilities:
Decrease in trade notes and accounts receivable,
and costs and estimated earnings on long-term
construction contracts
Decrease in costs of construction contracts in process(Decrease) increase in trade notes andaccounts payable(Decrease) increase 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)¥ 19,050¥ (194,181 )$ 174,775(3,841 )
3,174
67
40
(10 )

6,230
2,816
41
1

(35,247 )29,122
619
372
(99 )

491

(52 )

4,508

(31,906 )(146 )(59 )

64,40963(980 )(292,722 )(1,344 )(542 )(1,290 )1,825(11,835 )(363 )(361 )
122(979 )(194 )(3,337 )(3,316 )
1,126

335

7,291
2,194

7,908
8,149

66,893
20,133(34,702 )28,180(318,370 )(1,285 )(3,960 )14,830(1,412 )(139 )(51,267 )46,210(23,097 )20,055(2,144 )(2,541 )
156,239(11,789 )(36,335 )
136,058(12,957 )(1,284 )(470,346 )¥ (32,217 )¥ (37,941 )$ (295,571 )Millions of Yen
2020
2019
Net cash used in operating activities—(Forward)
INVESTING ACTIVITIES:Net (increase) 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 andassociated companies
Proceeds from liquidation of subsidiaries andassociated companies
Payments of loans receivable
Proceeds from collections of loans
Other—net
Net cash (used in) provided by investing
activities
FINANCING ACTIVITIES:
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of preferred stock
Payments of cash dividends
Other—net

Thousands of
U.S. Dollars(Note 1)2020

¥ (32,217 )¥ (37,941 )$ (295,571 )(7,358 )(560 )
91(1,702 )
(9 )

1,150
(642 )
3(1,611 )(109 )(67,506 )(5,141 )838(15,623 )
(85 )

1,791
1,116
(7 )
604
(2 )

10,240
138
(2 )
59

(69 )
5,545
(18 )

(7,828 )778(71,822 )20,000(118 )
70,0006,220(231 )

183,486(1,088 )642,201(680 )(1,939 )(29 )89,2004,020

818,350

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS(1,528 )(317 )(14,020 )NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

47,626(33,461 )436,936

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

68,306

101,767

626,667¥ 115,932¥ 68,306$ 1,063,604

Net cash provided by financing activities

CASH AND CASH EQUIVALENTS, END OF YEAR

(6,240 )See notes to consolidated financial statements.

(Continued)

10

Chiyoda Corporation Consolidated Financial Statements FY2019(Concluded)11

Notes to Consolidated Financial Statements

Chiyoda Corporation and Consolidated Subsidiaries
Year Ended March 31, 2020
Notes
to Consolidated Financial Statements
Year Ended March 31, 2020

1.

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 20 years.

BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
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 of International Financial Reporting Standards ("IFRS").

All significant intercompany balances and transactions have been eliminated on consolidation. All
material unrealized profit included in assets resulting from transactions within the Group is also
eliminated.
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 ("PITF") No. 18, "Practical Solution on Unification of Accounting Policies Applied toForeign Subsidiaries for the Consolidated Financial Statements," the accounting policies andprocedures 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 inaccordance with either IFRS or generally accepted accounting principles in the United States ofAmerica (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 in accordance 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 fairvalue model of accounting for property, plant and equipment and investment properties andincorporation 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 for Investments," 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 associated companies in accordance with either IFRS or generally accepted
accounting principles in the United States of America tentatively may be used in applying theequity 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.

d.

Construction Contracts—Under Japanese GAAP, construction revenue and construction costs
are recognized 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 thestage of completion of the contract at the balance sheet date can be reliably measured, theoutcome of a construction contract is deemed to be estimated reliably. If the outcome of aconstruction contract cannot be reliably estimated, the completed-contract method should beapplied. When it is probable that the total construction costs will exceed total construction
revenue, an estimated loss on the contract should be immediately recognized by providing for aloss on such construction contracts.

In preparing these consolidated financial statements, certain reclassifications and rearrangements
have been made to the consolidated financial statements issued domestically in order to present
them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications
have been made in the 2019 consolidated financial statements to conform to the classifications usedin 2020.
The consolidated financial statements are stated in Japanese yen, the currency of the country inwhich Chiyoda Corporation (the "Company") is incorporated and principally operates. The translationsof Japanese 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 ¥109 to $1, the approximate rate of exchange at
March 31, 2020. Such translations should not be construed as representations that the Japanese yenamounts could be converted into U.S. dollars at that or any other rate.
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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Consolidation—The consolidated financial statements as of March 31, 2020, include theaccounts of the Company and its 20 (20 in 2019) significant subsidiaries (together, the "Group").
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 theequity method.
Investments in three (three in 2019) associated companies are accounted for by the equity
method.
MPDC GABON Co., Ltd. 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 statedat cost. If the equity method of accounting had been applied to the investments in thesecompanies, the effect on the accompanying consolidated financial statements would not bematerial.
Most of the foreign consolidated subsidiaries have a December 31 year-end, which is different
from that 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 andthe year-end of the Company.

Concerning the construction contracts, the Group applies the following accounting methods:
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 areaccounted for by the percentage-of-completion method, and payments received on the othercontracts, are presented as current liabilities.
Costs of preparation work for unsuccessful proposals and other projects that are not realized
are charged to income, as incurred, and are included in cost of revenue.

12

Chiyoda Corporation Consolidated Financial Statements FY201913

Notes to Consolidated Financial Statementse.

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
three months of the date of acquisition.

f.

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.

g.

Investment Securities—All marketable securities are classified as available-for-sale securities
and are 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.

q.

Provision for Business Structure Improvement—To improve business structure, the provision
for business structure improvement is provided based on anticipated loss reasonably estimatedin and after next consolidated fiscal year.

r.

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.

s.

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.

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 pertaining to the contract work 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 evaluationof potential losses in the receivables outstanding.

j.

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

k.

Long-Lived Assets—The Group reviews its long-lived assets for impairment whenever eventsor changes 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
the amount by which the carrying amount of the asset exceeds its recoverable amount, which is
the higher of the discounted cash flows from the continued use and eventual disposition of theasset or the net selling price at disposition.

l.

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

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.

14

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 and losses are amortized on a straight-line basis over 10 years within the averageremaining service period.

n.

Share Issuance Costs—Deferred assets―share issuance costs are accounted for as the fullamount at the time of the expenditure.

o.

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

p.

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 thecosts of construction contracts in process in the balance sheet.

Chiyoda Corporation Consolidated Financial Statements FY2019

Actuarial gains and losses that are yet to be recognized in profit or loss are recognized withinequity (accumulated other comprehensive income), after adjusting for tax effects, are recognizedin profit or loss over a certain period no longer than the expected average remaining service
period of the employees.
t.

Asset Retirement Obligations—Under Japanese GAAP, an asset retirement obligation isdefined 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 withthe retirement of such tangible fixed asset. The asset retirement obligation is recognized as thesum 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 reasonableestimate of the asset retirement obligation cannot be made in the period the asset retirement
obligation is incurred, the liability 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 cost is capitalized by increasing the carrying amount of the related
fixed asset by the amount of the liability. 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 each period. Any subsequent revisions to the timing or the amountof the original estimate of undiscounted cash flows are reflected as an adjustment to the carrying
amount of the liability and the capitalized amount of the related asset retirement cost.

u.

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

v.

Leases—Japanese GAAP require that all finance lease transactions be capitalized byrecognizing lease assets and lease obligations in the balance sheet.
All other leases are accounted for as operating leases.

w. Income Taxes—The provision for income taxes is computed based on the pretax income
included in the consolidated statement of income. The asset and liability approach is used torecognize 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 are measured by applying currently enacted income tax rates to the temporary
differences.
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.

15

Notes to Consolidated Financial Statements

ab. Accounting Changes

Concerning items which transitioned to the group tax sharing system and those for which thenonconsolidated tax payment system was reviewed in line with the transition to the group tax
sharing system, which has been established under the "Act for Partial Amendment of the Income
Tax Act, etc." (Act No. 8 of 2020), the Company and its domestic consolidated subsidiaries will
not apply the provisions of Paragraph 44 of "Implementation Guidance on Tax Effect Accounting"(ASBJ Guidance No. 28 of February 16, 2018), in accordance with Paragraph 3 of "Treatment of
Tax Effect Accounting for the Transition from the Consolidated Declaration System to the GroupTax Sharing System" (PITF No. 39 of March 31, 2020). As a result, the amounts of deferred tax
assets and deferred tax liabilities are reported based on the provisions of the tax act before theamendment.
x.

Foreign Currency Transactions—All short-term and long-term monetary receivables andpayables denominated in foreign currencies are translated into Japanese yen at the exchange
rates at the balance sheet date. Foreign exchange gains and losses from translation arerecognized in the consolidated statement of income to the extent that they are not hedged byforeign currency forward contracts.

y.

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 fromsuch translation are shown as "Foreign currency translation adjustments" under accumulated
other comprehensive income in a separate component of equity. Revenue and expense
accounts of consolidated foreign subsidiaries are translated into Japanese yen at the current
exchange rate as of the balance sheet date.

z.

Derivatives and Hedging Activities—The Group uses derivative financial instruments,
including foreign currency forward contracts, as a means of hedging exposure to foreign currency
risks. The Group does not enter into derivatives for trading or speculative purposes.

Adaption of IFRS 16 Leases
Effective from the current fiscal year, the overseas consolidated subsidiaries excluding the onesin the U.S., applied "Leases" (IFRS 16). The effect of these changes on consolidated financial
statements was immaterial.
Adaption of ASU No. 2014-09 Revenue from Contracts with Customers
Effective from the current fiscal year, certain overseas consolidated subsidiaries that apply
generally accepted accounting principles in the United States of America (U.S. GAAP) applied
Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers(revised on May 28, 2014). The effect of these changes on consolidated financial statements was
immaterial.
ac. 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 AccountingStandard for Revenue Recognition," and ASBJ Guidance No. 19, "Implementation Guidance on
Disclosures about Fair Value of Financial instruments." The core principle of the standard andguidance is that an entity should recognize revenue to depict the transfer of promised goods orservices to customers in an amount that reflects the consideration to which the entity expects tobe entitled in exchange for those goods or services. An entity should recognize revenue inaccordance 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

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 income.

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.

(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 thehedged items, gains or losses on derivatives are deferred until maturity of the hedgedtransactions.
Foreign currency forward contracts are utilized to hedge foreign exchange risks. Certain assets
and liabilities on construction contracts denominated in foreign currencies are translated at thecontracted rates if the forward contracts qualify for hedge accounting.
Foreign currency deposits are held to hedge foreign exchange risks derived from forecasted
purchases of fixed assets denominated in foreign currency.
aa. 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 the period, retroactively adjusted for stock splits.
Diluted net income per share reflects the potential dilution that could occur if preferred stocks
were exercised. Diluted net income per share of common stock assumes full exercise ofpreferred stocks.
Cash dividends per share presented in the accompanying consolidated statement of income are
dividends applicable to the respective fiscal years, including dividends to be paid after the end of
the year.

The Company expects to apply the accounting standard and guidance for annual periods
beginning on or after April 1, 2021, and is in the process of measuring the effects of applying theaccounting standard and guidance in future applicable periods.
3.

BUSINESS DIVESTITURE
The Board of Directors met on January 28, 2020, and conditionally resolved to spin off the IT
business from Chiyoda System Technologies (the "CST"), succeeding it with a newly combined
company of CST IT business and TIS Inc. and to transfer part of the new company shares to TIS Inc.
On February 28, 2020, the condition was fulfilled and the share transfer agreements were executedwith TIS Inc.
a.

Overview of the Business Divestiture(1) Name of the counterparty of the business divestiture and the share transfer(a) Name of the counterparty of the business divestiture
TIS Chiyoda Systems Corporation(b) Name of the counterparty of the share transfer
TIS Inc.

16

Chiyoda Corporation Consolidated Financial Statements FY201917

Notes to Consolidated Financial Statements

5.

(2) Name and description of the business subject to the business divestiture

INVESTMENT SECURITIESInvestment securities at March 31, 2020 and 2019, consisted of the following:(a) Name of the businessIT business operated by CST(b) Contents of the business
Providing IT system consulting, development, integration and operational support, etc.
(3) Purpose of the business divestiture
CST provides clients with IT solutions covering project management, project control andoperational control of industrial plants to resolve challenges. In order to promote value
creation through internal and external digitalization, the Group believes that it is necessary tofurther strengthen the management infrastructures and to develop the abilities of the humanresources working in the IT business who play a core role in the delivery of IT services. The
Company is pursuing improved performance as an IT solution provider via enhancement of
CST's IT capability in collaboration with TIS Inc., a first class integrated IT enterprise inJapan.
(4) Date of the business divestiture

Non-current—Equity securities¥ 1,540

March 31, 2020

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

¥ 297

Cost

(a) Business divestiture
Incorporation-type split of CST with succession of CST's IT business by the newcompany

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

Transfer of stocks, with cash, etc. as the only compensatory assets
Cost

Reportable Segment in Which the Divested Business Is Included
Securities classified as—
Available-for-sale—equity securities

Engineering
CONSTRUCTION CONTRACTS
Costs and estimated earnings recognized with respect to construction contracts which are accounted
for by the percentage-of-completion method at March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019

Net

Chiyoda Corporation Consolidated Financial Statements FY2019

¥ 112

¥ 19

Fair
Value
¥ 390

Millions of Yen
Unrealized
Unrealized
Gains
Losses
¥ 164

¥ 121

Fair
Value
¥ 453

¥ 332,157(301,647 )¥ 30,510¥ 311,707(287,545 )¥ 24,162

Thousands of
U.S. Dollars
2020$ 2,731

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
Losses$ 1,030

$ 175

Fair
Value
$ 3,587

Information on the available-for-sale securities sold during the years ended March 31, 2020 and
2019, was as follows:
March 31, 2020
None
March 31, 2019

$ 3,047,320(2,767,406 )$ 279,914
Securities classified as—
Available-for-sale—equity securities

18

Millions of Yen
Unrealized
Unrealized
Gains
LossesMarch 31, 2020(b) Share transfer

Costs and estimated earnings
Amounts billed$ 14,131

The costs and aggregate fair values of investment securities at March 31, 2020 and 2019, were as
follows:(5) Summary of other transactions including legal forms

4.

¥ 1,603

March 31, 2019

October 1, 2020 (planned)b.

Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019

Proceeds

Millions of Yen
Realized
Gains

¥7

¥1

Realized
Losses19

Notes to Consolidated Financial Statements

The impairment loss on available-for-sale securities for the year ended March 31, 2020, was¥122 million ($1,126 thousand).
6.

9.

LONG-TERM DEBT
Long-term debt at March 31, 2020 and 2019, consisted of the following:

IMPAIRMENT LOSS OF LONG-LIVED ASSETS
Impairment loss on long-lived assets for the fiscal year ended March 31, 2020, was as follows:

Millions of Yen
2020
2019

March 31, 2020

Location

Used Status

Category ofAssetsJapan—

Goodwill

Long-term loans from banks, with interest rates at
2.5% (2020)—Unsecured
Long-term loans from banks, with interest rates at
1.9% (2020) and 1.9% (2019)—Unsecured
Long-term loans from banks, with interest rate at
0.8% (2020) and 0.8% (2019)—Unsecured
Long-term loans from banks, with interest rate at
0.7% (2020) and 0.7% (2019)—Unsecured
Long-term loans accounted as financial transactions,with interest rate at 3.4% (2020) and3.4% (2019)—Collateralized
Obligations under finance leases
Total
Less current portion

Impairment Loss
Thousands ofMillions of Yen
U.S. Dollars
¥ 67

$ 619

Regarding the goodwill recorded on the acquisition of the shares of subsidiary in Japan, the Group
concluded that it was required impairment, as its recoverable amount at the time of transfer from theCompany to the new company whose stock is to be owned by the non-Group company was lower
than its book value. The recoverable amount for goodwill is measured at its net realizable values at
the transfer date.
7.

INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATEDCOMPANIES

Long-term debt, less current portion

Investments in and advances to unconsolidated subsidiaries and associated companies at March 31,
2020 and 2019, were as follows:
Millions of Yen
2020
2019

8.

¥ 4,058¥ 4,789$ 37,230

Total¥ 4,058¥ 4,789$ 37,230

Millions of Yen
2020
2019
Land
Buildings and structures
Tools, furniture and fixtures
Current portion of long-term debt
Long-term debt

20

Year Ending
March 31ASSETS AND LIABILITIES ACCOUNTED FOR AS FINANCIAL TRANSACTIONS
Assets and liabilities accounted for as financial transactions at March 31, 2020 and 2019, were as
follows:

Chiyoda Corporation Consolidated Financial Statements FY2019

¥ 381
341

¥ 381
373

122
747

118
870

Thousands of
U.S. Dollars
2020$ 3,496
3,136
1
1,124
6,862

$ 183,486

10,000¥ 10,000

91,743

4,000

4,000

36,697

1,000

1,000

9,174

870
1,129
37,000(542 )

989
22
16,011(121 )

7,986
10,366
339,454(4,976 )¥ 36,458¥ 15,889$ 334,477

Annual maturities of long-term debt, excluding finance leases, at March 31, 2020, were as follows:

Thousands of
U.S. Dollars
2020

Investments¥ 20,000Thousands of
U.S. Dollars
2020

10.

Millions of Yen

Thousands of
U.S. Dollars

2020
2021
2022
2023
2024

¥

122
747
10,0005,000
20,000

$

1,124
6,862
91,74345,871
183,486

Total¥ 35,870$ 329,087

RETIREMENT AND PENSION PLANS
The Company and consolidated subsidiaries have funded or unfunded defined benefit pension plansand defined contribution pension plans for employees.
Under defined benefit corporate pension plans, all of which are funded, employees are entitled tocertain lump-sum payments or pension payments based on cumulated points which are granted inaccordance with years of continuous employment, occupational classification and performance
evaluation. Under severance lump-sum payment plans, employees are entitled to certain lump-sum
payments based on salary 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.

21

Notes to Consolidated Financial Statements(1) The changes in defined benefit obligation for the years ended March 31, 2020 and 2019, wereas follows:
Millions of Yen
2020
2019

Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Balance at beginning of year
Current service cost
Interest cost
Actuarial gains
Benefits paid
Others¥ 20,896
1,087
151(212 )(2,116 )3¥ 21,174
1,092
179
(27 )
(1,506 )(16 )$ 191,708
9,977
1,391
(1,952 )(19,414 )27

Balance at end of year

¥ 19,809¥ 20,896$ 181,737

Liability for retirement benefits
Asset for retirement benefits
Net liability arising from defined
benefit obligations

Balance at beginning of year
Expected return on plan assets
Actuarial gains
Contributions from the employer
Benefits paid
OthersBalance at end of year

¥ 19,669
354(868 )
712(1,669 )6¥ 18,204¥ 20,532
378(443 )
689(1,454 )(33 )¥ 19,669

Thousands of
U.S. Dollars
2020$ 180,449
3,250(7,967 )6,534(15,313 )56¥ 1,986¥ 1,541$ 18,226¥ 1,087151(354 )(338 )
206¥ 1,092179(378 )(77 )183$ 9,977
1,391(3,250 )(3,103 )1,891

Net periodic benefit costs

¥ 752

¥ 999

$ 6,906

Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Actuarial losses

¥ 914

¥ 495

$ 8,388

Total

¥ 914

¥ 495

$ 8,388(7) Amounts recognized in accumulated other comprehensive income (before income tax effect) in
respect of defined retirement benefit plans as of March 31, 2020 and 2019, were as follows:

Balance at beginning of year
Benefit costs
Benefits paid
Contribution to the plans
Others

¥ 313
206
(66 )
(68 )
(2 )

¥ 330
183
(124 )(78 )3$ 2,880
1,891(612 )(632 )(27 )Unrecognized actuarial gains¥ (2 )¥ (917 )$ (25 )

Balance at end of year

¥ 381

¥ 313

$ 3,500

Total¥ (2 )¥ (917 )$ (25 )

(4) Reconciliation between the liability recorded in the consolidated balance sheet and the balancesof defined benefit obligations and plan assets:
Millions of Yen
2020
2019

22

$ 18,226(6) Amounts recognized in other comprehensive income (before income tax effect) in respect ofdefined retirement benefit plans for the years ended March 31, 2020 and 2019, were as follows:(3) The changes in the liability recorded in the consolidated balance sheet by using the simplified
method for the years ended March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019

¥ 1,546(5 )Service cost
Interest cost
Expected return on plan assets
Recognized actuarial gains
Benefit costs in simplified method$ 167,011

Thousands of
U.S. Dollars
2020¥ 1,986(5) The components of net periodic benefit costs for the years ended March 31, 2020 and 2019,were as follows:
Thousands ofMillions of Yen
U.S. Dollars
2020
2019
2020

(2) The changes in plan assets for the years ended March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Thousands of
U.S. Dollars
2020

Funded defined benefit obligations
Plan assets
Total
Unfunded defined benefit obligations¥ 20,948(19,293 )
1,654
332

¥ 21,684(20,778 )906
634$ 192,187(177,008 )15,1793,047

Net liability arising from defined
benefit obligations¥ 1,986¥ 1,541$ 18,226

Chiyoda Corporation Consolidated Financial Statements FY2019

Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020(8) Plan assetsa.

Components of plan assets
Plan assets as of March 31, 2020 and 2019, consisted of the following:
2020

2019

Debt investments
Equity investments
General accounts
Others

36 %
23
26
15

30 %
31
25
14

Total

100 %

100 %

23

Notes to Consolidated Financial Statementsb.

Method of determining the expected rate of return on plan assetsb.

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 theplan assets.
(9) Assumptions used for the years ended March 31, 2020 and 2019, were set forth as follows:

Discount rate
Expected rate of return on plan assets

2020

2019

Mainly 0.7%
Mainly 1.8%

Mainly 0.7%
Mainly 1.8%

(10) Payables to defined contribution plans of the Company and consolidated subsidiaries for theyears ended March 31, 2020 and 2019, were ¥400 million ($3,673 thousand) and ¥408 million,
respectively.
11.

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.

Dividends
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 soin 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 theCompanies Act. The Company became organized as a company with an audit and supervisorycommittee effective June 23, 2016. However, the Company does not meet all the above criteria.
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 amountof net assets after dividends must be maintained at no less than ¥3 million.
The preferred dividend annual rate for the Class A Preferred Shares is set at 3%. If there is a
shortfall in dividend on the shareholders of Class A Preferred Shares during a fiscal year, such
shortfall will be carried over into the following fiscal year or into subsequent fiscal years. The
shareholders of Class A Preferred Shares may not receive dividends from surplus in excess of
the amount of such preferred dividends. The order of preference on payment of dividends fromsurplus between the Class A Preferred Shares and common shares is as follows: the amountequal to the unpaid dividends carried over on the Class A Preferred Shares is paid first; preferred
dividends on the Class A Preferred Shares are paid next; and dividends on common shares arepaid last.

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 asa legal reserve (a component of retained earnings) or as additional paid-in capital (a componentof 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 capitaland 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 the accounts within equity under certain conditions upon
resolution of the shareholders.
The Company issued new shares through a third-party allotment to Mitsubishi Corporation andpayment process was completed on July 1, 2019.
Outline of the third-party allotment was as follows:(1) Number of newly issued sharesClass A Preferred Shares 175,000,000(2) Issue price¥400 per share(3) Total issue price of stocks¥70,000 million ($642,201 thousand)(4) Method of subscription or allotment (planned allottee)
Allotment to Mitsubishi Corporation by third-party allotment(5) Amount of increase in capital¥35,000 million ($321,100 thousand)(6) Amount of increase in capital surplus¥35,000 million ($321,100 thousand)(7) Other notable matters
The shareholders who own the "Preferred Shares" do not hold voting rights, but have theright to 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.
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 theshareholder.
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.

24

Chiyoda Corporation Consolidated Financial Statements FY201925

Notes to Consolidated Financial Statementsc.

Treasury Stock and Treasury Stock Acquisition Rights*1 Net deferred tax assets as of March 31, 2020 and 2019, were recorded in the accompanying consolidated balance sheet as follows:

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 ofequity.
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.
12.

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes
which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 31% foreach of the years ended March 31, 2020 and 2019.
The tax effects of significant temporary differences and tax loss carryforwards which resulted indeferred tax assets and liabilities at March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019
Deferred tax assets:
Tax loss carryforwards*3
Adjustment of percentage of completion for foreign
construction
Loss on valuation of investment securities
Cost of revenue
Allowance for losses on construction contracts
Advances receipts on construction contracts
Long-term accounts receivable
Long-term loans receivable
Allowance for employees' bonuses
Accounts receivable from completed construction
contracts
Costs of construction contracts in process
Liability for retirement benefits
Foreign tax credit carryforwards
Other
Subtotal of deferred tax assets
Valuation allowance for tax loss carryforwards*3
Valuation allowance for temporary differences
Subtotal valuation allowance*2¥ 49,172¥ 45,519$ 451,125

5,218
4,809
3,815
3,579
2,471
1,824
1,643
1,247

8,762
4,895
4,747
8,499
28
1,824
1,643
908

47,87344,12035,00532,841
22,676
16,735
15,075
11,447

895
822
581

8,211
7,550
5,331

3,896
79,977(49,138 )(29,725 )(78,864 )

2,182
1,051
584
551
3,298
84,498(45,463 )(37,943 )(83,406 )35,743
733,738(450,814 )(272,714 )(723,528 )

1,112

1,091

10,209

291
161
65

153
138
305

2,676
1,482
599

518

597

4,758

Total
Deferred tax liabilities:
Fixed assets as asset retirement obligations
Profit/loss in joint venture
Other
Total
Net deferred tax assets*1

26

Chiyoda Corporation Consolidated Financial Statements FY2019

Thousands of
U.S. Dollars
2020

¥

594

¥

493

$

Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
Investments and other assets—Deferred tax assets
Long-term liabilities—Other

¥ 599
(5 )

¥ 701
(207 )$ 5,503(53 )*2 The main reason for the fluctuation of the valuation allowance is the decrease of the valuation allowance for the allowance for losses on construction contracts.
*3 Amounts of tax loss carryforwards and related deferred tax assets by tax loss carryforwards for the year ended March 31, 2020 and 2019, were as follows:

March 31, 2020
Tax loss carryforwards*
Valuation allowance for tax loss carryforwards
Deferred tax assets

March 31, 2019
Tax loss carryforwards*
Valuation allowance for tax loss carryforwards
Deferred tax assets

March 31, 2020
Tax loss carryforwards*
Valuation allowance for tax loss carryforwards
Deferred tax assets

1 Year
or
Less

After
1 Yearthrough
2 YearsAfter
2 Years
through
3 Years¥ 653(653 )¥ 291(291 )¥ 161(161 )

1 Year
or
Less

After
1 Yearthrough
2 YearsAfter
2 Years
through
3 Years¥ 656(656 )¥ 115(115 )¥ 236(236 )

Millions of Yen
After
After
3 Years
4 Years
throughthrough
4 Years
5 Years¥ 3,482(3,448 )33

After
5 Years

¥ 65
(65 )

¥ 44,518(44,518 )Millions of Yen
After
After
3 Years
4 Years
throughthrough
4 Years
5 Years

After
5 Years

¥ 47
(47 )

¥ 3,995(3,938 )56¥ 40,468(40,468 )1 Year
or
Less

After
1 Yearthrough
2 Years

Thousands of U.S. Dollars
After
After
After
2 Years
3 Years
4 Years
throughthroughthrough
3 Years
4 Years
5 Years

After
5 Years$ 5,993(5,993 )$ 2,671(2,671 )$ 1,483(1,483 )$ 408,423(408,423 )$ 31,948(31,637 )
310

$ 604
(604 )

Total¥ 49,172(49,138 )33

Total¥ 45,519(45,463 )56

Total$ 451,125(450,814 )310* Figures for tax loss carryforwards were the amounts multiplied by the effective statutory tax rate.

5,450

27

Notes to Consolidated Financial Statements

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates
reflected in the accompanying consolidated statement of income for the years ended March 31, 2020
and 2019, is as follows:
2020

2019

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Nontaxable dividend income
Profit/loss in joint venture
Tax rate differences with overseas subsidiaries

31 %
1
(2)
14
(7)

*

Actual effective tax rate

37 %(3) Risk Management for Financial Instruments
Credit risk management

RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥1,620 million ($14,871 thousand) and¥1,917 million for the years ended March 31, 2020 and 2019, respectively.

14.

LEASES

Future minimum payments under non-cancelable operating leases were as follows:
Millions of Yen
2020
2019

Commercial paper is exposed to insignificant default risk because transactions are limited tocompanies with high credit ratings.

Market risk management (risk of foreign exchange and interest rates)
Thousands of
U.S. Dollars
2020

Due within one year
Due after one year

¥ (139 )(116 )¥ 540
844$ (1,278 )(1,070 )Total¥ (256 )¥ 1,385$ (2,349 )Effective from the current fiscal year, the overseas consolidated subsidiaries excluding the ones in
the U.S., applied "Leases" (IFRS 16). The effect of these changes on consolidated financial
statements was immaterial. The operating leases related to these companies is included only in theyear ended March 31, 2019.

Foreign currency trade receivables and payables are exposed to market risk resulting fromfluctuations in foreign currency exchange rates. Such foreign exchange risk grasped by currency
and month is hedged principally with foreign currency forward contracts.
Foreign currency forward contracts are controlled under internal guidelines. The position related
to particular construction contracts is identified and is reviewed monthly. For setting andcancelling foreign currency contracts, reconciliation of the transaction and balances withcustomers' 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 andfinancial position of issuers on a regular basis. The Group assesses the stock price risk
quantitatively so as to account for significant declines in market value as impairment losses.

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

Liquidity risk management(1) Group Policy for Financial Instruments

Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on
their maturity dates. The Group manages its liquidity risk by holding adequate volumes of liquid
assets along with timely, adequate financial planning.

The Group uses financial instruments for cash surpluses, if any, invested in low-risk financial
assets, such as short-term 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 offluctuation 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.

28

The Group manages its credit risk from receivables on the basis of internal guidelines, which
include monitoring of payment terms and balances of major customers to identify the default riskof customers at an early stage.

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.

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

15.

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 inforeign currency exchange rates, the position, net of receivables in foreign currencies, is hedgedby using foreign currency forward contracts.
Derivatives are foreign currency forward contracts, which are used to manage exposure tomarket risks from changes in foreign currency exchange rates of receivables and payables.
Please see Notes 2.z and 16 for more details about derivatives.

* As loss before income taxes is provided, the amount is omitted.
13.

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.

Chiyoda Corporation Consolidated Financial Statements FY2019(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 16 for fair values for derivatives.

29

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

March 31, 2020
Thousands of U.S. Dollars
Carrying
Unrealized
AmountFair Value
Gain (Loss)

March 31, 2020
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¥ 115,932
8,471
30,671(1,222 )¥ 115,932
8,471
30,671(1,222 )30,51068,712(20 )96,028390

30,51068,712(20 )96,028390

Total¥ 349,475¥ 349,475

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

¥

¥

Total

¥ 174,629

122
137,546
1,212
35,747

Unrealized
Gain (Loss)

30

279,914630,391(191 )
880,995
3,587

279,914630,391(191 )
880,995
3,587

Total

$ 3,206,199$ 3,206,199

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

$

1,124
1,261,892
11,120327,963$

1,124
1,261,892
11,120327,453$ (509 )$ 1,602,101$ 1,601,591$ (509 )Total¥ 174,573¥ (55 )* Allowance for doubtful accounts corresponding to trade receivable is deducted.

Millions of Yen
Fair Value¥ 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

Chiyoda Corporation Consolidated Financial Statements FY2019$ 1,063,604
77,718281,393(11,214 )¥ (55 )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

118
175,277
708
15,870$ 1,063,604
77,718281,393(11,214 )122
137,546
1,212
35,692

March 31, 2019
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
their short 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 thestock exchange for the equity instruments. Fair value information for investment securities
by classification is included in Note 5.
The above schedules do not include investment securities with fair values that cannot be
reliably determined.

118
175,277
708
14,857¥ (1,013 )¥ 190,962¥ (1,013 )31

Notes to Consolidated Financial Statements

Notes and Accounts Payable—Trade and Income Taxes Payable

March 31, 2019

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

Due in1 Yearor
Less

Current Portion of Long-Term Debt (Bank Loans) and Long-Term Debt (Bank Loans)
The fair value of long-term debt 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
the loan was newly borrowed.
Derivatives
Fair value information for derivatives is included in Note 16.
(b) Carrying amount of financial instruments with fair values that cannot be reliably determined
Millions of Yen
2020
2019
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

Thousands of
U.S. Dollars
2020¥ 1,146¥ 1,147$ 10,519

2

2

24

4,058

4,789

37,23032

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

56,30968,691
96,028¥ 3,650

Total¥ 345,405¥ 3,650

Chiyoda Corporation Consolidated Financial Statements FY2019

61,52265,923110,967¥ 5,858

Total¥ 307,796¥ 5,858

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$ 1,063,341
77,718516,604
630,200
880,995$ 33,489

Total$ 3,168,860$ 33,489* Allowance for doubtful accounts is deducted.
Please see Note 9 for annual maturities of long-term debt.
16.

¥ 115,904
8,471¥ 68,232
1,150

Thousands of U.S. Dollars
Due inDue after Due after
1 Year
1 Year
5 Yearsor
throughthroughLess
5 Years
10 Years

March 31, 2020

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

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, 2020

(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities

Due in1 Yearor
LessMillions of Yen
Due after
Due after
1 Year
5 Years
throughthrough
5 Years
10 Years

DERIVATIVES
Derivative Transactions to Which Hedge Accounting Is Not Applied
March 31, 2020

Contract
AmountMillions of Yen
Contract
AmountDue afterFair
One Year
Value

Foreign currency forward contracts:
Selling USD/buying JPY
Selling EUR/buying JPY
Selling AUD/buying JPY¥ 32,165
5,685
43,251¥ (28 )
(13 )(341 )¥ (28 )
(13 )(341 )

Total¥ 81,102¥ (383 )¥ (383 )Unrealized
Gain (Loss)

33

Notes to Consolidated Financial Statements

March 31, 2019

March 31, 2019

Contract
AmountMillions of Yen
Contract
AmountDue afterFair
One Year
Value

Hedged Item

Unrealized
Gain (Loss)

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

¥ 503

¥ (556 )(3 )¥ (556 )
(3 )

Total

¥ 13,467¥ 503¥ (560 )¥ (560 )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

Contract
AmountOther*2:
Buying EUR/selling JPY
Buying SGD/selling JPY

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

Foreign currency forward contracts:
Selling USD/buying JPY
Selling EUR/buying JPY
Selling AUD/buying JPY$ 295,100
52,157
396,802$(261 )(119 )(3,136 )$ (261 )(119 )(3,136 )Total$ 744,060$ (3,517 )$ (3,517 )March 31, 2020

Foreign currency forward
contracts—Accounted forunder deferred hedge
accounting method:
Selling USD/buying JPY
Buying USD/selling JPY

Millions of Yen
Contract
AmountFairContract
Due after
Value
AmountOne Year (Loss)*1

Foreign currency
forecasted transaction

Total
Payables

Total

¥ 138
1,076

¥ 17
489

¥ (6 )
20¥ 1,215

¥ 506

¥ 13

¥ 141
376
¥ 518

Foreign currency
forecasted transaction

Total
Other*2:
Selling USD/buying JPY
Buying USD/selling JPY¥ 3,859
3,680
1,293
18

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

¥ 1,636¥84¥ 1,637¥

84

Thousands of U.S. Dollars
Contract
AmountFairContract
Due after
Value
AmountOne Year (Loss)*1

Hedged Item

March 31, 2020

Hedged Item

Payables

Total

Derivative Transactions to Which Hedge Accounting Is Applied

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

Foreign currency
forecasted
transaction

Total

March 31, 2020

Foreign currency forward
contracts—Accounted forunder deferred hedge
accounting method:
Selling USD/buying JPY
Buying USD/selling JPY

Millions of Yen
Contract
AmountFairContract
Due after
Value
AmountOne Year (Loss)*1

Payables$ 1,272
9,877

$ 160
4,488

$ (56 )
183

$ 11,150$ 4,649$ 127$ 1,300
3,452

Total

$ 4,753*1 Fair value is based on prices obtained from financial institutions.
*2 Fair value of the foreign currency forward contract assigned for payables is included in the fairvalue of payables disclosed in Note 15.
17.

CONTINGENT LIABILITIESAt March 31, 2020, the Group had the following contingent liabilities:
Millions of Yen
Guarantees on employees' housing loans and others

34

Chiyoda Corporation Consolidated Financial Statements FY2019

Thousands of
U.S. Dollars$335Notes to Consolidated Financial Statements

18.

20.

PROVISION FOR BUSINESS STRUCTURE IMPROVEMENTNET INCOME (LOSS) PER SHARE
A reconciliation of the differences between basic and diluted net income (loss) per share ("EPS") for
the years ended March 31, 2020 and 2019, was as follows:

The Company recognized "provision for business structure improvement" in the year ended March
31, 2019. As part of the Company's medium-term management plan, it has been striving to implement
structural reform including restructuring of the group companies.

Year Ended March 31, 2020

Along with the cost being spent, the Company recognized ¥232 million ($2,129 thousand) as"reversal of provision for business structure improvement" in the year ended March 31, 2020.
19.

OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the years ended March 31, 2020 and
2019, were as follows:
Millions of Yen
2020
2019
Unrealized gain (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
Deferred gain on derivatives under hedge accounting:
Gains 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
Total
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 of associates:
Loss arising during the year
Reclassification adjustments to profit or loss
Total
Total other comprehensive income (loss)

36

Chiyoda Corporation Consolidated Financial Statements FY2019

¥

¥
¥

¥

(66 )
115
49
14

¥

64

¥

(67 )

$

(67 )
(2 )
(69 )

Basic EPS—Net income available
to common shareholders
Effect of dilutive securities—
Preferred stockThousands of
U.S. Dollars
2020

$

43
13
1
59
(2 )

¥ 2,554
(34 )
(21 )
2,498
(779 )$

56¥ 1,719$

Diluted EPS—Net income forcomputation(605 )
1,063
457
135

Year Ended March 31, 2019

592
400
127
15
542
(26 )

Basic EPS—Net loss available
to common shareholders

Millionsof YenNet Income
Attributableto Owners of
the Parent

Thousandsof Shares¥ 10,602

258,967

1,575

525,956¥ 12,177

Yen

WeightedAverage
SharesU.S. Dollars

EPS¥ 40.94$ 0.38783,923¥ 15.51$ 0.14

Millionsof Yen
Net Loss
Attributableto Owners of
the Parent

Thousandsof Shares

Yen

WeightedAverage
SharesEPS¥ (214,948 )

258,967¥ (830.02 )There is no dilutive effect for the year ended March 31, 2019.

516
21.

SUBSEQUENT EVENTS¥ 3,197¥ (1,348 )$ 29,337(Reduction of Capital and Capital Reserve and Appropriation of Surplus)¥ 3,197¥ (1,348 )$ 29,337

The Board of Directors met on May 8, 2020, and resolved to reduce capital and capital reserves andappropriate these funds as compensation for deficit, which is to be proposed at the ordinary general
meeting of shareholders of the Company on June 25, 2020.

¥ (576 )(338 )(914 )
1¥ (418 )(77 )(495 )408$ (5,284 )(3,103 )(8,388 )17¥ (912 )¥$ (8,371 )

(87 )

a.

This is carried out to offset the loss in retained surplus carried forward and improve its financial
condition. Capital and capital reserves are transferred to other capital surplus, and other capitalsurplus is transferred to retained earnings carried forward.
b.

¥

(66 )

¥

(99 )
(750 )$(611 )¥(66 )¥ (850 )$(611 )¥ 2,339¥ (636 )$ 21,463

Purpose of Reduction of Capital and Capital Reserve and Appropriation of Surplus

Outline of Capital Reduction(1) Amount of capital to be reduced
The capital amount of ¥78,396 million as of March 31, 2020, is to be reduced by¥63,381 million to ¥15,014 million.
(2) Method of capital reduction
In accordance with Article 447, Paragraph 1 of the Companies Act, the Company will reduce
its capital without compensation and transfer the total amount of reduced capital to othercapital surplus. This reduction will not affect the number of shares held by shareholders.

37Notes to Consolidated Financial Statementsc.

(2) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, Liabilities, andOther Items for Each Reportable Segment

Outline of Capital Reserve Reduction(1) Amount of capital reserve to be reduced
The capital reserve amount of ¥72,112 million as of March 31, 2020, is to be reduced by¥72,112 million to ¥0.
(2) Method of capital reduction
In accordance with Article 448, Paragraph 1 of the Companies Act, the Company will reduce
its capital reserve and transfer the total amount of the reduced capital reserve to othercapital surplus.

d.

Outline of Appropriation of Surplus
Based on Article 452 of the Companies Act, on the condition that the reduction of the amount of
capital and capital reserve outlined in b and c above takes effect, the Company will make up for
deficits by transferring to retained earnings a carried forward a total of ¥135,494 million, which isequivalent to the increase of other capital surplus due to the aforementioned capital reduction. As
a result, the amount of retained earnings carried forward after the transfer will be ¥0.

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.
(3) Information about Sales, Profit, Assets, Liabilities, and Other Items
Year Ended March 31, 2020
The reportable segment of the Group consists of only the "Engineering" segment. Since thetravel services of Arrowhead International Corporation were transferred to another company inthis fiscal year, the "Other" segment has become immaterial. Accordingly, the Group has omitted
reporting of segment information.
Year Ended March 31, 2019

Other*1

Total

Reconciliations*2¥ 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) Items and amount of reduced surplus
Other capital surplus ¥135,494 million

Sales:
Sales to external customers
Intersegment sales or transfers(2) Items and amount of increased surplus
Retained earnings carried forward of ¥135,494 millione.

Timeline
Decision by Board of Directors:

May 8, 2020

Approved by general meeting of shareholders: June 25, 2020

22.

Notice of objection of creditors:

June 26, 2020

Deadline for objections of creditors:

July 27, 2020

Effective date:August 7, 2020

2,837
2,463

17

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

SEGMENT INFORMATION

Notes for the year ended March 31, 2019:

Under Japanese accounting standards, an entity is required to report financial and descriptive
information about its reportable segments. Reportable segments are operating segments oraggregations of 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 isevaluated regularly by the chief operating decision-maker in deciding how to allocate resources andin assessing performance. Generally, segment information is required to be reported on the same
basis as is used internally for evaluating operating segment performance and deciding how toallocate resources to operating segments.

*1 "Other" represents industry segments which are not included in the reportable segment,
consisting of temporary staffing services and travel services.

(1) Description of Reportable Segments
The Group's reportable segments are those for which separate financial information is available
and regular 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 the most appropriate functions of each related company.

38

Millions of Yen

Reportable
Segment
Engineering

Chiyoda Corporation Consolidated Financial Statements FY2019*2 Details of the reconciliations are as follows:(1) The reconciliation in segment profit of ¥16 million is the elimination of intersegment
trades.
(2) The reconciliation in segment assets of ¥(274) million is the result of the elimination ofintersegment trades of ¥(2,748) million and the Group's assets of ¥(2,474) million, which
are not included in the reportable segment.
(3) The reconciliation in segment liabilities of ¥13,240 million is the result of the eliminationof intersegment trades of ¥(2,748) million and the Group's liabilities of ¥15,989 million,
which are not included in the reportable segment.
*3 The calculation of segment profit (loss) is based on the operating income in the consolidated
statement of operations.

39Notes to Consolidated Financial Statements(3) Information about Major Customers

Related Information

Year Ended March 31, 2020

(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.

Name(2) Information about Geographical Areas

Cameron LNG LLC
Gulf Coast Growth Ventures, LLC(a) Revenue
Year Ended March 31, 2020

Related Segment

Millions of Yen
Revenue

Thousands of
U.S. Dollars
Revenue

Engineering
Engineering¥ 79,612
57,378$ 730,385
526,403

Related Segment

Millions of Yen
Revenue

Engineering¥ 116,918

Year Ended March 31, 2019
Millions of Yen

Thousands of
U.S. Dollars

U.S.A.
Japan
Others¥ 192,057
133,080
60,787$ 1,761,997
1,220,919
557,679

Total¥ 385,925$ 3,540,596

Name
OJSC Yamal LNG(4) Information about Goodwill by Reportable Segment
The ending balance of goodwill as of March 31, 2020 and 2019, was as follows:Year Ended March 31, 2019

Millions of Yen
2020
2019

Millions of Yen
Japan
RussiaU.S.A.
Others¥ 120,400
116,961
35,465
69,125Engineering
Other*1

Total¥ 341,952*1 "Other" includes temporary staffing services.

Year Ended March 31, 2020
Millions of Yen

Thousands of
U.S. Dollars

Japan
Asia
Others¥ 10,160
1,974
319$ 93,212
18,117
2,927

Total

¥ 12,454$ 114,257

40

Japan
Asia
Others¥ 10,311
1,290
112

Total

¥ 11,714

Chiyoda Corporation Consolidated Financial Statements FY2019¥ 427*2 The reportable segment of the Group consists of only the "Engineering" segment, and the"Other" segment is immaterial. Accordingly, the Group has omitted reporting of segment
information. Regarding the goodwill, which is not included in the reportable segment, its
amortization in the year was ¥29 million ($275 thousand) and its unamortized balance was¥284 million ($2,614 thousand).

(b) Property, plant and equipment

Millions of Yen

¥ 112
314

Total

Note: Revenue is classified by country or region based on the location of construction sites.

Year Ended March 31, 2019*2

Thousands of
U.S. Dollars
2020

23.

RELATED PARTY DISCLOSURES
The material transactions of the Group with the parent company and major shareholders for the year
ended March 31, 2020, were as follows:
Millions of Yen

Thousands of
U.S. Dollars¥ 70,000
35,00030,000$ 642,201
321,100
275,229

Subscribe for shares*1
Loan of funds*2
Borrowings*3*1 Mitsubishi Corporation subscribed to a third-party allotment.

*2 This was due to the transaction Mitsubishi Corporation Financial & Management Services(Japan) Ltd. Regarding the loan of funds, applicable interest rates are rationally determined
upon taking into account the market rate of interest.
*3 This was due to the transaction Mitsubishi Corporation Financial & Management Services(Japan) Ltd. Regarding the borrowings, applicable interest rates are rationally determined upontaking into account the market rate of interest.

41

Notes to Consolidated Financial Statements

Independent Auditor’s Report

There are no material balances with these unconsolidated subsidiaries and associated companies asof March 31, 2020.
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 ofMarch 31, 2019.

******

42

Chiyoda Corporation Consolidated Financial Statements FY201943

Independent Auditor’s Report

44

Chiyoda Corporation Consolidated Financial Statements FY201945

Chiyoda Global Headquarters
Minatomirai Grand Central Tower, 4-6-2, Minatomirai, Nishi-ku,
Yokohama 220-8765, Japan
https://www.chiyodacorp.com/en/

Printed in Japan