JGC Group Medium-Term Business Plan
Building a Sustainable Planetary Infrastructure 2025

(BSP 2025)
Full Text

July 7, 2021
JGC Holdings Corporation

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JGC Group Medium-Term Business Plan
Building a Sustainable Planetary Infrastructure 2025 (BSP 2025)

Contents
EXECUTIVE SUMMARY........................................................................................................................... 3
1.

REVIEW OF PREVIOUS MEDIUM-TERM BUSINESS PLAN ...................................................................... 8
1.1

SUMMARY.................................................................................................................................................................8

1.2

BUSINESS RESULTS .................................................................................................................................................8

1.2.1 TOTAL ENGINEERING BUSINESS ..........................................................................................................................8
1.2.2 HIGH-PERFORMANCE FUNCTIONAL MATERIALS MANUFACTURING .............................................................92.

AWARENESS OF BUSINESS ENVIRONMENT .......................................................................................... 11
2.1

ENERGY TRANSITION ...........................................................................................................................................11

2.2

HIGH-PERFORMANCE MATERIALS MANUFACTURING .....................................................................................13

2.3

HEALTHCARE/LIFE SCIENCES, CIRCULAR ECONOMY, INDUSTRIAL & URBAN INFRASTRUCTURE ...........143.

KEY STRATEGIES .................................................................................................................................. 16
3.1

TRANSFORMATION OF EPC OPERATIONS ...........................................................................................................16

3.1.1 INCREASING COMPETITIVENESS AND PROFITABILITY OF MEGA-SIZED EPC PROJECTS ...........................16
3.1.2 TAKING ON EPC GROWTH MARKETS AND SEGMENTS ....................................................................................19
3.2

EXPANSION OF MANUFACTURING BUSINESS FOR HIGH-PERFORMANCE FUNCTIONAL MATERIALS ......20

3.2.1 OFFERING MORE PRODUCT LINES IN EXISTING CORE BUSINESS .................................................................20
3.2.2 EXPANDING SALES OF STRATEGIC PRODUCTS ................................................................................................21
3.2.3 EXPLORATION AND DEVELOPMENT OF NEXT-GENERATION BUSINESS .......................................................22
3.3 ESTABLISHMENT OF FUTURE ENGINES OF GROWTH ............................................................................................23
3.3.1. OFFSHORE WIND POWER ....................................................................................................................................24
3.3.2. BLUE HYDROGEN/FUEL AMMONIA ...................................................................................................................24
3.3.3. CHEMICAL RECYCLING ......................................................................................................................................25
4.

INVESTMENT STRATEGY...................................................................................................................... 26

5.

TALENT AND ORGANIZATION .............................................................................................................. 27
5.1

TALENT ...................................................................................................................................................................27

5.2

ORGANIZATION ......................................................................................................................................................27

6.

FINANCIAL TARGETS ............................................................................................................................ 30

7.

CAPITAL AND SHAREHOLDER RETURN POLICIES .............................................................................. 31

8.

ESG INITIATIVES ................................................................................................................................... 32

9.

COMMITMENT TO CARBON NEUTRALITY BY 2050.............................................................................. 33

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JGC Group Medium-Term Business Plan
Building a Sustainable Planetary Infrastructure 2025 (BSP 2025)

Executive Summary
Under the JGC Group's newly established 2040 Vision, the Group will seek to contribute toenhancing planetary health in five (5) business areas. Over the next five years through to FY2025,
the Group will be taking on the challenges of “Building a Sustainable Planetary Infrastructure 2025”,
which the Group is positioning in its new medium-term business plan, “BSP 2025”.

1. Review of previous medium-term business plan
Achievements during the previous medium-term business plan (FY2016–2020) include
strengthening risk management and raising the operating income ratio from 3.0% in FY2017 to 5.3%
in FY2020. The positioning of high-performance functional materials manufacturing as a corebusiness came into clearer focus, and efforts in EPC operations, such as establishing a track record ininfrastructure, steadily laid the groundwork for future growth. To provide a more robust framework
for implementing its growth strategies, the Group also adopted a holding company structure.
2. Awareness of business environment
In this medium-term business plan, the business environments in the areas defined in the 2040
Vision are as follows:⚫

Energy transition: LNG, promoted as a cleaner, lower-carbon fossil fuel, is expected to keep
growing steadily amid higher demand in emerging economies. Additionally, traditional
renewable energy business such as solar power, energy storage, and biomass power generation
as well as new fields including offshore wind power and hydrogen/fuel ammonia are also
poised to offer significant opportunities in the energy transition to a low-carbon or decarbonizedsociety.

⚫

High-performance functional materials manufacturing: Existing applications of thismanufacturing are likely to thrive, driven by a recovery in demand following the impact of thepandemic on semiconductor and telecommunications products and chemical/environmental
products. Greater demand is also expected in new applications such as high thermal
conductivity silicon nitride substrates for the power units of EVs, as well as polishing

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JGC Group Medium-Term Business Plan
Building a Sustainable Planetary Infrastructure 2025 (BSP 2025)

nanoparticles used in CMP for semiconductors.
⚫

Healthcare/Life sciences, Circular economy, Industrial & Urban infrastructure:
Healthcare and Life science markets in Japan as well as elsewhere are expected to expand as
people live longer and standards of living improve. Significant business opportunities will also
emerge as value chains are formed to recycle plastic waste and economic growth in Asia spurs
further development of water treatment and railway markets.

3. Key strategies
From this awareness of the business environment, the medium-term business plan sets the stage for
the Group to transform EPC operations, expand high-performance functional materials
manufacturing, and establish future engines of growth. Two of the strategies are aimed at securing
and expanding revenue in existing operations, and the third strategy seeks long-term growth towards
2040.
1) Transformation of EPC operations(1) Increasing profitability and competitiveness in EPC megaprojects
Having targeted ¥350 billion in net sales from mega-sized overseas EPC projects in FY2025, theGroup will take its core competencies to the next level. Severer risk management and projectnegotiations will improve the gross profit ratio, and optimized joint venture strategies, digitaltechnologies, and construction methods will provide a competitive edge in securing orders.
(2) Taking on EPC growth markets and segments
In addition, by expanding EPC operations into growth markets and segments, and by seeking adiversified portfolio, the Group will pursue a net sales target of ¥300 billion from EPC businessin growth markets and segments in FY2025. Increased revenue will be sought by strengthening
operations to secure some of the many projects anticipated for LNG receiving terminals, gasfired thermal power, solar power, and biomass power plants, pharmaceutical plants and hospitals,
as well as chemical facilities. Moreover, the Group will reinforce regional management in Asia,
which is growing rapidly, and bolster the workforce with the domestic market also in mind.
2) Expansion of manufacturing business for high-performance functional materials
High-performance functional materials manufacturing will be scaled up as the Group seeks net
sales of ¥60 billion in FY2025. The Group will work to broaden its revenue base in its primarybusiness by offering an increased line-up of JGC-developed chemical catalysts, hard disk
polishing nanoparticles, semiconductor manufacturing equipment materials, and other products.
Another engagement will be strategic investment for the future and development of nextgeneration business. Investments will target development of fine chemical product silicon nitride
substrates facilities, among other applications. Development will also include carbon recycling
catalysts, electrolytes for all-solid-state batteries, and bone regeneration materials.
3) Establishment of future engines of growth
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JGC Group Medium-Term Business Plan
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The Group will establish the following five (5) business areas defined in the 2040 Vision, which
are especially promising as future growth engines. Net sales of ¥50 billion in FY2025 areprojected, to be developed over the next decade to ¥500 billion.
Energy transition:
Carbon management support, offshore wind power, smart O&M, hydrogen / fuel ammonia,
small modular reactors (SMRs) for nuclear power generation



Healthcare/Life sciences:

Smart hospitals, smart factories, digital healthcare
Circular economy:
Recycling of plastic and fiber waste, production of SAF (sustainable aviation fuel)High-performance functional materials:
Carbon/Chemical recycling catalysts, bone regeneration materials, etcIndustrial & Urban infrastructure:
Water treatment, railways

4. Investment strategy
The path to success through these key strategies will call for a total of ¥200 billion in investment
during the medium-term business plan in areas such as digital transformation, M&As, production
facilities, business development, commercial demonstrations, and R&D. Specifically, ¥70 billion
will be allocated to transformation of EPC operations, ¥50 billion to expansion of manufacturingbusiness for high-performance functional materials, and ¥80 billion to establishing future engines ofgrowth.

5. Financial targets
Net sales of ¥800 billion are targeted in FY2025, with operating income of ¥60 billion, net profit of5

JGC Group Medium-Term Business Plan
Building a Sustainable Planetary Infrastructure 2025 (BSP 2025)¥45 billion, and ROE of 10%.
A diversified business portfolio will ensure that the energy transition area is not the only source ofrevenue. Transformation will also be sought from the standpoint of business models, where theGroup will expand from an EPC-focused model.

6. Capital and shareholder return policies
Disciplined investment and fund allocation will support its goal of reaching an ROE of 10%. The
Group will respond flexibly in its strategic investments for sustainable growth and stable revenue.
In making strategic investments, the Group will use cash in hand effectively and maintain soundfinances, with the intention of keeping the shareholders' equity ratio at or above 50%.
As for shareholder return, as before, the basic policy is directed at steady annual cash dividends
aimed at a payout ratio of 30%. The Group will also introduce a minimum ¥15 dividend per share.
Share buybacks will be considered as necessary in light of business situation.
7. Commitment to carbon neutrality by 2050
The core domain of the Group has long been Oil & Gas, but the Group have taken the opportunity ofthis transformation for “enhancing planetary health” to commit to the ambitious target of carbon
neutrality by 2050 as a sign of its dedication to sustainably incremental corporate value. The Groupwill work toward the following targets:
1) Net-zero Scope 1 and Scope 2 CO2 emissions by 2050
2) Thirty percent (30%) reduction in Scope 1 and Scope 2 CO2 emissions per unit ofproduction by 2030 in support of (1)3) Reduction in Scope 3 CO2 emissions as determined with stakeholders
To reduce Scope 3 emissions, the Group will leverage technologies cultivated by itself to provide
energy transition solutions to stakeholders.
In responding to climate change, the Group will disclose relevant information in line with
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JGC Group Medium-Term Business Plan
Building a Sustainable Planetary Infrastructure 2025 (BSP 2025)

recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

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JGC Group Medium-Term Business Plan
Building a Sustainable Planetary Infrastructure 2025 (BSP 2025)

Under the JGC Group's 2040 Vision, forecasting future 20 years, the Group will seek to contribute toenhancing planetary health in five business areas. Over the next five years through to FY2025, we
will be taking on the challenge of “Building a Sustainable Planetary Infrastructure 2025”, which weare positioning in this medium-term business plan, BSP2025.
Details of the plan are presented in this document.
1.

Review of previous medium-term business plan

1.1 Summary
Although the Group did not achieve its financial targets during the previous medium-term businessplan from FY2016 to FY2020, management measures were taken to stabilize EPC operations and lay
the groundwork for the future growth.
Higher operating income
The Group attained a higher operating income ratio and stabilized income as a whole. In FY2016 a
loss was posted, stemming mainly from a mega-sized EPC project in North America. However,subsequent tightening of project risk management was successful and improved the operating
income ratio, which rose from 3.0% in FY2017 to 5.3% in FY2020.
Groundwork for growthHigh-performance functional materials manufacturing was positioned as a core business, laying the
groundwork for sustainable growth. The Group also took on EPC in infrastructure to expand thebusiness in this area, part of efforts to build second and third pillars of businesses. A framework forcommercializing sustainable technologies linked to clean energy and circular economies was alsoestablished.
Holding company structure
In October 2019, the JGC Group adopted a holding company structure. This has reinforced
management of the business portfolio of the Group as a whole and, through delegation of authority,
more proactive and agile operations by each operating companies. The Group believe the framework
is now in place for more effective promotion of future growth strategies.
1.2 Business results
Results in total engineering business and functional materials manufacturing show that in the total
period of the previous medium-term plan, the Group’s business was on a firmer footing pursuing
strategies and measures for growth.
1.2.1 Total Engineering businessIn total engineering business, the Group strengthened project execution capabilities, expandedbusiness regions in Oil & Gas EPC, as well as diversified business areas, and promoted
digitalization.
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JGC Group Medium-Term Business Plan
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Strengthening of project execution capabilities
Project risk management was strengthened, and its specialized modular construction was establishedthrough projects in Australia, Russia, and Canada. This has made it possible to execute mega-sized
EPC projects with less risk and cost.
Expansion of type of plant and business region in Oil & Gas EPC
A new track record was established in offshore LNG plants through several projects. Regarding
business regions, Canada, Russia, East Africa, Iraq, and other areas were added to the regions where
the Group has done business.
Diversification of business areas
In the domestic market, the Group actively pursued renewable energy projects such as solar andbiomass power plants, as part of business area diversification. In the global market, its position in the
renewable energy segment was strengthened through EPC projects for Solar power plants in Vietnam
and Mongolia. Through investment in U.S.-based NuScale, a foothold was also gained in small
modular reactors (SMRs).
Promotion of digitalization (digital transformation: DX)
The Group’s long-term information strategy “IT Grand Plan 2030” was formulated in 2018. Since
then, various measures have been taken in each phase of EPC project execution through digitaltechnologies such as AI and IoT, aiming at greater improvement in operation and project
management, including project forecasting capability.
The EPC DX Department was established in 2020 to promote digital transformation in EPC. Efforts
here have included EPC project digitalization, centralized data management, and, to streamline EPC,
work unit standardization with Advanced Work Packaging (AWP). To promote the implementationof AWP, the Group also invested in U.K.-based MODS as a strategic partnership.
1.2.2 High-performance functional materials manufacturing
In high-performance functional materials manufacturing, the Group has conducted investment for
growth, expanded sales and strengthened frameworks for new product development.
Growth investment, sales expansion
The fine chemicals business of JGC Catalysts and Chemicals was expanded, and in the fine ceramics
area, production began at new factories serving the growth segment of high thermal conductivity
silicon nitride substrates for electric vehicle power modules, following investment in these facilities.
Strengthening of frameworks for the development of new products
In catalyst business, R&D centers were consolidated for higher efficiency, and human resources forsales and development were expanded. In overall manufacturing business, the Group strengthened
overall development framework for improvement of product development efficiency through
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JGC Group Medium-Term Business Plan
Building a Sustainable Planetary Infrastructure 2025 (BSP 2025)

reassignment of personnel and closer R&D collaboration within the Group.

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JGC Group Medium-Term Business Plan
Building a Sustainable Planetary Infrastructure 2025 (BSP 2025)

2.

Awareness of business environment

The business environment outlook is described, by segments, for this medium-term business plan.
2.1 Energy transition
Since LNG is positioned as a relatively clean fuel, a fossil fuel with a lighter carbon footprint, higher
LNG demand is expected that drives steady plant demand. Besides the LNG segment, new business
opportunities are also anticipated in other segments as the energy transition1 toward a low-carbon or
decarbonized society accelerates.
LNG
In the market outlook over the next decade, a tight balanceof LNG supply and demand is expected in the late 2020s
globally due to economic growth. FIDs for LNG projects ona scale of tens of millions of tons are expected in 2022 andbeyond. Several new projects are expected to start in North
America, East Africa, Russia, and elsewhere.
In the LNG segment, the Group recognizes that it must
respond not only to the greater demand but also to thetransition to low-carbon/zero-carbon energy, as the shift tocarbon-neutral LNG.2
Business opportunities are also expected to expand as more
LNG receiving terminal projects and LNG thermal power
plants are expected on the demand side of emerging
economies.
Renewable energy
Growing needs are expected in both biomass power in Japan (which will benefit from an ongoing
FIT3 program) and solar power overseas. The need for energy storage technologies is expected to
grow globally due to the fluctuating output associated with renewable energy.
Carbon management4
As the trend toward low carbon and decarbonization continues, the Group anticipates having to meetgreater support needs in carbon management at new and existing plants in industries with significant
CO2 emissions such as refining, gas, LNG, or petrochemical operations, the chemical industry, andothers. Technically, these services may involve adding CCS facilities, saving energy, switching to2040 Vision defines the energy transition as a change in the industrial structure of the energy industry, as global carbon neutrality
is sought by 2050 through carbon reduction/decarbonization in oil and gas consumption and expansion of clean energy.
2 LNG free of CO emissions from the well to the stage of combustion. Currently this term lacks a clear definition. Our
2interpretation is broad and includes not only LNG in a decarbonized supply chain from production to consumption but also net-zero
LNG for which emissions are offset by tree-planting or carbon credits.
3 Feed-in tariff
4 Broadly refers to continuous efforts by groups and organizations including national and local governments and companies tounderstand, curb, and reduce greenhouse gas emissions thought to contribute to global warming. In reference to support services
provided by the JGC Group, refers to specific solutions to curb and reduce GHGs, as described later in this document.
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JGC Group Medium-Term Business Plan
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electric power, or introducing clean external power and, economically, services may involve carbon
credits or transactions in the power market.
Offshore wind power
A legal framework is
being developed in Japan
to introduce offshore
wind power generation.
One example of this is the
Act on Promoting theUtilization of Sea Areasfor the Development ofMarine Renewable
Energy Power Generation
Facilities, enacted in
2019. The Japanese
government's Vision for
Offshore Wind Power

Source: Offshore Wind Industry Vision (1st; provisional translation), METI

Industry calls for 10 GW
of capacity to be introduced by 2030. Accounting for conditions as rules and relevant policies are
established, the Group anticipates that the related domestic EPC market will truly begin to form in
the early 2020s. 5
Hydrogen/fuel ammonia
Domestic ammonia demand is projected to stand at 3 million tons per year in 2030, and 30 million
tons per year in 2050, according to an interim report by the Public-Private Fuel Ammonia Promotion
Council.6 Progress in building value chains is expected during the period of this medium-termbusiness plan, in anticipation of significant market growth in 2030 and later.

Ministry of Economy, Trade and Industry, Vision for Offshore Wind Power Industry (1st; provisional translation), Public-Private
Council on Enhancement of Industrial Competitiveness for Offshore Wind Power Generation (December 2020)
6 Ministry of Economy, Trade and Industry, interim report of the Public-Private Fuel Ammonia Promotion Council (February 2021)
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Source: Interim report of the Public-Private Fuel Ammonia Promotion Council, METI

2.2 High-performance materials manufacturing
Existing segments are likely to recover demand sapped by the pandemic. In particular, growth isexpected in markets involving semiconductors, telecommunications, and chemical/environmental
applications. In new segments, growth is expected for materials used in electric vehicles and insemiconductor applications.
Catalysts
Although demand in the petroleum catalyst market will remain sluggish, the Group anticipate a
steady increase in needs for chemical and environmental
catalysts, driven by demand from refineries switching tochemicals, as well as chemical recycling demand insupport of a circular economy.
Fine chemicals
Greater demand for hard disk polishing nanoparticles is
expected as more data centers are sought to meet increased
data traffic. Needs are also increasing for display materials
such as hollow silica sol, as used in telecommunication
and automotive applications. Additionally, it is anticipatedthat keener interest in microplastic alternatives will drive
demand in silica beads as a cosmetics material.

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JGC Group Medium-Term Business Plan
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Fine ceramics
The Group foresees favorable demand for materials used in semiconductor manufacturing equipment
and in communication circuit board substrates, supported by greater investment in the semiconductor
market (which is expected to grow at an average annual rate of about 7%) and facilities used in IoTapplications.
High thermal conductivity silicon nitride substrates
Widespread adoption of electric vehicles around the world makes sharp growth likely in highthermal conductivity silicon nitride substrates used as heat-dissipating substrates for power
semiconductors.
CMP slurry materials
Growth in the semiconductor industry is expected to drive demand in polishing nanoparticles such as
silica sol used in the semiconductor production process of chemical mechanical polishing (CMP).
2.3 Healthcare/Life sciences, Circular economy, Industrial & Urban infrastructure
In the Healthcare/Life sciences segment, market expansion in Japan and overseas is expected withthe higher standards of living and the aging population. As for the Circular economy, progress informing recycling value chains (such as for chemical recycling of plastic waste) will be made in
developed economies and elsewhere during the time frame of the medium-term business plan.
Meanwhile, amid Asian economic growth, expansion is also expected the segment of Industrial &Urban infrastructure.
Pharmaceuticals, hospitals: Global
In Asia, greater medical demand is likely as economic growth improves living standards, expands
the middle class, and helps people live longer. Demand is especially high for biopharmaceuticals,
and the market in the Asia-Pacific region is expected to expand at an average annual rate of about
17%.
Pharmaceuticals, hospitals: JapanThe trend toward stronger domestic pharmaceutical capital investment has been driven by factors
such as a shift from small-molecule drugs to biopharmaceuticals, the outbreak of global pandemics
and associated problems, and concerns about the quality of active pharmaceutical ingredients
produced overseas. A steady increase in demand is also expected in hospital construction, amid
greater medical needs from an aging population and more sophisticated treatment as personalized
medical care becomes common.
Chemical recycling of plastic waste
As global plastic demand continues to grow at an average annual rate of about 3%, there will begreater demand in advanced economies and elsewhere for recycling technologies with low
environmental-impact to replace conventional incineration and thermal recycling. Demand for
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JGC Group Medium-Term Business Plan
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recycled materials is expected to expand, at an average annual growth rate of 10% or more.7
Water treatment, railways
Emerging Asian countries face an urgent need to improve water and sewage infrastructure inmeeting the needs of urbanization as their economies grow, with driving the demand for suchinfrastructure. As electrification spreads, hopes are also higher for railways to serve as low-carbon
transportation networks. The associated EPC market is expanding at an average annual rate of about
3.6%. Since Japanese railway manufacturers tend to focus on the equipment supply business, there isa need for project management contractors capable of managing overseas construction projects
where demand is growing.

Thomas Hundertmark et al. (2018), How Plastics Waste Recycling Could Transform the Chemical Industry,
https://www.mckinsey.com/industries/chemicals/our-insights/how-plastics-waste-recycling-could-transform-the-chemical-industry.
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3.

Key strategies

From an awareness of the business environment and achievement of the previous medium-termbusiness plan, this new Plan sets the stage for the Group to transform EPC operations, expand highperformance functional materials manufacturing, and establish future engines of growth. Two of thestrategies are aimed at securing and expanding revenue in existing operations, and the third strategy
seeks long-term growth towards 2040.

3.1 Transformation of EPC operations
As a first key strategy, the Group will take on transformation of EPC operations.
3.1.1 Increasing competitiveness and profitability of mega-sized EPC projects
By taking JGC Group core competencies in the sphere of mega-sized EPC projects such as LNG
plants to the next level, the Group seeks to improve the gross profit ratio of projects, as well as its
competitiveness in securing orders.
1) Improve project gross profit ratios
By strengthening risk management and negotiations throughout projects, the Group will seek ahigher gross profit ratio for EPC business and ensure a steady ratio of at least 10% overall.
Risk management
Using the Group's own, independently developed, risk profiling, we will formulate and implement
reliable execution plans for a variety of risks in EPC projects, with a balance of avoidance,
mitigation, transfer, and retention.
Project teams
Business management skills of engineers will be raised to a higher standard. Client communication
will also be honed, as all members of project teams become more effective communicators. These
efforts will include seeking out qualified global leaders for managerial roles.
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JGC Group Medium-Term Business Plan
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2) Improve competitiveness in securing orders
To maintain a competitive edge in securing orders, the Group will implement joint venture
partnering strategies, apply digital technologies, and streamline and optimize construction methods.
Through these initiatives, we are targeting ¥350 billion in net sales from international mega-sized
EPC projects in FY2025.
Joint venture strategies
Joint venture partnerships are a key strategic factor in receiving orders for mega-sized EPC projects.
For greater competitiveness in securing these orders, optimal partnerships will be forged byleveraging its status as a tier-one contractor to put together optimal JV partnerships for each project,
and through partnerships based on long-term alliances.
Digital technologies
Project delivery will be accelerated, and design/execution quality improved by implementing AI
design and AWP for execution. For this purpose, development of EPC DX technologies will be
instrumental. Establishing a track record with EPC DX technologies will further strengthen
competitiveness in securing orders.
Optimal construction methods
Competitiveness will also be enhanced through optimal construction methods that reduce on-site
costs, including automated welding robots, digital radiographic testing (RT) and AI judgment of
welding quality, high-frequency induction bending for pipes, and remote site management to reduce
on-site personnel.

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Examples:Promoting EPC DX utilizing AI for design and AWP for project execution
Shifting to AI design
The AI design program in the JGC Group started from recording the skills and experience-based insightsof senior engineers as knowledge. This was followed by automating input checking and optimal design

selection, and then automatic generation of optimal design, as AI was gradually introduced to automate theentire design process. A specific example is plot planning. In contrast to the weeks of study by senior
engineers that is traditionally required, the Group recently developed a new system applying AI-based
multi-objective optimization that can generate several cases and perform comparative evaluation much
faster. It will be incorporated in a system we are building to reduce the lead time for proposing optimal plot
planning.
Applying AWP
Advanced work packaging (AWP) is an approach to project planning and management that has attracted
much attention in recent years. With AWP, an entire project is first subdivided into work packages. Inputs,
outputs, and dependencies of each package are then clarified. Scheduling, costs, and the required resourcesof packages are determined based on those of the construction stage. This enables detailed, quantitative
schedule and cost control in EPC execution. To respond to the need for accurate management of muchlarger volumes of project data than before, the Group will develop a means of efficient data collection andanalysis by leveraging digital technologies throughout EPC processes.
Promoting EPC DX
The JGC Group is transforming business processes from document-centric to data-centric for faster, higherquality project execution. For this purpose, the framework under construction will link each EPC support
system via a flexible data hub, automatically collect data on a data collection platform, and display it in realtime with various KPIs on the project dashboard. Conditions at construction sites can be visually
represented even at remote sites, which enables more accurate investigation and decision-making.
Moreover, the collected performance data can accelerate processes and reduce costs, yielding a competitiveedge in securing orders. The Group plans to develop a predictive project simulator that will apply the ample
performance data acquired.

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3.1.2 Taking on EPC growth markets and segments
Currently, mega-sized EPC projects still dominate JGC Group income, and the result of the related
bids, as well as the timing of the FIDs,8 are the main cause of fluctuations of the Group’s overallbusiness performance. Hence, stable orders must be sought without necessarily relying at all thetimes on mega-sized EPC contracts. The Group will therefore take measures to expand into small
and midsize projects in markets and segments where future growth is expected.
Specifically, EPC operations will be expanded into the following growth markets and segments as its
portfolio is diversified over the five years of this medium-term business plan. Through these
initiatives, the Group is targeting ¥300 billion in net sales from growth EPC markets and segments in
FY2025.
1) Expanding into growth markets
An increase in small and midsize projects is expected in the Asia region, where high economic
growth is expected. In response, while utilizing the Group's existing base of operations, the Groupwill strengthen its framework for regional management in Asia. This will enable project proposals
and execution from an approach closely aligned with clients that emphasizes “local project by
national workforce” based on current regional levels of development and demand.
In reinforcing this framework through a larger workforce, the Group will implement the following
measures:-Establish a regional headquarters serving the bases (sites) of operations in Asia-

Strengthen each site's business development and project execution capabilities-

Centralize engineering functions for projects in Asia

To attain these objectives, the Group's workforce in Asia will be increased from 2,600 to 3,100.
2) Expanding into growth segments
In Japan and elsewhere in Asia, market growth in the following segments is expected during thismedium-term business plan. Through a more robust collaboration framework for sales and project
execution, the Group will seek higher revenue by seizing opportunities in these segments.
Asia region
LNG receiving terminals, gas-fired thermal power, solar power and biomass power plants,
pharmaceutical plants and hospitals, chemical facilities
Japan
Biomass power plants, pharmaceutical plants and hospitals, chemical facilities
The workforce at domestic offices will also be increased by the following measures:-

Increase the Group’s pharmaceutical EPC workforce-

Establish a business unit focused on chemical projects

8

Final investment decision
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3.2 Expansion of manufacturing business for high-performance functional materials
As the second key strategy of the medium-term business plan, the Group will take on expansion of
manufacturing operations for high-performance functional materials.
3.2.1 Offering more product lines in existing core business
Existing core business in high-performance functional materials manufacturing will be scaled up,
targeting net sales of ¥50 billion in 2025. To reach the planned target, product lines in existing
business will be expanded through steady efforts toward a broader revenue base.
In the catalysts segment, increased income will be sought by supplying catalysts jointly developedwith the client by jointly developing catalysts used in chemical refining to improve yields ofchemical products from refineries that serve as chemical raw materials, and by expanding sales of
JGC-developed chemical catalysts.
In fine chemicals, in addition to boosting production capacity for wafer-polishing nanoparticles tomeet higher demand for data center hard disks, the Group will focus on expanding sales of materials
for high-speed telecommunication applications, which are expected to grow.
In fine ceramics, the Group will focus on expanding sales of ceramics for semiconductor
manufacturing equipment, where continuous growth is expected, MMCs9 for liquid crystal
manufacturing equipment, and thin-film circuit substrates used in high-speed telecommunications.
Examples of specific measures the Group’s in existing core business are as follows:
Catalysts
Development of catalysts offering high-bottom cracking performance (high-bottom cracking
catalysts, high-performance additives)
Expansion of joint development with clients
Strengthening of catalytic support (such as zeolite) business
Development of catalysts for chemical refineries
Expansion of development of original chemical catalysts
Early development of low-temperature denitration catalysts (for biomass power generation)
Fine chemicals
Expansion of sales of nanoparticles for hard disk polishing
Expansion of sales of cosmetics materials (microbead alternatives), optical materials
Development of optical film materials for automotive display applications
Expansion of sales of materials for semiconductor/ high-speed telecommunication applications (finematerials with low/ high dielectric constants)
9

Metal-matrix composites, consisting of metal and ceramic materials
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JGC Group Medium-Term Business Plan
Building a Sustainable Planetary Infrastructure 2025 (BSP 2025)

Fine ceramics
Expansion of sales of products used in semiconductor manufacturing equipment
Expansion of business from contract manufacturing of thin-film circuit substrates to design andsupply of original products

Example:FCC catalysts for chemical refineries(FCC catalysts to improve propylene yield – PMC catalysts)
To improve propylene yield, theGroup has developed FCC catalysts(PMC catalysts) for bothconventional FCC and chemical FCC
processes. In conjunction with anadditive for propylene conversion,
the catalyst offers high propylene
yield. It represents new technology tomeet refinery needs for the
production of petrochemical raw
materials.

3.2.2 Expanding sales of strategic products
The medium-term plan calls for the Group to develop new fine chemical products (including
polishing nanoparticles for CMP), work to rapidly expand the market, and strategically invest in highthermal conductivity silicon nitride substrates, targeting net sales of ¥10 billion in FY2025.
For the substrates in particular, production capacity will be increased to meet market growth asautomotive products are further introduced and certified at new factories that went online in
January 2021. The Group also intends to become a leading supplier of next-generation products
by responding to growing demand for materials with high thermal conductivity, as the industry
hifts to silicon carbide (SiC) in power semiconductors.

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JGC Group Medium-Term Business Plan
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Example:Semiconductor CMP (chemical mechanical polishing)
The Group will offer ceria-silica composite particles andvariant silica particles as low-defect, high-speed polishingslurry for STI and ILD applications developed usingmorphology, composite and nanoparticle impurities
control techniques.
Example:High thermal conductivity silicon nitride substrate forpower semiconductor
Production capacity will be expanded for highthermal conductivity silicon nitride substrates
that improve heat dissipation (indispensable forhigher performance in power semiconductors) tomeet increasing demand as electric vehicles
become more widespread.

3.2.3 Exploration and development of next-generation business
Additionally, exploration and development in the segments of catalysts, fine chemicals, and fineceramics will support the objective of expanding the Group's product portfolio in the future.
Besides improving the Group’s original technologies, the Group will move quickly to expand theportfolio in the environment, energy, and life sciences segments by cultivating growth businesses,
including by acquiring external technologies and resources.
For its portfolio expansion, themes to be explored and developed are as follows.
Catalysts
Catalysts for carbon recycling and chemical recycling
Fine chemicals
Materials for high-speed communications (balloon silica low dielectric constant materials, highdielectric constant nanomaterials)
Antibacterial and dental materials and materials used in the life sciences segment (such as diagnostic
agents and sustained release materials)
Fine ceramics
All-solid-battery/Li recovery electrolytes
CMCs10 for engineering ceramic parts
10

Ceramic-matrix composites
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JGC Group Medium-Term Business Plan
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OCP11 for bone regeneration
Bone regeneration materials/OCP
Greater demand is expected forhighly biocompatible boneregeneration material such as thisvery effective OCP developed by
Tohoku University. Developmentby the JGC Group will lay thegroundwork for venturing into
orthopedics, as we apply technicalexpertise for commercial viability.

3.3 Establishment of future engines of growth
The third key strategy of the medium-term business plan is to establish new business as engines for
future growth. Among the business areas defined in the 2040 Vision, the following are especiallypromising as future growth engines.
Business areas
Energy transition

Healthcare/Life sciences

High-performance functional materials
Circular economy
Industrial and urban infrastructure

Potential growth engines
・ Carbon management
・ Offshore wind power
・ Hydrogen/fuel ammonia
・ SMRs12 (Small Modular Reactors)
・ Smart O&M
・ Smart hospitals
・ Smart factories
・ Digital healthcare
・ Catalysts for carbon recycling, chemical recycling
・ Bone regeneration materials/OCP, etc.
・ Recycling of plastic and fiber waste
・ SAF13・ Water treatment
・ Railways

By developing operations in these areas into profitable new pillars of business, the Group targets net
sales of ¥50 billion in FY2025. Assuming rapid market expansion in the segments thereafter,
business will be potentially expanded to a scale of ¥500 billion in FY2030.
In the following sections, the Group’s stance on business segments of particular interest are
Octacalcium phosphate Example:
Small modular reactors
13 Sustainable aviation fuel, produced from sustainable sources with low CO emissions
2
11
12

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JGC Group Medium-Term Business Plan
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described for offshore wind power, hydrogen/ fuel ammonia, and chemical recycling (of plastic andfiber waste).
3.3.1. Offshore wind power
The offshore wind sector is in the limelight as the next major renewable energy sector to be
developed in pursuit of global carbon neutrality by 2050. Japan has seen projects of this kind emerge
especially in the Tohoku region, with more offshore wind power generation expected to be
introduced in the 2020s.
In this medium-term business plan, the Group seeks to establish a record by being awarded andexecuting EPC projects for domestic offshore wind power, as the Group become a leading contractor
in this sector.
For this purpose, the Group will strengthen partnerships with other companies to secure orders andexecute EPC projects. The Group may participate from a business perspective if required. Capital
investment is also planned to support acquiring relevant technologies and establish a track record inthis new segment.
Engagements in the medium term will focus on domestic fixed bottom offshore wind power projects.
In anticipation of venturing into floating facilities over the medium to long term, the Group willcontinue to acquire technologies and build partnerships to overcome technical challenges.
The Group targets sales of ¥30 billion in 2025 and ¥100 billion in 2030.
Much attention is focused on this sector, which many competitors (mainly general contractors) havestated their intention to enter. Unique qualifications of the Group include expertise in the design andinstallation of offshore structures for FLNG projects, worldwide networks of partners and vendors,
and management capabilities proven in mega-sized EPC projects. Moreover, while focusing on EPC
in this sector, we will also undertake related O&M and serve as a business partner.
3.3.2. Blue hydrogen/fuel ammonia
Hydrogen/fuel ammonia are recently attracting attentions as next-generation CO2-free fuels. Fuelammonia in particular is expected to be in much greater demand, with annual domestic demand
projected to grow to about 30 million tons by 2050. Energy value chains for existing power systems
can be utilized, and mixed combustion enables reduced CO2 emissions at thermal power plants.
Economical large-scale production of ammonia poses an urgent need for expanded production ofblue hydrogen/fuel ammonia which is hydrocarbon-derived and the widespread adoption of transport
value chains.
During this medium-term business plan, the Group seeks to acquire relevant technologies andparticipate in construction of blue hydrogen/fuel ammonia value chains. It will develop as well as
acquire relevant technologies (including process licenses), demonstrate the technologies in Japan and
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JGC Group Medium-Term Business Plan
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overseas, fund and participate in blue and green hydrogen/fuel ammonia projects, conduct M&As,
and form strategic partnerships.
Business expansion through these efforts will introduce blue hydrogen/fuel ammonia in society. The
Group will also work to popularize green hydrogen/fuel ammonia from renewable energy, withsignificant progress toward practical adoption to be seen by seen around 2040.
A sales target of ¥50 billion in 2030 has been set in segments related to blue hydrogen/fuel ammonia.
Many manufacturers and engineering firms developing supporting technologies. Uniquequalifications of the Group include process engineering capabilities from refining andpetrochemicals, a record of CCS facility design and construction (for blue hydrogen/fuel ammonia),
and facility expansion expertise gained from LNG plants. While focusing on EPC in this sector, theGroup are also planning for business expansion with a combination of business models, including
process licensing, providing consulting services, and serving as a business partner.
3.3.3. Chemical recycling
The environmental impact of plastic waste has become a serious global issue in recent years, callingfor urgent action around the world. Needs for reduction of plastic and fiber waste become greater,
mainly chemical companies and apparel manufacturers worldwide.
During this medium-term business plan, the Group will develop business as a technology licensor
and operator in the chemical recycling segment, with new markets for recycled products
internationally.
The Group will gain a firmer foothold by tapping strategic partnerships with upstream anddownstream players in the recycling value chain, besides identifying and acquiring licensed
technologies worldwide. The Group will also acquire and then market operational knowledge
through commercial demonstrations as key capabilities for actual recycling operations. The Groupwill be engaged in talent development dedicated to the early and start-up phases of businessdevelopment in this segment.
Through these initiatives, the Group will pursue commercialization by 2025, working toward target
sales of ¥50 billion in 2030.
Unique qualifications of the Group include process engineering capabilities from refining andpetrochemicals, worldwide networks of clients and partners, and a record of executing projects.
While focusing on EPC in this sector by acquiring relevant technologies during this medium-termbusiness plan, the Group is also planning for business expansion founded on a combination ofbusiness models, including process licensing, marketing operational knowledge, and serving as abusiness partner, including in commercial demonstrations.

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JGC Group Medium-Term Business Plan
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4.

Investment strategy

A total ¥200 of strategic investment is planned over the period of this medium-term business plan toensure sustained growth and stable revenue for the Group.
¥70 billion will be allocated to the transformation of EPC operations, ¥50 billion to the expansion of
manufacturing business for high-performance functional materials, and ¥80 billion to establishing
future engines of growth, specifically in digital transformation, M&As, production facilities,business development, commercial demonstrations, and R&D, as described in the below:
Transformation of EPC operations
Information technologies focusing on EPC DX (for innovative execution of EPC projects throughdigital transformation), expansion into healthcare and life sciences in Asia, acquisition of businesscapabilities in industrial & urban infrastructure, and acquisition of engineering technologies relevant
to medical care.
Expansion of manufacturing business for high-performance functional materials
Development of new product technologies, such as for the life sciences, and core businessexpansion, as in facilities used for products such as polishing nanoparticles for CMP or high thermal
conductivity silicon nitride substrates.
Establishing future engines of growth
Carbon management (including CO2 capture and storage), offshore wind EPC, small modular
reactors (SMRs) already invested in, hydrogen/fuel ammonia applications, and commercial
demonstration of chemical recycling of plastic and fiber waste.

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5.

Talent and organization

5.1 Talent
Human resources will be realigned internally and expanded with talent in new occupational
categories to attain the goals of the medium-term plan.
Specifically, the total workforce of the Group including holding company, EPC operatingcompanies, high-performance functional materials manufacturing companies, and Japan NUS(JANUS) will be expanded from 10,800 in FY2021 to 12,000 in FY2025. New workforce will bemainly assigned for EPC growth segments, high-performance functional materials manufacturing,and future segments viewed as engines of growth.
For implementation of key measures, diverse talent will be sought in areas such as digitaltechnologies, business development, and management.
The Group will also continue to encourage more diverse working styles.
5.2 Organization
1) Segments for commercialization in the medium-term business plan
Commercialization will be accelerated by establishing specialized business units at each company insegments targeted for commercialization and profitability during the period of this medium-termbusiness plan. Examples of the segments include the recent establishment of units.
JGC Corporation-

Facility infrastructure (such as overseas LNG receiving terminals, gas power generation plants,
and solar power)-

Nuclear energy-

Carbon reduction, CCS

JGC Japan Corporation-

Wind power-

Next-generation factories (discrete manufacturing of food, cosmetics, among others)

Japan Fine Ceramics-

Business involving high thermal conductivity silicon nitride substrates2) Segments for commercialization over the medium to long term
Innovation processes, organizations, and systems will be strengthened to promote the Group's
innovation environment as explained in the below sections, cultivating segments for futurecommercialization and promote business development. These measures are already under way. The
Group will foster a more vibrant culture of innovation early in this five-year period.
Technology Commercialization Council
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The Technology Commercialization Council was established in JGC Holdings in April 2021 to linktechnical development and business development and tie these efforts to future sources of revenue.
The Technology Commercialization Officer manages the innovation process for new business,
supports commercialization, and allocates resources depending on the progress of each program.
Sustainability Co-Creation Department
Established when JGC adopted a holding company structure in October 2019, the Sustainability CoCreation Department has been promoting sustainability-oriented business development with theGroup-owned environmental consulting company Japan NUS (JANUS). The department will bebuilding up its framework to promote new business development, collaborating with relevant
divisions of JGC Corporation (JGC) and JGC Japan Corporation (JGC Japan).
Engineering Solutions Center
April 2021 saw the integration of JGC Corporation's Process Technology and Design Engineering
divisions into the Engineering Solutions Center (ESC). As a core technical expertise of JGC
Corporation, ESC boasts about 700 engineers who can contribute to new business and establish aframework for project development.
Corporate Venture Capital
The JGC Mirai Innovation Fund, a corporate venture capital (CVC) fund on the scale of ¥10 billion,
was established in April 2021 for collaboration between JGC Japan, which operates the domestic
engineering business, and start-up companies. Under the supervision of the strategic planning officeof JGC Japan, appropriate partners will be sought to create synergies with JGC Japan's corebusiness.
In addition to these measures, business units in each company focused on new enterprises will workwith JGC Holdings in quickly establishing cycles of innovation while applying knowledge from its
business sites in development of technologies and business.
New personnel system
To foster a corporate culture that encourages autonomy, initiative, and perseverance in delving intocurrent and new areas, a new personnel system will be introduced by JGC Holdings, JGC Japan, and
JGC around FY2022.

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JGC Group Medium-Term Business Plan
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6.

Financial targets

With these initiatives, the medium-term business plan sets net sales of ¥800 billion, operating
income of ¥60 billion, net income of ¥45 billion, and ROE of 10% as financial targets in FY2025.
As for individual business areas, expansion will be centered on energy transition (including clean
energy) and also emphasize healthcare/life sciences, high-performance functional materials, andindustrial & urban infrastructure. By business model, double the level of sales in non-EPC businessis sought, as the Group grows beyond an EPC-focused model. Achievement of these targets will
demonstrate that the Group is expanding and diversifying revenue over the next five years in linewith the 2040 Vision.

Table 1 Target Net Sales of BSP2025 by Category
Three key strategies
Category
Transformation of EPC Operation

Expansion of manufacturing businessforhigh-performance
functional
material
Future engines of growth
OthersMega-sized international EPC
EPC in growth market andsegment
Product lines in Existing Core
Business
Strategic Products
Total of five areas
Maintenance, etc.
Total

30

Target Net
Sales¥350 billion¥300 billion¥50 billion¥10 billion¥60 billion¥40 billion¥800 billion

JGC Group Medium-Term Business Plan
Building a Sustainable Planetary Infrastructure 2025 (BSP 2025)

7.

Capital and shareholder return policies

Basic capital policy: Strategic investments while maintaining sound finances
The period of this medium-term business plan is thefirst phase for transformation and growth toward the2040 vision, positioned as "five years of challenge."
While pursuing a basic policy of making strategic
investments to expand future revenue, the Group will
ensure disciplined investment and fund allocation toreaching or surpassing an ROE of 10%.
To do so, the three objectives of maintaining soundfinances for mega-sized EPC projects, remaining
flexible in growth investment, and providing steadyshareholder return will be met through a balanced
approach supporting greater corporate value and shareholder’s benefit.
Financial strategy: Secure strategic investment funds with effective use of cash in handIn making strategic investments, the Group will use
cash in hand effectively and maintain soundstrategic finances. Keeping finances on a solid
footing will entail maintaining a stable equity ratioof 50% or higher. Moreover, the Group will ensureliquidity in hand for business continuity evenduring market turmoil. The Group will also look to
reduce effective tax rates as we work to maximize
final profit.
Along with allocating around ¥100 billion of cashin hand for investment, overall capital efficiency for the Group will be improved through debt
financing and optimized cash management, as the Group strengthen the process management for
prompt response and decision-making in strategic investment.
Steady shareholder return remains a priority, even as new policies are introduced.
Shareholder return policy
In the area of shareholder return, the basic policy remains to provide annual cash dividends aimed ata payout ratio of 30%, and the Group will also introduce a minimum ¥15 dividend per share.
Share buybacks will be considered, as necessary in light of business conditions.

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8.

ESG initiatives

The corporate philosophy of the Group has been reconsidered from the perspective of environmental
and social value that the Group will provide. This has led to the Group's newly redefined reason forexistence: “Enhancing planetary health”.
Meanwhile, several goals have been treated as material issues for the Group. We are working toward
society in harmony with the environment (that is, the “E” in ESG) and, in social aspects of ESG theGroup contributes toward energy access and quality of life, works with local communities aroundthe world, and respects human rights as well as promotes employee motivation. Governance aspectsof ESG that make it possible to pursue the environmental and social goals are upheld throughscrupulous corporate governance and risk management.
Guided by the new corporate purpose of enhancing planetary health, the Group has defined fivebusiness areas, including energy transition, as specific areas in which to address materiality underthe vision for 2040.
As for specific ways the Group will engage in these five business areas during the medium-termbusiness plan, engagement will support the three key strategies of transformation of EPC operations,
expansion of manufacturing business for high-performance functional materials, and establishmentof future engines of growth.
In this business, the Group will create environmental and social value while pursuing ESG.

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9.

Commitment to carbon neutrality by 2050

Though the Group business has long served the core domain of Oil & Gas, the Group has taken theopportunity of this transformation for enhancing of planetary health to commit to the ambitious
target of carbon neutrality by 2050, attesting to its dedication to sustainable gains in corporate value.
Targets-

Net-zero Scope 1 and 2 CO2 emissions by 2050-

Thirty percent (30%) reduction in Scope 1 and 2 CO2 emissions per unit of production by 2030-

in support of (1).
Engaging in Scope 3 CO2 emissions reduction as determined in collaboration with stakeholders.

Supporting initiatives-

For Scope 1 and 2 reductions, we will adopt low-carbon/decarbonization practices, such as by
reducing energy consumed in business activities, using renewable energy, and other means.

-

For Scope 3 reductions, we will leverage technologies cultivated by the Group to provide energy
transition solutions to stakeholders. Some examples of CO2-reducing solutions provided by theGroup are as follows:-

Reduction of plant energy consumption through smart O&M-

CCS technology-

Construction of environmentally conscious facilities as used for solar, biomass, andoffshore wind power, as well as small modular reactors-

Hydrogen/fuel ammonia operations-

Chemical recycling (plastic and fiber waste, SAF, etc.)

Disclosure-

In responding to climate change, we will promote disclosure of relevant information in line withrecommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

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This concludes the medium-term business plan (BSP2025) developed as the first step in achieving
the 2040 Vision guided by the corporate purpose of enhancing planetary health.
The JGC Group will steadily implement the measures in this medium-term business plan over the
next five years in meeting its financial targets and making the 2040 Vision a reality.

34