MODEC Group
Mid-term Business Plan
2021-2023
February 9, 2021

Outline
1. Company Overview
2. Our Strengths & Competencies
3. Business Environment
4. Long-term Vision
5. Business Model Evolution
6. Path to Long-term Vision
7. Review of Mid-term Business Plan 2018-2020
8. Mid-term Business Plan 2021-2023
9. Financial Highlights
10. Long-term Profit Base2Company Overview &Business Environment3

1. Company Overview

MODEC is a leading provider offloating production solutions,such as FPSOs*1, FSOs *2 andTLPs*3, to the offshore oil & gas
industry. These units can handle
oil & gas production in ultradeep water and in harshenvironments. MODEC has an
exceptionally strong track record
to prove its excellency.

*1 FPSO: Floating Production, Storage, and Offloading system*2 FSO: Floating Storage and Offloading system*3 TLP: Tension Leg Platform*4 EPCI: Engineering, Procurement, Construction and Installation*5 O&M: Operations and MaintenanceFounded in 1968,
MODEC has been leading theoffshore industry for over 50-years

Diverse team comprised ofover 5,000 employees from 25countries

EPCI *4 track record:
46 completed projects,
6 new under construction.

Over 250 cumulative years ofO&M*5 experience with 28 units

MODEC has 17 FPSOs/FSOs
operating around the world 24/365

MODEC is responsible forabout 1/4 of pre-salt
production in Brazil4

1. Company Overview

Projects

54 units in 18 countries​
Offices

18 offices in 14 countries​52. Our Strengths & Competencies
Floating Solution

 Project management capability enabling robustand smooth execution from project development
to EPCI to operations

 Unparalleled offshore development expertise
accumulated in our long history of O&M service

 Track record and technical capabilities in ultra
deep-water development

 Project development partnership with major oilcompanies, partners and project finance lenders

 Proprietary mooring technology

62. Our Strengths & Competencies
Digitalization

 Started as a corporate initiative to solve pain points
in FPSO operations and maintenance

Our FPSO, MV29, was recognized as a
“Lighthouse” of the Fourth Industrial Revolution,
by World Economic Forum in January 2020.

 Unique cloud-based platform optimized for rapid
model development and scaling-up to many otherFPSOs

 Stored +250 billion lines of data including FPSO
operation data, people data, engineering drawings

 Implemented business process transformation andperformance management based on data andevidence Installed 500+ models converting data into insightsand impacts

 Digital as a potential enabler of Life Cycle Valuemaximization (e.g., Operational data to FPSO designsand engineering)77

3. Business Environment
Trends and Topics of the Energy Industry

Energy Demand
Mtoe
5,000

Oil
Gas

4,000

Coal

3,000

Bioenergy
Otherrenewables
Nuclear
Hydro

2,000
1,000
0

1990

2000

2010

2020

2030

2040

Source: World Energy Outlook 2012 & 2020 – Stated Policies Scenario (IEA)

Oil demand is unlikely to decline sharply but tends todecline in the long-term with the growth of demand forrenewable energy.
(Due to the impact of COVID-19, oil demand is expected todecrease by about 9% year-on-year in 2020 and gradually recoverafter 2021.)

President Joe Biden has signed an executive order to rejoin
the Paris Agreement.
Prime Minister Boris Johnson announced a ban on the saleof new petrol and diesel cars from 2030, five years earlier
than previously planned.
Japan plans to set a policy that all new vehicles must be
electric starting in mid-2030s. Prime Minister Yoshihide
Suga has pledged to reduce Japan's greenhouse-gas
emissions to net zero by 2050.
China plans to gradually eliminate non-hybrid gas-powered
vehicles in the next 15 years and promised to becomecarbon neutral before 2060.
A majority of oil majors are aiming to become a net-zeroemissions energy business by 2050 or sooner.
One of our clients is committed to accelerating thedecarbonization of processes, including “zero routine flaringby 2030”.
8

3. Business Environment: FPSO/FSO & TLP Market Trends
Although some investment decisions are suspended due to the impact of COVID-19, potential demand is expected
to remain consistent at the current oil price level*, and development of new projects is expected to proceed steadily.
* The U.S. Energy Information Administration (EIA) expects that Brent prices will average USD49/barrel in 2021 (Short-Term Energy Outlook on Dec 8, 2020)

World Total
Bidding & Final DesignPlanning
Appraisal

92

15

5

Our Main Target Area

45

Northern Europe233365

China2Canada01330Southeast Asia

Mediterranean

17GOM

512957

Southwest Asia & Middle East
95Africa

Brazil and Other South America
16153223
910

Australia, New Zealand
681

Projects in Planning Pipeline (Appraisal, Planning, and Bidding/Final Design) as of January 2021
Source: 2021 Jan Outlook Report (EMA)

9

Long-term Vision10

4. Long-term Vision
Our Goal

Become the Offshore Industry’s Global Leader
exploring Potential of the Ocean and Sustainable FutureSelf-innovation & Reshaping Industry

New Business

Creation ofEnvironmentally-FriendlyBusiness

Concern forEnvironment &Decarbonization

Business ModelEvolution

Development of NextGeneration FPSO

Lifecycle Cost
Optimization

Process Safety& Asset Integrity

Core Business

Important Themes of Energy & Offshore Industry

11

5. Business Model Evolution
Developing Next-Generation FPSO and new
businesses by applying core technologies

FPSO
Business

New Built Hull / Autonomous Operation /Low Carbon Technology
FPSO Evolution

New Business Creation

CoreTechnology
Digital Application to Clientsand Other Industries

DigitalDigital Solution
Business

Floating Solution Utilization

FloatingSolution

Low Carbon
Business

Self-developed Technology + Partnership + M&A

12

6. Path to Long-term Vision
Business model evolution with continued cycle of “Reinforcement of FPSO Business Profitability”,“Investments in R&D” and “Response to Environmental and Social Changes”

FUTURE
Reinforcing FPSO
Business Profitability
 FPSO evolution, improvingcompetitiveness Asset Integrity improvement
 Refining core technologies

Contribution to Sustainable
Society with Business Model
Evolution

Reinforcement ofBusiness Foundation
 Corporate Reformation (Suitable
Organization and HR Strategies)
 Investments in R&D

PRESENT
Contribution to Society by
Supplying Stable Energy

Actions in response toEnvironmental & Social Changes
 Establishing business structure that isenvironmentally and socially friendly

13

Review of Mid-term Business Plan
2018-2020147. Review of Mid-term Business Plan 2018-2020
Achievements

Strategic Targets

 The concept of Lifecycle Value is firmly established as ourMaximizing Lifecycle Value Evolution of Asset Integrity
 Digitalization

corporate culture with implementation of initiatives such as theorganizational reinforcement and risk analysis, as well as
enhancing synergies within MODEC group.

 Made substantial progress in Digitalization in Operations(FPSO awarded as WEF* 4th Industrial Revolution Lighthouse)

Development of new business Accelerating development of Floating Offshore Wind Power Penetration into gas market
 Continuous investment in R&D The new offshore hull repair method with vacuum assisted resin

Target for 2020

 Awards : 6 vessels

 Revenue:
 Net Profit: ROE:
 Award: Digitalization:* WEF: World Economic ForumUSD 4,000MM
USD 200MM
12%
2 vessels/year (Oil), 1 vessel(Gas)
6 vessels in 2018 and expands(signed a contract with NEDO** related to the R&D)

transfer molding approved by the American Bureau of Shipping

Order backlog : USD 11,953 MM (2020-year end) Revenue : USD 2,994 MM (2020)
 Diversifying financial sources by issuing the first projectbond (awarded PIF*** Bond of the Year 2020)** NEDO: National Research and Development Agency. New
Energy and Industrial Technology Development Organization*** PIF Award: Project & Infrastructure Finance Bond of the Year 2020

15

7. Review of Mid-term Business Plan 2018-2020
Challenges
Change in Net Income (Billion JPY)
21.0

2016

(Record high)
21.9
19.4

2017 20182019 2020▲13.0

Key factors for net loss
(2019 and 2020)

Current status / Impacts on
Mid-term Business Plan (MTP)

COVID-19

Heavy impact on operations and constructions due toCOVID-19 pandemic in 2020, and the impact will remainduring the MTP period.

Cost increaseMV34Construction schedule delayed for MV34 due to COVID-19
and expected to start oil production in the first half of 2022.

Hull damage
MV14

Sold for decommissioning in 2020. Recorded a provision
for related repair costs and recognized it as extraordinary
loss in 2019.

Key Initiatives during MTP period

 It is necessary to build a more integrated asset management structure forNet Income▲18.2

expanding the operating area and number of vessels.
 Especially, it is vital to keep asset integrity of aged large vessels constructedaccording to specifications of earlier stage and installed in Brazil area.
16

Mid-term Business Plan 2021-2023

17

8. Mid-term Business Plan 2021-2023
Plotting the three years of the Mid-term Business Plan
as a period of steady recovery and foundation rebuilding
towards the Long-term vision～2030
Next MTP

MTP 2021-23

FPSO

Recovery andReinforcement

Digital Business

Commercialization

New Business

R&D

Income Stabilization

Next Generation
FPSO

Business Expansion
Validation andBusiness Preparation

Commercialization

18

8. Mid-term Business Plan 2021-2023
Our Themes & Initiatives

Evolution of the Business Model

Contribution to a Sustainable SocietyLong-term
VisionMid to Long-termStrategies

Key Themes in Mid-term
Business Plan (MTP)

Reinforcementof FPSO
Business

Asset Integrity
Improvement

Reinforcementof Business
Foundation

Response toEnvironmental& Social
Changes

Digitalization
StrategyAcceleration
R&D: Incubationof Next Businessafter FPSO
Respond to
Environmental
and Social DemandMajor Initiatives

 Intensive maintenance campaign for early-stage FPSO/FSO in Brazil
 Continue LCV maximization (next generation new built FPSO hulls,1and risk management) New operational technical support structure to prepare for growth ofoperations (3-pole system – Americas, Asia Pacific, and Europe)2 Setting up digital solution business EPCI control reinforcement by Digital utilization
 Asset Integrity enhancement by predictive maintenance withDigital and IoT

34

 Cultivating future business pillar next to FPSO
 Accelerating R&D targeting commercialization in the late
2020s (TLP type Floating Offshore Wind Power etc.)

 Approach to SDGs
 Promotion of safe and secure working environment
 Response to decarbonized society
19

MTP Key Theme

1

Asset Integrity Improvement
Maintaining Aged Vessels in Brazil
FSO Cidade de Macaé MV15

BackgroundLarge FPSOs for ultra deep-water built in early days before
establishment of industry standards have different challenges
from recent FPSOs in terms of securing asset integrity

 Revisiting management and maintenance standards to makethem stricter than laws and industry standards based on thelessons learned from MV14 hull damage.

CounterMeasuresFPSO Cidade de Niterói MV18
Charter Period: ~ 2027
FPSO Cidade de Santos MV20

 Conduct intensive maintenance campaign for MV15 to MV23
in 2021 and partly in 2022 by mobilizing accommodation
vessel and sufficient workers (approx. 400 people). (*)
 Improving and increasing the technical support team in Brazil.
 Revamping maintenance program and its system forplanning, management and implementation.

With special maintenance campaign and continuous asset
management work, we are committed providing a total service toensure safe and continuous offshore oil and gas production.
* Special maintenance campaign was originally planned in 2020 but shifted to 2021 due to
COVID-19, and the scope became wider.

Charter Period: ~ 2018
Extension Period : ~ 2024
FPSO Cidade de Sâo Paulo MV23
Charter Period: ~ 2022
+ 3 one-year options
FPSO Cidade de Angra dos Reis MV22

Charter Period: ~ 2033

Charter Period: ~ 2025
+ 5 one-year options

20

MTP Key Theme

2Accelerated Digitalization Strategy
Three digitalization strategies to evolve MODEC’s business
MTP 2018-2020

Digital as
our newservices

BidMTP 2021-2023

2024-

Setting up Digital Solution BusinessPreparation for setting
up new business Deliver “Digital Solutions” proven in MODEC’s FPSO business topotential solution users in Oil & Gas and other industries

Expanding our digitalization sphere from O&M to upstream

 “Digital Control Tower” to improve controls on EPCI projectsEPCIand to support immediate decision making
 “Smart Procurement” to streamline our procurement activities

Toward further operational excellence

O&M

 “New prediction models” to cover more equipment and processes
 “IoT devices” and “next-generation network system” to expand the capabilityof remote asset monitoring “Various use cases” to enhance FPSO operations in areas such as HR,logistics, process safety, asset integrity, and GHG emission control

21

MTP Key Theme3

Incubation of next business after FPSO: Floating Offshore Wind Power
Applying our floating technology and Tension-Leg Platform (TLP) design to wind turbines,
we aim to commercialize offshore wind power generation (EPCI and O&M)
Expanding business as
one of our main products
World-wide businessdevelopment

Water tank test underwind and wave
condition2020 to 2027
Technology development
phase (utilizing TLP)
Obtained AiP* from
DNV-GL
Completed the basic
design work

Compared to catenary mooring, TLP
has advantages in lower oscillationand less space, and therefore ismore compatible with fishery

TLP

Rigorously working
on the NEDO** project*AiP：Approve in principle**NEDO：New Energy and Industrial Technology Development Organization
MODEC is currently working on ”Research and Development for Technology to reduce Capital
Expenditure (CAPEX) and Operating Expense (OPEX) of Floating Offshore Wind Turbines”

Catenary Mooring

223MTP Key Theme

Incubation of Next Business after FPSO: Seabed Mining Technology
Applying our FPSO technology, we aim to actualize seabed resource mining (such asmethane hydrate) in the Japan sea and its commercialization in the long term.
Hokkaido

Confirmed methanelayers exist along
the coast in Japan

HidakaCompared to naturalgas, methane hydrate
requires less refinerysince it purely consistsof methane and water

Akita/Yamagata
JoetsuContributing to domestic
natural resource
development in JapanFor fuel and feedstock forhydrogen production

Oki2020 to 2027
R&D on shallow methane
hydrate development
Working on government-initiative projects,
we are rigorously incubating technology
toward commercialization in the future

Harvesting methane hydrate from shallow
resource layers under the seafloor

23

MTP Key Theme4

Respond to Environmental and Social Demand
Approach to Sustainable Development Goals(SDGs):
SDGs are universal goals which were adopted by all UN Member States in 2015. They consist of 17 goals and
169 targets to end poverty, protect the planet and improve lives.
While we recognize that our business activities may have impact to all 17 goals directly and indirectly, we believe
our business activities contribute most to five goals, namely Goal 5, 7, 8, 13 and 14, and we will focus toachieve them.

Our Contributions to sustainable society:Improve comprehensive support fordiversity and gender equality

Develop and supply clean energy
solution based on our technologies- Floating Offshore Wind Power- Seabed methane hydrate Promote safe and secure working
environments for all workers
 Measures for our path to Zero TRIR
 Recruiting local people and supportingthe creation of business Take measures to eliminate child laborand forced labor

Take action to reduce GHG emissions
 Measures to further reduce gas flaring A combined cycle power plant forFPSO

Take action to reduce marine pollution
 Measures for reduction in oil spills
to Zero Further reduction of oil % inproduced water Increased reduction of plastic use
and waste24

Financial Highlights

25

9. Financial Highlights
Path to profitability recovery
Target for 2023

Net Profit : USD 200 MM

Net Profit Forecast
USD MM

Net Profit Forecast

200

ROE :12%
FCF : Covers large investment CF with operating CF200-150

Profitability Recovery

10050(50)
(100)

45

 Minimizing losses from operation and asset

2021

2030
（Outlook）

2023

(85)
(20)
(25)

Keep asset integrityby special maintenancemanagement of aged assets in Brazil is the mostimportant task.

 By conducting special maintenance project in 2021
(and partly in 2022), we maintain asset integrity.

 By controlling asset management cost and expanding(150)Impact of Covid
Other unusual maintenance cost
Spacial maintenance

Unusual Costs

stable profit from FPSO charter business, net profit will
be recovered.

Adjusted net profit excluding unusual items
Net Profit

26

9. Long-term Profit Base
Expanding stable income base by increasing long-term charter & operation projects
1FPSO Sangomar

2010

Woodside2030

2020

2

32.5 FPSO Anita Garibaldi MV33

Petrobras

25y335.0 FPSO Almirante Barroso MV32

Petrobras

21y435.0 FPSO MIAMTE MV34

Eni15y529.4 FPSO Guanabara MV31

Petrobras

22y6

29.4 FPSO Carioca MV30Petrobras

21y1Cicada de Campos dos Goytacazes
29.4 FPSOMV29

Petrobras

225.0 FPSO Prof. John Evans Atta Mills

Tullow

10y3

29.4 FPSO Cidade de Caraguatatuba MV27

Total

20y

4

29.4 FPSO Cidade de Itaguai MV26

Petrobras

529.4 FPSO Cidade de Mangaratiba MV24

Petrobras634.0 FPSO Cidade de Sao Paulo MV23

Petrobras

742.5 FPSO Cidade de Angra dos Reis MV22

Petrobras

15y8

50.0 FPSO Cidade de Santos MV20

Petrobras

12y945.0 FPSO Cidade de Niteroi MV18

Petrobras

9y6y1065.0 FSO Rang Dong MV17JVPC

9y7.5y1140.6 FSO Cidade de Macae MV15

Petrobras

1242.0 FSO Rong Doi MV12KNOC

1350.0 FPSO Baobab Ivoirien MV10CNR-40.0 FPSO Stybarrow Venture MV16

standby

As of 2021 February (fixed)
 EPC(I) period
 Charter period (fixed)
 Charter period (option)
 Operation period

20y20y
20y
20y

20y

8y

7y
10y

5y7y +1

FPSO Raroa

OMV

15y2

FPSO Kwame Nkrumah MV21

Tullow

15y3

FPSO Pyrenees Venture

BHPB

4FPSO Fluminense

ShellOwned by MODEC group companies (%)

204015y18.5y27

9. Expanding Charter Profit Base
Profit from Charter Business (excl. O&M)
350
300
250

FPSO Charter
200150

 Five Charter FPSO are under construction at

this moment and those charters will commencein Mid-term Business Plan period100 Assuming normal operational uptime and5002020

2025
Existing Charter

2030
Awarded Charter

Potential Awards (*)

2035

continuous award of new projects, more than
USD200M per year of profit base is expecteduntil late 2030s solely from FPSO charterbusiness(*) Potential awards for Charter Business assumes 2 charter projects per 3 years until 2035

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GOING BEYOND
THAT IS WHAT WE DO EVERYDAY