MODEC Group
Mid-term Business Plan
2024-2026
February 14, 2024

Outline

Introduction
Overall Framework......................................................... 2
New Vision, Mission and Core Values............................. 5
Review of MTP 2021 – 2023............................................. 6
Business Environment Recognition................................. 7

Materiality & Vision 2034

Mid-term Business Plan
2024-2026
Overall Strategy..............................................................12
Enhance Earning Power ............................................ 13-16
FY2026 Financial Target ........................................16
Strategic Resource Allocation & Acquisition……...............17
Advance FPSO Decarbonization......................................18
Pave the Way for Materializing New Business…................19
Enhancing Group Collaboration and Synergies…............. 20
Improving Group Governance pursuing Sustainability...... 20

Our Materiality............................................................... 9Vision 2034....................................................................10Going Beyond
Our Aspiration for Net Zero 2050….………….…….…………. 22
Our View of the World : Ocean is Full of Potential…......... 23
Copyright © 2024 MODEC, INC. All Rights Reserved2Introduction
Overall Framework
New Vision, Mission and Core Values
Review of MTP 2021 – 2023
Business Environment Recognition

Overall Framework

Vision , Mission and Core Values

Sustainability Foundation

p.5

Code of Business Conduct & Ethics
Materiality

p.9

Stable and Sustainable Supply of Energy

Climate Change Mitigation

Operational Excellence

New Value Creation through Innovation

Organization with Integrity and Transparency

Secure and Inspiring Workplace Embracing Diverseand Talented Teams

StrategyLong-term Visionp.12-20

Key Initiatives

Mid-term Business Plan

Business Processes
Organization & Governance Structure

Copyright © 2024 MODEC, INC. All Rights Reserved4

New Vision, Mission and Core Values

VISION
Pioneering a world where the ocean and humanity co-exist in harmony
MISSION
Unlocking the ocean's potential by supplying unique floating solutions for a sustainable future
CORE VALUESMODEC is committed to our OCEAN

One team

Unifying a diverse MODEC through inclusion, equality, trust, collaboration and open communication to cultivate true value creation.

Care

Prioritizing safety in all we do and nurturing our people, our assets, our environment and our legacy.

EmpoweredHarnessing our pioneering spirit, taking ownership of our decisions and empowering our people to go beyond, together.

Agile

Responding swiftly to change with a results-oriented mindset and pursuing continuous improvement.

iNtegrity

Conducting business in the right way, every day through our compliance and ethics culture, by upholding human rights and acting with professionalism.
Copyright © 2024 MODEC, INC. All Rights Reserved

5

Review of MTP 2021 - 2023
Strategies

Financial Results
Net Profit (*)

ROE 10.7%(Million USD)

96100

2020

2021

2022

2023

(50)

Despite the COVID-19 pandemic maintained andimproved asset integrity utilizing Flotels•Developed innovative tank maintenance andinspection method together with business partners•

Developed an AI-based failure prediction model
contributing to O&M cost reduction•

Established a joint venture entity (“Shape”) and provided
digital-related services to external clients

Digitalization(100)
(150)

•3750
0AssetIntegrity

(131)

(350)
(400)

(363)
* Profit attributable to owners of parent

NewBusiness・Below target (USD 200 million) for 2023, largely due to thenegative impacts of COVID-19.

•

Implemented NEDO Green Innovation Fund Project Phase 1 for
Floating Offshore Wind in Japan・Since 2022, have been on track to return to a stable
growth trajectory thanks to our efforts and favorable
market trends.
・Capital increase and corporate bond issuance covered
the need for cash in our charter business.

ESG•

Started GHG emission disclosure (Scope 1, 2 and 3) based on GHG protocol•

Developed 2050 Net Zero roadmap

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6

Business Environment Recognition• Increasing social requirements to mitigate climate change• Continuous growth of world population• Diversification of values and lifestyles▶ Long-term (10 + years)Long-Term• Increasing geopolitical risks, uncertainty and complexity▶ Long-term (10 + years)• Acceleration of worldwide effort for decarbonization• Acceleration of automation and digitalization using AI▶ Short to Mid-term

Macro Trend• Offshore development to play apivotal role during energy transition

Short toMid-term

Offshore Industry Trend• New floating solutions for renewable
and alternative energies• Innovations to lead various businesstransformations▶ Short to Mid-term• Continuing development of competitive deepwater offshore fields• Meeting global energy demand with stable supplies of oil and gas• Advancing decarbonizing technologies on offshore floating units

Copyright © 2024 MODEC, INC. All Rights Reserved7Materiality & Vision 2034
Our Materiality
Vision 2034

Our Materiality
Materiality : the important sustainability challenges that the MODEC Group must address

Stable and Sustainable Supply of Energy

Climate Change Mitigation

・Contribute to a stable and sustainable energy supply
by ensuring reliable operations and continuous
improvement of our facilities’ asset integrity withlifecycle value maximization.

・Minimize GHG and other emissions across our business
operations and supply chain and develop clean energy
solutions to achieve global goals.

Solutions for Social Issues

Operational Excellence

New Value Creation through Innovation

・Execute projects and operations in a safe andresponsible manner, that assures the preservation ofour environment, quality of our products/services, andcompliance with applicable requirements.

・Deliver and operate innovative and digitally-enabledsolutions, responding to evolutionary changes in energy
landscape.

Value Creation

Organization with Integrity andTransparency

Secure and Inspiring Workplace
Embracing Diverse and Talented Teams

・Conduct business with a focus on strong internal
governance and implementation of robust risk
management systems that secure business
transparency and promote shareholder values.

・Respect the rights and dignity of all people, cultivate
diverse and talented teams, and support the protection ofuniversal human rights.

・Follow best practices and requiring strict adherence to
our Compliance and Ethics programs.

Reinforcement of Business Foundations

・Promote the well-being of the workforce by ensuring all
individuals have the right to health, safety, security, andtraining so that all can take pride and perform at their best.
Copyright © 2024 MODEC, INC. All Rights Reserved9Vision 2034
“Global Leading Player in Connecting Ocean and Humanity”

Vision 2034

World's best FPSO builder and operator achieving theSmallest Carbon Footprint alongside safety and high uptime

FPSOMateriality

FloatingOffshore Wind

Essential player in Floating Offshore Wind based on
our Unique Ocean Friendly Solutions

AlternativeEnergy

Make ready Floating Production
Solutions for Carbon Free Alternative Energy

DigitalSolution

Culture &People

Provide Innovative Digital Solution to help resolve industry
challenges including GHG Emissions Reduction• Innovation culture and new business incubation• Unlock our Human Capital (employees' potential) through DE&I (*)*Diversity, Equity & Inclusion

Copyright © 2024 MODEC, INC. All Rights Reserved

1010Mid-term Business Plan
2024-2026
Overall Strategy
Enhance Earning PowerFY2026 Financial Target
Strategic Resource Allocation & Acquisition
Advance FPSO Decarbonization
Pave the Way for Materializing New Business
Enhancing Group Collaboration and Synergies
Improving Group Governance pursuing Sustainability

Mid-term Business Plan 2024 - 2026
“Explore a Sustainable Future with Innovation”

MTP 2024 - 2026

FPSO
1EnhanceEarningPower2

StrategicResource
Allocation &Acquisition

Commence operation ofworld’s first FPSO with GTCC (*)

34

Advance FPSO
Decarbonization

Pave the Way for
Materializing NewBusinessBusiness Promotion

Floating
Offshore Wind

Development of 15MW classor larger demo plant

Major Activities& Deliverables

Business Foundation
56Enhancing Group
Collaboration andSynergies

Improving Group
Governance pursuing
Sustainability

Digital Solution

Alternative Energy

Develop innovative solutions
and expand their application
to external clients

Conceptual design for floatingproduction solutions for carbon
free alternative energy* Gas turbine combined cycle power unit

Vision2034

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Mid-term Business Plan 2024 - 2026

134562Enhance Earning Power

Increased Profit BaseFPSO Delivered
2021
2022
2023

MV30
MV31
MV34
MV32
MV33

Operational Excellence as Global Leading FPSO Player

FPSO Under
Construction
2024*
2025*
2026*
2027*

Sangomar
Bacalhau
Uaru
Raia* Scheduled delivery year

EPCI
• Maximize customer value with our
sophisticated scheduling and cost
control, backed by proven trackrecord and digital solutions• Steadily carry out ongoing projects
and secure additional awards

Charter• Increase profit base, which iscontributed to by new charter
projects (shown to the left) andsupported by our operations

Operation• Maintain higher uptime supported by improvementof asset integrity• Improve profitability through operational
excellence with lessons learned from over 300
years of cumulative operation timeDigital• Maximize throughput by integrating design
data and optimizing design and operations
with AI-based analytics• Enhance productivity by automating design
work and operations

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13Mid-term Business Plan 2024 - 2026

134

5

6

Enhance Earning Power2

Project Prospects

Project Timeline
World Total

Bidding & Final Design

56

PlanningAppraisal

9036

China0

Northern Europe

20116Southeast Asia

2165Canada236421GOM

424

Mediterranean

4Southwest Asia & Middle EastBrazil

389Africa

1121220
107

Australia, New Zealand
227Source : January 2024 Outlook Report (EMA)

1

Other South America,
Hawaii & Caribbean

23• Substantial number of new prospects, especially for large scale deepwater inBrazil and Africa where we have a competitive advantage• Using strong relationships with key clients to pursue opportunities• Charter contracts provide long-term profitand cash base

 EPC(I) period
 Time Charter fixed period
 Time Charter option period
 O&M period

Copyright © 2024 MODEC, INC. All Rights Reserved

14Mid-term Business Plan 2024 - 2026

456

Enhance Earning Power

2

Order Backlog

Net Cashflow from Charter Business *（Billion USD）

（Million USD）

30.0

27.2
24.7

20.0

17.1

12.1

24.7

12.0

23.2

11.6

21.9

9.5

0.0

3.0

3.8

3.3

2.3

1.3

2018

2019

2020
建造 操業

2021
チャーター

2022
合計

9.4

MTP 2024-2026

250
200
150

11.2
8.9

6.8

MODEC’s share of
SPC’s contractual cashflow

11.1

7.3
10.0

10.4

300

100
MODEC Group’s
consolidated backlog

9.4

5.6
2023

• Back orders reached a new record in 2023, providing robust future cashflow

500

2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040

13

* MODEC’s share of SPC’s expected net cashflow after opex, tax and debt services• Charter business will provide a predictable and stable cashflow for over
10 years
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15Mid-term Business Plan 2024 - 2026134562

Enhance Earning Power

Financial KPIs
（Million USD）

FY2023

FY2024FY2026(Target)(Actual)(Forecast)

Net Profit (*1)

96120175• Maximize customer value through thesteady implementation of projects underconstruction

ROE

10.7%

-12.0%• Free cashflow earned will be partly
invested in our future(e.g., decarbonization and new business)

PBR

1.12-> 1.0• Maximize corporate value based on costof-capital conscious management

Adjusted
EBITDA (*2)

248-300• Shareholder distribution based on
financial performance* 1 Profit attributable to owners of parent* 2 Adjusted EBITDA represents EBITDA before adjustments of non-recurring extraordinary items

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16Mid-term Business Plan 2024 - 2026

134562Strategic Resource Allocation & Acquisition
Add-Value to our FPSO
• Advance FPSO decarbonization

Enhance EarningPower• Improve FPSO business safety and efficiency• Strengthen project management capabilities

Resources• EPCI delivery and quality

New Business• Robust backlog and cashflow• Enhancing asset integrity

Allocation for Future
・R&D, M&A• Free cashflow• People• Floating offshore wind
• Alternative energy production system (ammonia,methanol, hydrogen, etc.)• Other businesses utilizing our floating solutions
Human Capital• Invest in people through various training anddevelopment initiatives• Cultivate the next generation of leaders• Promote DE&I
Copyright © 2024 MODEC, INC. All Rights Reserved

17Mid-term Business Plan 2024 - 2026

1

Implementation

3

4

5

6

Advance FPSO Decarbonization

2Up to 2023

2024 - 2026

Vision 2034

Incremental Reduction

Preparation forRadical Reduction

Target Zero FPSO

Low Carbon FPSO Gen 1.0

Gen 2.0

Gen 3.0/4.0• Reduced emissions by :-improving asset design/integrity- optimizing production• Incorporated GTCC in
FPSO design
Design,R&D Phase

FPSO Carbon Intensity (*2)
as a Strategic KPI• GTCC in operation• CCS (post-combustion) in• Increase GHG emissions reduction operation• Minimum flaring and fugitive
throughout the value chain• Improved operation practiceemissions leaks• Nurture sustainability-conscious
mindsets• CCS (*1) (post-combustion) design • Further innovations
and demo plant installation
related to FPSO and the• Design an alternative energy
alternative energy
production systems
production system (as part of newbusiness)(*1) Carbon capture and storage

70~90%
Reduction

NowTarget(*2) tons-Co2e per tons-Hydrocarbon
Copyright © 2024 MODEC, INC. All Rights Reserved18Mid-term Business Plan 2024 - 2026

13

4

5

6

Pave the Way for Materializing New Business

2

Floating Offshore Wind

Alternative Energy• Move forward with development of 15MW classor larger floating offshore wind demo plant• Prepare for future needs in the emerging non-oil(ammonia, methanol, hydrogen, etc.)
production market• Diligently work on conceptual studies and PreFEED projects• Fully utilize our experience in floating solutions
and our client and partner networks

Digital• Build and expand a new revenue stream fromexternal digital sales, leveraging the expertise
gained from our own EPCI and/or O&M digitalsolutions

Other New Business Potential
Establish and nurture new businesses by leveraging ourfloating and digital solutions, and establish a pattern ofinnovation in our organization.

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Mid-term Business Plan 2024 - 2026
Embedding Sustainability in our Business Foundation
314256Enhancing Group Collaborationand Synergies

134562Improving Group Governancepursuing Sustainability

Digitally Enhanced Management System

Sustainability Management• Implement an enhanced management system forstandardization of business processes• Promote Group-wide activities via theSustainability Committee• Establish an enterprise data platform that makes
real-time and historical data available, promoting
data-driven decision-making• Improve GHG emissions measurement andreporting systems with third party verification

Group-wide Human Capital Management

Safety and Human Rights• Cultivate a thriving culture through our OCEAN• Increase the safety awareness level of MODECGroup employees and subcontractors• Empower individuals through a wide spectrum oftraining opportunities• Enhance our collective potential with acomprehensive human capital management
system, and amplify DE&I initiatives• Implement human rights due diligencethroughout our supply chain
Copyright © 2024 MODEC, INC. All Rights Reserved20Going Beyond
Our Aspiration for Net Zero 2050
Our View of the World : Ocean is Full of Potential

Our Aspiration for Net Zero 2050We aspire to achieve Net Zero(*1) carbon emissions by 2050 as a result of implementing the business strategy, including FPSO
decarbonization with significantly reduced FPSO Carbon Intensity and new business development.
Path Toward Net Zero 2050
We aspire to achieve Net Zero by 2050

Emissions from
MODEC FPSO

Innovative Solutions to deliverclean energy
Digital Arm will contribute to
non-MODEC facilities
Floating Offshore Wind will produce
clean energy

Contributions from
New Businesses

FPSO will continue to deliver stableenergy with a minimal carbon footprint,
backed by digitalization*1: - MODEC's Scope 1, 2 and 3 (Category 13 - Downstream Leased Assets only) GHG emissions will be reduced, and residual emissions will be offset by GHG reduction contributions through new businesses (e.g. we consider electricity generated by FOW
as a contribution to emissions reduction relative to conventional energy).
- We are also working to quantify other Scope 3 emissions, beginning with Category 1 (Purchased Goods and Services).
- As part of the above path, we aim to achieve net zero for Scope 1 and 2 by 2030.
Copyright © 2024 MODEC, INC. All Rights Reserved22Our View of the World : Ocean is Full of Potential

Offshore
PlantsFloating
Storage

Floating
Logistics
Bases
Floating
Residences

Ocean
Deepwater
Ocean
MineralResources

LeisureMethaneHydrateFisheries

Food

Oil and Gas

Aquaculture

Great
Garbage
Patch

OffshoreWind

MarineMicroplastics

Wave/Tidal
energyOTEC
Floating
Solar

MarineBiodiversity

Our Vision
Pioneering a world wherethe ocean and humanity
co-exist in harmony

Our Mission
Unlocking the ocean's potential
by supplying unique floating
solutions for a sustainable future

Water
Quality

Copyright © 2024 MODEC, INC. All Rights Reserved23