Chiyoda’s Revitalization Plan
Initiatives for revitalization and the future
Explanatory materials

May 9, 2019
Chiyoda Corporation© Chiyoda Corporation 2019, All Rights Reserved.

Agenda1. Financial restructuring plan2

2. Building the foundation for revitalization

4

3. Business plan11

4. Long-term vision for the future18© Chiyoda Corporation 2019, All Rights Reserved.

1

Financial restructuring plan Financing(*) package of JPY180bn will be secured from
Mitsubishi Corporation and MUFG Bank, Ltd.
 Mitsubishi Corporation and MUFG Bank will provide support other thanfinancing
 Mitsubishi Corporation：• Enhance strategy / risk management capabilities by sharing know-how andexperts• Assist new business creation through its business network and businessdevelopment capability
 MUFG Bank：• Continue to send CFO and financial experts

 Chiyoda will work on the following with the above support
 Execute projects in project structures where Chiyoda’s strengths are to be applied Implement the revitalization plan Shifting of business portfolio to pursue future growth(*) The completion of the financing is subject to the approval from shareholders through a resolution at the annual
general meeting on June 25, 2019 and fulfillment of other conditions precedent© Chiyoda Corporation 2019, All Rights Reserved.

2

Agenda1. Financial restructuring plan2

2. Building the foundation for revitalization

4

3. Business plan11

4. Long-term vision for the future18© Chiyoda Corporation 2019, All Rights Reserved.

3

Causes of losses in major projects
The impact of the occurrences below exceeded
our reasonable expectations
 The effect of works outside Chiyoda’s scopeon construction
 Shortage of skilled labor Decreased productivity / increased costs ofsite workers
 The effect of natural disasters and weather
on construction schedules and costs© Chiyoda Corporation 2019, All Rights Reserved.

4

Actions addressing the causes of losses

Further develop
the risk management structure

1

2

3

Enhance EPC execution andmanagement capacity

Reinforce human resources© Chiyoda Corporation 2019, All Rights Reserved.

5

1

Further develop the risk management structure (1)Operate Strategy & Risk Integration Division in full-scale to further develop risk management
and project execution structure, by taking account of estimated risks more prudently

Management support /strategy planning function

Project support /risk monitoring function

Corporate Planning Division

Project Management Division

Strategy & Risk Integration Division
Enhancing its function incorporate strategy & risk management

EPC execution

Marketing / Pre-order intakeOrder intake that is commensurate withresources and capabilities of Chiyoda andallows the application of Chiyoda’s strengths
Selective project intake by conducting
thorough evaluation of associated risks andestimated profits
Further improvement of accuracy of estimatesby introducing enhanced evaluation mechanism
An execution plan with a sufficient contingencyplan to have leeway for the worst case scenario© Chiyoda Corporation 2019, All Rights Reserved.





Enhancement of project support system bycooperating with project operations
Integrated management of overall projects
profit and loss
Prevention and minimization of causes ofdisputes
Company-wide support for earlycountermeasures
Project audits including a third-party
engagement
611Further develop the risk management structure (2)Further enhancement of corporate governance Increase the ratio of independent external board members to40% of the board→ Enhance external monitoring function

 Board members who concurrently serve as Executive Officers
are limited to the COO and the CFO→ Further separate the function of operation/management ofbusiness plan and monitoring of its management【New】【Current】

Members of the Board (14)Audit & Supervisory
Committee

External

Executive Officers© Chiyoda Corporation 2019, All Rights Reserved.

Independent externalboard members
Board members who
concurrently serve as
Executive Officers

Members of the Board (10)Audit & Supervisory
Committee

External

Executive Officers
72Enhance EPC execution and management capacity

Promote the utilization of a digital platform thatthoroughly manages cost /schedule / quality ofdesign, procurement, and construction

Upgrade EPC
management
methods

Operate digital tools that reinforce the managementof site workers and construction materials

Strengthen
construction
execution
capabilities

Advance methods to manage the data ofconstruction budgets and records
Reinforce human resources that can flexibly
manage construction productivity

Enhance project control capabilities
Preventing expansion of losses by prompt countermeasures© Chiyoda Corporation 2019, All Rights Reserved.

83

Reinforce human resources

Further implementation of meritocracy,with the promotion of competentemployees based on performancebased evaluation and compensation

Diversification of eachindividual’s capabilities throughexperience in different functions(position & role rotations)

Reinforce and further develop
human resources Mindset of pursuing higher added value Literacy in risk, contracts and finance Management capabilities in cost andschedule

Proactive recruitment andintegration of external talent© Chiyoda Corporation 2019, All Rights Reserved.

9

Agenda1. Financial restructuring plan2

2. Building the foundation for revitalization

4

3. Business plan11

4. Long-term vision for the future18© Chiyoda Corporation 2019, All Rights Reserved.

10

Chiyoda’s strengths
 Chiyoda’s strengths backed by our proven track record
remain robust

Optimize design
Guarantee high quality

Create a future of energy andglobal environment in harmony
New technology
commercialization
Integration of basic research capability
and knowledge applied from EPC© Chiyoda Corporation 2019, All Rights Reserved.

Integration&Optimization
Provide the best solution for complex
constraints and challenges by utilizing a
mix of technologies across varying areas

11Key points in Chiyoda’s business plan

Ensure benefits fromgrowth areas• Prioritize the execution of existing projects• Capture the new demand for LNG, which isexpected to steadily grow• Accelerate the shift to the global environment
business as base load, given the business
transitions to low-carbon society

Order intake withthorough and prudent
risk management• Take on EPC projects where Chiyoda can playa leadership role in its execution• Thoroughly examine construction risks to avoid
uncontrollable risks• Ensure that contract schemes fully reflect risks

Strengthen downturn
resilience by reductionof fixed costs• Thorough review and optimization of both
domestic and overseas subsidiaries and offices• Significant reduction in headquarter expenses© Chiyoda Corporation 2019, All Rights Reserved.

12

LNG market expected to grow steadily LNG demand expected to grow steadily, mainly in Asia
 Approximately 100mmtpa demand for construction of new plants
by 2030 expected Includes areas and clients where Chiyoda’s track record is fully leveraged
LNG supply and demand balance estimate(mmtpa)
700

In construction
In production

600

500

100mmtpa

400

Demand as of 2019 1Q
Demand as of 2018 1QIn construction (As of 2018 1Q)
In production (As of 2018 1Q)

300

20010002016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

© Chiyoda Corporation 2019, All Rights Reserved.

Source: Wood Mackenzie, as of May 201913

Chiyoda’s efforts in the growing global environment market
 Domestic renewable energy market growing steadily
 Chiyoda has a track record in solar and biomass power generation, as well as in battery storage systems
 Chiyoda plans to expand into offshore wind power generation and Energy Management Services (EMS)

Installed capacity(10,000kw)
15,000Hydrogen

EMS

Chiyoda’sadvancements

Offshorewind power
Large battery
storage

10,000

Biomass
power
5,000

Marine energy
Biomass

Solarpower

Geothermal
Small and medium hydro power
Large hydro power
Wind
Solar

0
Current

2020

2030

(Source: Edited by Chiyoda Corporation based on “2014 Reports of the feasibility study on the establishment of renewable anddecentralized energy system in 2050”, Ministry of the Environment” )© Chiyoda Corporation 2019, All Rights Reserved.

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Strengthen downturn resilience by further reduction of fixed costs 30% reduction of SG&A by FY20

<SG&A reduction quantified>（vs FY17）

 FY18 actual

JPYbn

Consolidated fixed costs
JPY59.4bn※(vs FY17：JPY5.3bn reduction from JPY64.7bn)

20.9

17.5

15.0

FY17

FY18

FY20

SG&A
JPY17.5bn※(vs FY17: JPY3.4bn reduction from JPY20.9bn)
Fixed cost items to be reduced

(5.9)

1.1

Concrete actions to be taken

Thorough review and optimization of overseas
subsidiaries and offices• 50% cost reduction in overseas subsidiaries and offices

Thorough review and optimization of domesticsubsidiaries• Business transfer, spin-off, and transition to equity method
affiliates

Significant reduction in headquarter expenses• Reduction of compensation for senior executives andboard members• Reduction in outsourcing costs / IT expenses / depreciation• Reduction in travelling expenses / office related expenses

Increase in efficiency by utilizing IT• Promotion of RPA (Robotic Process Automation)※ Excluding JPY1.1bn of costs related to measures for the revitalization plan
© Chiyoda Corporation 2019, All Rights Reserved.

15

Business plan
Net income/Revenue(JPYbn)40

FY18FY19

FY20

FY21FY22Net incomeRevenue
FY233050020400

10300

0200(10)
(20)

100～0

Capital/Capital Ratio(JPYbn)120

 Assumed yearly order intake of(JPYbn)
JPY200~450bn in LNG/Gas,
700
JPY100bn~150bn in global
600
environment areas

FY18

FY19

FY20

FY21

10080

FY22

Capital ratio
FY23

 Shareholders’ equity ratio
30%
expected to recover to over 20%
25%
by 2023
20%
15%

4010%

200(40) Build up profit of JPY90bn in5 years

Capital60(20) Transform to a company thatstably generates a net profit of
JPY10bn~20bn per year～～© Chiyoda Corporation 2019, All Rights Reserved.

 Aim to eliminate the5%accumulated losses within0%
the period of this business plan
-5%
-10%

16

Agenda1. Financial restructuring plan2

2. Building the foundation for revitalization

4

3. Business plan11

4. Long-term vision for the future18© Chiyoda Corporation 2019, All Rights Reserved.

17

Progress of mid-long term growth strategy and vision of the future
Mid-term plan growth strategy
 Expansion of 2 business areas, “Energy” and “Global environment”
 Innovate EPC execution and diversify business by penetrating into Investment & Service areas, utilizing digital
innovation technologies

Chiyoda’s current standing / progressEnergy Global environment area: order intake increase by 150% vs FY16
• Order intake in renewable energy, battery storages andfacilities related to renewable energy• Biopharmaceuticals production, technological progress inregenerative medicine and order intake in high-end medical
facilities
 Utilization of digital innovation technology:• Launch of digital tools further enhancing the management ofcosts/schedule/quality/site workers/construction materials• Provision of systems that improve production efficiency inplant facilities

PresentLNG, gas, petroleum,chemicals,
metal resources

Investment& Service

Innovation of
EPC execution

New energy,
industrial facilities,
life sciences

EPC

Environment
Environment

Vision of the future
Re-define Chiyoda’s value
in engineering© Chiyoda Corporation 2019, All Rights Reserved.

Synergies with new businesscreation capability of
Mitsubishi Corporation

Accelerate
growthstrategy18

Mirai(*) Engineering for the future for energy and global environment
Until now Services provided for each phase of the project life cycle, mainly in FEED/EPC
 Optimize individual plants
 In-house R&D and implementation of external new technologies through EPC services

What Chiyoda envisions with
its engineering capabilities

Challenges & needs ofsociety / clients
 Optimization andimprovement of existing
business assets throughdigitalization
 Dilemma between
increasing population /energy demand andresource limitation /climate change(decarbonization)➊ Realize technologies
 Project life cycle partner to maximize theclients’ asset valueSolutions
 Data-centric plant delivery Optimized plant system operation to
improve productivity, save manpower,automated, and remotely controlled➋ Integrate technologies
 Integration partner to provide
compound system fit for complex energy
needs & restrictions➌ Accelerate future technologies

 Enhancement in disasterresilience Continuity of healthcaresystem Incubation partner for future technology
development to solve challenges inenergy and global environment

 Development and provision of optimal
diversified compound energy systems
and demand chain systems

 Creation of a carbon neutral society
through managing carbon anddeveloping new technology
 Development of technologies related tosmart cells, iPS cells for fundamental
cure and regenerative medicine
 Development of manufacturing
process to reduce drug production cost(*) Mirai means future in Japanese© Chiyoda Corporation 2019, All Rights Reserved.

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Future business portfolio
 Business area
～2030

Now（Revenue based）
LNG
Gas chemicals

23%50～65%

77%

35～50%

Globalenvironment

EnergyRenewable energy
New energy
Carbon management andcirculation technology
Life science
Compound energy system

Globalenvironment

Energy Business model
～2030

Now

Incubation business forfuture technology

EPC
Almost
100%EPCServices and operations/Maintenance throughthe project life-cycle(recurring business)© Chiyoda Corporation 2019, All Rights Reserved.

Integration business forcompound energysystem

20Any projections included in these materials are based solely on information available at thetime this presentation was prepared. It is possible that actual results may vary significantly
from the projections due to a number of risk factors such as economic conditions. The
results projected here should not be construed in any way as being guaranteed by theCompany. Investors are recommended not to depend solely on these projections for making
investment decisions.
Please address inquiries to:
Chiyoda Corporation
IR, PR & CSR Department
Tel. +81-45-225-7734
https://www.chiyodacorp.com/en/© Chiyoda Corporation 2019, All Rights Reserved.