Management Policies
Strategic Overview(Interim Report FY2005)
Nobuo Seki,President and Chief Executive Officer
Nov. 11, 2004

Contents
1.

Strategic Overview of Interim Financial Results2.

Principal Management Issues of the Current
Term

3.

Operating Environment and Market Situation

4.

Conclusion

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1

Strategic Overview ofInterim Financial Results

An important milestone in the New Reconstruction
Plan—Eliminating Accumulated Loss—reached a year
ahead of schedule Remarkable earnings growth compared with the first halfof the previous fiscal year drove sales and profit beyond
initial forecasts.
 Sweeping changes in risk management boost earnings,
transforming Chiyoda from a low profitability company
into a firm with sustained earnings
 The next step is to develop management policies thattransform Chiyoda into a firm with the ability to generateearnings growth.
All Rights Reserved, Copyright

Chiyoda Corporation3

Principal
ManagementIssuesof2
the Current Term
 Build up management capabilities to achieve

objectives and targets of management plan.
(See Management Strategy Map on next slide.) Minimize uncertainties in project execution andstabilize earnings by methodical risk management.
 Set sights on becoming Reliability No. 1 Excellent
Project Company.
Reliability No.1 Excellent Project Company

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2

Management Strategy Map
Roadmap based on Balanced
Score Card (BSC)

PDCA Cycle

PerformanceEvaluation
Evaluation
Performance

Key Performance Indicator
Financial Viewpoint
Stabilize
Stabilizeprofitability
profitability
Customer Viewpoint
Build
Buildlong-termlong-term
relationships
relationshipswith
withcustomers
customers

Total
TotalCostCost

CS level
CS level
Ratio of trustedRatio of trusted
customers
customers

New
NewOrders
Orders/ Profit/ Profit

PLE
PLE/ Continuation/ Continuationofof
Contracts
Contracts

Business Process Viewpoint
Strengthen
Strengthen
competitivenesscompetitivenessAction Plan
Action Plan
Achievements
Achievements

ExecuteExecuteriskrisk
management
management

Reliability No.1

Strengthen
StrengthenHSE
HSE

Smart EPC

Risk
Risk
Management
Management

Management of GroupManagement of Group
companies
companiesininsync
sync

Dividends toDividends toShareholders
Shareholders

Net Sales / Profit
Net Sales / Profit

ProjectProject
Execution
Execution
Capability
Capability

LL Program and
LL Program andPromoting KM
Promoting KM

EEEngineering
Engineering

PP

Procurement
Procurement

CC

Construction
Construction
Management
Management

ITITExpertise
Plant21® ®) )(i-(i-Plant21
Expertise(i-Utilize
Utilizeoverseas
overseasGroup
Groupdesign
designcompanies
companies
EnhancecostcompetitivenessandEnhance cost competitiveness andmobility
mobility

Personnel and Reform Viewpoint
Human
Humanasset
asset
development
developmentand
andproper
deployment
proper deployment

Employee
Employee
Satisfaction
Satisfaction

Enhance Human
Enhance Human
Resources
Resources

PLE: Plant Lifecycle Engineering

Personnel
Personnel
System Reform
System ReformPDCA: Plan, Do, Check, Act

Career and Human Resource Development
Career and Human Resource Development

HSE: Health, Safety & Environment

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2Improve Reliability of EPC
Risk
Risk
Management
Management

ProjectProject
Execution
Execution
Capability
Capability

LL
LLprogram
programand
andpromoting
KM
promoting KM

EEEngineering
Engineering

PP

Procurement
Procurement

CC
Construction

Construction
Management
Management

ITITExpertise-Plant21®®) )Expertise(i(i-Plant21
Utilize
Utilizeoverseas
overseasGroup
Groupdesign
designcompanies
companies
EnhancecostcompetitivenessandEnhance cost competitiveness andmobilitymobility

LL: Lesson and Learnt

KM: Knowledge Management

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Reserved,Reserved,
Copyright
Copyright
ChiyodaChiyodaCorporationCorporation66

3 Operating Environment and Market Situation
MarketSociety/Environment
Enlargement
Enlargementofof
LNG
LNGMarket
MarketIncrease
IncreaseininGas
Gas
Development
Development(Upstream, Gas(Upstream, Gas
Chemicals, etc,)
Chemicals, etc,)

2 Protocol )(Kyoto(Kyoto Protocol )Group

LargerLargerPlant
PlantSize
Size
Chiyoda Corporation
Chiyoda Kosho Co., Ltd.

Development
Developmentofof
Information
Information
Industry
Industry(Intelligent home
(Intelligenthome
appliance,ITIT-related,appliance, IT-related,etc.)
etc.)

EconomyProtect
ProtectGlobal
GlobalEnvironment
Environment, ,COCO2 Emissions
Emissions

Chiyoda Techno Ace Co., Ltd.

Economic
Economic
GrowthGrowthininChina
China(Responding to a rise
(Responding to a risein the price ofin the price ofmaterials, etc.)
etc.)
materials, etc.)

ChAS

Chiyoda Advanced
Solutions Corporation

Increase
Increaseinin
Concern
Concernofof
Corporate
CorporateSocial
SocialResponsibility
Responsibility

Chiyoda Keiso Co., Ltd.

Group companies(including Satellite Engineering Center)

EnergyEnergyConservation,Conservation,New
NewEnergy
Energy(GTL, DME)(GTL, DME)

Inflating
InflatingCrude
Crude
OilPrices
Oil Prices

EnergyAll Rights Reserved, Copyright

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3 Market Environment
 Kyoto Protocol takes effect: Promoting energy

conservation in Japan. Accelerating shift tonatural gas to reduce carbon dioxide emissions.
 Escalating oil prices: Oil majors and Japan’s oilrefiners report strong earnings. Countries
importing LNG raise their plans for LNG imports.
 US LNG imports: To jump sharply from thecurrent 10.5 million tons (0.5Tcf/year) to 96
million tons (4.8Tcf/year) by 2025. [EIA forecast] China LNG imports: Plan to import 25 million
tons by 2010 revised to 33.5 million tons.
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Energy Source Shift in U.S.A.—
from Pipeline Natural Gas Produced in Canada to LNG
6

LNG780mtpa x 10 trains—
equivalent to LNG500mtpa x 15 trains
5—in the next 20 years

Increase:
Increase:
LNG780mtpa
LNG780mtpaprojectproject
XX77trains
trains

AEO2003 for Pipeline
Natural Gas from Canada

Canada, AEO2003
LNG, AEO2003
Canada, AEO2004
LNG, AEO2004

AEO2004 for PipelineNatural Gas from Canada

3

LNG Import 2004

AEO：Annual Energy Outlook

2

LNG780mtpa
LNG780mtpaprojectproject
X 3 trains
X 3 trains

1Year202420222020

2018

2016

201420122010

2008

2006

2004

2002

2000

1998

1996

1994

1992

0

LNG Import 2003

1990

trillion cubic feet4

Estimate from Energy Information Administration (EIA)
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9

3

Increasing Large-Scale Investment in Qatar

Indicate orders received

QATARGAS

RasGasQATAR

Train 1
Train 2Train 3Train1/2/3

Ras Laffan

EPC (1997)
EPC (1997)
EPC (1998)
Debottlenecking (2005)

LNG
LNG9.2mtpa
9.2mtpa(in(inoperation)operation)

QATARGAS II
Train 1 (2007)
Train 2 (2009)

FEED

Qatar announced
LNG export plan:

77 million ton /year by 2010

LNG
LNG15.6mtpa
15.6mtpa(Planned)(Planned)

Train 1 FEED
660 (in operation)
Train 2 FEED
Train 3 EPC (2003) 470 (in operation)
Train 4 EPC (2005) 470 (under construction)
Train 5 EPC (2007) 480 (under construction)
Train 6/7 (2008) 780X2 (planned)

LNG
LNG36.4mtpa
36.4mtpa

AlAl-Khaleej Gas Development Project
EPC (2006)
GTL plants

QATARGAS 3
Train 1 (2009)

LNG
LNG7.8mtpa
7.8mtpa(Planned)(Planned)

QATARGAS
LNG
LNG5mtpa
5mtpa(F/S)(F/S)

Independent Water and Power Plant

Qatar Petroleum
Common Cooling Water Project EP (2004)
Expansion of Common Cooling Water
SystemGas Chemical Plants (Ethylene, etc.)
Export through pipelines

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104Conclusion

 A New Medium-Term Management Plan is to be

developed as the New Restructuring Plan targets comewell within reach.
 The New Medium-Term Management Plan will continue
to focus on strengthening Chiyoda’s earnings powerand launch additional initiatives to assure thecompany’s ability to generate earnings growth.
 Transform Chiyoda into an excellent company capableof living up to its corporate social responsibilities byestablishing and strengthening its position as theworld’s most reliable project company, and by
developing systems and capabilities to implement
projects at all times and in all business segments.
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11

Please address inquiries to: Takuhiro Murata, IR Manager, Corporate Communications OfficeTel: 045-506-7538 Fax: 045-506-7085 Cell: 090-3348-3484
e-Mail: tamurata@ykh.chiyoda.co.jp URL: http://www.chiyoda-corp.com/
Forward-looking Statements
The forecasts and plans in this presentation are based on information available to management on
November 11, 2004, the date these materials were prepared. Actual results may differ significantly fromthese forecasts for a number of factors, including but not limited to changes in economic conditions andoperating environment in Japan and overseas.

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