Presentation of Results
Half Year, FYE June 30, 2019
March 2, 2020

Nippon Koei Co., Ltd.
Representative Director and President
Ryuichi Arimoto

I:

Accounting Report(July 2019 - Dec 2019, FYE20/6 1H) andFYE 20/6 Forecast

1

2Q Results for FYE June 30, 2020
Net sales increased as all segments performed well. Operating loss was reduced.
Records of sales and income still tend to concentrate at the year end (March) after theapplication of the percentage-of-completion method.
FYE19/6 2Q
Results

FYE20/6 2Q
Results(Millions of yen)

YoY Change
Amount%Orders47,70758,395

10,618122.4%Net Sales

39,14649,14810,002125.6%

Gross profit

10,215

12,7002,484

124.3%

Operating Income△2,817△1,427

1,390-

Ordinary income△2,901△1,185

1,715-

Profit attributable to owners of parent△2,331

△910

1,421

-

■Orders received were higher than in the same period of the previous year as International
Consulting and Power Engineering performed well.
■Net sales increased year-on-year in all segments.
■For operating income, although losses in energy business expanded, losses were reduced
overall year on year due to sales growth in other segments.
■ Quarterly net loss was reduced due to an increase in operating income and an improvement
in non-operating expenses.
2

Consolidated Profit and Loss Summary (FYE 20/6 1H) and Profit/Loss Analysis
FYE19/6 2Q
Results

FYE20/6 2Q
Results

47,707 (as aofpercentage
sales)
39,146 100.0%
28,93073.9%
10,21526.1%
13,03333.3%△2,817△84△2,9010△2,331

58,395 (as aofpercentage
sales)
49,148 100.0%
36,44774.2%
12,70025.8%
14,12728.7%△1,427241
0.5%△1,1850△910(Millions of yen)Orders
Net sales
Cost of sales
Gross profit
SG&A
Operating income
Non-operating income / expenses
Ordinary income
Extraordinary income/loss

Profit attributable to owners of parent■Profit factor ■Loss factor

FYE 19/6 2Q
Net Loss△1,094+2,610Gain on
Sales

10,61810,002
7,517
2,484
1,094
1,390
325
1,715
0
1,421

122.4%
125.6%
126.0%
124.3%
108.4%-

Increase in general and administrative
expenses and amortization of intangible
assets due to consolidation of Quadrangle△126△2,331YoY Change
Amount
%

△910
+325

Cost of
Sales

General andadministrative
expenses

Nonoperating
income

△270

△24

Taxes

Other

FYE 20/6 2Q
Net Loss3

Balance sheet• In the current assets section, trade accounts receivable increased with further progress in shifting to thepercentage-of-completion method.
• Current liabilities increased due to seasonal short-term borrowings, while notes and trade accounts payable
decreased.
• All leases of IFRS-applied subsidiaries are recognized as assets and liabilities.
• Net assets declined due to current loss, dividend payments, increase in treasury shares, etc.
(Millions of yen)FYE19/6
Results

FYE20/6 2Q
Results

AmountAssets113,175

129,372

16,197

Current assets

52,44663,487

11,040Property, plant and equipment

29,882

34,1594,277

Intangible assets

13,501

13,429△ 71

Investments and other assets

17,345

18,296951

Liabilities

52,96972,341

19,372Current liabilities

28,082

46,07617,993

Non-current liabilities

24,886

26,265

1,378

Net assets

60,20557,031△ 3,1744Cash Flows• For net cash from operating activities, negative cash flow expanded due to an increase in tradereceivables.
• For net cash from investing activities, negative cash flow expanded due to acquisition of property, andplant and equipment.
• Net cash from financing activities increased due to an increase in short-term borrowings.

(Millions of yen)FYE19/6 2Q
Results

FYE20/6 2Q
Results

YoY

Net cash provided by (used in)operating activities△ 13,816△ 15,457△ 1,640

Net cash provided by (used in)investing activities△ 310△ 1,451△ 1,141

Net cash provided by (used in)financing activities

14,636

16,352

1,716

Cash and cash equivalents at theend of period

15,56912,399△ 3,1705

Results by Business Segment (Orders/Net Sales)(Millions of yen)OrdersDomestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyNet sales
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate/Others

Operating Income
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate/Others

FYE19/6 2Q
Results

47,70723,471
11,569
4,568
7,824
225
39,146
14,071
10,685
6,718
6,761
364
543
△ 2,817△ 1,990
△ 72
519
△ 21
△ 113
△ 1,139

FYE20/6 2Q
Results

58,39524,495
17,627
7,182
8,984
56
49,14819,267
12,025
7,583
8,963
710
597
△ 1,427△ 1,338
173
620
504
△ 175
△ 1,211

YoY Change
Amount10,687
1,024
6,057
2,614
1,159
△ 169
10,002
5,196
1,339
864
2,201
345
53
1,390
651
245
100
526
△ 62
△ 71

YoY Change%

122.4%
104.4%
152.4%
157.2%
114.8%
24.9%
125.6%
136.9%
112.5%
112.9%
132.6%
194.7%
109.9%
119.4%
6

Domestic Consulting
Progress in 1H◼

Points in 2H

Orders received were higher than the same period of the previous year due toTyphoon Hagibis disaster-related orders and large-scale orders.
• After Typhoon Hagibis, we received requests for river and sediment disastersupport from a wide range of areas.

◼

Net sales increased due to continued efforts and steady progress in projects
related to national land resilience, as well as the expansion of the scope of
application of the percentage-of-completion method.

◼

Operating loss was reduced with an increase in net sales.
• The ratio of outsourcing decreased, and in-house production increased due to anincrease in manpower.
• Indirect costs increased due to the impact of the percentage-of-completion
method and the mandatory use of paid holidays.
• Impact of transient costs (expenses for relocation of branch offices, etc.)

FYE19/6 2Q
Results(Millions of yen)

23,471
14,071
11,652
2,419
4,409△ 1,990

Orders
Net sales
Cost of sales
Gross profit
SG & A
Operating income
Orders

21,67523,471 24,495◼

Thorough implementation of measures to increase
orders in response to the government’s policy to
expand competitive tender projects.

◼

More frequent and wider-area disasters,
strengthened cooperation among branch offices inemergency responses, cooperation with partnercompanies, etc.

◼

The per-engineer cost will increase by 2.5 pts fromMarch 2020.

YoY Change%
AmountFYE20/6 2Q
Results(as a percentage ofsales)

100.0%
82.8%
17.2%
31.3%
-

24,495
19,267
15,9493,318
4,657△ 1,338

Net sales

19,267(as a percentage ofsales)

100.0%
82.8%
17.2%
24.2%
Operating income

1,024
5,196
4,297
899
247
651

104.4%
136.9%
136.9%
137.2%
105.6%-

2018 2Q 2019 2Q 2020 2Q

14,071△1,338

6,335△1,990△3,1722018 2Q

2019 2Q

2020 2Q

2018 2Q 2019 2Q 2020 2Q
7

Project Case Study / Domestic Consulting
Detailed engineering of Iwakuni Port Road (2)ClientPort and Airport Department, Chugoku Regional
Development Bureau

Contract
value

210 million yen (for FYE June 2020)

Summaryof project⚫ Facilitating port cargo transport and mitigating traffic
congestion on National Route 2 is planned⚫ Detailed engineering of a 1 km continuous viaductpassing through plants⚫ Development of a rational design with a structural
type suitable for soft ground and a construction planachieving both consideration for plant operation anda shorter construction period, and preparation of all
documents necessary for construction

Under
construction (1)Photographed in August
2019

Under
construction (2)Completed

Preparation of documents on the travelling environmentof the Pacific Cycling Road
ClientRoad Traffic Management Division, Kinki Regional
Development Bureau

Summaryof project⚫ Creation of an action plan to improve the travelling
and accepting environments on the 1,400 km PacificCycling Road between Chiba Prefecture andWakayama Prefecture⚫ Creation of websites and cycling maps as measures
to enhance information dissemination⚫ Support for the operation of the Pacific Cycling RoadNCR Designation Promotion Council
Source: Website of Kinki Regional Development Bureau, Ministryof Land, Infrastructure, Transport and Tourism
8

International Consulting
Progress in 1H◼

Orders received were higher than the same period of the previous year as we
obtained orders for a large-scale project in the Chennai metropolitan region inIndia.
••◼

Points in 2H

Orders for large-scale projects have progressed as planned in the current period.
Orders for projects in the railway sector, one of our priority investment areas, grew by
145% year on year

Net sales increased due to steady progress in projects◼

Recording of delayed orders in the first half(scheduled after 3Q)◼

Maintenance of the contract operating rate
through the operation of large-scale projects
won in the current period◼

Improvement of productivity and profitability
through collaboration among bases andGroup companies➢ For the development and nurturing of local engineers, the assignment of suchengineers to NK’s projects is being conducted steadily, standing at 50% of the levelset in the annual plan.

◼

Operating loss turned positive as net sales increased.

FYE19/6 2Q
Results(Millions of yen)of
11,569 (as a percentage
sales)
10,685100.0%
8,107
75.9%
2,578
24.1%
2,650
24.8%
△ 72

OrdersNet(Millions
sales of yen)
Cost of sales
Gross profit
SG & A
Operating income
17,627

OrdersFYE20/6 2Q
Results

14,197
11,569Net sales

17,627
12,025
9,069
2,956
2,783
173

(as a percentage ofsales)

100.0%
75.4%
24.6%
23.1%
1.4%
Operating income

12,731
10,685YoY Change%
Amount

6,057
1,339
961
378
132
245
1,397

12,025△722018 2Q 2019 2Q 2020 2Q

152.4%
112.5%
111.9%
114.7%
105.0%-

2018 2Q 2019 2Q 2020 2Q

173

2018 2Q 2019 2Q 2020 2Q
9Project Case Study / International Consulting
Traffic transportation projects in Chennai, India
Contractvalue

3 projects totaling about 7 billion yen

Summary of
project

Provision of consulting services on the following three projects⚫ Chennai Metro Rail Project (Phase 2)
Line 3 and part of Line 5, 57 stations, about 52.0 km
Our Group’s first metro project in India⚫ Project for the Construction of Chennai Peripheral Ring Road
(Phase 1)
Construction and system introduction for the section of thering road that provides access to the port (about 25 km)⚫ Project for Installation of Chennai Metropolitan AreaIntelligent Transport Systems
Collaboration with the Power Engineering Business

Courtesy call on Bansal MD after signing
contract

Foreign Direct Investment Promotion Project, Bangladesh
Contract
value

approx. 1,300 million yen

Summary of ⚫ Project to promote foreign direct investment by improving
project
the investment environment for higher value-added
investments to Bangladesh’s manufacturing industry andindustrial diversification⚫ Major consulting services include basic design, bidding
support, and construction supervision and management forthe development of basic infrastructures such as landdevelopment, roads, and power and gas supply in industrial
parks.
⚫ JV of Nippon Koei and our Group company Koei Research& Consulting

Signing ceremony

10Power Engineering
Progress in 1H

Points in 2H◼

Orders received were higher than the same period of the previous year
due to orders for regional power company projects and other large private
projects.

◼

Net sales increased due to the steady processing of orders in hand.
••◼

The mechanical and electrical consulting business performed well.
In spite of steady order receipt, the design period has been prolonged due
to an increase in the size of projects, and sales progress has been
delayed.

◼

A change in the construction period of a
TEPCO PG project due to a typhoon or the
Olympics may affect orders and sales
plans.

◼

Sharing of precedents and activation ofactivities for cost reduction

Operating loss was reduced with an increase in net sales.

FYE19/6 2Q
Results(Millions of yen)Orders
Net sales
Cost of sales
Gross profit
SG & A
Operating income

4,568
6,718
4,727
1,991
1,472
519

(as a percentage ofsales)

100.0%
70.4%
29.6%
21.9%
7.7%

7,182
7,583
5,481
2,102
1,481
620

Net sales

Orders

7,182

6,598

YoY Change

FYE20/6 2Q
Results

6,718

7,583

%

Amount(as a percentage ofsales)

2,614
864
754
110
9
100

100.0%
72.3%
27.7%
19.5%
8.2%

157.2%
112.9%
116.0%
105.5%
100.6%
119.4%

Operating income

5,608
4,568
519

620

240
2018 2Q

2019 2Q

2020 2Q

2018 2Q

2019 2Q

2020 2Q

2018 2Q

2019 2Q

2020 2Q
11

Project Case Study / Power Engineering
Project for Installation of Chennai Metropolitan AreaIntelligent Transport Systems, India
ClientChennai Smart City Limited

Summary of
project⚫ Project to mitigate traffic congestion through theintroduction of traffic information systems using
Japanese technology⚫ Collaborative project with the International Consulting
Business⚫ We carry out detailed engineering, bidding support,
construction supervision and management, and O&M
supervision and management of traffic management,
traffic information, and bus management systems.
⚫ Scheduled to be completed in May 2029

Integrated CommandControl Center (ICCC)TMS Server

Summary of
project⚫ Project to build a smart community led by Katsurao
Electric Power, which was established as a joint venture
between the Village of Katsurao in Fukushima
Prefecture and Fukushima Electric Power, a third-sector
company in Fukushima Prefecture⚫ We proposed the introduction of EMS and a batteryenergy storage system to Sekisui House, the businessowner and EPC provider in this community building
project.
⚫ Our technical specifications were highly evaluated anddelivery was decided as we have a business base inthis prefecture.
⚫ Completion is scheduled for November 2020.

Traffic
Data

FutureFutureTraffic Management System (TMS)
Area Traffic Signal Control
SystemVariable
Message Sign
System (VMS)

City Bus System (CBS)Chennai Traffic Information System (C-TIS)
Probe System/Internet
System
ATCC System

ATCC camera

Mobile/
Smart
Phone

Bus Tracking System
Passenger Info System
Depot Management System

Internet(Metropolitan Transport
Corporation)

ANPR System

FMWS System
ANPR camera(Chennai Traffic Police)
Image
Data

Control

Flood
Measurement andWarning System(Chennai Smart City
Ltd.)

Traffic
Information

Passenger Information
System (Bus VMS)

Probe
Data
Bus
Depot

Traffic
SignalBus

System configuration diagram

Project for building the Katsurao Village smart
community
Sekisui House, Ltd.

ITS for Chennai Peripheral Ring Road

C-TIS Server CBS Server

Traffic
Data

CCTV

ClientTamil Nadu State Data Centre(TNSDC)

CEMS(Energy supply and demand management system)
Stable power supply to the village center

Installation of solar
power generationequipment andpower storage
equipment

Public facilities

Schools

Factories

Residences

Commercial
facilities

12Urban & Spatial Development
Progress in 1H◼

Points in 2H

Orders received were higher than the same period of the previous year despite
the impact of the UK election in the private sector.
• Winning of orders from outside the UK for projects in Asia and the
Middle East◼
◼

Net sales increased due to steady performance in the refurbishment of the
Palace of Westminster and in-hand projects.
Operating loss turned positive due to the strong performance of the new
Canadian consolidated subsidiary consolidated to our group in the third quarterof the previous fiscal year, in addition to the improved profitability of BDP.

FYE19/6 2Q
Results(Millions of yen)Orders
Net sales
Cost of sales

Gross profit
SG & A
Operating income

7,824
6,761
3,861
2,900
2,922
△21

◼

Orders were withheld until the British
general election in late 2019, but now
have recovered.

◼

Maximization of orders in the UK andoverseas in preparation for a potential
slump in the UK market◼

Winning of projects that have synergy
between BDP and Quadrangle
YoY Change%
AmountFYE20/6 2Q
Results(as a percentage ofsales)

8,984
8,963
4,928
4,034
3,529
504

100.0%
57.1%
42.9%
43.2%
-

(as a percentage ofsales)

1,159
2,201
1,067
1,134
607
526

100.0%
55.0%
45.0%
39.4%
5.6%

114.8%
132.6%
127.7%
139.1%
120.8%-* The fixed exchange rate applied to the results for the 2nd quarter of FYE June 30, 2020: 1 GBP = 136.46 JPY (the rate used in the plan for FYE June 30, 2020 was 1 GBP = 149.17 JPY)** The amount of amortization expense of Urban & Spatial Development business for FYE June 30, 2020 is approx. 1 billion JPY (goodwill: approx. 400 million JPY; other intangible fixed assets: approx. 500 million JPY).

Orders

8,984

Net sales

8,963

Operating income

504

7,824
6,209

5,356

2018 2Q

2019 2Q

2020 2Q

2018 2Q

6,761

2019 2Q

2020 2Q△10△21

2018 2Q

2019 2Q

2020 2Q
13

Project Case Study / Urban & Spatial Development
University of Birmingham, Teaching and
Learning Building, UK
Client

University of Birmingham

Summaryof project⚫ BDP was responsible for architecturaldesign, structural design, landscapedesign, lighting, and acoustics.
⚫ Completed in December 2019 andofficially opened in January 2020
⚫ Many small seminar rooms and selfstudy spaces are available to provide
students with a flexible learning
environment.

Innovation Hub Launches at Keele University,
UK
ClientKeele University

Summaryof project⚫ BDP was responsible for architecturaldesign, acoustics, and landscapedesign.
⚫ Inside, there are an innovation space, a200-seat hierarchical lecture theater, abusiness lounge, social learning, and acafe space.
⚫ Completed in October 201914

Energy
Progress in 1H◼

Points in 2H◼

Orders received were lower than in the same period of the previous year due
to the delay in expected orders related to storage batteries in Europe.
• Though projects related to energy management in Europe are behindschedule by several months, we are developing projects in the UK and
Belgium centering on the base in Europe (NKEE), including investment
in YUSO.

◼
◼

◼

Net sales increased due to progress in the construction of power receiving andtransforming facilities, installation, etc., for two storage battery projects in the
United Kingdom.
Operating loss widened due to expenses of European bases, an upfront
investment.

FYE19/6 2Q
Results(Millions of yen)

225
364
293
71
184
△113

Orders
Net sales
Cost of sales

Gross profit
SG & A
Operating income

225

YoY Change%
AmountFYE20/6 2Q
Results(as a percentage ofsales)

100.0%
80.4%
19.6%
50.5%
Net sales

OrdersFormation of individual projects forenergy management and accumulationof results
The power generation business at 7
locations in Japan is performing well,and annual sales of 500 million to 600
million yen are planned.

56
710
613
96
272
△175
710

(as a percentage ofsales)

100.0%
86.4%
13.6%
38.3%
Operating income

△169
345
320
25
87
△62
2019
2Q

24.9%
194.7%
209.2%
135.6%
147.4%
2020
2Q

364
56
△113

2019
2Q

2020
2Q

2019
2Q

2020
2Q

△175
15

Project Case Study / Energy
Our efforts to date in the VPP demonstration

Participation in the VPP demonstration project
Summary⚫ We participated in the project in 2016 from theresource side that uses a battery energy storage
system.
⚫ We acquired relevant technologies to play a role
as a resource aggregator while deepening
understanding of VPP mechanisms and systems.
⚫ For the VPP demonstration from January 2020, as
a resource aggregator, we will install battery
storage at JX Nippon Oil & Energy Kiire Terminal,a JXTG affiliate, and jointly demonstrate thetertiary reserve capacity, etc.

2016~

◼ Participated in the VPP demonstration with battery
storage at the Fukushima Works2018◼ Participated in Tohoku Electric Power’s demonstration

2019◼ Introduced battery storage at the Research &Development Center◼ Participated in the VPP demonstration as a resource
aggregator

2020◼ Introduced battery storage at
JX Nippon Oil & Energy Kiire Terminal(i)

Projects in which we participate as a resource aggregator
Project
name(FY2019)◼ VPP demonstration project for integrated control ofvarious energy resources with the AutoDR system (ii)(AC: Azbil Corporation)◼ Open platform aggregation business demonstration
project(AC: Tokyo Electric Power Company Holdings, Inc.)

Electric utilities
Transactions with electricutilities
Aggregation coordinator(Azbil)CommandCommand

Aggregator

Resource aggregator(Nippon Koei)

CommandCommandConsumers(JXTG)(i) JX Nippon Oil & Energy Kiire Terminal

Consumers

Control of energy resources
Consumers(ii) Demonstration system diagram(the execution part is in the red frame)
16

FYE June 2020 Forecast(millions of yen)OrdersDomestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyNet sales
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate Leasing/Others
Operating income
Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
EnergyReal Estate Leasing/Others
Ordinary Income
Profit attributable to owners of parent
Operating margin (%)
ROE (%)FYE 19/6
Results
118,085
52,85528,482
15,411
20,510723
108,589
49,59324,928
16,531
15,359
719
1,456
5,110
4,990
841
2,089
151
-365
-2,597
5,584
3,318
4.7
5.7

No changes have been made to the forecast for
the entire FYE June 2020 period.

FYE20/6
Forecast(Japanese GAAP)

137,400
52,40048,10016,00018,6002,100
127,700
51,30034,50019,60018,800
2,200
1,300
5,800
4,200
2,900
2,200
600
-800
-3,300
6,200
3,600
4.5
6.1

YoY Change
AmountYoY Change%

19,314-455
19,617588-1,9101,376
19,110
1,706
9,571
3,068
3,440
1,480
-156
689
-790
2,058
110
448
-434
-702
615
281

116.4%
99.1%
168.9%
103.8%
90.7%
290.1%
117.6%
103.4%
138.4%
118.6%
122.4%
305.8%
89.3%
113.5%
84.2%
344.6%
105.3%
395.0%
111.0%
108.5%

FYE20/6
Forecast(IFRS)

137,400
52,40048,10016,00018,6002,100
127,700
51,30034,50019,60018,800
2,200
1,300
6,700
4,300
2,900
2,300
1,500
-900
-3,400
4,500
5.2
7.5
17

Capital Policy/Dividend Policy
Capital policy• Conduct appropriate financing in line with the circumstances and improve capital efficiency• Target equity ratio of 50% and maintain at least 40% even during concentrated investment periods• Strive to increase corporate value by expanding business through growth investments based on
medium- and long-term strategies

Capit
al
Securing of
Policyfinancial

Enhancementof corporate
valuesoundness

Investments for
future growth

Stable dividends/
enhancement ofshareholder return

Improvement of
capital efficiency

Dividend policy•

Aim for a dividend payout ratio of 30% and strive to provide
stable dividends and enhance returns to shareholders inline with the rise in the profit level✓ Plan to pay out dividend of 100.0 yen, an increase of 25
yen, in the fiscal year ending June 2020

FYE
2017

FYE
2018

FYE
2019

FYE
2020
(Forecast)18

II: Progress of Priority Investment Areasin the Medium-term Management
Plan

19

NK-Innovation 2021 — Priority Issues for FYE June 2020 and Progress
Strong performance in the Canadian market and steady progress in business creation in the Consulting BusinessBusiness strategy

Priority Issues for FYE June 2020

Enhancement of operating➢ Establish local production systems throughsystem for Railways Businesspromoting alliances

Overseas expansion of Urban ➢ Expand operations in the Canadian and Asianmarkets& Spatial Development
Business➢ Develop the Japanese market
Establishment of Energy
Business➢ Pursue business development and accumulate
operating results and know-how in Europe➢ Acquire the hydropower concession business inJapan

Creation of businesses andoverseas expansion ofConsulting Business➢ Promote alliances and accelerate businesscreation➢ Acquire orders in new technology fields bytaking advantage of the superiority of domestic
technologies

Product development and➢ Create new products and services
Overseas expansion of Power➢ Build domestic and overseas supply chains
Engineering Business

Establishment of one-stop
marketing system➢ Promote cross-segment projects such as smart
citiesin technologies and humanresources➢ Maintain and improve superior technologies
such as disaster prevention/mitigation andmaintenance management using AI➢ Expand hiring, strengthen education, andpromote early demonstration of capabilities

Enhancement of group
governance➢ Introduce IFRS and establish a global
accounting platform

Progress
Personnel development at local
subsidiaries and utilization of BIM
in the Bangladesh railway projectContracts outside the UK awardedin Asia and the Middle East,strong performance of Quadrangle
Investment in Yuso and businessformation startedConcession bids in Japan
Alliance with Geoplan and overseas
promotion of the domestic disasterprevention sector
Development of and order
receipt for new standard
equipment for substations
Consideration of participation in
peripheral development centeredon the airport business, andcreation of the Maas business
Promotion of progress inthe technology promotion
themes and review of the themes
Progressing steadily

20

Progress of NK-Innovation 2021-１

Enhancement of operating system for
Railways Business

Utilization of BIM by local staff in Bangladesh⚫ For the Dhaka Mass Rapid Transit Development Project(Line 1), BIM was introduced for basic design, detailed
engineering, and construction supervision andmanagement. BIM is also scheduled to be introduced forLine 5, for which we received orders in the current period.
⚫ Nippon Koei worked with engineers belonging to the local
subsidiary in Bangladesh to promote the project incooperation with BDP, which has advanced BIM technology
in Europe, and a local subsidiary in India.
BIM model for the Uttar Badda Station

Nippon Koei
Training at BDP
Preparation of local projectguidelines and training

NK India

BDP
Sharing software add-in
Accepting NK employee fortraining

Dispatching experts on site

NK Bangladesh
Deployment to the project

Civil model
Utilization in Bangladesh

Architecture model
3D model using drone video21

Progress of NK-Innovation 2021-2

Overseas expansion of Urban & Spatial
Development Business

Progress in orders in Asia

Design, supervision, and management of the Hydro
Informatics Center, the headquarters of the National
Water Resources Committee of Myanmar⚫ Jointly won by NK, BDP, PKII, MKI, Modular Architects, andArtelia Myanmar⚫ Competitive bid is under evaluation, and construction isscheduled to start in spring 2020.
Resource： Presidential Office, The Republic of The Union of Myanmar⚫ 7 projects in progress as of 2Q of FYE June 2020
⚫ Market strategies are shared with Domestic
Consulting and International Consulting.

Projects under way

Conceptional drawing

Progress of orders in Japan⚫ Architecture CM (construction management) andinitiatives in local cities (urban revitalization smart
cities and public land utilization) have remained
firm.

Ground-breaking ceremony in December 2019 in Yangon

Projects under way
CM business for constructing private investmentbuildings⚫ Continuously conducting CM business related to the renovationof tenant buildings owned by private companies⚫ There is a plan for several orders in the same type of business.
22

Progress of NK-Innovation 2021-3

Establishment of Energy Business

Investment in YUSO in Belgium and business creation
Businesses developed by NK x YUSO

⚫ Investment in YUSO (head office: Belgium), an
aggregation business, through our subsidiary
NIPPON KOEI ENERGY EUROPE⚫ YUSO and Nippon Koei have collaborated since
2018.
We jointly developed a power storage project inBelgium (25 MW).
⚫ We aim to build a new platform that can be applied to
the Japanese market by utilizing know-how inEurope.

(i) Renewable energy aggregation business(Sale of renewable energy to wholesalemarkets)(ii) Business of retailing electricity to consumers(Supplying electricity purchased fromwholesale markets)(iii) Battery storage aggregation business(Providing reserve capacity to adjust
frequencies and supply/demand)

Business schemeElectricity sales (kWh)Renewable energy
power generationcompanies(Medium-scale/home)

Power generation
capacity (kWh)Trading fee (€)

Electricity sales fee
(€)

YUSO
Charge and discharge(ΔkW, kWh)

Battery storage
owners(FOM/BTM)

Procurement → Electricity sales(kWh)Electricity sales fee (€)
Reserve capacity (ΔkW, kWh)

Ancillary fees,
imbalance fees, etc. (€)

Ancillary fees,
imbalance fees, etc. (€)

Electricity wholesalemarket(EPEX SPOT, etc.)

Electricity consumers

System and power
distribution operators(Elia, etc.)23

Progress of NK-Innovation 2021-4

Creation of businesses and overseas expansionof Consulting Business
Gas network system digitization and gas sector operational efficiency
improvement project in Bangladesh

Gas network system digitization and gas sector
operational efficiency improvement project in Bangladesh⚫
⚫
⚫

We plan to utilize the know-how of GeoplanNamtech Inc., which
joined the Group in the current period, for a project to digitize gas
network systems such as gas power plants.
System experts participate from Geoplan
Business is expected to expand into other facilities (electricity
and water/sewage), other countries, and non-ODA projects.
Pipeline

Gas suppliersPower transmission lines

Facilities related to gas and power supply

People’s Republic of Bangladesh
Main Gas Pipeline Network Diagram
Source: Created by the proposer based on “Information Collection and Confirmation
Survey Related to Digitization of Network Infrastructure and Gas Infrastructure”

Overseas expansion of domestic disaster prevention
technology, and domestic disaster response byInternational Consulting staff
Domestic Overseas

Overseas 
Domestic⚫
⚫
⚫

Overseas field guidance by the Domestic
Consulting segment
Domestic Consulting staff participate in thedisaster prevention project in Sri Lanka
Support for emergency disaster response byutilizing a period between large-scale orders in theInternational Consulting segment
Explanation on the status of a sedimentdisaster24

Progress of NK-Innovation 2021-5

Creation of businesses and overseas expansionof Consulting Business

Application of ground observation technology using a
synthetic aperture radar (satellite SAR)
⚫ Promotion of domestic and overseas business development of satellite observation technology thatwas developed jointly with JAXA
⚫ We formed a business alliance with SKY Perfect JSAT in November 2019, established a business
scheme in 2020, and started operations together for business expansion overseas.
Detection of land subsidence in a wide area

Matters for which a project may be formed⚫ Monitoring of airport deformation⚫ Monitoring of power generation andtransmission facilities⚫ Monitoring of power transmission routes⚫ Monitoring of collapsed areas andslopes⚫ Detection of dam deformation and waterlevels, etc.

Ground subsidence is monitored and results are utilized for management

Achieve reduction in labor, cost,and construction time

Scope of collaboration with SKY Perfect JSATSAR analysis

Risk assessment

Acquisition of satellite data and timeseries interference analysis

Determination of risks based on
observation of deformation

Strengthening and packaged service development through business allianceField
surveyDetailNipponsurvey

Koei

Study
and
designNippon Koei
25

Progress of NK-Innovation 2021-6

Product development expansion of PowerEngineering Business

IP/HDLC converter developed and orders received from TEPCO PG⚫
⚫
⚫

TEPCO Power Grid promotes digitization of substations, including installation of monitoring equipmentthat adopts the new standard (IP transmission system) at substations.
On the other hand, the centralized monitoring and control system at existing substations cannot directly
take in IP transmission until TEPCO PG shifts to the next generation system.
As the manufacturer of the existing system, we proposed equipment for conversion from the newstandard (IP) to the conventional transmission system (HDLC), and it was adopted at the Narita control
station.

Substation A
IP-I/F (1)IP-I/F (2)IP/HDLC converter

IP-I/F (3)IP-I/F (4)GW-LAN
System 1(PMCN)

IP-I/F (5)IP-I/F (6)IP-I/F (7)IP-I/F (8)GW-LAN
System 2(PMCN)⚫ Achieves conversion
between new standard (IP)and conventional one(HDLC)⚫ Can be incorporated into
existing systems⚫ Substantially reduces waste
such as steel scraps andwaste plastics compared withnew installation

Substation’scentralized
monitoring andcontrol system

IP-I/F (9)IP-I/F (10)Substation B
26

Progress of NK-Innovation 2021-7

in technologies and human resources,
Enhancement of group governance

Development of climate change data technology
and release of a free portal site
⚫ Development of TR3S, a new bias correction
method for climate change prediction⚫ Release of NK-ClimVault, a portal site to provide
free climate prediction information including rainfall
and temperature in major cities

Strengthening Group companies’ governance⚫ The Head Office dispatches Directors and Audit &Supervisory Board Members to Group companies.
In particular, Audit & Supervisory Board Members
exercise the check and balance function because
they are dispatched from the Head Office.
⚫ For overseas Group companies, Corporate
Governance Directors are appointed from thosedispatched Directors.
⚫ Seminars by dispatched Directors and Audit &Supervisory Board Members to strengthen
knowledge and awareness of group governance27

III: Outline of Long-term Management
Strategy28

Mega Trend
Social issues such as progress of urbanization and changes indemographics that emerge in the infrastructure areas in which the
Nippon Koei Group operates are growth opportunities.
Mega Trend

Needs for realization of sustainable society
Establishment of social infrastructure
for safe and reliable living

Rapid
progress ofurbanization

Shift in global
economic
power

Developmentof technology

Changes indemographics

ClimatechangeLack of natural
resources

Social environment where all
people can freely interact witheach other and play an active role

Creation of attractive cities

Preservation of the global environment
by realizing decarbonized society

29

Mission of Nippon Koei GroupOur mission is to globally meet the needs forrealization of sustainable society with our accumulated
technological capabilities and new knowledge.

MissionOur mission

ValuesShared values

VisionWhat we want to be“Make the world morelivable”“Tackle your problems withsincerity and the road ahead
shall be clear”

Be a company that the world
recognizes as valuable andindispensable30Basic Concept of Long-term Management Strategy

NKG Global Strategy 2030
~ Cultivating Sustainability through Exploration, Integration and Innovation ~Provide new value and realize a sustainable society through exploration ofknowledge and innovation and integration of technologies(1) New development of 3 business domains
Innovation andintegration oftechnologies

Promote new businesses by reorganizing business groups that havecultivated much knowledge into 3 domains(2) Realization of one-stop services and flexible
business operations
Create a sales system that integrates and presents services acrossdomains to meet a wide range of social needs

Provision of newvalue(3) Full expansion into management areas
Expansion into business investment (PPP, PFI), government support,
and data management areas

Promotion of technology development, human resource development,
and establishment of a governance system

31

Business Strategy: (1) New Development of 3 Business Domains, (2)Realization of One-Stop Services⚫ Promote new businesses by reorganizing business groups that have cultivatedknowledge into 3 domains⚫ Construct a sales system ranging across 3 domains to promote provision of one-stop
services and flexible business operations

Consulting Business

Urban & Spatial
Development
Business

Consolidates Domestic andInternational Consulting
business areas by sector andintegrates the Research &Development Center
Accelerates global expansion

Combines civil engineeringand architecture areas andexpands comprehensive
production for
urban/regional
revitalization projects

Power and Energy
Business
Provides one-stop
solutions by integrating
electric power and energy

Realizes one-stop services and flexible business operations

32

Business Strategy: (3) Full Expansion into Management Areas⚫ In order to meet the needs for maintenance and operation management of
infrastructures due to the maturity of the social infrastructure, we will fully expand into
management areas including business investment (PPP PFI), government support, anddata management in each domain.
Category

Business overview

Business
investment
area

PPP/PFI (including concession)business• Operation business by acquiringownership and operation rights ofsocial infrastructures• Operations and management as SPC

Government
support andagency area

PM/CM business• Seamless support for governments
not only in normal times but also intimes of disasters (disaster recovery
projects, etc.)• Support of business optimization for
private infrastructure operators

Business image

Airports

Dhaka MRT Line 6 in
Bangladesh

Roads

Supervision and management of the concession
project for the Yellow Line ring road in Peru

New Clark City, Philippines

Datamanagement
area

Water and sewage

Northern Kyushu heavy rain

Data business• Data provision business integrating
various internal and external data33

Future Schedule⚫ Promote system establishment for the coming one year as a preparation period
for the start of the new Long-term Management Strategy in July 2021

Long-term Management Strategy

New Long-term Management Strategy

Medium-term Management Plan NK-Innovation
2021

New Medium-termManagement Plan

New Long-term Management
Strategy preparation period
FYE2019

FYE2020

FYE2021

FYE2022

FYE2023

Present

May 2020
Relocation of
the Head
OfficeAugust 2020
Announcement ofLong-termManagement
Strategy (detail)June 2021
75th
anniversary

August 2021
Announcement of new
Medium-termManagement Plan

34

Act with integrity and contribute to society
through technology and engineering.

35

IV: References

36Corporate Profile◼Corporate NameNIPPON KOEI CO., LTD.
◼Date of Foundation
June 7, 1946
◼Capital¥5,497 million◼Number of Employees 4,923 (consolidated)◼Consolidated Subsidiaries 68◼Businesses Domestic Consulting
International Consulting
Power Engineering
Urban & Spatial Development
Energy◼Management Philosophy
Act with integrity and contribute to society throughtechnology and engineering.

◼ Founder

Yutaka Kubota (1890-1986)

Before WWII, Yutaka Kubota was engaged
in the development of hydropower
resources (e.g. Suiho Dam/700MW, in the
Korean Peninsula, one of the world's
largest at that time).
After the War, in a bid to work toward therestoration of Japan and reconstruction ofcountries damaged by the War, he founded
the Company at the age of 56.
Known as the "Father of Overseas Engineering Cooperation", he wasawarded the Grand Cordon of the First Order of the Rising Sun in
1985.
He directed projects in many countries throughout the world until he
was 90 years old, contributing to development in developing countries.

Transition of Sales / Operating Income (Millions of yen)

FY19/6 Sales by Geographical Location— Net sales — Operating income

37

Business Development
Domestic Consulting

International Consulting

Power Engineering

We have implemented approx. 3,000
projects/year to underpin the foundations ofpeople's daily lives, such as development
and maintenance of social capital including
rivers, roads, etc., and regional reforms torealize prosperous and safe living.

We have supported the growth ofdeveloping countries in Africa, the Middle
East, Latin America and, especially, in Asia
by providing support in a broad range offields including water resources, energy,
urban development, transportation,
agricultural development, and environment
control.

We have worked on the development of powersources and the promotion of businessaccommodating electricity demand in Japanand overseas. The Company has engaged in
new construction and repairs of substations,switching stations, power stations, theformation of dam management systems athydroelectric power plants, etc.

Urban & Spatial

EnergyWe strive to create multifunctional, wellorganized, barrier-free, eco-friendly and beautiful
life space in emerging economies in Asia andother developing countries/regions throughdevelopment projects of social infrastructure
design, such as of railway
stations, airport buildings, rearrangement of thestreetscape, etc.

Amid increasingly strict environmental
regulations, we provide energy consultationand perform design and installation ofhydropower/solar facilities in the field of
renewable energy.

FY19/6 Sales distribution ratio38

Job Description for Civil Engineering Consultants
Domestic: Mainly involved through the design stage. Core customers are primary government organizations including the
Ministry of Land, Infrastructure, Transport and Tourism, and secondary government organizations including prefectural andother local governments.
Overseas: Involvement varies by project, and can range from planning and construction to construction supervision andmanagement. Core customers include the Japan International Cooperation Agency (JICA), other governmental agencies,
the United Nations and the World Bank.

Planning

DesignPlan and draft,
Basic engineering,feasibility studies Detailed engineering

Construction
Competitive bids,
Providing
Proposals

Bid evaluation and support
for supplier selection

Operation/
Management

Contract supervision and management Operational consulting
Construction supervision andManagement consulting
management

Domestic

Consultant (NK)Construction (General Contractors, etc.)

Overseas

Consultant (NK)Surveillance (NK)Construction (General Contractors, etc.)

Example: Chronic traffic congestion problems in Region A
Planning

DesignConstruction

Provide engineering services forstudies, planning, design and otheractivities.

Supervise the work of contractors on behalfof the client (supervision and management)

Completion ofroad・ Should roads or subways be constructed?
・ Is the project economically viable?
・ Propose the optimum construction
methods given the terrain(General contractors, manufacturers, etc.)
Execution of construction work according to thespecifications agreed upon by the contractee andcivil engineering consulting firm

Provided as aservice toresidents

39

Nippon Koei's Development Along with Social Progress

NipponKoei
XSocietyBusiness
Development

Formulation of business base,
Fostering positive relationshipwith foreign governments

Comprehensive strength anddevelopment capability toencompass various fields

Flexible responses tochanges in environmentand social needs

Stable supply of electricity
Development of infrastructure
for daily life

Establishment of foundation
for industrial growth

Realization of sustainable
society

Dam

Electricity
Production

Rivers anddrainageTransportation

Environmental
systemNKInnovation
2021

NKAIM
Urban & spatial
development

Maintenanceandmanagement

Building
National
Resilience
Longer operating
lives of infrastructure
Environmental
responses

Advances

Deregulation ofelectricity
business

Infrastructure
exportEstablishment ofsocial capital
Restoration of
infrastructure fordaily livings
Human
Resources

Provision of employment
opportunities for engineers whocame back alive from overseas
territories

Improvement in quality ofengineers,
Training of engineers in extensive
industrial fields

Improving social reputation ofengineering consultants
Transfer of technologies todeveloping countries

Stage

Foundation stage

Growth stage

Maturation stage

Innovation stage

Era

Restoration in the postwar
period1946-1960s

High economic growth
Population increase
1970s-1990s

Collapse of bubble economy
Global warming
1990s-2000s

Great East Japan Earthquake
Urban problems
2011-Present

Recruitment of regional engineers
Paying attention to work-life balance40

Strengths of Nippon Koei
(1) Sustainable business model developed
along with progress in society(Win-win relationship between society and theCompany)

Implementation of transformation to meetmarket needs(2) Japan's leading engineering consultant(Business domains, technologies, and humanresources)

Comprehensive strength: Capable of solving
sophisticated or complex issues
Human resources: Has the largest number ofengineers in the industry

Commercialization of solutions on social
issuesConsolidated
net sales:¥108 billion

No. ofcountries inwhich businessis undertaken:
160

Technologies: Equipped with in-house R&D
facilities and a number of patents

No. of orders
per year: over
5,500

No. of patents
acquired:83

No. of
Professional
Engineers*:
1,621*Certified by the Japanese government

Provide solutions on needs of the era and realize sustainable business expansion
and profitability growth41

Position in Industry
Nippon Koei is Japan's leading civil engineering consultant.
Sales (Millions ofyen/Non-consolidated)
Rank

Company

Segment ofConst.
Consultation

Corporate
Total

Employees(Nonconsolidated)
Professional
Engineers

Total number of
employees

1

Nippon Koei

50,44264,782

1,337

2,412

2

Pacific Consultants Co.,LTD.

46,35948,595

1,228

1,891

3

CTI Engineering Co., Ltd.

35,10836,768

1,265

1,612

4

JR East Consultants Company

21,08022,779

152

752

5

Oriental Consultants Co., LTD.

21,00521,088

593

1,062

6

Yachiyo Engineering Co., Ltd.

20,694

20,986

531

1,072

7

OC Global

18,626

18,626

121

481

8

Nihon Suido Consultants Co., Ltd

17,86818,055

498

748

9

Eight-Japan Engineering Consultants Inc.

17,65019,747

482

882

10

IDEA Consultants, Inc.

17,306

17,758

462

899

18

Tamano Consultants Co., Ltd. (strong point:
urban planning)

10,734

12,580

224

716

89

NIPPON CIVIC CONSULTING ENGINEERS
CO.,LTD (strong points: underground spatialplanning, tunnels)

2,153

2,177

62

129

※ Source: Nikkei Construction, April 22, 2019 edition. Ranking by engineering consultant division sales (according to published financial results)
42

World Ranking
Ranked as the only Japanese company in the world ranking.
2018
Rank
1
2

2017
Rank
4
JACOBS
2
AECOM

3

20

SNC-LAVALIN

Canada4

1

WSP

Canada5

3

ARCADIS NV

The Netherlands

6

8

FLUOR CORP

U.S.A

7

6

DAR GROUP

U.A.E

8

7

STANTEC INC

Canada95

WORLEYPARSONS LTD

Australia

109

FUGRO NV

44

53

NIPPON KOEI GROUP

Company

Head Office

U.S.A
U.S.A

The Netherlands

Japan
Source ： ENR The Top 225 International Design Firms

43

Group Vision
To provide services that are of value in building safe and reliablesocial infrastructure and comfortable living spaces.

44New Medium-term Management Plan "NK-Innovation 2021"(FYE19/6 - FYE21/6)- NK-Innovation 2021 Three years of tackling various innovations to become a truly global company
FYE2021/6 Plan (IFRS assumed)
Net sales

Operating income

Operating margin

ROE (Return on Equity)¥140 billion¥12.6 billion

9.0%

12.7%

Basic Objective
Continue to evolve into a global consulting and engineering firm
Business strategy
Enhancement of operating
system for Railways Business

Overseas expansion of Urban &Spatial Development Business

Creation of businesses and overseas
expansion of Consulting Business

Establishment of Energy
Business

Product development and overseas expansion ofPower Engineering BusinessGroup-wide measures
Establishment of one-stop marketing system / Investment in technologies and humanresources / Enhancement of group governance45

Domestic Consulting
Nippon Koei's Operating Results in Domestic Consulting(¥ million)

Public Works Expenditures (¥ trillion)

 Initial budget  Supplementary

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018■Orders■Net Sales■Operating Income

FYE 14/6 FYE 15/6 FYE 16/6 FYE 17/6 FYE 18/6 FYE 19/6 FYE 20/6
(Plan)(Plan)
46

International Consulting
Initial ODA Budget in the General Account(¥ billion)

Nippon Koei's Operating Results in International Consulting(¥ million)■Orders ■Net Sales ■Operating Income

FY 2013

FY 2014

FY 2015

FY 2016

FY 2017

FY 2018

FYE 14/6 FYE 15/6 FYE 16/6 FYE 17/6 FYE 18/6 FYE 19/6 FYE 20/6
(Plan)
47

Power Engineering
Repair Expenses and Facility Investment and Its
Distribution for Tokyo Electric Power Co., Ltd. (¥ billion)■Orders ■Net Sales ■Operating Income■Repair Exp. ■Facility Inv.

FY 2013

FY 2014

FY 2015

FY 2016

Nippon Koei’s Operating Results in Power Engineering Business(¥ million)

FY 2017

FY 2018

FYE 14/6 FYE 15/6 FYE 16/6 FYE 17/6 FYE 18/6 FYE 19/6 FYE 20/6
(Plan)48

Urban & Spatial Development
Sales Trend of Top 164 Researchand Designing Companies(Billions of dollars)

Sales of top 164 firms in 2018
by sector(Billions of dollars)

Nippon Koei’s Operating Results in
Urban & Spatial Development
Business (¥ million)■Orders ■Net Sales ■Operating Income■Architecture■Transport■Others

FYE 17/6 FYE 18/6 FYE 19/6 FYE 20/6
(Plan)

Source of data: ENR Magazine (issued in August 2019)49