Director［ Kibe-log ］

Representative Executive OfficerPresident and CEOKibe Kazunari#6

The challenge of a Ghana toll road concession
Dear stakeholders, I am Kazunari Kibe, the President and CEO of INFRONEER Holdings Inc.
Thank you for continuing to visit Kibe-log.

Today I would like to talk about the details of the overseas toll road concession, which we signed an MOU(Memorandum of Understanding) with the government of Ghana on August 27th.

The first concession project in Africa by a Japanese consortiumThis time, we reached a basic agreement with the government of Ghana in a feasibility study ofconcessions for two road projects, a greenfield (new construction) and a brownfield (existing road), eachof which is a part of state road No. 1 and are approximately 50 km long. Although the total project cost is
not that large, it will be the first concession project in Africa by a Japanese company.
In overseas concession projects it is not uncommon for private consortiums to propose thecommercialization of the project to the government, and once the proposal is approved, it will becommercialized as a PPP. In that case, the government’s preferential treatment is often given to theproposer even if it becomes a bid.
This time in Ghana, a consortium including INFRONEER proposed a concession to the Ghanaian
government and acceptance of the proposal led the consortium into an MOU. In the future, we willconduct feasibility studies together with a Japanese consultant and a major European construction
company with a track record of construction in Africa and other companies participating in theconsortium, aiming to commercialize the project within two years.
A concession is one of the PPP (Public-Private Partnership) methods in which the right to operate social
infrastructure such as airports and toll roads is sold to a private consortium for a certain period of time
and the maintenance, management and repair of the infrastructure is also entrusted to the private sector.
The INFRONEER Group has also actively acquired domestic infrastructure PPPs such as Sendai Airport-1-

and Aichi Prefecture toll roads as the core of our "de-contracting" initiative. I hope you can see that ourconcession business has just begun to expand overseas.

Reasons for embarking on overseas infrastructure PPP
Africa is not a familiar country for INFRONEER.

Looking back on the history of Japanese generalcontractors who made huge losses on overseas construction projects in the past, some may think that thisis a high-risk project.
However, we have made the decision to embark on a toll road concession in Ghana for the several following
reasons:
One of the reasons is our "de-contracting" initiative I mentioned earlier.
The business model of INFRONEER is "de-contracting". Meaning, not only do we operate a conventional
contracting business, but we also take on the business risks of projects as a construction company as wecomprehensively take care of construction, operation, maintenance, and management of social
infrastructure such as airports, water supply systems, sewerage, and toll roads.
This de-contracting infrastructure business is starting to spread in Japan. But the speed of progress is muchslower than others in emerging countries and developing countries where social infrastructure has beendeveloping very fast. Going forward, domestic infrastructure business alone will not be nearly enough tofoster the infrastructure business into the same scale of the conventional contracting business.
The decision of participating in this project in Ghana was made in order to gain a foothold in theinfrastructure business overseas.
I believe that these projects will also prove that the PPP model is a viable pillar of our business.

PPP Infrastructure Projects -“Good for all three”

As I mentioned earlier, PPP is represented by concessions. Simply put, they are a scheme to develop social
infrastructure by utilizing technology, funds and know-how from the private sector. Having been involvedin many ongoing PPP projects, I became convinced that there is no other business model than the-2-concession business which fits the rule: “Good for all three”
The private consortium, which has acquired long-term operating rights of 20 or 30 years, will generate
profits through various ingenuities such as measures to increase sales and reduce costs, while properly
managing the infrastructure. This is synonymous with the management of the operation of socialinfrastructure.
Until now, managing and operating social infrastructure in Japan has been the role of the government.
Although the government is solid in terms of safety and quality, the concept of management must not berecognized enough due to the different accounting system from the private sector. We have experienced
this through the operation of the Aichi Prefectural Toll Road. To be honest, there are many areas whereefficiency can be improved from the standpoint of private companies.
In that respect, in the case of PPP, the private consortium must operate and maintain infrastructure
properly to make a profit. Necessary measures should be taken to increase sales and eliminate inefficiency
in operations as much as possible to make the project profitable. Some people criticize that the privatesector will focus on profits and not on management. However, if we cut corners in operation andmaintenance, it will eventually lead to a decrease in the number of users, so we cannot cut corners. In thatsense, efficient maintenance and management in infrastructure can be expected as companies try to remain
profitable.
In the infrastructure PPP, the private sector can earn stable income over the long term through themaintenance and management of infrastructure. The government can also efficiently promote
infrastructure development with limited funds. If the overall cost of the project is reduced by the creativityof the private sector and usage fee of infrastructure gets lower, it is beneficial for users as well. This is thereason why I feel that infrastructure PPP is good for all three parties involved.

Our ideal image to aim for
The same applies to our overseas concession business.
In emerging and developing countries, there is a strong demand for infrastructure development as it
becomes the foundation for further economic growth. Among them, PPP infrastructure projects can bedeveloped using private funds and help reduce fiscal expenses, which would be significantly beneficial tothese countries. In particular, these countries can expect great benefit in the procurement of funds throughJapanese governmental financial institutions and private banks given the low interest rate environment in-3-Japan.
Also, Japan is far behind China in its influence in Africa. Under such circumstances if Japan strengthens its
relationship with Ghana, which is also an oil-producing country, through infrastructure development, it will
also contribute to Japan's national interests. To that end, I think that the Japanese government needs tobuild a risk-sharing mechanism between the government and the private sector rather than letting theprivate sector take on the risks alone.
In fact, Africa is an unfamiliar market for INFRONEER and you may decide not to get involved if you weighthe efforts and benefits of this toll road concession. However, this project is not only contributing to thegovernment and people in Ghana, but also strategically meaningful to Japan. Meaning this project is “goodfor all three” or even “good for all four”. Therefore, I decided to confront this challenge.
Writing like this may sound like just fine-sounding talk. However, I believe that a company should be
aiming for the “good for all three”.
German philosopher Markus Gabriel, who advocates "ethical capitalism" says that existing capitalism basedon the principle of pure competition cannot solve current issues such as inequality and the number ofintellectuals following him is increasing.
The reason why the SDGs have been called out around the world in the past several years is that a newsystem is needed in which the winner cannot win alone by himself.
Of course, as a listed company, it is natural to pursue profit growth. However, at the same time as pursuing
profit, I would like to aim for the “good for all three” or the “good for all four” contributions to our various
stakeholders. We are looking at infrastructure PPP as a tool to achieve our aim.
This toll road concession is the first project for INFRONEER, and I think we may face some challenges.
But I would like to achieve our vision “the world where the freedom of infrastructure services spreads
everywhere” by accumulating experiences and achievements in such a challenging environment. By thattime we must be able to show you the new image of our company being different from existing construction
companies which still focus on contracting business.

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