［ Kibe-log ］

Director
Representative Executive OfficerPresident and CEOKibe Kazunari#11

The fusion of technology and finance learned when I
was wearing a helmet
Dear Stakeholders, I am Kazunari Kibe, President and CEO of INFRONEER Holdings Inc.
Thank you very much for reading the "Kibe-log" again.

I studied civil engineering at university, and after graduating I joined MAEDA CORPORATION. Before I
became the President and CEO of INFRONEER, I was often asked, "Which financial institution did you workfor before?”
Indeed, INFRONEER, dealing with infrastructure-related concessions, is a unique company in the generalcontracting industry.

I must have been assumed to be from the financial industry because I used a lot offinancial vocabulary when talking about the project.
For a while, to everyone I met, I was passionately talking about the importance of the secondary (secondarydistribution) market for buying and selling structured projects. I don't think there was a person from a generalcontractor anywhere who talked about that at the time. Whenever people asked me “Which financial institution
were you with?” I joked “With MAEDA Bank.”

The time I worked on construction sites where I had to deal with
unexpected events.

I worked on construction sites wearing a helmet for the first 10 years of my career with MAEDACORPORATION. How did such a person like me come to talk about finance? It is because I began tostudy the infrastructure business and concessions as MAEDA CORPORATION proceeded along its "decontracting" path.
In the late 1990s, I learned that European construction majors were working on concessions for airports
and highways, and I saw MAEDA CORPORATION's future in that business. Since then, I have taken-1-every opportunity to visit these companies and have studied not only their actual business, but also theirlegal systems and other structures. A quarter of a century later, INFRONEER was born and is finallytaking the shape that I envisioned at the time.
However, looking back, I feel that the " root" that led me to where I am today existed when I was working
at construction sites, wearing a helmet.
When I joined the company in 1986, I worked primarily on urban civil engineering sites, such as utility
tunnels and sewer works in urban areas. These were small-scale construction sites with relatively short
construction periods, rather than large-scale, long-term construction sites such as dams. I believe that thisenvironment has made me the base of what I am today.
This is because urban civil engineering, such as sewer construction, deals with the unseen realm of theunderground, and unexpected things happen daily.
For example, sometimes pipes are buried in different places from the drawings, or the drawings that thegovernment has are wrong from the beginning. If something unexpected occurs during the actual digging,
we must respond flexibly onsite each time.
In addition, every project site has a budget. The latest technology allows us to use better construction
methods and select better machineries, but of course, it costs additional money. In public works projects,
the budget for such projects comes from our tax money, so we must always consider the balance between
cost and effectiveness when deciding on construction methods. This is the same story in theinfrastructure business today.
Moreover, if an unexpected event occurs that may increase construction costs, the construction method
must be revised, and cost increases need to be discussed with the client beforehand.
In the case of urban civil engineering, the client is either the national government, public administration,or organizations with a highly public nature such as railroads, electric power companies, and gascompanies. Cost increases bounce back to taxpayers and users, so even when asking for a budget increase,
the reason for the cost increase and what construction methods will be used to solve the problem must beable to support the accountability of the clients themselves. For this purpose, it is necessary to talk withthem based on numbers and other evidence.

-2-At that time, as an onsite employee, I was repeatedly making hypotheses and verifying what I should do todeal with the problems in front of me and to keep the construction period and cost within the budget. If I
have acquired the ability to think deeply, it is because I was trained to do so during working onconstruction sites.

Infrastructure business integrating construction and finance.
As I wrote in the Vol. 4 Kibe-log "The secondary market of infrastructure will bring more investment”(https://www.infroneer.com/pdf/en/company/topblog/kibelog_en_vol4.pdf), infrastructure projects area fusion of engineering and finance, and the construction engineering-based technology and financial
knowledge and know-how are indispensable.
For example, in the case of renewable energy-related facilities such as a solar power plant, we will determine,based on our engineering capabilities, whether the project will contribute to "decarbonization" and whether
it can generate stable returns over the long term. In doing so, in addition to knowledge about the equipment,
we need to know the conditions of the location and the ground where the equipment will be installed tocorrectly calculate the possible risk.
INFRONEER also operates infrastructure such as the Aichi Toll Road and Osaka City Industrial Water
Supply through concession projects in the form of special purpose companies (SPCs), where we serve as
the representative company.
When participating in such concession projects, it is essential to have experience in road maintenance andmanagement, such as paving and repair of road surfaces, or knowledge of water pipes and their deteriorated
condition, as well as expertise in determining the timing of repairs, for risk assessment purposes.
The same is true for the "BT + Concession*" for the new Aichi Prefecture Gymnasium (Arena) that we areworking on. For such a large-scale public facility, it is necessary to calculate not only the business income
and expenditure for event operations during the concession period, but also detailed construction costs andrepair costs during the concession period. If these costs are not reflected in the bid price, the project cannot
be structured.
*BT + Concession
The concession method in which the operator designs and builds (B) the facility based on its own proposal,transfers (T) ownership to the prefecture upon completion, and then the prefecture sells the right to operate
the facility to the operator for a certain period and entrusts the operation and maintenance of the facility to-3-

the operator (concession). It is called "BT + Concession", an acronym for Build and Transfer plus
Concession.

The elements listed above are related to engineering capabilities, but financial perspectives are of course
also important to make infrastructure operations viable as a business.
To generate stable returns, private funds such as project finance must be introduced wisely and leveraged
within the range of risk that can be taken. Since infrastructure operations are long-term, spanning 20 to 30years, it is also necessary to manage debt by considering the duration and procurement costs.
In addition, since social infrastructure that generates stable earnings over the medium to long term is afinancial product suitable for long-term investors such as pension funds, we must consider selling the equity
portion of the SPC that is responsible for the operation to them at the appropriate time while optimizing
the operation and maintenance. This is the story of the secondary market.
Thus, to develop an infrastructure business, it is neither possible to have engineering capabilities alone nor
financial knowledge and know-how alone, it is necessary to have a good balance of both capabilities.
Furthermore, the INFRONEER Group has technology and expertise not only in construction and paving,
but also in industrial and construction machinery. That is why we believe that the infrastructure businessis the right business to entrust the future of INFRONEER to.

Business opportunities exist where different industries and sectors
overlap.

I have been studying the infrastructure business since the early 2000s, including research trips to Europe,
but I only started to get seriously involved in finance in 2012, when I began discussing the establishmentof a joint venture with the Australian investment bank Macquarie Group. To develop an infrastructurebusiness centered on renewable energy projects, we decided to form a joint venture with Macquarie,
which had an outstanding reputation for infrastructure investment.

-4-The joint venture closed in 2023 as Macquarie scaled back its operations in Japan. However, during its
nearly 10 years of activity, the joint venture launched many projects, including solar power plant projects
in Ibaraki and Yamanashi prefectures. These projects have already been sold to other investors.
Companies like INFRONEER will structure the project and sell it as a financial instrument once it isstable enough to operate. This is meaningful not only in terms of decarbonization but also for the people
who receive the returns from the project. It is what we call recycling of capital, and I learned that throughthe business with Macquarie.
Looking back, I learned a lot about business risk assessment and the concept of future value from myexperience of having heated discussions with Macquarie's experts at that time. But I was able tounderstand these easily because I was conscious of managing construction schedules and budgets on sitewhen I was young, and I am keenly aware that my experience working on construction sites has led me tothe business I am in today.
As society has developed, the boundaries between traditional "industries" have become blurring. In thepast, there was a clear division between construction and finance, with construction companies doing
construction and banks and securities companies doing finance.
I feel that new business opportunities are now emerging where the respective industries overlap. The
infrastructure business, which is on the borderline between construction and finance, is a typical example.
Therefore, there are opportunities.
I tell my employees to learn about finance, but finance is only possible with knowledge on site.
I believe this is the reason why general contractors must be able to engage in infrastructure business.

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