SECOND PARTY OPINIONHITACHI ZOSEN CORPORATION
2ND GREEN BOND PERIODIC REVIEW (#2)

Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: 29th September 2023
Ref. Nr.: PRJN-269261-2021-AST-JPN-3

Publication history
Date of issue
28
29

th

th

Contents

October 2022

Hitachi Zosen Corporation 2nd Green Bond Periodic Review (#1)

September 2023

Hitachi Zosen Corporation 2nd Green Bond Periodic Review (#2)

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Scope and Objectives
Hitachi Zosen Corporation (hereinafter “Hitz”) has commissioned DNV Business Assurance
Japan (hereinafter "DNV") to conduct a periodic review of the 2nd Hitachi Zosen
Corporation Green Bond (hereinafter "the Bond"). The objective of the periodic review at
DNV is to implement an assessment to confirm that the Bond meets the identified criteria of
the Green Bond Principles (ICMA, 2021, hereinafter “GBP”), Green Bond Guidelines (Ministryof the Environment, 2020, hereinafter “GBGLs”) and to provide the issuer with independent
second-party opinion on the eligibility of the Bond.
After issuing its first green bond on 21st September 2018, Hitz issued its 2nd green bond,the subject of this review, on 28th October 2021. The issue amount of the Bond is JPY 10
billion. DNV's review team conducted the first periodic review for the period from October
2021 to March 2022 based on the GBP and GBGLs, and has now conducted the second
periodic review for the period from April 2022 to March 2023.
DNV, as independent external reviewer, has identified no real or perceived conflict ofinterest associated with the delivery of this second-party opinion for Hitz.
In this report, no assurance is provided regarding the financial performance of the Bond,
the value of any investments in the Bond, or the long-term environmental benefits of thetransaction.
Table-1: The Bond covered by this review

Date of issue

Hitachi Zosen Corporation 27th Series Unsecured Straight Bonds(Green Bonds) with inter-bond pari passu clause.
28th October 2021

Maturity Date

5 years

Total amount of issue

10 billion yen

Name of the bondNumber of periodic reviews 2ndStandards/guidelines to be applied or referred
Scheme owner
International Capital Markets
Association (ICMA), 2021

Applied*1 or Referred*2

Green Bond Guidelines (GBGLs)

Ministry of the Environment, 2020

AppliedClimate Bonds Standard Version 3.0(CBSv3.0) (Sector criteria)

Climate Bond Initiative, 2019

Referred(applicable technicalcriteria)*3

International Capital Markets
Association (ICMA), 2020

ReferredInternational Capital Markets
Association (ICMA), 2021

ReferredNo.

Standards/guidelines

1.

Green Bond Principles (GBP)

2.
3.

4.
5.

Green and Social Bonds: A High-Level
Mapping to the Sustainable
Development Goals
Handbook Harmonized Framework for
Impact Reporting

Applied*1 Applied Eligibility for all four core common elements to each principle or guideline was assessed.

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*2 Referred: Based on the green projects and implementation plans, relevant contents were partiallyconsidered.
*3 Referable technical criteria are; Wind Energy

Responsibilities of the Issuer and DNVHitz has provided the information and data used by DNV during the delivery of thisreview. DNV’s statement represents an independent opinion and is intended to inform
Hitz and other interested stakeholders in the Bond as to whether the establishedcriteria have been met, based on the information provided.
In its work, DNV has relied on the information and the facts presented by Hitz. DNV is
not responsible for any aspect of the candidate projects or assets referred to in thisopinion and cannot be held liable if estimates, findings, opinions, or conclusions areincorrect. Thus, DNV shall not be held liable if any of the information or data provided
by Hitz and used as a basis for this assessment were not correct or complete.

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Basis of DNV’s opinion
To provide as much flexibility as possible for Hitz, DNV has applied our green bondassessment methodologies, which incorporates the requirements of GBP and GBGLs,
to create Hitz-specific Green Bond Eligibility Assessment Protocol (hereinafter “DNV’s
Protocol”). The DNV’s Protocol can be applied to the green bond under GBP and
GBGLs.
DNV’s Protocol includes a set of suitable criteria that can be used to underpin DNV’sopinion. The overarching principle behind the criteria is that a green bond should“enable capital-raising and investment for new and existing projects withenvironmental and social benefits”.
As per DNV’s Protocol, the criteria against which the green bond has been reviewed
are grouped under the four Principles:•

Principle One: Use of Proceeds.
The Use of Proceeds criteria are guided by the requirement that an issuer of a green
bond must use the funds raised to bond eligible activities. The eligible activities should
produce clear environmental benefits.

•

Principle Two: Process for Project Evaluation and Selection.
The Project Evaluation and Selection criteria are guided by the requirements that anissuer of a green bond should outline the process it follows when determining eligibilityof an investment using green bond proceeds, and outline how the issuer consider
impacts to objectives.

•

Principle Three: Management of Proceeds.
The Management of Proceeds criteria are guided by the requirements that a green bondshould be tracked within the issuer, that separate portfolios should be created whennecessary and that a disclosure of how unallocated funds will be handled should be
made.

•

Principle Four: Reporting.
The Reporting criteria are guided by the recommendation that at least Sustainability
Reporting to the bond investors should be made on the use of bond proceeds and byusing quantitative and/or qualitative performance indicators, where feasible.

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Work Undertaken
DNV work constitutes a comprehensive review of the available information, based on theunderstanding that this information was provided by Hitz in good faith. DNV has not
performed an audit or other tests to check the veracity of the information provided.
The work undertaken to form DNV’s opinion included:

Initial (Pre-Issuance) Assessment: *Not included in this reportCreation of the Hitz-specific Protocol, adapted to the purpose of the Bond, as
described above and in Schedule-2 to this Assessment;Assessment of documentary evidence provided by Hitz on the Bond andsupplemented assessment by a comprehensive desktop research. These checks
refer to current best assessment practices and standard assessment methodology;
Discussions with Hitz, and review of relevant documentation;
Documentation of findings against each element of the criteria.

Periodic (annual) review * Contents of this report







Evaluation of the supporting documents provided by Hitz related to the Bond, highlevel desktop surveys, document reviews, and interviews with key personnel of theissuer. These checks refer to current best assessment practices and standard
assessment methodologies;
Interview with key personnel of the issuer and review of relevant documents;
Field survey and inspection, if necessary;
Review of the nominated projects and assets as at the time of periodic review;
Documentation of findings for periodic review as detailed in this document.

The DNV's opinion statement (see below for details) summarises these.

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Findings and DNV’s opinion
Principle One: Use of Proceeds.
DNV has confirmed that, as at the end of March 2023, part of the proceeds raised by Hitz
(10 billion yen) had been allocated to the following project.

Mutsu Ogawara Onshore Wind Farm Project - 825 million yen allocatedDetails of the Mutsu Ogawara onshore wind farm project are shown in Table-2. The
project is carried by a joint venture between Hitachi Zosen Corporation, ITOCHU
Corporation, with Hitachi Zosen as the construction contractor and the operation andmaintenance management company after operation starts. DNV has confirmed that the
project is progressing smoothly and that no significant delays are envisaged at this stage.

Table-2: Overview of Mutsu Ogawara onshore wind farm projects
Location

Rokkasho Village, Kamikita District, Aomori Prefecture

Targeted

Design, construction and post-construction operationtasks

of onshore wind power facilities

Number ofwind turbines
Maximum
outputCompletion of
construction

4.3 MW turbines × 15 units
57,000 kW
Scheduled for April 2026
Received an order for construction work and longterm operation and management services from Mutsu

Status quo

Ogawara Wind Power LLC.
Ordered and manufactured various equipment andstarted foundation work.

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Principle Two: Process for Project Evaluation and Selection.
DNV confirmed that the following project evaluation and selection process had been
established within Hitz, and that it had been applied to the Bond, based on the evidence
from the minutes of board meeting and other sources.
In evaluating and selecting the green projects, each responsible department implementing
each eligible project and the Finance Department of Hitz confirmed that the project were
eligible projects. Final approval for project selection was given by the Board of Directors,
the highest decision-making body in business execution.
In addition, DNV confirmed that Hitz had targeted projects that met the following
requirements.
-

The environmental impact assessment by the country of residence or local government iscarried out appropriately, if it’s required.

-

The overview of the projects is explained to the residents around the projects location andefforts are made to get the understanding of the projects from local residents.

-

Making efforts in the equipment manufacturing process to decrease the environmental
risks through management of emissions by setting voluntary standards and target values
that are stricter than the law on the emission of pollutants to the environment.

-

Strict adherence to work standards and reliable implementation of equipment inspection
and maintenance so as to preventing the occurrence of environmental problems inbusiness activities and minimizing environmental risks.

-

Establishing response procedures to minimize pollution in the event of an environmental
accident and conducting regular drills for the event of an abnormality or emergency.

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Principle Three: Management of Proceeds.
DNV reviewed the evidence presented on how Hitz has managed the proceeds raised fromthe bond issuance to 31st March 2023.
DNV confirmed that the Finance Department of Hitz managed the proceeds by the number
assigned to each eligible project and tracked the budget and actual expenditure in theinternal control system in accordance with the stipulated cash management flow. DNV also
confirmed that the allocation of proceeds was as shown in Table-3 and that unallocatedproceeds were managed in cash or cash equivalents and that the allocation is expected tobe completed by the end of FY2024.

As mentioned above, no assurance is provided regarding the financial performance of thegreen bond, the value of any investments, or the long-term environmental benefits of thetransaction.

Table-3: Allocation status (as of 31st March 2023)
Green bond allocated amount
Allocated to investments in special
purpose companies
Capital construction costs of power
generation facilities
Unallocated balance

10,000 million yen
825 million yen
0 million yen
9,175 million yen

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Principle Four: Reporting.
DNV has confirmed that Hitz plans to disclose the allocation status in Table-3 and theenvironmental benefits in Table-4 on the Hitz website. As the Mutsu Ogawara onshore
wind farm project has not yet started operation, the environmental benefits are stated in
the form of the planned maximum output, rather than CO2 emission reductions.

Table-4: Environmental benefits
Mutsu Ogawara onshore wind farm project(Awaiting construction orders)Maximum output

57,000 kW(4.3 MW turbines × 15 units)

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Assessment Conclusion
On the basis of the information provided by Hitz and the work undertaken, it is DNV’sopinion that the Hitz green bond meets the criteria established in the Protocol and that it isaligned with the stated definition or purpose of green bond within the GBP and GBGLs,
which is to “enable capital-raising and investment for new and existing projects withenvironmental benefits”.

DNV Business Assurance Japan K.K.
29th September 2023

Thomas Leonard

Naoki Maeda

Head of Section, Sustainability Services

President and Representative Director

Supply Chain & Product Assurance

DNV Business Assurance Japan K.K.

DNV Australia, New Zealand & Southeast Asia

Jun Chokai

Akira Tsukasaki

Project Leader

Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

About DNV
Driven by our purpose of safeguarding life, property and the environment, DNV enables organisations to advance the safety
and sustainability of their business. Combining leading technical and operational expertise, risk methodology and in-depth
industry knowledge, we empower our customers’ decisions and actions with trust and confidence. We continuously invest in
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With our origins stretching back to 1864, our reach today is global. Operating in more than 100 countries, our 16,000
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Disclaimer
Responsibilities of the Management of the Issuer and the Second-Party Opinion Providers, DNV: The management of Issuer
has provided the information and data used by DNV during the delivery of this review. Our statement represents an
independent opinion and is intended to inform the Issuer management and other interested stakeholders in the Bond as towhether the established criteria have been met, based on the information provided to us. In our work we have relied on theinformation and the facts presented to us by the Issuer. DNV is not responsible for any aspect of the nominated assets
referred to in this opinion and cannot be held liable if estimates, findings, opinions, or conclusions are incorrect. Thus, DNV
shall not be held liable if any of the information or data provided by the Issuer’s management and used as a basis for thisassessment were not correct or complete.

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Schedule - 1 Hitz Green Bond Allocated Project
Of the project categories listed in Schedule-1 under the Hitz Green Bond Framework, the proceeds have been allocated toonshore wind power project in the 2nd Hitz Green Bond. (No money was allocated to the greyed out areas. )Project

01

02

03

04

05

Category

Energy-from-Waste facilities andequipment of energy-saving andemission saving type

Energy-fromWaste

Methanefermentation
systems

Onshore andoffshore wind
power

Land
aquaculture
systemFlap-Gate

Project overview and Activities to be allocatedPollution prevention
and control

Equipment that extracts biogas fromsolid organic waste such as food waste
and pruned branches and converts it
into energy（business example）Hitz Kompogas
system, WTM system

Renewable energy
Environmentally
sustainable
management oflivingnatural resources
and land use
Climate change
adaptation

onshore and offshore wind power
facilities.
Land-aquaculture facilities andequipment that are implemented inconsideration of reducing theenvironmental impact of marineaquaculture while supplementing thesustainable use of natural resources.
Flood disaster countermeasureequipment that requires no electricity
or manual operation, using of the

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Activities to be allocated：
Capital investment andcosts related to facility /equipment development,
manufacturing,
construction, installation,
operation, andmaintenanceContribution to
SDGspower of nature itself such as tsunamis
and storm surges.
(Business example): neo RiSe, Seabedtype Movable Flap-Gate type
Breakwater system

06

Hydrogen
Generation
SystemCircular economy
adapted products,
production
technologies andprocesses

Equipment that generates hydrogenfrom electricity and water, and requiresa sufficiently low amount of electricity
and CO2 emissions.
(Business example): On-site type waterelectro-chlorination hydrogen generator
Hydrospring

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