JBIC Today
Special Issue

JBIC

Today

Japan Bank for International Cooperation

Organizational Realignment

2. Realignment to Strengthen Support for Mid-Tier Enterprises and SMEs

Previous

Industry Finance GroupNew

Industry Finance Group

Finance Office for SMEs
Finance Division for SMEs of East Japan
Marine and Aerospace Finance Department
Marine and Aerospace Finance /Financial Products Department
Equity Finance Group

Equity Inverstment Department* The above chart describes only where the changes are made.

URL: http://www.jbic.go.jp/en/

Special Advisor for SMEs

Tel. +81-3-5218-3100

On October 1, 2016, JBIC set up the Finance Oﬃce for SMEs. On the basis of the "Economic
Measures for Realizing Investment for the Future" (decided by the cabinet on August 2,2016), the consultation and loan operations, the former of which had been conducted under
the supervision of the Special Advisor for SMEs and the latter of which had been handled by
the Finance Division for SMEs of East Japan), are integrated into the Finance Oﬃce forSMEs. This is intended to strengthen our support for Japanese mid-tier enterprises and small
and medium-sized enterprises (SMEs) to assist their overseas business.
Meanwhile, West Japan Oﬃce continues to be in charge of the support for mid-tierenterprises and SMEs located in western Japan as before.

Press and External Aﬀairs Division, Corporate Planning Department, Corporate Group, Japan Bank for International Cooperation

On October 1, 2016, JBIC newly established the Equity Finance Group and the Equity
Investment Department, and renamed the Marine and Aerospace Finance/Financial Products
Department to Marine and Aerospace Finance Department. The objective of the establishmentof the Equity Finance Group and Equity Investment Department is to strengthen its
institutional capacity of equity investments in line with various government's initiatives. The
Marine and Aerospace Finance/Financial Products Department was renamed upon thetransfer of fund investment operations to the Equity Investment Department.

4-1, Ohtemachi, 1-chome Chiyoda-ku, Tokyo 100-8144, Japan

1. Establishment of Equity Finance Group and Equity Investment Department, as well as
renaming of Marine and Aerospace Finance/Financial Products Department

SPECIAL
ISSUE

Rising Global Demandfor Infrastructure Development– Challenges and Contributions of Japan
Interview

Turning Infrastructure Demand
into New Business Opportunities
Tadashi Maeda CEO, Executive Managing Director, JBIC
Our Infrastructure Projects Overseas

Intercity Express Railway Project in UK
World’s First South Atlantic Submarine Cable System
Partners' Voice

Embassy of the Kingdom of Morocco
Asian Development Bank

© Mr.Hreinn Hjartason

JBIC Today

Interview

SpecialFeatureThe global infrastructure market is projected to continue
growing at a significant rate, backed by such factors as
the economic growth of emerging countries. Countries
across the world are fiercely gearing up to enter themarket, fueling the mega-competition for infrastructurebusinesses amongst nations.
The Japanese government is also actively supporting
the export of infrastructure systems, as a strategy tocapture the economic growth of emerging countries. In
respect of Asia, which shows particularly strong demand,
the government announced in May 2015 the Partnership for
Quality Infrastructure, which provides approximately 110
billion US dollars for quality infrastructure investments
over the next five years in cooperation with the Asian

Rising Global Demand forInfrastructure Development– Challenges and Contributions of Japan
Development Bank (ADB). In light of these initiatives,
the amendment of the Japan Bank for International
Cooperation Act was enacted in May 2016 with the aim tostrengthen its functions, allowing JBIC to take further
risks related to overseas infrastructure businesses.
Furthermore, subsequently at the G7 Ise-Shima Summit,
the Japanese government announced the Expanded
Partnership for Quality Infrastructure, which included an
aim to enhance the supply of risk money for infrastructure
projects worldwide. It set out a target to supply fundsof approximately 200 billion US dollars over the next
five years for infrastructure projects across the world,
widening its scope from Asia to the whole world, as
well as broadening the field of infrastructure to include
natural resources and energy to its support.
JBIC takes part in said initiative by supporting a widearray of infrastructure development, including power,
railway, and water. Utilizing its experiences and knowhow
attained over the years, as well as relations with foreign
governments and governmental agencies, JBIC willcontinue to actively support the overseas infrastructure
projects promoted by Japanese companies. Throughsuch efforts, JBIC is moving forward to translate theJapanese government’s policies into action andcontribute to the stability and development of the
global and Japanese economies.

2

JBIC Today Special Issue

Turning Infrastructure Demand into
New Business Opportunities
Tadashi Maeda
CEO, Executive Managing Director, JBIC

Growing Demand for Infrastructure vs.
Shortage of Bankable Projects– Please explain the trend of
global demand for infrastructure.
Global demand for infrastructure continues on its course of growth. In addition to new demand seen mainly inemerging market countries, there is anincreasing demand for renovation indeveloped countries, as well as rapidly
growing infrastructure development
projects which enhance regional connectivity, such as those in the Mekong
Delta connecting roads, railway andports between Vietnam, Cambodia,
Thailand, and Myanmar. The world is
experiencing such growth of demandthat outstrips past estimates.
Asia has formerly been the centerof infrastructure demand, but with theslowdown of the Chinese economy
foreseen to be a long-term phenomenon, it is becoming difficult to hope forthe same explosive demand seen in the– Is the current supply of funds
meeting such worldwide
expansion of demand?
The fund supply continues to see a surplus backed by global monetary easing,but despite the liquidity, the funds are
not reaching the projects. That is, theformation of bankable projects is notcatching up with demand.
This was caused by tightened financial regulations (Basel III), restricting excessive risk taking and placing
quantitative liquidity requirements on
international transactions. This has
made it difficult for the supply side to
put full commitment into infrastructure projects. Another factor is that it
has been less feasible for the governments of developed countries to in-■ World’s Infrastructure Investment Forecast($ trillion,constant 2015 dollars)
50

30– Please tell us about thestrengths and challenges ofJapanese companies, along with
their past infrastructure
achievements.
The Japanese government has set thetarget to reach approximately 30 trillion
Japanese yen by 2020 for infrastructureorders, and promoting initiatives actively under the infrastructure systems
export strategy. We have seen steady($ trillion,constant 2015 dollars)

Total:$49.1 trillion
60% share of
Emerging
Markets

31.4

Japan’s Strength Lies in High Quality,
while Corporate Alliances Need
Improvement■ World’s Infrastructure Investment by sector in 2016-30

49.1

40

crease the supply of funds while theytend to face structural budget deficits.
Furthermore, we need to keep oureyes on the US policy interest rates, as
their change may further increase thecapital inflows from Japan and Europe
into the US which are already active,
increasing the gap between supply anddemand for infrastructure funds.

past. It can be said that demand will
spread throughout the world given theincreasing investments for renovation indeveloped countries and the anticipatedsteady economic growth in Africa.

8.3
11.4

20

7.5

10
0

5.1
2000-2015■ Developed Asia and Oceania■ Western Europe■ United States and Canada■ Africa■ India

2016-2030■ Other emerging Asia
■ Middle East
■ Latin America■ Eastern Europe■ China

Source: McKinsey Global Institute Bridging Global Infrastructure Gaps June 2016

14.7

0.9
1.3

■ Road■ Rail■ Port■ Airports■ Power■ Water■ Telecome

Source: McKinsey Global Institute Bridging Global Infrastructure Gaps June 2016

JBIC Today Special Issue

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JBIC Today ・ Special Feature

Supplying More Risk Moneyand Engaging from a Project s
Initial Stage to Promote Exportof Quality Infrastructure
growth from about 10 trillion Japanese yen in 2010 to 16 trillion in2013, then to 19 trillion in 2014.
The biggest strength of Japanesecompanies producing such strong results lies in high-quality infrastructure facilities. This level of quality
swells up the initial investment costs,
but infrastructure facilities needmaintenance given that they are used
for the long term. Regular maintenance for power stations required thetemporary suspension of operationsin the past, but modern Japanesetechnologies allow maintenance to bedone without suspending operations,which has the advantage of reducing
the maintenance cost while maintaining the plant operation rate.
It has been pointed out that, although the quality is high, Japanese
products tend to be expensive, and eachof the products is indeed more expensive compared to those made by China
and Korea. However, even with cheap
initial costs, it will cost more in the end if
the products easily break down. In otherwords, Japanese products have advantages also in terms of life-cycle costs.

Meanwhile, Japan faces the challenge of collaboration between companies. Japanese companies are notalways experienced in collaborating
amongst themselves as they had only
been competing mainly in the domestic market until recently. Collaboration between companies, regardlessof country and even between different industries, is vital for the exportof infrastructure systems overseas. It
is crucial for the operation of infrastructure development as businesses
to form alliances among companies
which each have their own strengths
and knowhow, and to establish thebest project operating framework encompassing a complete workflow
from infrastructure design and construction to operation and maintenance, as well as fund procurement.
Engaging in Projects from the Initial
Stage, and Supporting with LocalCurrency Loans– What support has JBIC
provided for Japanese companies’
infrastructure export?

The role of JBIC in the export ofinfrastructure systems is not only toprovide official funding support,
but to strengthen the final competitiveness of projects by being actively
involved in project formation fromthe initial stage. By utilizing close relationships built with foreign governments over many years and its
experiences of negotiations with key
players overseas, JBIC has been putting effort into providing intellectual
support to project operators and hostcountries from the initial stage, including advice and capacity building.
In the past, JBIC used to be consulted by project operators in the final
stage of project formation, but as a result of our efforts, we are receiving
more consultations at the initial stage.
JBIC holds high-level policy dialogues
periodically with host countries, such
as Indonesia, Mexico, Vietnam, Turkey, and India, committing to prepare
the environment for forming bankableprojects and to maintain relationships.
Furthermore, as a measure to support securing the feasibility of infrastructure projects whose payback

periods are long and whose revenues
will be in local currencies, JBIC provides loans in local currencies in orderto mitigate currency risks related to foreign currency borrowing by Japanesecompanies (the project operators) andto support steady long-term operation.
Further Support for Infrastructure
Export by Enhancing Institutional
Capacity for Risk Money Supply– What new initiatives has JBIC
embarked on to enhance thesupport for infrastructure export?
JBIC’s functions have been enhanced by the amendment of theJapan Bank for International Cooperation Act (JBIC Act) enacted in
May 2016, enabling JBIC to giveeven stronger support for the overseas infrastructure businesses of Japanese companies, in particular, theSpecial Operation. This was set up
on October 1st, 2016 for Japanesecompanies to win infrastructurebusiness orders. This will enable
JBIC to provide risk money even for
projects which are expected to generate enough revenues but entail
risks, by exempting the requirement
to ensure certainty of repayment foreach project while maintaining theprinciple of securing sufficient revenue to cover expenses as a whole account for the Special Operation.

JBIC will also strengthen its equity
participation operations in the future
although this is not the result of theamendment of the JBIC Act. We havemade equity investments in the past,
but they have been limited to “mezzanine” which includes preferred stocks
or subordinated loans. JBIC will befully engaged in investments for foreign entities together with Japanesecompanies, as part of the aim to increase the supply of funding for projects with relatively high risk profiles,
which the Japanese government statesin the Partnership for Quality Infrastructure. JBIC will also engage inmore advanced risk managementfrom now onwards, on the basis of our
project formation skills attained overtime and methods and knowhow ofrisk management.
As many Japanese manufacturers relocate their production bases
outside of Japan, the support for social infrastructure development indeveloping countries has significant
advantages for Japanese companies
which have already started operating in those countries. JBIC will put
more efforts than ever before in infrastructure development in orderto turn growing demand into business opportunities for Japanesecompanies, while contributing to
the social and economic development of host countries.

JBIC Today Special Issue

an agreement was signed between JBIC andthe Ministry of Planning and Investment (MPI) in
March 2013, setting up a framework to holdspecific discussions on a system for facilitating
PPP activities in Vietnam. The theme of this 6th
working-level meeting was the promotion of
PPP in the environmental sector, including
renewable energy.
Vietnam has been developing its policy
related to reducing climate change, in order topromote the use of renewable energy, such as
solar and wind, in the power sector in Vietnam.
On the basis of this effort, JBIC presented, in
addition to its activities in environmental
preservation, the respective roles of the hostcountry government, project operator, andfinancial institutions in the project formation
stage. Meanwhile, MPI presented its efforts indeveloping a PPP-related policy, as well as
renewable energy projects in the country, andindicated their expectation for JBIC's futurecooperation in forming PPP projects. The
presentations were followed by a number ofquestions from the participants, resulting in an
active Q&A session.

Japanesecompany

Overseas subsidiary/ Foreign entity

4

JBIC has regularly held similar dialogues since

JBIC supports overseas expansion of Japanese companies byfurther utilizing JBIC s investment facility in overseas M&A andthe sectors of infrastructure and natural resources.
Investment

Indonesia
Financial policy dialogue with Indonesia's Ministry of
Finance (held in April 2016)

PPP Promotion in the Environmental
Sector: JBIC Holds Policy Dialogue
with the Ministry of Planning andInvestment of Vietnam in August 2016

■ JBIC’s investment facility■ Dialogues with host countries to form feasible projects
Through periodic dialogues and discussions with foreign governments, JBIC commits to building mutually trusting relationships, developing a sound business environment support for Japanese companies, as well as
resolving various issues.

Vietnam
Policy dialogue for PPP project formation andpromotion with the Ministry of Planning andInvestment of Vietnam (held in August 2016)(N.B.: See JBIC’s Case Example on P5)

JBIC’s Case Example

MexicoThe third annual meeting for policy dialogue with the
Mexican government (held in December 2013)

Presentation by MPI of Vietnam

JBIC
Investment

JBIC Today Special Issue

5

JBIC Today ・ Special Feature

Key Examples of JBIC's Recent Support
project
for Infrastructure Projects
JBIC'sJBIC has supported diversification and promotion of worldwide infrastructure development by Japanese companies, utilizing its
experiences in infrastructure projects across the globe, as well as the trusting relationships built over time with host countries.
JBIC’s recent support activities have expanded beyond the limitations of countries, regions, and financial schemes particularly inthe power sector, and its commitment in social infrastructure projects, such as railway and water, has increased. JBIC is also actively committed to environmental preservation including the measures against global climate change.

TurkeyAs of end - June 2016

● TSL and Export for Renewable Energy-Related Project● Export for Ports Facility
Construction and Expansion Project■ Export for Geothermal Power Plant■ Power

Canada● Water● Transport Infrastructure(ports, railways, roads, etc.)● Renewable Energy Power
Generation Project● Broadcasting Telecommunications● Renewable Energy

IcelandUnited Kingdom● Geothermal Power Plant● Intercity Express Programme● Offshore Wind Power Generation Project

The Netherlands■ Power Transformer
Manufacturing and Seles Project■ IPP Project■● IWPP Project

Kuwait●MoroccoChina

Kazakhstan

Power Generation and
Desalination Project■●●Offshore Wind Power
Generation Project

Export of Coal-fired
Power Generation Plant ■Thermal Power Generation Project ■Russia

Qatar

Korea

Export of Gas-fired Power
Generation Plant●

Uzbekistan

JordanPhotovoltaic Power
Generation Project ●Export of Terrestrial
Digital Broadcasting Equipment

Laos■● IWPP Project■ IPP Project● Equity Participation in water
Management Company (DUBAI)■■ Export for Oil Thermal
Power Plant Project

Oman■IPP Project● Seawater Desalination Project●Gas-fired Combined Power
Generation Plant Construction

AngolaExport of Communications
Infrastructure System

TSL for Renewable
Energy-Related ProjectIndonesia

Thailand■ Nature Gas-fired
Combined Cycle Power
Plant Project

India● Export of Telecommunications
Machinery and Equipment■IPP Project■ Submarine Cables
Replacement Project■ Export of Transmission andSubstation Equipment● Geothermal Power
Plant Project● Hydro Power Plant Project■ Export of Coal-fired Power
Generation Plant

Example ❷Gas-fired power generation anddesalination project

Water project
July 2014

Latin America and the Caribbean region● TSL for Renewable Energy-Related Project

Venezuela

Colombia
Export of Hydraulic Power Generation Facilities ■TSL for Renewable Energy-Related Project ●Singapore● Export of Seawater Desalination Plant● Export of Railway Cars

Ecuador● Export for Terrestrial Digital
Broadcasting Project

Brazil● São Paulo Beltway(RODOANEL) Project● Cargo Railway Network
Development Project● Equipment Export for
Digital Broadcasting● TSL for Renewable
Energy-Related Project● Delhi-Mumbai Industrial Corridor(DMIC) Project■ Combined Gas-fired Power Plant Project■ Export for Supercritical Pressure
Coal Thermal Power Plant● TSL and Export for Renewable Energy-Related Project

Example ❶January 2016

JBIC Today Special Issue

The Philippines● TSL for Renewable
Energy-Related Project●■ Export of Coal-fired Power Generation Plant■ Supercritical Pressure Coal-fired Power Plant Expansion■ Portfolio Acquisition of Existing IPP Projects

Malaysia
South Africa

6■

Tanzania■ Export of High-Energy Efficient
Coal-fired Power Plant■ Portfolio Acquisition of
Existing IPP Projects● TSL for Renewable
Energy-Related Project

VietnamMaldives
Water Supply and
Sewerage System●

MexicoBangladesh■ Export of Gas-fired Combined Power
Generation Plant

Hydro Power
Plant Project●

UAE

Saudi Arabia

Export of Gas-fired Power
Generation Plant■● Equity Contribution to an
Environment-Related Fund

Example ❸Example ❹Express railway project

Renewable energy project

July 2012 (Phase 1)
April 2014 (Phase 2)

March 2016

Project finance for facility D natural
gas-fired power generation anddesalination project in Qatar

Equity participation in Metito Holdings
Limited in Dubai, United Arab Emirates

Project finance for Intercity Express
Programme in the UK

Project finance for offshore wind power
generation project in the Netherlands

JBIC financed up to approx.

JBIC invested up to approx.

JBIC financed a total of approx.

JBIC financed up to approx.

USD1,269 million

USD92 million

GBP1.86 billion

EUR244 million

JBIC Today Special Issue

7

JBIC Today ・ Special Feature

TOPICS

MessageAmendment of the Japan Bank forInternational Cooperation Act

Enhancing JBIC’s functions to support the overseas business expansion of Japanese companies
Following economic growth and rapid urbanization in emerging economies, global demand for infrastructure development is expected
to continue expanding. Responding to this trend, the Japanese government announced the “Partnership for Quality Infrastructure.”
This initiative intends to promote “Quality Infrastructure Investment,” referring to infrastructure investment under which life-cycle
costs,* safety, resilience against natural disasters, the environmental and social impact, and contribution to the local society and economy are adequately taken into account.
As part of this initiative, the Act for Partial Amendment of the Japan Bank for International Cooperation Act was enacted on May
11, 2016, to further support the overseas business expansion of Japanese companies by strengthening JBIC’s functions. Three primaryenhancements were made to JBIC’s functions by this amendment.

Message

JBIC’s Support
for Infrastructure– What we value now
and expect in the future
Mr. Eizo Kobayashi■Overview ❶ Establishment of Special Operations

Chairman of Japan Foreign Trade Council, Inc. (JFTC)The Operations enable JBIC to take further risks to support overseas infrastructure projects.

■Overview ❷ Expansion of JBIC’s operations in local currency
JBIC has introduced long-term borrowings in foreign currencies to further promote loans denominated in local currencies, forwhich there is strong demand from infrastructure projects carried out in developing countries.

■Overview ❸ Improvement of JBIC’s financial tools
JBIC has introduced new ﬁnancial tools to further support the overseas deployment of Japanese companies.
*A life-cycle cost (LCC) is the sum of all costs accumulated throughout the project life, including not only the initial costs (such as those for planning, design, and construction), but also the cost of operationand maintenance, ﬁnal dismantling and other cost.

Examples of Projects under Special Operations (see NB)

Public sector

Finance for governments, government agencies or

projects

local governments with relatively high risk proﬁleOverseas

Finance for PPP projects with the principal cash-ﬂow

infrastructure

undertaken by an off-taker with relatively high risk

projects

Public-proﬁleprivatepartnerships(PPP)

Finance for PPP projects with relatively high risk proﬁleentailed in the ﬂuctuations in demand(NB) The classiﬁcation into either Ordinary Operations or Special Operations is determined at the point when JBIC approves eachindividual project in light of relevant regulations.

8

JBIC Today Special Issue

JBIC’s support for infrastructurebusiness of shosha
Among a great variety of businesses in which shoshas
are engaged across the world, the power, railway andother infrastructure development, particularly inemerging and developing countries, are vital in laying
the foundations of countries’ industrial growth. Shoshas prepare to participate in such infrastructure projects by examining regional needs and attributes,
selecting a suitable business model, and forming ahighly competitive consortium that exerts the strengthsof partner manufacturers and local companies.
However, infrastructure businesses cannot be
managed by private-sector companies alone, given
their close ties with the host country’s policies, as wellas the enormous amount of funds required by eachproject and the risks peculiar to the infrastructure
sector. That being the case, we request JBIC to support our projects in various forms, including financing and risk allocation, as well as support tailored tothe strategy and direction of each shosha .
One such example is the Safi thermal power generation project in Morocco, operated by Mitsui &Co., Ltd. This was the first ultra super critical coalfired power project to be carried out in the African
continent after the Japanese government announced
their commitment to promote the region’s development at the Tokyo International Conference on African Development (TICAD).
Another example is the Sarulla geothermal power
plant project in Indonesia by ITOCHU Corporation. This project, financed in 2014, represents theworld’s largest-ever project finance deal for a geothermal power station, and its operation is scheduled
to commence this year.
Among recent projects, there has also been financing for those in developed countries, such as the
Dutch offshore wind power generation project by
Mitsubishi Corporation. Infrastructure projects inthe European Union (EU) invariably involve fierce
competition, and it has never been easy for Japanesecompanies to participate. Given such conditions, it
was profoundly important to receive JBIC’s support
for a project in which a Japanese company competes
in one of the latest fields of renewable energy.

What do we expect from JBIC
in the future?
As the scales of infrastructure projects and M&As havebecome larger in recent years, the environment surrounding commercial banks has become harsher. Thus
the expectations for JBIC are increasing to complementin areas where the private sector alone cannot fulfill its
own needs.
Following the Amendment of the JBIC Act, the establishment of Special Operations strengthened JBIC’s
risk-sharing function for projects involving the development of overseas social infrastructure. Shoshas are anticipated to further enhance their engagement acrossthe entire value chain of the infrastructure sector andincrease their investment in overseas businesses. Promotion of such businesses will require a firm cooperation framework between JBIC and the shoshas, in orderto share accurate information for extensive risk analyses
before proceeding with risk-sharing.
Looking ahead, project risk structure will likely diversify, demanding prompt decision-making withintight schedules. I would ask JBIC to continue to reinforce its organizational structure including workforce
enhancement to respond to these needs.
With a huge demand for funds anticipated to continue,
JBIC’s support in various financial schemes remains critical for overseas business expansion of Japanese companies. We look forward to JBIC’s broad-based support bymaking the best use of the Special Operations to take further steps, as well as to provide financing as a competitive
advantage against our global rivals.
JBIC Today Special Issue

9Our Infrastructure Project Overseas

SPECIAL INTERVIEW❶Inverness

Intercity Express Railway Project

Aberdeen

Glasgow-The Largest Ever UK Railway Project

Edinburgh

East Coast
Main Line

Newcastle

by Public Private Partnership

Harrogate

Hull

Doncaster

Shinya Mitsudomi
Chief Strategy Officer
for Railway Systems Business Unit
Hitachi, Ltd.

A prominent example of overseas railway infrastructure development by a Japanese company is
the Intercity Express Programme (IEP), an express railway project in the United Kingdom (UK) won
by Hitachi, Ltd. in July 2012. IEP extensively replaces aging railcars running along the Great
Western Main Line (GWML) and the East Coast Main Line (ECML), which connect London and othermajor UK cities. This is the largest-ever project in British railway history, with a total project costof 4.5 billion Pounds Sterling. Hitachi will provide 866 railcars, as well as maintenance service
over a period of 27.5 years, after constructing railway depots for maintenance. As part of the
project, Hitachi built a local train manufacturing plant in September 2015, and prepared the railcar
supply system for IEP.
JBIC provided project financing, consisting of loans totaling approximately 1.86 billion Pounds
Sterling (JBIC portion) in two phases. First to Agility Trains West Line Limited (ATWL) in 2012 (for
GWML), and then to Agility Trains East Limited (ATEL) in 2014 (for ECML); two UK entities set up
specially for IEP and for which Hitachi serves as the top shareholder. The overall co-financing
amount was approximately 4.2 billion Pounds Sterling.

Lincaln
Kings Lynn

Carmarthen Hereferd
Swansea

Great Western
Main Line
PlymouthPenzance

Cardiff Bristol TM

LondonReading

Planned IEP rail sections

Railcar production base in Newton Aycliffe, Durham.

aftermath of the post-Lehman collapse, and rising concerns
about financial arrangements prolonged the contract negotiation. Furthermore, the UK general election was coming
up in May 2010, so the government put the negotiation on
hold in accordance with the customary practice of freezing
all large-scale government procurement before generalelections. Then a change to the administration occurred,
and the spending cuts promoted by the new regime led to
IEP being subject to a spending review.
Despite the extremely difficult situation, we continued
to put strenuous efforts into resuming the negotiation. We
stressed the point that the railcar manufacturing plant andmultiple maintenance depots will create substantial local
employment, and at the same time launched our sales efforts as a partnership between private and public sectors, including the Japanese government, Japanese Embassy in theUK, and JBIC. Our efforts were rewarded when, in March
2011, the new administration announced it would resume
the IEP negotiation, finally shifting the main focus to the financial close.
Financial Close Prompted by JBIC s Decision
to FinanceContinued Severity After Winning Preferential
Negotiating Rights
The bid for IEP was officially announced in 2007, in the
public-private partnership (PPP) system that has been led by
the UK’s Department for Transport. There had not been
many PPP achievements for the Japanese railway companies, including Hitachi itself. An even harsher reality wasthat our competitor was the combined force of two of the
Big Three train manufacturers (Bombardier (Canada), Siemens (Germany), and Alstom (France)) – Bombardier and

10

JBIC Today Special Issue

Siemens. Therefore some at Hitachi were opposed to thechallenge when we started.
Following an intense battle between the two candidates,
Hitachi Group won the preferential negotiating rights in
February 2009. However, even after acquiring the rights, wefaced several risks of deal failures for over three years, until
we reached the final financial close (the conclusion of a loan
agreement) in July 2012.
The financial closure usually occurs within a year after
acquiring the preferential negotiating rights, and is followedby the official agreement. But the timing coincided with the

JBIC’s loans gave the finishing stroke to the negotiation,
during which I was impressed the strengths of JBIC, particularly in two instances.
One of them was that, amid the volatile state of IEP following the change of the administration in 2010, JBIC repeatedly demonstrated their positive attitude for financing
to the UK’s Department for Transport. I believe this had reassured the UK side that JBIC would be a very reliable supporter for the IEP project.
The second time was when JBIC decided to finance anenormous loan amount (approx. 1 billion Pounds Sterling)
after resuming the negotiation for the IEP procurement.
At the time, the European Union was going through thesovereign debt crisis that originated out of the Greek debt
crisis. This had weakened the financing capacity of European financial institutions, which were originally planningto participate in IEP, causing one after another to pull outof the project.
JBIC made the timely, decisive move when dark clouds
had again begun to hang over the project, which was juststarting to see the light. This was the first project for which
JBIC applied the “investment loan for developed countries,” which was set up to back the Japanese government’s
initiative to enhance infrastructure development overseas.
Moreover, JBIC went out of its way to provide the loans in
Pounds Sterling, when it usually only provides in Japanese
yen and US dollar loans in principle; and what is more, thatthese were long-term loans. Following JBIC’s decision, Nippon Export and Investment Insurance (NEXI) and Japanese banks also announced their support. The “All-Japan”
financial support powerfully pushed the project forward to
the official financial close in July 2012.
JBIC supported our IEP project again in the subsequent
Phase 2. The two results were highly praised, leading Hitachi to successfully receive orders for another two projects
after GWML and ECML: West of England (173 railcars;
2015) and Transpennine Express (95 railcars; 2016). With a
total of four projects, we gained orders for over 1,100 railcars, an increase of Hitachi’s presence in the UK, plus
maintenance contracts for a period of 27.5 years. Our successful participation in the IEP project has truly brought
about a great leap forward for the future of Hitachi’s train
manufacturing business.
What Hitachi intends to do from now onwards is tocombine the knowhow of project order management thatwas gained through this IEP project, train manufacturing
skills of an Italian train company that we acquired in November 2015, as well as the Japanese skills, including train
design knowhow, to attain an even higher capability for
global project implementation.
Through these projects, I have felt that JBIC gives agreat deal of thought to preparations for supporting Japanese companies in expanding their overseas infrastructure businesses. As business operators, we must build up
our strengths, products, and competitiveness to be eligible for such support.
JBIC Today Special Issue

11

Our Infrastructure Project Overseas

SPECIAL INTERVIEW❷World’s First South Atlantic
Submarine Cable System

landing station A

landing station B

Some segments of the cable are buried underground

Maximum water depthof approx. 8,000m-Linking Africa and South America▶

The cable is also laid inside ocean trenches

Motoyoshi Tokioka
Executive Director-Global Sales
Submarine Networks
NEC Corporation

Japanese companies’ accomplishments in infrastructure development have also been
demonstrated in submarine cable system projects that play crucial roles in international
telecommunications. One such project is the South Atlantic Cable System (SACS), a fiber-optic
submarine cable system connecting Angola and Brazil. The system construction agreement was
signed in November 2014 between NEC Corporation (NEC) and Angola Cables S.A., an Angolan
telecom operator partly owned by its government, and came into force in March 2016. SACS is theworld’s first fiber-optic submarine cable system, which will be laid across the South Atlantic Ocean
connecting the African and South American continents. Also, Angola Cables has the plan to connect
the cable in Brazil to another submarine cable that will link to the U.S. SACS will therefore provide
enormous telecommunications capacities, connecting all the way from Angola to North America via
South America.
JBIC provided majority of the funds (approximately USD65.8 million) through Angola’s stateowned bank, Banco de Desenvolvimento de Angola (BDA), for purchasing the complete system
required for the SACS project (overall co-financing amount reached approximately USD109.7
million). The system is being manufactured and constructed by NEC with its subcontractors, using
the latest transmission technologies. SACS construction commenced in April 2016, and it isscheduled to be fully operational by mid-2018.

Production Plant of Submarine Cable in Fukuoka, Japan

A Public-Private Partnership Approach to theFirst Trans-South Atlantic ProjectWith the growing economies in recent years, Angola andother major African countries have experienced rapid increase in demand for international telecommunications.
In such context, new submarine cables connecting the Af-

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JBIC Today Special Issue

rican west coast and South America were planned. SACS
was among such plans.
While NEC has had many successful achievementswith submarine cable projects in the Asia and the Pacificregions, it was the first time for us to compete for a transAtlantic project. It was unknown how we would be evaluated in this industry, where emphasis is placed on

Fortaleza, Brazil

Optical submarine repeaters
set approx. every
60km to 100km

6,200km
The South Atlantic Ocean

Luanda, Angola

Maximum distance of communication
12,000〜13,000km
The distance of approx. 9,000km between Japan and U.S. (West coast) would require
about 100 repeaters
A direct telecommunication route from Angola as the hub in Africa to South America
Fortaleza, Brazil

experience and track records. Perhaps we were not wellevaluated at early stages of the selection process because
our bid was deemed less feasible due to the distance fromJapan to the project sites.
In late June 2013, at the Fifth Tokyo International
Conference on African Development (TICAD V), theJapanese government announced it would commit up to
3.2 trillion Japanese yen to be invested in Africa over the
next five years, together with the private sector. Angola
was represented by the Foreign Minister in this conference. That was a timely opportunity for Japan and Angola. We introduced JBIC’s export loan (buyer’s credit),to which the client responded positively, and that helped
us to actively exchange dialogues with Angola Cables.
Just before this happened, I visited Angola for the firsttime. Although the client always made it clear that the project was fully funded, it turned out that finance with competitive conditions would always be welcome for Angola
Cables and its share holding companies.
As we promoted the use of the Japanese finance for
SACS, the client expressed much more interest in the
proposal. Angola Cables was so positive about the finance proposal that, in the autumn of 2013, the CEO
himself visited JBIC’s Head Office to reconfirm withthe banks’s executives their willingness to support
SACS construction .
Yet the situation went back and forth. Angola Cables
wanted to launch the project as soon as possible, and they
were concerned that JBIC’s financing would take a halfyear to one full year for completion of various steps before
the financing would be approved. Therefore, at that point,
Angola Cables chose to procure the funds from majorbanks in Angola.

Turns of Events Amid Changing
Financial Climate
In the meantime, discussions to finalize SACS construction agreement continued, and in November 2014, a
construction agreement was finally signed. Since the cli-ent chose financing using banks in Angola, NEC had toreceive a down payment as well as the payment guarantee for the balance in order to make the construction
agreement come into force. After waiting for several
months, however, those did not arrive. This was in fact
due to drastic changes in the financial situations in Angola. The country’s economy was hit by the worldwide
decline in oil prices. This led to an unstable financial environment, and some projects became frozen. However,
SACS project continued to move forward, with expectation to acquire foreign currency when it starts functioning. Soon after it became clear in the beginning of 2015that Angolan banks would not be able to provide thefunds for SACS construction, the country’s Ministry of
Finance made an official request to JBIC for financing
the construction.
JBIC responded to this request by swiftly handling theprocess, including the environmental assessment which
normally takes a long time in infrastructure projects, andcame to a decision to provide the bank loan to Angola Cables through BDA. In June 2015, all of the involved parties
gathered in the capital city of Luanda, holding a kick-off
meeting to materialize the financing. This accelerated theprocess, and the loan agreement was finally signed and thenecessary down payment was made in March 2016, putting into force the SACS project, the world’s first transSouth Atlantic project. It was the result of positive
collaboration among Angola Cables, BDA, the Angolan
government, JBIC, the Ambassador of Japan to Angola
and other members of the Embassy of Japan in Angola, as
well as members of staff at the Japanese Ministry of Internal Affairs and Communications, Nippon Export and Investment Insurance (NEXI), and Sumitomo Mitsui
Banking Corporation, the lead arranger, among others.
Financing plays a remarkably important role in manyof overseas infrastructure development projects. Therefore, I am sure JBIC’s support, particularly from the project’s formation stage, continues to be useful for bothpurchasers and exporters, addressing rapidly changing business environment.
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Partners' Voice
Power Infrastructure Development–Establishing Morocco as a Gateway
to Africa
H.E. Dr. Samir Arrour
Ambassador of the Kingdom of Morocco to Japan“A gateway to the fast-growing African continent” – Morocco is well on its way to establishing itself as such. Not only Europe but the whole world has its
eyes on the country as a destination for direct investment given its steady economic growth and geographical advantages. In order to achieve further
economic growth, however, the key lies in the enhancement of power supply and diversification of supply sources.
This year marks the 60th anniversary of diplomatic relations between Japan and Morocco, and over these years, Japanese companies have helped tostrengthen the tie through participations in projects. We interviewed H.E. Dr. Samir Arrour, Ambassador of the Kingdom of Morocco to Japan, on Morocco’s
future demand for infrastructure particularly of power, as well as expectations the country has for Japanese companies.
We continue to experience remarkable economic development in Morocco thanks to the development in the automobile and aircraft industries and tourism, etc. This has led toincreasing demand for power not only in the urban areas but
also in the rural and other non-electrified areas. The demandhas grown by an annual average of 6.5% over the past 10
years which finally reached the annual domestic demand of
34,413GWh in 2015. Almost half of this demand is met bycoal, about 17% by natural gas, and 11% by renewable energy, but about 15% still has to be compensated by imports
from Spain and Algeria. We expect the power demand to continue rising, so we aim to gradually become less dependent on
power imports and enhance the energy infrastructure to increase the supply capacity and diversify the sources.
The Jorf Lasfar 5&6 coal-fired power plant (power generation capacity: approx. 700MW), for which we received support from JBIC in June 2012, provides about 10% of thedomestic power, and at present serves an extremely importantrole as a power source. The Safi project, another project supported by JBIC in September 2014, is the first ever ultra-supercritical coal-fired power project in the African continentand is expected to meet about 25% of the domestic demandby 2018 (power generation capacity : approx. 1,386MW).
Through these projects, we have come to recognize thehigh quality and performance of the Japanese-made equipment used at our domestic power plants. We also noticed as
one of the characteristics of Japanese companies that they
have much respect for the local employees, as well as a highregard for the local environment. I believe these qualities help

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JBIC Today Special Issue

them achieve their excellent adaptability to the local conditions and realize accurate and reliable operations through advanced technologies. Such operational know-how is being
steadily transferred to the local employees and contributes
significantly to the sustainable growth of Morocco.
In addition to the coal and natural gas, the renewable energy infrastructure will be increasingly important to Morocco in the future. If we manage to prepare large-capacity
renewable energy infrastructure systems which take advantage of Morocco’s natural resources, such as the abundantsolar energy, they will provide power that is much less expensive and thus drive the domestic industries towards further development.
We cannot achieve such development by ourselves. We arevery grateful that we have been able to build a good relationship with Japanese companies which own high-quality andsustainable technologies, as well as with JBIC which supports
their activities. We look forward to JBIC’s support in renewable energy and energy-efficiency projects in Morocco to continue diversifying our energy supply sources. Development of
Morocco will lead to the development of the whole of the African continent. We hope to achieve technological innovations that bring better lives to all households in Morocco andto further strengthen our partnership with Japanese companies and JBIC who make this goal possible.

Combining Efforts of JBIC and ADB
To Meet Vast Demand forInfrastructure Development in Asia
Mr. Michael Barrow
Director General for Private Sector Operations Department (PSOD)
Asian Development Bank (ADB)

Asian Development Bank (ADB) and JBIC have a long history of partnership. Faced with ever-increasing demand for infrastructure developmentin Asia, the two financial institutions have begun intensifying their financial cooperation, to promote investment in quality infrastructure in the
Asia-Pacific region. We interviewed Mr. Michael Barrow, Director General for Private Sector Operations Department, which directly finances
projects, on the present state of the Asian infrastructure development and ADB’s cooperative relationship with JBIC.
In ADB’s “Infrastructure for a Seamless Asia,” we predict an enormous demand for overall infrastructure development in Asia, not only
for hard infrastructure but also for soft infrastructure, such as education and health systems. This means that an enormous investment ofat least USD8 trillion will have to be made between 2010 and 2020.
The governments of Asian countries in general lack the financing capacity as well as the expertise, although there are differences among
countries, and this has prevented them from fully responding to infrastructure demands. Each government will have to recognize its financing capacity and expertise and demonstrate even more clearly its
desire for infrastructure-supported economic growth. Given that public funds are not enough to meet this enormous demand for infrastructure, the role of the private sector is critical. Also, the landscape of theinternational financial markets has changed dramatically over the last
few years. In the past, the project finance market in Asia was driven by
a number of international commercial banks, particularly the westernbanks. But since the 2008 financial crisis, the number of active longterm international lenders has declined and most of the funds now
consist of those from Japanese commercial banks and from the local
financial institutions of each country. The market has lost some of its
momentum. The key to responding to the escalating need for funds in
Asia lies in the active mobilization of private-sector financing throughPublic-Private Partnerships (PPP).
Given this environment, ADB, under its Strategy 2020, aims toincrease infrastructure investment and the growth of the private sector in Asia as strategic priorities. To mobilize more private-sector
funds into infrastructure projects, three areas take central roles at
ADB. One is the Private Sector Operation Department (PSOD),
which directly finances private projects, another is the Office of Public-Private Partnerships (OPPP), which helps governments structure
projects and bring them to the market, and the third are ADB’s public
sector departments that work upstream with host governments to support capacity-building and private sector development. At PSOD,
which I am responsible for, we have set targets, based on “Strategy
2020”, to increase our annual commitment to 25% of ADB’s general
operations. In dollar terms, this means going from some USD2.6 billion in 2015 to well over USD 4 billion by 2020, increasing both theamount of funding and the overall ratio of private sector financing
within ADB. ADB finances at a ratio of about one to two with privatesector banks, so increasing the financing amount from ADB means

mobilizing even more from private-sector funds. Furthermore, ADB
enhanced its loan capacity by merging two accounts, OCR (Ordinary
Capital Reserve) and ADF (Aiding Development Fund), and leveraging based on the total capital. In such a way, ADB plans to continue
expanding its operations for infrastructure projects in Asia and themerger of the OCR and ADF has unleashed our private sector operations potential and in particular our ability to invest more by way ofequity in infrastructure-related transactions.
Under this growth scenario, ADB proposes to further enhance thesupport for infrastructure development using advanced and highquality technologies. However, cooperation with other public-sectorbanks is vital for us, considering the upper limit set on the amount ofloan or investment that ADB can provide for each project. With theJapanese government announcing the “Partnership for Quality Infrastructure” and with Japanese companies expanding their overseas infrastructure business, JBIC is an important partner for ADB. ADB
and JBIC have built a cooperative relationship through collaborationin projects such as the Sarulla geothermal power plant project in Indonesia (2014) and the Nam Ngiep hydropower plant project in Laos(2014). In November 2015, a memorandum of understanding(MOU) was signed between JBIC and ADB, confirming the further
strengthening of the cooperative relationship in the fields of infrastructure and renewable energy. Taking advantage of this partnership, ADB would like to address the enormous infrastructure needs in
Asia together with JBIC. In addition, the amendment to the JBIC Act
in May 2016 strengthened its functions, enabling the bank to provide
even more support to infrastructure projects through the acquisitionof project bonds and increased loans in local currencies. Such methods of support are necessities when promoting infrastructure projects,
but they are still “missing pieces” in the current financial market. Thus
the strengthening of JBIC’s functions, which align very well with thepriorities of PSOD, is very significant for us.
It is inevitable that the demand for infrastructure in Asia will continue to grow. We need to think how we can respond to this enormous
demand on the basis of the long-lasting relation built between ADB
and JBIC and strategies planned by each. Both ADB and JBIC willneed to mobilize our own respective functions and promote thegrowth of the private sector and infrastructure development. Throughsuch efforts, I hope we can both devote even greater energy to development in Asia.
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