Hitz Green Bond
Framework
1. Introduction
1.1 Overview of the Company
Hitachi Zosen Corporation (hereafter “Hitz” or “the Issuer”) is a plant engineering
company rooted in Osaka Tekkosho (Osaka Iron Works) and founded in 1881 by
E.H. Hunter. Hitz has globally expanded and developed its business in the field of“Environment”, “Machinery” and “Infrastructure” in order to provide
the values for society through engineering and manufacturing technologies
developed by shipbuilding technology (since the shipbuilding business division wasdivested in 2002). Its head office is located at Osaka in Japan. The global
enterprise activity is executed with 10,377 employees and 114 consolidated subsidiaries
in 19 countries (as of March 31, 2018).
1.2 Environmental Strategy of the Company
1.2.1 Corporate philosophy
Our corporate philosophy is "We create value useful to society with technology andsincerity to contribute to a prosperous future."
As a part of management action to realize this corporate philosophy and to put ourendeavors into concrete form, we have established our ISO14001 management system,and set up our "Environment Policy" to carry out our business activities.
(1) Regarding our company products, service and business activity, we try to reduce
environmental burden and contribute to protecting the regional environment.
(2) Observe statutory and regulatory requirements, agreements and other requirements
applicable to the organization and comply with our company's self-imposed controls.
(3) Set environmental objectives and annual environmental targets (an Environment
Management Program), and make a continuous commitment to reduce burden on theenvironment and prevent environmental pollution.
(4) Review regularly, make continuing improvements and maintain operations of theEnvironment Management System effectively.
1.2.2 Policy on Environmental Issues
Hitz established its “Basic Environmental Protection Policies” 1for its employees in1"Environmental Data book 2017" (Hitachi Zosen Corporation)1

1992, and also established its environmental management organization which isresponsible for environmental issues in order to work actively for resolution ofenvironmental issues. Hitz’s technologies and trust established in Japan can provide
solutions for social issues aligned with social communities globally.
In 1993, we have also established the “Hitachi Zosen Environmental Protection
Promotion Plan”, built on the prior policies with a concrete agenda based on the Action
Guidelines. It adds breadth to our previous regional environmental protection activities,
with additional focus on areas like ozone layer protection, global warming prevention,
waste reduction and recycling.
FY2016 Environmental Results

18.4% CO2 emission reduction (compared with fiscal year 2005)

17.4% waste reduction (compared with fiscal year 2000)



66.4% landfill waste reduction (compared with fiscal year 2000)

1.2.3 Long-term Vision
Creating a recycling society that reduces environmental burden by reclaiming andreusing resources is vital for sustainable development for future generations, which canmake everyone’s everyday life safer and more secure while maintaining humankind’s
standards of living. With this consensus, we present long term vision that commits toproviding solutions for global environmental issues, shortage of foodstuffs and water andenergy, by reinforcing the areas in the environmental domains of energy and water as acore business..
1.2.4 Environmental Management Framework
To promote the above environmental activities, we established the EnvironmentalProtection Promotion Committee in 1992. The committee has formulated the basicpolicies and priority implementation items for environmental protection at global andregional levels, and has carried out the necessary measures. Every factory andsubsidiary has its own Business Site Environmental Preservation Committee which
promotes environmental preservation measures in line with these basic policies. Also,
periodical environmental audits are conducted by an external reviewer in ISO 14001
acquiring offices at all the sites.
1.3 Hitz Green Bond
http://www.hitachizosen.co.jp/ir/data/pdf/DB2017_J.pdf

2Hitz will issue the Green Bond to provide Hitz’s environmental solution technology andservice (facilities and management). We believe that delivering service consistent with
our environmental policy in all the business phases from funding to providing technology
and services to customers will achieve Hitz’s mission. We made this framework for theGreen Bond to ensure consistency with the International Capital Market Association("ICMA")'s 2018 Green Bond Principals ("GBP"), Ministry of the Environment's Green
Bond Guidelines 2017, and Climate Bond Initiative's Climate Bond Standard version 2.1.
2. Green Bond Framework
For the issuance of the Green Bond, this framework is designed in align with the GBP's
four core components which are: Use of Proceeds, Process for Project Evaluation andSelection, Management of Proceeds, and Reporting. This framework will be released on
our web page, and components of framework will also be revealed on legal
documentations for the relevant Green Bond issuance or disclosed information to thestakeholders.
2.1 Use of Proceeds
All the net proceeds from the issuance of the Green Bond will be allocated to financeand/or refinance of expense for development, construction, installation and operation ofprojects which meet the following eligibility criteria. The Board of Directors, Hitz's
supreme decision-making body on operational execution, will give approval to the Green
Bond issuance.
Eligibility Criteria

Waste-to-Energy Facility: It is a facility which can utilize waste as an importantresource of energy by burning it hygienically. Waste itself is undesirable material
though at the same time is unavoidable during human activities. However, it canbe an important energy resource, as well. Hitz can simultaneously realize ‘energy
generation’ and waste treatment of useless, not reusable and not recyclable wastes.
Hitz’s activities provide effective solutions for global future energy problems. Hitz
will allocate the Green Bond proceeds to projects whose benefit of CO2 emission
reduction exceeds the negative effect.

Refinanced existing projects are limited to be finalized/taken into operation within
24 months preceding to the date of issuance of the Green Bond.

For the process of Waste-to-Energy plants, please refer to Reference 1.

3When implementing the projects, we work for mitigating environmental negativeeffects, and make sure the proceeds from the Green Bond will be used exclusively
for the projects which went through the process of fulfilling social accountabilityof explanation about potential negative effect of projects as below.
Projectsimplemented

thecountermeasuresforpreventing

seriousenvironmental impacts by conducting environmental surveys, forecast andevaluation according to the procedure required by the "Environmental Impact
Assessment Law"2 by project proponents.
Projects implemented the countermeasures to prevent environmental
negative effect , in cases where the local government of project site requires alocal environmental assessment.

Projects conducted meetings to explain for and to get the understanding ofdevelopment of projects from local residents.

Projects conducted periodical drills and training based on the preparedmanuals in order to minimize pollution in the event of environmental
problems arising from its business activities. We endeavor to reduce
environmental risks by thoroughly managing its emissions of substances, byimposing tougher standards on itself than legally mandated and setting
environmental targets for reducing emissions of substances that pollute theenvironment from its plants. We surely inspect and maintain its equipment
and ensure work is performed according to work process standards with theaim of minimizing environmental risk and preventing environmental
problems arising in its business activities.

For details on the specific eligible projects, please see Reference 2.
2.2 Process for Project Evaluation and Selection
The list of selected eligible projects to be allocated with proceeds from the Green Bond
will be evaluated in co-operation with Domestic Project Management Department andEnvironmental Plant Planning & Engineering Department of Engineering Business
Unit in Environment Business Headquarters, and Finance Section of the CorporatePlanning Department in Corporate Planning Headquarters. The Board of Directors,
Hitz's supreme decision-making body on operational execution, will give final approvalto the eligible project selection and allocation of Green Bond Proceeds.

2 Environmental Impact Assessment Law (Ministry of Environment, Japan) http://www.env.go.jp/policy/assess/13outline/img/pamph_e.pdf

42.3 Management of Proceeds
Finance Section of Corporate Planning Department is in charge of allocation of theproceeds to eligible projects and managing the proceeds. The budget and actual outlayof the proceeds from the Green Bond issuance will be traced and managed using aninternal management system on a monthly basis in accordance with Hitz's cash
management flow by numbering each eligible project. We will preserve cash
management related documents complying with Hitz's accounting rule defining therange of accounting documents and preservation of the documents, and manage thedocuments with document saving books. Hitz intends to allocate all the proceeds of theGreen Bonds within 3 years of the issue date. Unallocated proceeds will be managed incash or cash equivalent forms.
For Hitz's process of management and tracking of proceeds, please see Reference 3.
2.4 Reporting
Hitz will provide information on the allocation of the net proceeds and environmental
effects of the eligible projects on an annual basis. During construction of the eligible
projects, Hitz will only disclose allocation of the net proceeds. After completion of theeligible projects, Hitz will report environmental impact

from the coming April

throughout the life of the bond.
2.4.1Reporting by the Issuer
Allocation Reporting
Hitz will annually publish a report that shows the allocation of the proceeds as well as
the project information until full allocation of the proceeds on the company's website orannual report. Hitz will disclose allocation breakdown in proportion by each project levelsubject to the clients' approval. The first allocation report will be made public within 1
year from the date of the Green Bond issuance. In case of material developments, we will
renew the information on the use of proceeds on a timely basis even after the full
allocation of the proceeds.
Impact Reporting
Hitz commits to report on the following impact indicators on an annual basis throughout
the term of the Green Bond on the company's website or annual report;
Number of constructing/constructed facilities and a description of the projects
5

(includingprocessingcapacity,progressoftheprojects

including"constructing/constructed")Actual power output of the constructed facilities (MWh/year) *Disclosure issubject to the clients' approval.

GHG emission reduction based on the actual power output (tCO2/year)*Disclosure is subject to the clients' approval.

2.4.2 Compliance Review
Before the first anniversary of the Green Bond issuance, Hitz will engage DNV GL toreview the eligible Green Bond project in order to assess the compliance with the Green
Bond Framework. This review will be conducted annually until the full allocation of thenet proceeds from the Green Bond.

6

Reference１：Process of Hitz's Waste-to-Energy Plants
Waste is delivered by waste collection vehicles to the waste pit, then carried on a stoker(combustion system) through the combustion oven and transformed into ash. The ash isdischarged while energy contained in exhaust gases from the combustion process isrecovered as steam in the boiler and used to drive power generator turbines. The
resulting electricity is also available for use outside the facility.

7Reference 2：Eligible Project List (As of September 2018)
ProjectProject

GBP

ProgressPower

Environmental Assessment

Category

Name

Category

Waste toKyoto South

Pollution

Under

EnergyClean

preventi

constructenvironmental assessment requiredCenter EfW

on andion (willby local government ordinanceproject

controlbe<Assessed environmental factors>(Fushimi-complete

1) Air quality, 2) noise,3) vibration,

ku, Kyoto-d in4) smell, 5) soil, 6) ground, 7) radiocity, Kyoto)

March,

disturbance, 8) scenery, 9) waste,2019)10) global environmental load

Output14.0MW

City of Kyoto has completed(Reference) "Survey after theconstruction of Kyoto South Clean
Center" (City of Kyoto)
http://www.city.kyoto.lg.jp/kankyo/page/0000163546.html
Constructio

Pollution

Undern andpreventi

construct

Preservation Association has

Operation ofon andion (willcompleted environmental

Energy-control

beassessment required by local

from-Waste

completegovernment ordinance

Plant ford in<Assessed nature condition

KikuchiMarch,

factors>1) Air quality, 2) water,3)Environmen2021)

soil and ground, 4) landscape and2.8MWKikuchi Environmental

talgeology, 5) habitat, vegetation andPreservatio

ecosystem, 6) scenery and naturencommunication activity, 7) radio

Association

logical material(Koshi-shi,(Reference) "Public inspection andKumamoto)public comments on environmental
assessment" (Kikuchi
Environmental Preservation
Association)
http://www.kikunanseisou.or.jp/kan
kyoukoujou/kankyou-uketuke.htm

8Reference 3： Hitz's process of management and tracking of proceeds9