Hitachi Zosen Green Bonds

On September 21, 2018, Hitachi Zosen became the first Japanese manufacturer to issue green bonds. The proceeds from the Hitachi Zosen Green Bonds is used to purchase materials for the construction and refurbishment of EfW plants.

As a company sustained by the environmental sector, we will contribute to realizing a recycling-oriented society by further promoting the introduction of environment-friendly facilities. This business policy and the need for diversification of financing methods coincided, leading us to issue green bonds. The purpose of issuing bonds must be specified, and after a great deal of consideration we selected two green projects: "Rebuilding and construction of Kyoto City Nambu Clean Center No. 2 Plant" for Kyoto City and "Construction and operation of new EfW plant" for Kikuchi Environmental Preservation Association (Kumamoto Prefecture). The funds raised will be used for expenses such as purchasing materials for the project.
To be eligible for green bonds, the environmental benefits of the green project must be “specifically” disclosed. We clearly presented the benefits according to the specified items, such as what kind of production process the project will have and how much CO2 reduction can be expected. It was not easy because it was an ongoing project, but we worked with the project managers to respond. We thus issued the "Hitachi Zosen Green Bond", the first of its kind in the Japanese manufacturing industry.
Here is the current state of things.

Overview of Hitachi Zosen Green Bonds

Issuer Hitachi Zosen Corporation
name Hitachi Zosen Corporation 26th Debenture Bonds
(Hitachi Zosen Green Bonds)
date of issue September 21, 2018
Condition decision date September 14, 2019
Issuance period 3 years
Issue amount 5 billion yen
Interest rate 0.24% per year
Use of funds Served as working capital for expenses such as purchasing materials for waste incinerator power plants ordered by the Hitachi Zosen Group
Green Project 1.Kyoto City Nambu Clean Center No. 2 Plant
2.EfW Plant for Kikuchi Environmental Preservation Association
Corporate bond rating BBB+(JCR)
Lead underwriter Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Nomura Securities Co., Ltd.
Green bond structuring agent(Note 1) Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
(Note 1) Green bond structuring agent
Someone who supports the issuance of green bonds through the formulation of a green bond framework and advice on getting a second opinion.

Overview of projects and status

(1)Rebuilding and construction of Kyoto City Nambu Clean Center No. 2 Plant (provisional name)*

Rebuilding and construction of Kyoto City Nambu Clean Center No. 2 Plant

It is characterized by having a facility that turns food waste into biogas as well as generating electricity from waste with high efficiency.
We aim to recover the maximum energy from waste and reduce CO2 emissions more than conventional waste incinerator power plants.

Client Kyoto City
Project Rebuilding and construction of Kyoto City Nambu
Clean Center No. 2 Plant (provisional name)
Contents Design and construction of waste treatment facility,
administration office, and environmental learning facility
(including dismantling of existing facility and construction
of exterior and other ancillary facilities)
Description Treatment capacity 500 t/day (250 t/day x 2 stoker-type
incinerators), power output 14,000 kW
Sorting and resource reuse facility: 180 t/6 hrs
Biogas generation facility: 60 t/day (30 t/day x 2 lines)
Completion September 30, 2019
Current
Status
Completed at the end of September 2019, currently in operation.
  • *The name of the factory is the name recorded at the time of receiving the order.

(2)EfW Plant for Kikuchi Environmental Preservation Association

EfW Plant for Kikuchi Environmental Preservation Association

The association plans to build a new waste incinerator power plant in order to promote permanent and reliable waste treatment in light of future trends in the association's area and sustainable waste treatment. We received an order in 2018 as a representative firm.

Client Kikuchi Environmental Preservation Association
Project Construction and operation of new EfW plant
Contents Design, construction, and operation
for 20 years after completion of EfW plant
Description
  • Treatment capacity: 170 t/day (85 t/day x 2 lines)
  • Power output: 2,800 kW
Completion March 31, 2021
Current status Completed at the end of March 2021, currently in operation.
  • *The name of the factory is the name recorded at the time of receiving the order.

Allocation of proceeds

The table below shows the status of fund allocation as of March 31, 2020.

Allocation of proceeds as of March 31, 2020
(¥ million)
Beginning balance 5,000
Kyoto City Nambu Clean Center No. 2 Plant △4,366
EfW Plant for Kikuchi Environmental Preservation Association △634
Balance at the end of the period 0

Evaluation by an outside body

In order to ensure the eligibility and transparency for this green bond and to improve its appeal to investors, we obtained a second party opinion on green bond eligibility from DNV GL Business Assurance Japan (a pioneering international organization for risk management) before issuing the bonds. In addition, we received a regular green bond review in July 2020, confirming that we maintained eligibility.

Impact reporting

Hitachi Zosen Corporation will continue to disclose the following indicators for each of the EfW plants receiving allocations of the proceeds, as long as the corresponding green bonds remain.

  1. 1Annual power output (MWh/year)
  2. 2Annual GHG emissions saved (t-CO2/year)

The environmental benefits of the eligible green project, to which the proceeds from the Hitachi Zosen Green Bond issued in September 2018 were allocated, are as follows.

Power output and annual GHG emissions saved at Kyoto City Nambu Clean Center No. 2 Plant
Facility name Annual power output
*1 *3
MWh / year
Annual GHG emissions saved
(CO2 reduction amount) *2 *3
t-CO2
Incinerator facility 50,795 16,966
Biogas facility 4,266 1,425
total 55,061 18,390
  1. *1Power generation (MWh): Operation record from July 2019 (after power generation started) to March 2020 (about 9 months)
  2. *2CO2 reduction amount (t-CO2): Power generation (MWh) x CO2 emission factor (t-CO2 / MWh)
    In calculating the carbon dioxide emission reduction, the reduction can be reproduced with the CO2 emission factor of the Ministry of the Environment, based on the Act on Promotion of Global Warming Countermeasures
    We use the emission factor of Kansai Electric Power Company (0.334t-CO2 / MWh, 2018), which reflects the adjustment of the environmental value due to the fixed energy purchase system.
  3. *3Based on the operation record from July 2019 (after power generation started) to March 2020 (about 9 months) because it has had less than one year of operation
    The power generation output and environmental benefit (CO2 reduction amount) are calculated.
  • *The environmental benefit (CO2 reduction amount) of the Kikuchi Environmental Conservation Association's new environmental plant will be announced after completion and operation.