KOBE, Japan, April 1, 2004 - Kobe Steel, Ltd. announces that its second of two power plants started commercial generation of electricity today for wholesale supply to Kansai Electric Power Co., Inc. The power plant has a generating capacity of 700,000 kilowatts.

Together with the first power plant, which is already in operation, the combined generating capacity of 1.4 million kilowatts makes Kobe Steel the biggest independent power producer (IPP) in Japan. All of the electricity is supplied to Kansai Electric.

The two plants together are known as the Shinko Kobe Power Station. The generating capacity of the power station is equivalent to approximately 70% of the electricity used by Kobe City during peak times in the summer. The power station boosts Kobe City's self-sufficiency for electricity and provides a new lifeline for the city.

Sales from the first power plant are roughly 30 billion yen per year. With the start of the second power plant, sales are projected to rise to 60 billion yen this fiscal year.

Background to Japan's Biggest IPP Project
In 1995, a revision to the Electricity Utility Law enabled firms other than power companies to supply electricity on a wholesale basis. Kansai Electric called for tenders in 1996 and 1997 for companies to supply electricity. By utilizing the existing infrastructure of its steelworks as well as its coal procurement and in-house generation experience, Kobe Steel proposed building a 1.4 million kilowatt power station consisting of two 700,000 kilowatt power plants, which was accepted by Kansai Electric.

Following the completion of environmental assessments, construction of the first power plant began in March 1999 in the western section of Kobe Works. The Shinko Kobe Power Station covers 300,000 square meters of Kobe Works' 1.07 million-square-meter area. In April 2002, the first power plant began commercial operation.

Work began on the second power plant in February 2001 with trial runs starting in July 2003. Commercial operation commenced today.

As the power station is located in the city, careful consideration has been given to the environment. Environmental protection equipment that meets the highest standards for reducing nitrogen oxide, sulfur oxide and dust has been installed. A portion of the existing steelworks, comprising the raw materials yard and sintering plant, was shut down. Instead of heavy oil for fuel in steelmaking, gas is used. To cut coal dust, enclosed storage silos and conveyors have been constructed. Comprehensive environmental measures covering the entire Kobe Works reduce the impact on the environment to levels below the start of construction. Environmental measures comprise roughly one-third of the 200 billion yen construction cost.

Kobe Steel's IPP business operates in harmony with the surrounding community. Today sees the opening of the Nadahama Science Square, an interactive learning center. Heat generated by the power station is being supplied to nearby sake breweries. The Nadahama Sports Zone, a renovated sports ground, and the Nadahama Garden Baden, a health improvement facility, are already open to the public.

Outline of the Shinko Kobe Power Station