Electric

Financing of electric power supply business in Moka, Tochigi Prefecture

March 31, 2016

Kobe Steel, Ltd. announces that it has decided to use project finance to procure funds for its electric power supply business in Moka, Tochigi Prefecture, Japan. Today, project finance was arranged consisting of Kobelco Power Moka, Inc. as the borrower.

Outline of Financing

Procurement amount：: About 76 billion yen
Signing date of procurement agreement：: March 31, 2016
Arrangement banks：: Mizuho Bank, The Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation

Reasons for using project finance

Kobe Steel has been examining ways for financing from various perspectives. It decided on project finance for the reasons below.

As part of Japan’s electric power supply business, Kobe Steel recognizes that its supply responsibility carries a social mission. With this understanding, project finance enables the securing of construction funds and working capital and can establish a business base at an early stage, in addition to the procurement of a large amount of project funds over the long term. As the electric power supply business, from its business characteristics, is anticipated to generate steady cash flow over the long term and ensure a steady supply of electric power, Kobe Steel has determined that project finance is the most suitable method of fund procurement.
Under Kobe Steel’s Fiscal 2013-2015 Medium-Term Business Plan, improving financial performance is one of the management challenges. The policy is to maintain and improve the financial base for further investment growth in the future. In project finance, the Moka operation serves as collateral. As Kobelco Power Moka, Inc., a specific purpose company, is the main operating body, the off-balance sheet effect on the rating evaluation is anticipated to contribute to maintaining and strengthening the financial base of Kobe Steel.

An environmental impact assessment is currently underway for this project in Moka. In February, Kobe Steel received recommendations from the Minister of Economy, Trade and Industry on the environmental impact assessment preliminary report and on March 28 submitted the environmental impact assessment report. If procedures progress smoothly, construction will begin in summer this year and the first unit will go into operation in the second half of 2019. Kobelco Power Moka, Inc. plans to establish a solid business base for the stable supply of electricity.

Outline of Kobelco Power Moka, Inc.

Company name：: Kobelco Power Moka, Inc. (Established January 15, 2016)
Representative：: Kimio Hashimoto
Capital：: 600 million yen (100% owned by Kobe Steel)
Location：: 15, Kinugaoka, Moka, Tochigi
Power generation scale：: 1,248,000 kW (624,000 kW x 2 units)
Fuel：: City gas
Power generation method：: Gas turbine combined cycle (GTCC)
Start of supply：: No. 1 unit: 2nd half of 2019, No. 2 unit: 1st half of 2020

Outline of Kobe Steel’s electric power supply business

	(In operation)	(Under planning)	(Under planning)
Company or project name:	Kobelco Power Kobe, Inc.*	Kobelco Power Moka, Inc.	Kobe Works Power Plant (provisional name)
Location:	2, Nadahama Higashicho, Nada-ku, Kobe, Hyogo (within Kobe Works)	15, Kinugaoka Moka, Tochigi	2, Nadahama Higashicho, Nada-ku, Kobe, Hyogo (within Kobe Works)
Fuel:	Coal	City gas	Coal
Power generation scale:	1,400,000 kW (700,000 kW x 2)	1,248,000 kW (624,000 kW x 2)	1,300,000 kW (650,000 kW x 2)
Power generation method:	Pulverized coal-fired, supercritical pressure power generation (SC)	Gas turbine combined cycle (GTCC)	Pulverized coal-fired, ultra-supercritical pressure power generation (USC)
Start of supply:	No. 1 unit: April 2002 No. 2 unit: April 2004	No. 1 unit: 2H 2019 No. 2 unit: 1H 2020	No. 1 unit: FY2021 No. 2 unit: FY2022

* On April 1, 2016, Shinko Kobe Power Inc. will change its name to Kobelco Power Kobe, Inc.

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