Presentation Material for Medium-Term Management Plan

Medium-Term Management Plan 2019 （Energy & Environment Group）

June 5, 2017

INDEX

01 Summary of “Medium-Term Management Plan 2016”

02 Overview of “Medium-Term Management Plan 2019”

Ref. About Energy & Environment Group

Summary of “Medium-Term 01 Management Plan 2016”

01 Summary of “Medium-Term Management Plan 2016” (MTMP16)

Unit：JPY billion 70 Previous MTMP MTMP16 60 ・During MTMP16, the 50 FIT business grew to 40 approximately two times the 30 size it was during the 20 Overseas previous MTMP. 10 Japan 0 ・Domestically, the introduction of the Orders (FY) renewable energy feed-in tariff (FIT) system in 2012 Unit：JPY billion 70 led to an increase in demand Previous MTMP MTMP16 60 for biomass-fueled power 50 plants. 40 ・Due to prioritizing the 30 response to domestic 20 Overseas demand, overseas business 10 Japan development was put on 0 hold.

Net sales (FY)

01 Result of “Medium-Term Management Plan 2016”

CFB boiler market development Maintained No. 1 share of the domestic market 1986 1998 2002 2011 2014 2015 2016 Japan FIT 112MW RH First 150MW class The first FIT- FIT 5MW class 4units FIT 30MW class Reheating large-scale FIT 30MW class 2units High mixed-fire unit (RH) biomass boiler compatible biomass first unit in Japan first unit FIT 50MW RH FIT 75MW RH High mixed-fire FIT 75MW RH High mixed-fire biomass biomass Biomass fire only

Aimed to become a top brand in the Southeast Asian market

Overseas 2002 2003 2006 2010 2013 2015

The first unit The first The The first The first power overseas Second unit in Indonesia unit first unit plant EPC in Vietnam in China unit in Taiwan in Indonesia in Korea The first unit Others in Singapore ６% Company B 7% Result of “MTMP 16” Japan – Standardized the 50/75/112MW RH-type biomass-fueled power generation facility. Company A SHI 24% Overseas – Delivered power generation EPC projects. 63% Main priorities during the next MTMP Japan – Improve quality and reliability / CFB market share in Japan/2006-2016 Enhance after-sales service capabilities. Source 1)Developed by the company using data from the Directory of Thermal Power Overseas – Deepen relationships in the Southeast Asian Plants (2011), McCoy Boiler Order Data, and information collected at seminars market. 2)Share calculated on an ordered MW basis during the period from 2006 to 2016

Overview of “Medium-Term 02 Management Plan 2019”

Unit：JPY billion 100 ・Although there has been a negative impact from the decline in FIT 80 New subsidiary prices domestically, underlying 60 demand remains strong and, as such, we expect the business to 40 continue to trend positively. 20 ・Demand will shift to larger units 0 (greater than 75MW). 2016 2017 2019 Actual Plan Target ・Acquisition agreement signed to Orders (FY) purchase the CFB business of Amec Unit：JPY billion Foster Wheeler (AFW). 100 Will operate as a new subsidiary 80 that is the subject of consolidation, and expand business scale during 60 New subsidiary MTMP19. Overseas 40 ・The overseas business development 20 activities that were put on hold Japan during MTMP16 will be restarted 0 using the new subsidiary. 2016 2017 2019 Actual Plan Target Note – Orders and Net sales figures associated with (FY) the new company are converted using a Net sales USD1 = JPY110 exchange rate

50 India Rest of Asia Europe Africa Americas CFB Market 40

20 GW

0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Coal and Biomass Market Forecast by Region (excluding China)

Source: IHS GES Forecast Dataset - Rivalry, June 2016

・Underlying demand for solid fuel boilers around the world remains strong. The main market for such boilers is in Asia. ・The demand for CFB boilers is forecasted to be around 30% of overall demand – 6 to 10GW annually.

Market Compression Future Market Decline in electricity rates / fuel Forecast crunch / insufficient investment High efficiency / recovery diversification / larger-scale Small size Small scale Mid size Large size Super large Difficult High K Agri Bio Ease ofusing fuel source （EFB, etc.)

Asian Pellet (Low Grade： Rubber, etc.） SHI strategic PKS area Asian Pellet SHI ・High efficiency (High Grade：・Fuel diversification Wooden） performance ・Larger-scale N. A. Pellet

Easy Wood Chip 5 10 50 100 200 300 MW Biomass boiler segment map Future Direction of Domestic Business 1) Decline in FIT prices → Improved facility profitability → Higher efficiency Larger-scale units 2) Shortfall in availability of traditional bio-fuels → More diversification in fuels, expansion in use of cheaper fuels

Purpose and Meaning behind the Acquisition of AFWʼs CFB Division

Become the No. 1 CFB Boiler Growth in energy field of the SHI Group Company in the World

Make it possible to tender for projects others using the diverse experience of AFW 21% - Biomass-fueled large-scale power plants Company E AFW ＋ aimed at electricity companies 5% Licensee - Asia-manufactured biomass-fuel boilers 46% Company D 5% Company C

Strengthen the number of 6% Company overseas locations Company B A - Expand business area 7% 10% - Global development of SHI biomass-fueled boilers CFB boiler global share /2006-2016 Regionally expand Source 1) Developed by the company using McCoy Boiler Order after-sales service capabilities Data and the Companyʼs operating information 2) Share calculated on an ordered MW basis during the - Ability to propose large-scale period from 2006 to 2016. refurbishments and renewals However, information excludes supply from local suppliers in India and China.

Business performance SHI AFW After merger

+ =

Africa Africa Africa Japan Asia Europe America Japan Asia Europe America Japan Asia Europe America Middle Middle Middle East East East Area Area Area

・Europe and Asia (Korea, Philippines, ・Main battlegrounds are Japan, ・Japan is the main battleground Vietnam) are the main battlegrounds Europe and Asia ・East Asia → Develop the ・Act as a licensor in areas where there Area ・Supplement each otherʼs business Southeast Asia region are local peculiarities. SHI, ISGEC and Essar to develop in the various regions

・10-200MW basis but have products ・Design capabilities up to 800MW Product ・5-165MW capacity that are more than 200MW including supercritical units up to 550MW ・Supplement each otherʼs size

After- ・Periodic inspections as well sales ・Mainly periodic inspections as refurbishments and ・Further expand business areas service renewals in Europe

Synergies arising from AFW acquisition

Anticipated Benefit

・Globally expand SHIʼs domestic experience in biomass-fueled boilers ・Use AFWʼs experience as a basis to respond to new biomass demand 1. Expansion of in Japan business areas ・Expand business opportunities in SHIʼs energy-related divisions (e.g., new tie-ups with Shin Nippon Machinery Co., Ltd. in the field of steam turbines)

2. Enhanced ・Develop line-up of large-scale CFB boilers in anticipation of greater product demand for larger-scale units in the future capabilities ・Utilize SHIʼs pilot plant to expand verification of various fuel sources

3. Enhanced ・Mutual support service network after-sales service ・Expand areas of service, expand opportunities for large-scale capabilities refurbishments and renewals

Ref. About Energy & Environment Group

Machinery Power transmission & components control group Precision machinery Plastic machinery Plastics machinery division Advanced precision machinery SHI cryogenics group etc. Construction Hydraulic SUMITOMO(S.H.I) Construction machinery excavators Machinery Co., Ltd. Small scale Link-Belt cranes Mobile cranes Hitachi Sumitomo Heavy Industries Construction Crane Co., Ltd. Industrial Sumitomo Heavy Industries Material machinery Handling Systems Co., Ltd. Shin Nippon Machinery Co., Ltd. Etc. SUMITOMO HEAVY INDUSTRIES Ships MARINE & ENGINEERING Co.,Ltd. Small size Energy & Environment Group ‐ Circulating fluidized bed boiler ‐ Electrostatic precipitator Environmental ‐ Exhaust gas treatment facilities facilities & plants ‐ after sales services Sumitomo Heavy Industries Environment Co., Ltd.

Ref. Flow Diagram of Power Generation Utilizing the CFB Boiler

Turbine Gear Reducer (SHI Group) Generator

Wood Cuttings Transformer

Heat Exchanger Cooling Tower (SHI Group) Dried Wood Chips

Volumetric Chimney Feeder Circulating Fluidized Bed (CFB) Boiler Bag Filter (SHI Group) Also possible to use these Coal Waste Tires Waste Construction materials as a fuel source Materials

Ref. Features of the CFB Boiler

■Combustion Mechanism Combustion Gas Air is injected into the bottom of the boiler chamber and the heated particles and fuel are mixed in a suspended manner. Through this, various fuels are burned efficiently. The combustion particles and gas that rise together are separated using a cyclone, Separation of particles and returned to the bottom of the boiler, further improving the through a combustion efficiency. cyclone Combustion Particles ■Features Gas + 1. Compatible with various fuel sources Particles ⇒ Compatible with more difficult fuel sources such as biomass, low‐grade coal, construction waste, waste tires, waste plastic, coal refuse, and paper sludge. 2. No need for the fuel source to be ground finely ⇒ Wires and other materials inside waste tires can be removed smoothly (no need for prior separation). Particle circulation 3. Controls the generation of NOx ⇒ Due to the high combustion efficiency, temperatures are comparatively lower than other methods, controlling the amount of NOx emissions that are generated. Air

17 30MW 200MW ‐ 5MW ‐ 6 ： ‐ 30 ：： Vinacomin #2, Vietnam Vinacomin #1, Vietnam Tanjung Indonesia Power, Tanjung Indonesia Power, Antam Pomalaa #1, Indonesia Antam Pomalaa #2, Indonesia Cheng Loong Paper, Taiwan Resin Dragon Special #1, China Resin Dragon Special #2, China Resin Dragon Special #3, China Singapore Tuas #1, Power Tuas Power #2, Singapore Tuas #2, Power Jangsu Paper Oji #2, China Jangsu Paper Oji #1, China Biomass/Renewable Fuel Biomass/Renewable Under Construction or Design Coal Only Korea Kumho Petro Chemical #1, Korea Korea Kumho Petro Chemical #3, Korea Korea Kumho Petro Chemical #2, Korea Korea Kumho Petro Chemical #4, Korea Mid Scale Small Scale Small Size East and Southerneast Asia High mixed fire biomass FY2016 Ordered 74.9MWe(RH) Biomass fire only FY2015 Ordered 50MWe(RH) MOMBETSU Biomass Electric Power Co.,Ltd., HOKKAIDO Co.,Ltd., Power Electric Biomass MOMBETSU Power CO.,LTD., KANAGAWA CO.,LTD., Power Nippon Paper Industries Co., Ltd. HOKKAIDO Nippon Ltd. Co., Paper Industries Oji Green Energy EBETSU Co., Ltd., HOKKAIDO Ltd., Co., Energy EBETSU Green Oji MURORAN Biomass Power Generation G.K. Generation Power Biomass MURORAN NIPPON PAPER PAPER Industries NIPPON Ltd. Co., HOKKAIDO United Renewable Energy Co.,Ltd, AKITA Co.,Ltd, Renewable Energy United NIPPON PAPER PAPER Industries NIPPON Ltd. Co., MIYAGI Bio Power Station NIIGATA Co. Ltd, NIGATA Co. Ltd, Bio Power Station NIIGATA Copyright Copyright ©Reserved. Right All Ltd. Industries, Sumitomo Heavy Takasago PAPER CO.,LTD.Takasago PAPER IBARAKI Green HatsudenGreen FUKUSHIMA Ltd., Co. AIZU Nippon Nippon Daishowa Paperboard Ltd. AKITACo,. Hokuetsu KishuHokuetsu IBARAGI Ltd., Co., Paper Nippon Nippon SHIZUOKA Ltd. Co., Paper Industries Oji Paper Co., Ltd. SHIZUOKA KAWASAKI Biomass KAWASAKI Electric Summit SAKATA Power Power Ltd.Co., SAKATA Summit YAMAGATA Oji Paper Co., Ltd. AICHI Ltd. Co., Paper Oji Summit HANNDA POWERCo., Ltd. AICHI Oji Oji Paper Ltd. , TOKUSHIMA Co., Taiheiyo CementCorporation,KOCHI Taiheiyo Cement Corporation, NIGATA Corporation, Cement Taiheiyo Chuetsu Pulp & Paper Co., Ltd. TOYAMA Ltd. Co., Paper & Pulp Chuetsu Shinrin Hatsudensyo Co. Ltd, MIYAZAKI Ltd, Co. Hatsudensyo Shinrin Summit Myojo Summit NIGATA Corporation, Power Green Energy Hokuriku Co. Ltd, TOYAMA Ltd, Co. Hokuriku Energy Green Sumitomo osakaSumitomo cement corporation, KOCHI#1 Toray Industries, Inc., Industries, Toray EHIME Sumitomo Osaka Cement corporation,Osaka Cement Sumitomo KOCHI#2 Miyazaki poration, FUKUI OTAKE#1 OTAKE#2 CFB Boilers Energy Plants Delivered Units CFB Boilers Energy Plants / Japan & Overseas Delivered Daicel Corporation Daicel Corporation Kobe Steel,Ltd., HYOGO Kobe Steel,Ltd., Kobe Steel ,Ltd.Kobe Steel HYOGO , 48 Units Nihonkaisui HYOGO Co.,Ltd. OMIKENSHI Co., LtdOMIKENSHI HYOGO Nippon Steel Corporation, Steel Nippon HYOGO Biomass Power StationDAITO,,OSAKA OITA YAMAGUCHI OITA Kobe Steel,Ltd., Kobe Steel,Ltd., Corp., YAMAGUCHI Asahi Kasei Corporation, MIYAZAKI Corporation, Kasei Asahi TSURUGA Greenpower Cor Oji Paper Co., Ltd. MIYAZAKIOji PaperLtd. Co., Green BiomasGreen MIYAZAKI Co.Ltd, Factory Air Water&Energia Power YAMAGUCHI Taiheiyo Cement Corporation, Corporation, Cement Taiheiyo Kirishima Mokushitsu Hatsuden ltd Co. Industry Co.,Ltd., KUMAMOTO Co.,Ltd., Industry JAPAN Green HatsudenGreen Co. Ltd., OITA The Nippon The Nippon Synthetic Chemical Ref. Nippon Daishowa Paperboard Co,. Ltd. YAMAGUCHI Oji Green Energy NICHINAN Co.,Ltd., MIYAZAKI Energy NICHINAN Co.,Ltd.,Green Oji High mixed fire biomass FY2016 Ordered 112MWe(RH) 18 Water treatment June 5, 2017

18 Electric power company Industrial complex treatment Exhaust gas gas Exhaust Steam Electric power Electric Electric power Electric imum CFB power plants precipitator Electrostatic Electrostatic gears Bag Bag High High speed filter tower Cooling Steam turbines Ash disposal Peripheral environmental facilities environmental Peripheral coal CFB boilers Copyright Copyright ©Reserved. Right All Ltd. Industries, Sumitomo Heavy Power generator CFB boiler CFB CFB energy facilities plant Wooden biomass Wood cuttings Forests Fuel supply Establish the One-SHI network that encompasses CFB power plants Forklifts Construction reducers Cyclo gear Coal deliverer machinery for forestry Through One-SHI activities, provide customers with the most opt Ref. Fuel facilitiesdelivery 19 , Ltd. June 5, 2017 (Under construction) (Under 19 Shin Nippon Shin d FIT compatible first unit in Japan The first unit in Indonesia Indonesia in unit first The steam turbines manufactured by Enhance synergies ess than 50MW are being utilize ess than 50MW are being Shin Nippon Machinery Machinery Co., Ltd. Copyright Copyright ©Reserved. Right All Ltd. Industries, Sumitomo Heavy Year commencing of operation Year History Established of Synergies with Shin Nippon Machinery Co. 2000 2005 2010 2015 0 Collaboration Collaboration between CFB boilers and steam turbines

200 150 100 ubn aaiy(MW) capacity Turbine In the area In of CFB power plants, plants l Ltd. for MachineryCo., Ref. June 5, 2017

All forward-looking statements regarding the company’s future performance are based on information currently available to Sumitomo Heavy Industries and determined subjectively. Future performance is not guaranteed and all information related to future performance contained herein is subject to changes in business environments.