NEWS RELEASE Aug 04, 2020 R&I Affirms Ratings: 5 Expressway Companies Rating and Investment Information, Inc. (R&I) has announced the following: COMPANY NAME Central Nippon Expressway Co., Ltd. East Nippon Expressway Co., Ltd. West Nippon Expressway Co., Ltd. Metropolitan Expressway Co., Ltd. Hanshin Expressway Co., Ltd. * Please refer below for rated bonds, etc. RATIONALE: Central Nippon Expressway Co., Ltd., East Nippon Expressway Co., Ltd., West Nippon Expressway Co., Ltd., Metropolitan Expressway Co., Ltd. and Hanshin Expressway Co., Ltd. are expressway companies established through the realignment of four public highway corporations. Along with Japan Expressway Holding and Debt Repayment Agency (JEHDRA), which almost completely monopolizes Japan's expressway network, they manage the Japanese expressway system. The expressway companies are therefore extremely important for government policy. Their ratings are the same as Japan's sovereign rating, strongly reflecting the government's creditworthiness. To ensure that large-scale expressway renewal and repair works can proceed, the government in 2014 established a new framework that allows expressway companies to fund the project through additional toll revenues generated from the extension of the toll-charge period. As a result, the construction and management/operation of expressways and the debt repayment scheme handled by JEHDRA and expressway companies have become more robust. Now that many expressways are aging, countermeasures for this problem are necessary. Expressway companies are working on a program called "Expressway Renewal Project" in earnest to implement large-scale renewal and repair works, while gaining users' understanding. Going forward, their focus will shift from the construction of new expressways to large-scale renewal and repair works. Furthermore, the government is accelerating the upgrading of expressways by utilizing fiscal investment and loan programs. In FY2020 (the year ending March 2021), fiscal loans were budgeted for some expressway companies, as well as for JEHDRA. In R&I's view, the government maintains its strong willingness to provide support for the upgrading of expressways, a task that contributes to greater productivity of Japan's entire economy. Debt repayment, one of the objectives of the privatization of the public highway corporations, is steadily underway thanks partly to low interest rates. Though susceptible to economic fluctuations, toll revenues have been solid on the whole. In 2020, the novel coronavirus-induced economic slowdown may dampen toll revenues, but R&I expects them to start to recover when the economy picks up. Changes in toll revenues will have only a limited impact on expressway companies' revenues and expenditures, because the lease fees for expressway assets they pay to JEHDRA will be adjusted if actual toll revenues deviate by more than 1% from planned toll revenues. Besides expressway operations, each company runs service areas, etc. in related operations. If any risk actualizes in an expressway company's related operations that are burdened with debt on investment, there will be effects on not only the rating for the expressway company but also the ratings for other expressway companies and JEHDRA because of the nature of debt. Even so, given that an investment policy on related operations at each company is basically conservative, the possibility of the risk materializing is low. The obligations under the bonds issued for expressway construction will be jointly and severally assumed by JEHDRA when the ownership of expressway assets is transferred to JEHDRA. R&I ■Contact : Sales and Marketing Division, Customer Service Dept. TEL. +81-(0)3-6273-7471 E-mail. [email protected] ■Media Contact : Corporate Planning Division (Public Relations) TEL. +81-(0)3-6273-7273 Rating and Investment Information, Inc. TERRACE SQUARE, 3-22 Kanda Nishikicho, Chiyoda-ku, Tokyo 101-0054, Japan https://www.r-i.co.jp Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment. R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details, please refer to https://www.r-i.co.jp/en/docs/policy/site.html. ©Rating and Investment Information, Inc. NEWS RELEASE considers that the certainty of the debt assumption scheme is high. [Summary of Evaluations for Individual Companies] Central Nippon Expressway Co., Ltd. (NEXCO-Central) NEXCO-Central manages and operates key expressways, including the Tomei Expressway and the Chuo Expressway, which connect the Greater Tokyo area to the Chubu and Kinki regions. The company's business base is solid. The size of its related operations is comparatively large. In the service area business, which forms the core of such operations, NEXCO-Central has been taking advantage of monopolistic operations along its expressways. While the company has relatively high earning capacity, attention should be paid to the tendency that adverse effects on consolidated earnings are amplified in periods of demand contraction resulting from such events as the novel coronavirus outbreak. Because related operations are financed with funds on hand, it is unlikely that the risk associated with related operations will affect expressway operations. East Nippon Expressway Co., Ltd. (NEXCO-East) NEXCO-East manages and operates an extensive network of expressways covering the Kanto (including the Greater Tokyo area), Tohoku and Hokkaido regions. The company's business base is solid. In April 2019, NEXCO-East opened the section of the Tohoku-Chuo Expressway between the Nanyo Takahata interchange and the Yamagata Kaminoyama interchange. Some of its related operations, including the service area business, are suffering an impact from a decline in customer traffic caused by the coronavirus outbreak. Because related operations are financed with funds on hand, however, it is unlikely that the risk associated with related operations will affect expressway operations. West Nippon Expressway Co., Ltd. (NEXCO-West) NEXCO-West manages and operates expressways that cover a wide area of western Japan, including the Meishin Expressway, the Chugoku Expressway and the Kyushu Expressway. The company's business base is solid. In June 2017, a distance-based new toll system was introduced in the Kinki region, and at the same time, a scheme was implemented to manage toll roads in an integrated manner. Consolidation of expressway management into NEXCO-West is underway. Integrated management helps enhance efficiency and realize a seamless toll system. With additional routes brought under its management, NEXCO-West's roles are expanding. Some of its related operations, including the service area and parking area business, are suffering an impact from a decline in customer traffic caused by the coronavirus outbreak. Because related operations are financed with funds on hand, however, it is unlikely that the risk associated with related operations will affect expressway operations. Metropolitan Expressway Co., Ltd. Metropolitan Expressway manages and operates the Metropolitan Expressway, which plays an important role for social and economic activities in the Greater Tokyo area. The company's business base is solid. Metropolitan Expressway has embarked on large-scale renewal and repair works earlier than peers to address aging structures. While room for developing related operations is limited because of the nature of urban expressways, Metropolitan Expressway engages in the management of parking lots and commercial facilities/multi-purpose spaces, among others. Nevertheless, their description and scale suggest a very limited possibility that the company will be exposed to major risks. Since November 2017, a committee consisting of relevant parties has been discussing a project for moving a section of the Metropolitan Expressway that runs over the Nihonbashi bridge underground. With approval given to the urban planning project in April 2020, Metropolitan Expressway plans to start construction around the fall of 2020. Because the project is technically ■Contact : Sales and Marketing Division, Customer Service Dept. TEL. +81-(0)3-6273-7471 E-mail. [email protected] ■Media Contact : Corporate Planning Division (Public Relations) TEL. +81-(0)3-6273-7273 Rating and Investment Information, Inc. TERRACE SQUARE, 3-22 Kanda Nishikicho, Chiyoda-ku, Tokyo 101-0054, Japan https://www.r-i.co.jp Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment. R&I does not undertake any independent verification of the accuracy