Second Opinion October 8, 2020 Nagoya Expressway Public Corporation ESG Dept., Credit Rating Social Finance Framework Planning and Research Office Chief Analyst: Takeshi Usami Rating and Investment Information, Inc. (R&I) has confirmed the alignment of the Social Finance Framework of Nagoya Expressway Public Corporation dated September 10, 2020 with the Social Bond Principles (SBP) 2020. This opinion is based on the following views. ■ Overview of the Opinion (1) Use of Proceeds Proceeds will be allocated to the public corporation’s expressway projects (eligible projects) to finance or refinance the cost of new construction and renovation of expressways. As an agency that executes policies of Aichi Prefecture and Nagoya City, the public corporation not only contributes to solving social issues relating to road traffic in the Nagoya metropolitan area, but addresses social issues in the country, such as aging infrastructure. Eligible projects will deliver direct benefits, including eliminating traffic jams and securing emergency transport routes in the event of disasters, and indirect benefits, such as facilitating logistics and interaction of people in a wider area through a road network. In the implementation of eligible projects, appropriate steps are taken for local requests and expressway tolls. Although there may be an environmental impact over an extensive area, proper measures are in place, such as a prior environmental impact assessment and environmental measures in project implementation. R&I has evaluated that eligible projects will provide positive outcomes for the society as a whole. Eligible projects correspond to the project category of “Affordable basic infrastructure” illustrated in SBP2020, which targets the “General public” primarily in the Nagoya metropolitan area, but targets “Vulnerable groups, including as a result of natural disasters” in particular when a disaster occurs. (2) Process for Project Evaluation and Selection The public corporation’s expressway projects are designed based on the basic plan and development plan it formulates following the decision on city planning by Aichi Prefecture or Nagoya City. For the basic plan and development plan, the public corporation obtains the approval of the assemblies of Aichi Prefecture and Nagoya City, the consent of the road management authorities and the approval of the Minister of the Ministry of Land, Infrastructure, Transport and Tourism (MLIT). With an evaluation approach and criteria determined and eligible projects selected through appropriate processes, both third-party characteristics and expertise are ensured. (3) Management of Proceeds Proceeds will be managed appropriately using the public corporation’s accounting system and allocated to projects for road construction, etc. that are separated from other projects according to laws and regulations. Until allocated, proceeds will be held as cash or cash equivalents. Financial statements and reports, including the allocation of proceeds, will be audited by the auditor and submitted to the Governor of Aichi Prefecture and the Mayor of Nagoya City. Consequently, R&I considers that proceeds will be managed appropriately. (4) Reporting The public corporation will disclose the allocation of proceeds and the allocation method (financing or refinancing) to investors on its website annually. With regard to impact reporting, it will disclose output indicators and outcome indicators, including the progress of expressway projects, on an item-by-item basis annually or as needed. R&I considers the public corporation’s reporting to be appropriate. Rating and Investment Information, Inc. Copyright (C) 2020 Rating and Investment Information, Inc. All rights reserved. (Contact) Customer Service Department, Sales and Marketing Division: Terrace Square, 3-22, Kandanishiki-cho, Chiyoda-ku, Tokyo 101-0054, Japan TEL 03-6273-7471 Second Opinions are R&I's opinions on the alignment of a framework, formulated by companies etc. to raise funds for the purpose of environmental conservation and social contribution, with the principles etc. compiled by public organizations or private organizations related to the relevant financing as of the date of assessment and are not statements of fact. Further, R&I does not state its opinions about any matters other than the alignment, certify outcomes, give advice regarding investment decisions or financial matters, or endorse the merits of any investment subject to the financing. R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a Second Opinion and makes no related representations or warranties. R&I is not liable in any way for any damage arising in relation to Second Opinions. As a general rule, R&I issues a Second Opinion for a fee paid by the issuer. For details, please refer to the end of this document. 1/15 Second Opinion Outline of the Issuer The public corporation was founded by Aichi Prefecture and Nagoya City on September 24, 1970 as the first local road public corporation in Japan under the Local Road Public Corporation Act, to construct and manage urban expressways in and around Nagoya City. The public corporation constructs and manages an 81.2km expressway network consisting of nine routes, which are designated urban expressways1 stipulated in the Act on Special Measures concerning Road Construction and Improvement. The expressway network contributes to smoother automobile traffic in and around Nagoya City, and also serves as a part of Japan’s expressway network by connecting to major routes managed by other expressway companies, such as the Tomei Expressway, Chuo Expressway, Meishin Expressway, Higashi-Meihan Expressway and Isewangan Expressway. The public corporation has a management philosophy comprised of the basic philosophy and basic policy shown below. It intends to provide safety, security and comfort through its expressway projects and support the Nagoya metropolitan area, which is vigorously evolving toward the formation of a super mega region in the future. [Management Philosophy] Basic Philosophy We aim to support the local community by providing safe, secure and comfortable road services at any time. Basic Policy I We play a role as an urban transportation infrastructure and contribute to the creation of a vibrant Nagoya metropolitan area. II We put our customers first and offer a safe, secure and comfortable environment to road users. III We strive for efficient and transparent business operations and keep evolving with ingenuity and self-improvement. The expressway network around Nagoya City will be completed with the opening of the section between Nagoya Nishi JCT and Tobishima JCT on the Mei-Nikan Expressway2 in FY2020. In addition, the construction of the Tokai-Kanjo Expressway3 is well underway, which upgrades a road network around the Nagoya Expressway. These developments, along with the 20th Asian Games in 2026 and the opening of the Linear Chuo Shinkansen in 2027, are expected to extend economic activities in the Nagoya metropolitan area into a wider area and increase the non-resident population. The public corporation is making various efforts to spread the benefits across the Nagoya metropolitan area. The public corporation is engaged in a wide array of initiatives, such as conserving the roadside environment by reducing car traffic noise, and saving energy by installing solar power generation facilities. Another example is the quantification of environmental burdens, including differences in CO2 emissions between cars driving on its expressways and local roads. 1 A designated urban expressway network consists of only roads that meet the following two requirements (Article 12, Paragraph 1 of the Act on Special Measures concerning Road Construction and Improvement): - Roads that exist in and around an ordinance-designated city with a population of 500,000 or more - Roads that are used for automobile-only general traffic as designated under the provisions of Article 48-2, Paragraph 1 of the Road Act and are specified in city planning 2 Managed by Central Nippon Expressway Co., Ltd. 3 Managed by Central Nippon Expressway Co., Ltd. 2/15 Second Opinion 1. Use of Proceeds (1) Eligible Projects Eligible projects Eligible projects are expressway projects consisting of new construction, renovation, maintenance and repair of the designated urban expressways set out in the basic plan for road development as part of the articles of incorporation, and disaster recovery and other management stipulated in Article 13, Paragraph 1 of the Road Act. Proceeds will be allocated to finance or refinance new construction and renovation of expressways. Unlike expressway companies4, which construct, maintain and manage expressways under a two-tiered system 5 , the public corporation is responsible for the entire process from borrowing debts and constructing expressways to maintaining and managing expressways and repaying debts using toll revenues. Bond proceeds will be used only for new construction and renovation of expressways, and maintenance and management activities will be funded by toll revenues. Expressways do not produce social benefits just by being constructed or renovated, and must be maintained and managed. Eligible projects are expressway projects that encompass all of these activities. Objectives of eligible projects The public corporation was founded by Aichi Prefecture and Nagoya City under the Local Road Public Corporation Act to contribute to promoting residents’ welfare