MHI to Issue First Green Bond

TOKYO, Oct 30, 2020 – (JCN Newswire) – Mitsubishi Heavy Industries, Ltd. (MHI) today submitted a revised shelf registration statement to the Director-General of the Kanto Local Finance Bureau in preparation for its planned issuance of a corporate green bond(1) in the Japan market. The move represents the Company’s first issuance of this kind.

MHI Senior Vice President and Chief Financial Officer (CFO) Hisato Kozawa described the significance of the Company’s first green bond issuance as follows: “Since its founding, MHI has contributed to progress in society with myriad products and technologies. The funds raised by issuing this green bond will be used to address environmental issues and thereby facilitate achievement of a decarbonized society, and we believe we can contribute to that society by providing a well-balanced energy infrastructure. In this way, the green bond issuance will help resolve energy issues as a means of achieving decarbonization, a cornerstone of our materiality initiatives.”

1. Objectives and Background

MHI contributes to the resolution of global issues through worldwide provision of products and technologies that support infrastructure, both improving people’s lives and driving industry forward. Through our business operations we contribute to progress in the world as a company engaged in “monozukuri” — the traditional Japanese concept of craftsmanship — based on our corporate philosophy set out in “Our Principles.”

MHI Group is proactively addressing environmental concerns through its support of the “Declaration on Challenge Zero.” Challenge Zero (Challenge Net Zero Carbon Innovation) is a new initiative under which Japanese companies and organizations will promote and support worldwide innovative actions taken to achieve a decarbonized world — the long-term goal of the Paris Agreement, the international framework focused on addressing climate change.

As a measure to enable decarbonized world, MHI Group will bring environmentally improving effect by driving renewable energy/clean energy business (wind power equipment/business,
hydrogen power equipment/business, and geothermal power equipment/business), which are the usage purpose set for this fund issuance. Eventually, we aim to contribute to achieving “ensuring access to affordable, reliable, sustainable and modern energy for all”, which is the 7th Sustainable Development Goal defined by the United Nation.

2. Outline of the Issuance

Bond name: Mitsubishi Heavy Industries, Ltd. 36th Unsecured Corporate Bond (with Inter-bond pari passu clause)(MHI Green Bond)
Maturity: To be determined
Issuance amount: To be determined
Issuance time: To be determined
Use of proceeds: New or existing businesses or projects relating to renewable energy or clean energy (wind, hydrogen and geothermal power systems)
Lead-managing underwriters: Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.; SMBC Nikko Securities Inc.; Mizuho Securities Co., Ltd.; Nomura Securities Co., Ltd.; Daiwa Securities Co., Ltd.; Merrill Lynch Japan Securities Co., Ltd.(2)
Green bond structuring agent(3): Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

3. Preparation of Green Bond Framework and Acquisition of Second Party Opinion

In preparation for issuance of its green bond, MHI Group has compiled the “Mitsubishi Heavy Industries, Ltd. Green Bond Framework” recording its intentions regarding the four elements stipulated in the Green Bond Guidelines of the International Capital Market Association (ICMA): 1) use of proceeds; 2) process for project evaluation and selection; 3) management of proceeds; and 4) reporting.

With respect to evaluation of the green bond’s suitability, the Company has received a second party opinion (SPO) from Sustainalytics, a third-party institution, attesting to the bond’s conformity with ICMA’s “Green Bond Principles 2018” and the “Green Bond Guidelines” (2020 edition) issued by the Japanese Ministry of the Environment.

4. Outline of Green Projects

MHI Group’s operations in wind power systems trace back to 1982 when the Company delivered its first commercial unit in Japan. Since then, we have supplied a total of more than 4,200 wind turbines (approx. 4.4 gigawatts) worldwide. In 2014 we established a joint venture with Vestas Wind Systems A/S (Vestas) of Denmark dedicated to business in offshore wind power systems. Known as MHI Vestas Offshore Wind A/S (MVOW), the JV has grown into a top global player in the area of wind systems. On October 29, 2020, MHI made an agreement with Vestas to transfer its shares in MVOW to Vestas and to acquire a 2.5% shareholding in Vestas, in order to strengthen competitiveness in this field by unifying development and manufacturing, including onshore wind systems, under Vestas. The agreement also strengthens MHI Group’s partnership with Vestas in wind power systems, for example by MHI occupying one seat on the Vestas board. In addition, in July 2020, with an eye on the overall offshore wind systems value chain, we established a JV with Copenhagen Infrastructure Partners P/S (CIP), also of Denmark, to develop an offshore wind power project in Hokkaido. In partnership with CIP, MHI is now entering the domestic market for offshore wind power systems.

MHI Group has a robust track record in the manufacture and delivery of diverse products related to hydrogen, including hydrogen production systems and rocket engines that use hydrogen as a liquid fuel. We also have abundant experience in the use of hydrogen to generate electricity: specifically, a history of using hydrogen-containing by-product gas spanning some 50 years, back to the 1970s. In the area of large-scale gas turbines, we have achieved 30vol% hydrogen mixed combustion technology, enabled mainly through development of proprietary combustion chamber technology. In addition, MHI Group is participating in a feasibility study for a project targeting transition to 100% hydrogen firing by 2025 at part (440 megawatts) of a natural-gas-fired GTCC (gas turbine combined cycle) power plant in the Netherlands. Plans call for nearly a complete reduction of the plant’s current CO2 emissions (approx. 1.3 million tons per year).

MHI Group has continuously worked over many years to develop new geothermal power technologies. For example, we were first in the world to apply “two-phase flow and transport” in combination with a “double-flash” system, which today is a global standard in geothermal power plants. Our geothermal plants, which are based on the results of research accumulated over many years, today demonstrate their high performance and high operating rates worldwide. As an example, the Los Azufres III geothermal plant inaugurated in Mexico in 2015 achieved an operating rate of 99.6% within one year of start-up. MHI Group boasts an abundance of knowledge, experience and technologies in geothermal power systems, and today we rank first in the world in number of total deliveries. Going forward, we will continue to provide superlative geothermal technologies that enable stable supplies of electric power.

(1) An unsecured straight bond issued only to finance green projects: i.e. projects that will result in environmental improvement. The first bond designated as a “green bond” was issued in 2008 by the International Bank for Reconstruction and Development (IBRD), a member of World Bank Group. The scale of the green bond market has subsequently expanded in response to rising attention focused on the environment and such bonds’ potential to contribute to initiatives in environmental areas.
(2) Effective November 1, 2020, Merrill Lynch Japan Securities will change its trade name to BofA Securities, Inc.
(3) A green bond structuring agent supports the issuance of a green bond largely by advising the issuer on how to prepare a green bond framework and how to obtain an SPO.

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