Kawasaki Report 2016 - Making history anew - Kawasaki Heavy Industries, Ltd.
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Kawasaki Report 2016 Year ended March 31, 2016 Making history anew...... This Report can be accessed from the QR code on the left. Printed in Japan August 2016
River Mark: Used as the corporate emblem, this stylized version of the Japanese character for “river” —the first character in the name “Kawasaki”—was adopted by the Company’s founder, Shozo Kawasaki. Making history anew… 1 …by continuously moving society forward 3 120 Years of Value Creation: A History of Providing Social Value and Enhanced Enterprise Value Firmly Rooted in Technological Innovation 5 Kawasaki Group Mission Statement 6 To Our Stakeholders 7 Directors and Corporate Auditors 9 Performance Highlights 11 …by taking steps to increase enterprise value 12 Message from the Top Management 19 …by uniting to expand possibilities Initiatives to Realize a Hydrogen Society 25 …by utilizing our strengths to accelerate growth 27 Ship & Offshore Structure 29 Rolling Stock 31 Aerospace 33 Gas Turbine & Machinery 35 Plant & Infrastructure 37 Motorcycle & Engine 39 Precision Machinery ......by continuously moving society forward 41 …by realizing growth that benefits all CSR Activities of the Kawasaki Group 43 Corporate Governance/Compliance/Risk Management 47 Developing and Utilizing Human Resources 49 Collaboration with Business Partners/Human Rights Editorial Policy Period 50 Social Contribution This report focuses on activities undertaken in fiscal 2016 and key This report covers fiscal 2016 (April 1, 2015 to March 31, 2016), aspects of strategies for the future as well as the new medium-term but some fiscal 2017 content is also included. 51 Environmental Approach business plan that guides the Kawasaki Group from fiscal 2017. Also, because Kawasaki is celebrating a corporate milestone—our 120th Scope anniversary – we offer a look back at the technologies and expanding The report covers Kawasaki Heavy Industries, Ltd., its 99 54 Directors, Corporate Auditors and Executive Officers business footprint that characterize our growth into today’s Kawasaki consolidated subsidiaries (49 in Japan and 50 overseas) and 55 Management Discussion & Analysis Group. 20 equity-method non-consolidated subsidiaries. Some data, The purpose of this report is to update all our various stake- however, refer to the parent company alone. 59 Consolidated Financial Statements holder groups on the status of our efforts to create value for society 67 Notes to the Consolidated Financial Statements and to boost enterprise value, our management policies, our business Guidelines environment and strategic responses, and major environmental, social In preparing the report, the editorial office referred to the Sus- 97 Corporate Profile/Stock Information and governance (ESG)-related content. We hope that this information tainability Reporting Guidelines (G4 ver.)* issued by the Global 98 Base/Major Subsidiaries Introduction will enable everyone to acquire a deeper understanding of what we Reporting Initiative (GRI) and the Environmental Reporting Guide- do and what we aim to achieve as the Kawasaki Group. lines (2012 Edition) issued by the Ministry of the Environment. For more information on many of the topics touched upon in this *The Sustainability Reporting Guidelines (G4 ver.) follows the reporting report, please visit our website and follow the appropriate links. principles of the GRI G4 Sustainability Reporting Guidelines; however, Financial information: our reporting is not yet in accordance with the GRI G4 Guidelines. Disclaimer http://global.kawasaki.com/en/corp/ir/ Frequency of Publication Figures in this report appearing in forecasts of future business performance or similar contexts represent forecasts made by the Company based on information CSR information: accessible at the time, and are subject to risk and uncertainty. Readers are therefore advised against making investment decisions reliant exclusively on these Annually, in general http://global.kawasaki.com/en/corp/sustainability/ forecasts of business performance. Readers should be aware that actual business performance may differ significantly from these forecasts due to a wide range Previous number — Issued in July 2015 Environmental information: Following number — Expected to be issued in August 2017 of significant factors arising from changes in the external and internal environment. Significant factors that affect actual business performance include economic http://global.kawasaki.com/en/corp/sustainability/environment/ conditions in the Company’s business sector, the yen exchange rate against the U.S. dollar and other currencies, and developments in taxation and other systems. Contact us This report not only describes actual past and present conditions of the Kawasaki Group but also includes forward-looking statements based on plans, forecasts, Please make inquiries through the inquiry form on our website business plans and management policy as of the publication date. These represent suppositions and judgments based on information available at the time. http://global.kawasaki.com/en/corp/profile/contact/ Due to changes in circumstances, the results and features of future business operations may differ from the content of such statements. 1 2
Shozo Kawasaki, founder of what eventually grew into the Kawasaki Group, established Kawasaki Tsukiji Ship- yard in 1878 and ventured into the shipbuilding business, believing strongly that the construction of modern 120 Years of Value Creation: A History of Providing Social Value and Enhanced Enterprise ships was essential for Japan to develop and prosper and that his mission in life was to support this process. Value Firmly Rooted in Technological Innovation His philosophy “contributing to the nation—to society—through expertise” was embraced by Kojiro Matsukata, the first president of the incorporated company, Kawasaki Dockyard, who also guided the company into the Improve enterprise value rolling stock, aircraft, shipping and steel businesses and developed the company into one of Japan’s leading ROIC heavy industry enterprises. Later, to meet the needs of society and customers of the day, the company evolved Technological Social value of flexibly, through active introduction of technology and the enthusiastic pursuit of innovation and application. value businesses Adapting to changing times, the company has continued to grow, and enjoys a high profile in land, sea and air Kojiro Matsukata (innovative technology) transportation systems as well as energy & environmental engineering and ROBO-MECH. In 2016, Kawasaki cel- First president following transition to incorporated company in 1896 ebrates its 120th anniversary. Going forward, today’s Kawasaki Group will continue to provide social value Guided company into rolling stock, aircraft and shipping/steel businesses Implemented Japan’s first eight-hour day system through its business activities, underpinned by innovative technology, and pursue synergies derived among business segments to raise enterprise value to an even higher level. Shozo Kawasaki Established Kawasaki Tsukiji Shipyard in 1878 Please refer to pages 25–40 for details on the Believed in “contributing to the nation—to society—through expertise” Current business Split off/transferred Technology expansion activities of each internal company. Cargo-passenger Stock boat manufacturing Oyashio, Ship & Offshore ship Iyomaru Matsukata, anticipating a shortage 1878 Kawasaki Dockyard’s of vessels given the circum- first domestic submarine Structure Shipbuilding first vessel after stances of World War I, took the made after becoming a publicly decisive step to build stock boats, The 10th World traded company and by 1926 the company had Toyotamaru, War II First Japan-built constructed 96 vessels first Japan-built pure LNG carrier car ca ar carrier Know-how, particularly related to welding and internal 1906 combustion engines, provide basis for realizing domestic 1928 192 1929 29 Auto Automo tom bi mob le less Rolling Stock Business express train Rolling production of steam locomotives Split off into To meet the social needs of the day, Kodama Kod o ama Series 0 Shinkansen Stock Made Japan’s first steel-cast independent began production of automobiles using rolling stock manufacturing technology electric train in 1925, marking company *Suspended production in 1942 by order of 1906 The he e company’s compa company’ mpa first r t elec- ny’ss firs ny’ first step toward improved rail- way system in Japan and wider (reintegrated in 1969) the Department of War, as emphasis shifted from automobiles to greater production of tric-drive tri riic-d c-driv c-drive wooden rive wood ooden ccoach en coa en ch Steel Nankai Railway Type 1 use of rail transportation aircraft (some operations resumed later) Casting wooden coach Division Company’s first airplane: Split off into independent 1937 Aerospace 1918 Type Otsu 1 surveillance airplane company (reintegrated in 1969) Aircraft With interest piqued by thriving aircraft industry in the United States and Europe, introduced technology from abroad along with structural commercial Domestic com mmer mercia aircraft ci l aircraf ft YS YS-11 1 technology used in shipbuilding to launch aircraft production Participated from the planning g First helicopter stage, in charge of manufacturingring developed in Japan the main wings and nacelle parts Kawasaki BK117 Helicopter P-1 Maritime Patrol Aircraft 1942 Jet Engines 1969 Industrial Gas Turbine & 1907 Japan’s first jet engine: 1956 Gas Turbines Machinery Marine Steam Turbines Land-use Steam Turbines Began production of Ne-0 Marine-use turbine technology directed toward rd d Kawasaki GPS200, steam turbines for use Marine steam land-use applications to meet rapid increase in n First Japan-madeeg gas as as main engines of ships turbine demand for power in the industrial sector turbine generatorr 1880 Land-use applications 1937 Boilers (land-use) Cement plant for Plant & customer in Algeria Boilers (marine-use) Diversified into environmental plant engineering, utilizing 1960 Infrastructure Began production of cornerstone heat-transfer/combustion technology, to marine-use boilers 1907 expand energy-related engineering activities 1932 Environmental Plants, Steel Stru ruct ctur ure es Tunnel boring machines used Cement Plants Chemical Plants, LNG Tanks to excavate the Channel Tunnel, Embarked on Eitaibashi, bridge over Used steel structure/engineering technology and Shield Machines linking France and the U.K. production of steel Sumida River as a cornerstone to diversify range of indus- bridges, utilizing Many bridges, which collapsed trial equipment, adding chemical plants, LNG construction/ in the Great Kanto Earthquake, tanks, shield machines and other products welding technology were replaced derived from cement equipment Motorcycle & *Withdrew from bridge business in 2006 1949 1955 Engine Motorcycles ess Motorcycles (Engines) (Finished) KE-1 engine Began producing Activities started after the war finished motorcycles Z1 when production of aircraft Meihatsu 125-500 was not allowed Precision 1916 1968 Robots Machinery Hydraulic Machineryy Began producing Incorporated Began producing screw pumps Low-speed KV Series axial Kawasaki-Unimate 2000, first Hele-Shaw electro-hydraulic Hele-Shaw radial piston through technology alliance high-torque radial piston pump Japan-made industrial robot steering gears pumps with Sweden’s IMO AB piston motors Introduced technology from The Kawasaki Group is currently working to with technology acquired Unimation Inc., a U.S. company, Dual-arm SCARA Robot “duAro” create new products and quickly and efficiently from England and began domestic production improve enterprise value by deriving synergies across internal company lines and covering the extensive range of business activities that have emerged to date. 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 For details on hydrogen projects, Modernization of Railway World War I Great Kanto Great Depression World War II First exchange rate: Opening of the Tokaido Nixon Shock please refer to pages Japanese industry Nationalization Earthquake (initiatives to rebuild ¥360 to U.S. dollar Shinkansen line (Dollar Shock) 19–24. (rapidly expanding demand for Act (buildings/bridges after the war) 3 transportation infrastructure) collapsed) 4
Kawasaki Group Mission Statement To Our Stakeholders In 2007, Kawasaki formulated the “Kawasaki Group Mission Statement” as a compass directing the activities of the Kawasaki Group. The statement incorporates the social Working to Realize the Group Mission mission that the Group must fulfill in the 21st century, a shared sense of values to Kawasaki—and by extension, the Kawasaki Group—got its start in the shipbuilding business and, by responding to social increase Kawasaki brand value, the underlying principles of management activities, needs of the day, has grown into an integrated provider of heavy industry products and services over a diverse range of business sectors, including land, sea and air transportation systems, energy and environmental engineering (infrastructures) and guidelines for daily conduct that each and every member of the organization is and various kinds of industrial equipment. Throughout our history, we have consistently endeavored to improve enter- required to follow. prise value, developing along with our stakeholders, which includes shareholders, customers and local communities. Our mission, as a corporate group, is to fulfill the Group Mission: “Kawasaki, working as one for the good of the Group Mission planet (Enriching lifestyles and helping safeguard the environment: Global Kawasaki).” This is, essentially, our role in society, and to address this role, we must provide products and services that meet the varied needs of our customers as well as their customers around the world while seeking a harmonious balance with the Kawasaki, working as one for the good environment. Toward this end, we prioritize technology, and are thus on an enduring quest for originality and innovation in technology. of the planet In Kawasaki Report 2016, which you have kindly taken the time to read, we offer our thoughts on carrying out the Group Mission as well as information on business strategies, daily activities that ensure Kawasaki meets its social responsibilities as a good corporate citizen, and the relationship •We are the Kawasaki Group, a global technology leader with diverse integrated the Company maintains with stakeholders. We hope this report enables you to gain a better strengths. understanding of what we do. •We create new value-for a better environment and a brighter future for generations to come. Shigeru Murayama Chairman of the Board ((Representative (R Rep epre epresent nttat a iv ve Di D recct ctor)) Director) Kawasaki Value •We respond to our customers’ requirements •We constantly achieve new heights in technology Yoshinori Kanehana •We pursue originality and innovation President ((Representative (R Rep ep preese s nt nta atiiv ativve Di Dire ector) Director) The Kawasaki Group Management Principles 1 Trust As an integrated technology leader, the Kawasaki Group is committed to providing high-performance products and services of superior safety and quality. By doing so, we will win the trust of our customers and the community. 2 Harmonious coexistence The importance of corporate social responsibility (CSR) permeates all aspects of our business. This stance reflects the Kawasaki Group’s corporate ideal of harmonious coexistence with the environment, society as a whole, local communities and individuals. 3 People The Kawasaki Group’s corporate culture is built on integrity, vitality, organizational strength and mutual respect for people through all levels of the Group. We nurture a global team for a global era. 4 Strategy The Kawasaki Group pursues continuous enhancement of profitability and corporate value based on three guiding principles-selectively focusing resources on strategic businesses; emphasizing quality over quantity; and employing prudent risk management. The Kawasaki Group Code of Conduct 1. Always look at the bigger picture. Think and act from a long-term, global perspective. 2. Meet difficult challenges head-on. Aim high and never be afraid to try something new. 3. Be driven by your aspirations and goals. Work toward success by always dedicating yourself to your tasks. 4. Earn the trust of the community through high ethical standards and the example you set for others. 5. Keep striving for self-improvement. Act on your own initiative as a confident professional. 6. Be a part of Team Kawasaki. Share your pride and sense of fulfillment in a job well done. 5 6
Directors and Corporate Auditors (As of June 24, 2016) Corporate Auditor Outside Director Outside Director Corporate Auditor Takafumi Shibahara Yoshihiko Morita Michio Yoneda Katsuyoshi Fukuma Outside Corporate Auditor Outside Corporate Auditor Senior Vice President Senior Vice President Senior Vice President Senior Vice President Nobuyuki Fujikake Takashi Torizumi Toshiyuki Kuyama Kazuo Hida Kenji Tomida Kazuo Ota Senior Vice President Senior Vice President Senior Executive Vice President* Chairman of the Board* President* Senior Executive Vice President* Makoto Ogawara Tatsuya Watanabe Joji Iki Shigeru Murayama Yoshinori Kanehana Munenori Ishikawa *Representative Director 7 8
Performance Highlights Net sales 95.9 Net cash provided by operating activities CO2 emissions from business sites (non-consolidated)*1 Distribution of Value to Stakeholders (FY2016) Operating income Net cash used for investing activities (103t-CO2) 87.2 Value delivered (Net sales) Free cash flow (Billions of yen) 1,541.0 (Billions of yen) 318 325 (Billions of yen) Business partners 1,226.8 72.3 1,486.1 151.7 284 Business costs 1,385.4 127.6 1,303.7 1,288.8 263 (excluding costs for employees, society, 57.4 84.7 74.1 86.0 252 and government) 60.2 Net sales Net sales 42.0 18.7 28.1 11.8 1,541.0 1,541.0 Employees 241.9 Salaries, bonuses, etc. –53.0 Society 0.7 –65.9 –67.3 Social contribution expenses –81.1 –77.5 –74.1 Administration and government 20.1 2011 2012 2013 2014 2015 (FY) 2011 2012 2013 2014 2015 (FY) 2011 2012 2013 2014 2015 (FY) Income taxes-current *1 For details, please refer to page 52. Value created 51.3 Value created minus expenses for business partners, (Billions of yen) employees, society, and government Creditors 3.6 Interest expense Return on invested capital Net interest-bearing debt Net debt equity ratio CO2 emission reduction with our products*2 (%) Shareholders’ equity (%) (103t-CO2) (Billions of yen) 10.4% 9.4% 131.9% 741 745 Value created 109.3% Shareholders 21.6 121.8% 51.3 Non-controlling interests plus 8.1% dividends paid 7.4% 83.9% 82.5% 504 513 6.1% Company internal, etc. 26.0 446.1 396.6 431.9 431.3 321 Increase in retained earnings during period 372.8 363.0 338.2 306.0 362.7 356.2 Socially Responsible Investment (SRI)-related Evaluations that Included Kawasaki 2011 2012 2013 2014 2015 (FY) 2011 2012 2013 2014 2015 (FY) 2011 2012 2013 2014 2015 (FY) The Brand of Companies Return on invested capital = EBIT (Income before income taxes and Net debt equity ratio = Net interest-bearing debt (Interest-bearing debt - *2 Estimates based on actual delivery record non-controlling interests + Interest expense) / Invested capital Cash on hand and in banks) / Shareholders’ equity Enhancing Corporate Value ue (Interest-bearing debt + Shareholders’ equity) through Health and Pro- ductivity Management Capital investments Net income per share ROE Expenditure on social Recurring profit ratio (Health and Productivity R&D expenses Dividends per share (Return on equity) contribution activity (%) The Dow Jones Sustainability Stock Selection) is a list of companies (%) (Millions of yen) Index is a leading SI index which chosen jointly by Japan’s Ministry (Billions of yen) (Yen) 12.9% 796 759 773 assesses and selects leading of Economy, Trade and Industry 87.7 11.0% 10.6% 687 sustainability-driven companies in terms of economic, environ- (METI) and the Tokyo Stock Exchange (TSE) for making strategic efforts 78.6 80.0 76.3 9.5% 631 mental, and social criteria. to address employee health from a 30.8 63.9 7.8% 27.5 management point of view. Only one 1.75% TSE-listed company in each industry 23.0 39.9 41.7 40.3 41.6 43.6 18.4 category is selected for this index. 1.25% 1.04% 13.9 10.0 12.0 0.90% 0.83% The Nadeshiko Brand is a list of companies cho- 5.0 5.0 6.0 sen jointly by METI and the TSE that are outstanding in terms 2011 2012 2013 2014 2015 (FY) 2011 2012 2013 2014 2015 (FY) 2011 2012 2013 2014 2015 (FY) of encouraging the empowerment of Return on equity = Profit attributable to owners of the parent / Shareholders’ women in the workplace, and that are equity creating an environment in which women are able to pursue careers. MSCI Global Sustainability Indexes Companies listed on the First Section Share of net sales by segment Share of net sales by region Distribution of companies/employees by region include companies with high ESG of the TSE are eligible for selection, and ratings relative to their sector one or two companies are selected from Precision Machinery Ship & Offshore Structure Asia, Oceania, etc. 18% Asia, Oceania, etc. 13% peers. each industry category for the honor. ¥133.1 billion ¥94.8 billion ¥272.8 billion 28 companies/4,576 employees Kawasaki received a loan Rolling Stock The Americas 10% Japan 41% 14 companies/3,447 employees from the Development Motorcycle & Engine ¥146.6 billion ¥636.5 billion Bank of Japan (DBJ) in ¥333.5 billion The Morningstar Socially Respon- December 2015, under Europe 2% sible Investment Index is the the DBJ Environmentally Rated Loan 8 companies/ first index in Japan of socially Program based on a solid evaluation 685 employees responsible investment stock. under the bank’s rating structure for The stock prices of socially companies with particularly impres- Aerospace The Americas 32% responsible companies selected sive environmental programs. DBJ ¥351.8 billion ¥486.7 billion from all those listed in Japan also gave Kawasaki a special award Plant & Infrastructure Gas Turbine & Machinery Europe 9% Japan 75% by Morningstar Japan K.K. are recognizing the Company as a model ¥135.6 billion ¥236.4 billion ¥144.8 billion 50 companies/25,897 employees converted into an index. corporation in this effort. 9 10
Message from the Top Management We will create new value and boost enterprise value by integrating the world’s highest standards of technologies. On Assuming the Position of President Kawasaki Group Mission Yoshinori Kanehana My name is Yoshinori Kanehana. I assumed the The noteworthy feature of the Kawasaki Group is President position of president from Shigeru Murayama in that each business segment takes a multifaceted (Representative Director) June 2016. The Kawasaki Group traces its roots approach matched to prevailing market require- back to 1878, when Shozo Kawasaki established ments and consistently adds to its portfolio of Kawasaki Tsukiji Shipyard. This early company technological innovations, which underpins capa- was incorporated in 1896 as Kawasaki Dockyard bilities of the highest global standards. Our mis- Co., Ltd., and it is based on this year of incorpora- sion statement is “Kawasaki, working as one for tion that we will celebrate our 120th anniversary the good of the planet” and our goal is to use the in 2016. It is my mission to promote further devel- capabilities we have amassed to solve the some- opment of the businesses that today’s Kawasaki what conflicting issue of creating comfortable Group pursues across many fields worldwide, from lifestyles while ensuring a future for our planet, land, sea and air transportation systems to energy that is, the global environment. Success will and environmental engineering and all sorts of require new value, which we will create by inte- ......by taking steps to increase industrial equipment, to raise enterprise value even higher, and to ensure that I pass on to the grating the technologies of each business seg- ment and leveraging the synergistic effects to enterprise value next generation of employees and management deliver unique products and services to custom- a Kawasaki Group that has evolved beyond its ers and, by extension, society as a whole. current achievements. In this effort, I will be guided by the founder’s philosophy of “contributing to the Raising Enterprise Value nation—to society—through expertise.” The Kawasaki Group has embraced Kawasaki- I have been involved in the rolling stock busi- ROIC* Management, which prioritizes improve- ness ever since I joined Kawasaki. I believe I have ment in enterprise value among key performance been able to contribute to the safety and security indicators. The objective in Kawasaki-ROIC Man- of Japan’s railway system, which is one of the agement is to carefully control invested capital Main career history best in the world. I have also spent lots of time but still achieve higher profits, and to enhance overseas, on assignment at facilities in New York enterprise value by boosting the Group’s overall Mar. 1976 Graduated from School of Engineering Science, Osaka University and other locations, and I have gained experience profitability and stability while promoting Apr. 1976 Joined Kawasaki Heavy Industries, Ltd. in various aspects of business, from international growth. Kawasaki-ROIC Management led to 1976–1979 In charge of Kawasaki Computer-Controlled Vehicle System, in the Rolling Stock Group discussions where I faced off against global play- hugely successful results during MTBP 2013, ers in the industry to win orders to the running which finished in fiscal 2016. 1979–1988 Led Rolling Stock Group system integration work of rolling stock facilities overseas. From this point Recently, the Group embarked on a newly Oct. 1988 Seconded to Kawasaki Heavy Industries, Ltd. London Office on, however, my perspective changes, as I now drafted medium-term business plan—MTBP 2016— stand at the helm of the entire Kawasaki Group with measures and targets for the immediate Aug. 1997 Seconded to Kawasaki Rail Car, Inc. (New York, U.S.A.) and its seven internal companies (business seg- three years but looking 10 years down the road Jun. 2003 President, Kawasaki Rail Car, Inc. ments), each serving a different client base and to 2025 (fiscal 2026). MTBP 2016 has Kawasaki- Oct. 2007 General Manager, Project Management Division, Rolling Stock Company different markets. But I believe my background ROIC Management at its core and will set the stage will serve me well. I will draw on the global, for an improvement in medium- to long-term Apr. 2012 General Manager, Marketing Division frontline perspective I have acquired through enterprise value. I will discuss the details of MTBP Jun. 2013 President, Rolling Stock Company my involvement in the rolling stock business and 2016 on the next page. apply the insights and experience accumulated *ROIC (Return on Invested Capital): A management indicator that Jun. 2016 President (Current Position) over the past four years as a director participat- shows how much profit will be generated with the capital invested in a business segment. ing in Group management activities to achieve medium- to long-term growth of the Kawasaki Group and improve value for all stakeholders. 11 1 12
MTBP 2013 A particularly noteworthy achievement coming Positioning of MTBP 2016 Positioning of MTBP 2016 First, though, I would like to look back on MTBP out of MTBP 2013 was improved capital efficiency, In defining the content of the new medium-term 2013, which concluded in fiscal 2016. Net sales through Kawasaki-ROIC Management, which business plan, we revised Kawasaki Business Group Mission/Group Vision MTBP 2016 expanded significantly, buoyed mainly by inter- cemented a vastly reinforced financial position. Vision 2020 guided by our Group Mission and • Measures and plans for the next three nal companies, that is, Aerospace, Motorcycle & This is substantiated by aggregate free cash flow of Group Vision. That is, we pictured the kind of years with a view 10 years down the Engine, and Gas Turbine & Machinery, and hit an ¥146.2 billion on a Group-wide basis over the three businesses we would be running and the quanti- road • Picture of business 10 years on all-time high of ¥1,541.0 billion in fiscal 2016. years of MTBP 2013. In addition, interest-bearing tative targets we would be aiming for 10 years • Investment and strengthening of • Quantitative view of FY2026 business foundation for medium- to Operating income, at ¥95.9 billion, exceeded the debt decreased ¥86.2 billion, as of March 31, 2016, on, in 2025 (fiscal 2026). MTBP 2016 is therefore long-term growth initial target of ¥90 billion and also set a new from the level at the end of March 2013, and the net not just a business plan for the next three years • Response to changes in business envi- record, reflecting higher net sales, successful debt equity ratio* dropped 49.3 percentage points. but rather an immediate action plan that will set ronment and issues requiring attention Rethink cost-cutting measures and the merits of a low During MTBP 2013, we made tremendous prog- us well on the way toward our ultimate destina- Kawasaki Business Vision 2020 yen. Before-tax ROIC moved into double-digit ress in terms of performance as well as financial posi- tion ten years from now. territory—10.4%—in fiscal 2015, but backtracked tion and reached the majority of our initial targets. Realization of Group Mission and Group Vision to 9.4% in fiscal 2016 owing to the booking of *Net debt equity ratio is calculated by dividing net interest-bearing Group Mission, Group Vision extraordinary losses on a shipbuilding joint debt (interest-bearing debt - cash on hand and in banks) by share- Our Group Mission—“Kawasaki, working as one holders’ equity. The lower the ratio, the sounder the financial position. Picture of business 10 years on venture in Brazil. for the good of the planet”—is an expression of the social mission that we, as a corporate group, MTBP 2016 Net sales Interest-bearing debt Operating income 95.9 Free cash flow wish to fulfill. It remains the same as before. We (FY2017–FY2019) Action plan 87.2 (Billions of Yen) (Billions of Yen) also set out a three-point Group Vision that looks FY2017 FY2019 FY2026 72.3 1,486.1 1,541.0 484.6 444.6 414.3 398.4 forward to the kind of corporate group we plan 1,288.8 1,385.4 74.1 to become. 60.2 42.0 11.8 •We will become a corporate group with four Key Products and Services that Drive Growth Demand for Kawasaki Group products and ser- core business sectors—Air Transportation Sys- –53.0 tems, Land/Sea Transportation Systems, Energy vices is steadily expanding, fueled by such fac- 2013 2014 2015 2016 (FY) 2013 2014 2015 2016 (FY) & Environmental Engineering and ROBO-MECH tors as greater international movement of people Before-tax ROIC Net debt equity ratio (coined from industrial equipment sector)—that and transportation of goods due to increased glo- 131.9% creates new value with integrated technological balization, wider use of automation paralleling 10.4% 9.4% 109.3% the graying of society and a shortage of workers, 8.1% capabilities and offers products and services 6.1% 83.9% 82.5% that open up new possibilities for customers and heightened demand for products that address and society. environmental risk. This bodes well for our businesses. •We plan to become a corporate group that We expect the key drivers of growth for the achieves continuous improvement in enterprise Kawasaki Group to be commercial aircraft, com- 2013 2014 2015 2016 (FY) 2013 2014 2015 2016 (FY) value and a stable return to shareholders by mercial aircraft jet engines, rolling stock for over- Before-tax ROIC = EBIT (Income before income taxes and non-controlling Net debt equity ratio = Net interest-bearing debt (Interest-bearing debt - interests + Interest expense) / Invested capital at year-end (Interest-bearing Cash on hand and in banks) / Shareholders’ equity building a business portfolio that ensures a high seas markets, energy, and robots. debt + Shareholders’ equity) degree of adaptability to changes in the busi- ness environment and provides growth invest- Predicted Sales from Key Products and Services that Drive Growth ment and cash flow. “A particularly noteworthy achievement coming (Billions of yen) •We plan to become a corporate group that accu- 1,000 Robots, including Medicaroid* out of MTBP 2013 was improved capital efficiency, rately identifies social concerns and stakeholder expectations and delivers appropriate solutions through Kawasaki-ROIC Management, through business activities, and also promotes 800 Energy a workplace environment where employees which cemented a vastly reinforced financial position.” Rolling stock for overseas markets approach their jobs enthusiastically, driven by 600 hopes and dreams. Commercial aircraft jet engines 400 Guided into the future by our Group Mission and our three-point Group Vision, we will strive to raise enterprise value. 200 Commercial aircraft 0 2014 2016 2021 2026 *Medicaroid Corporation: A joint venture established with Sysmex Corporation to develop and manufacture medical robots; accounted for by the equity method. 13 14
Picture of Business in 2025 core competence, new products and business formulating the new medium-term business plan reinforcing our business foundation so that it is Visualizing business in 2025, we see growth models in each sector. MTBP 2016. truly primed for medium- to long-term growth. hinging on the key investment areas of air trans- Turning this image into reality should result The global economic forecast remains uncer- Specifically, we will establish business- portation systems, robots and energy, with enter- in a before-tax ROIC of 14% or higher, an operat- tain, clouded by such factors as a downturn in matched key performance indicators (KPI)* which prise value continuing to improve on a portfolio ing income margin of 9% or higher, ROE of 15% oil prices, a slowdown in emerging markets, and break down the components of ROIC, and track emphasizing high profitability, sustained growth or higher, and operating cash flow of at least withdrawal of the United Kingdom from the Euro- progress. Because KPI hinge on daily operations and stability. In addition, for each of the four ¥200.0 billion in fiscal 2026. pean Union (EU). And in currency markets, the and are based on the characteristics that define sectors—Air Transportation Systems, Land/Sea yen is trending upward. Given these factors, it is each business, our employees are better able to Transportation Systems, Energy & Environmental Fundamental Strategies under MTBP 2016 possible that the operating environment during grasp the “what” and “how” of ROIC to boost Engineering and ROBO-MECH—we have clarified What do we need to do over the next three MTBP 2016 will not be particularly favorable enterprise value and be more involved in Kawa- specific growth strategies as well as business years to achieve this vision for 10 years in the for us. To reach our objectives for 2025 despite saki-ROIC Management. Examples of KPI include strategies aimed primarily at promoting stronger future? That was the perspective we took in potential obstacles, we must be able to cope with inventory turnover, consolidated marginal profit changes in the operating environment and issues and accrued failure costs, and whatever indicator of concern in our business segments while contributes significantly to a better ROIC result in Picture of Business in 2025 steadily pursuing investment activities for each business will be the one that is chosen. Such Kawasaki Group medium- to long-term growth and solidifying our KPI are very useful not only in the pursuit of • Growth hinging on key investment areas of air transportation, robots and energy foundation. greater efficiency and growth but also in risk • Enhanced enterprise value through portfolio boasting high profitability, sustainable growth and stability Toward this end, we identified three funda- management. mental strategies to follow during MTBP 2016. *KPI (Key Performance Indicators): Quantitative business metrics Air Transportation Systems Land/Sea Transportation Systems The first is to promote further progress on • • used to evaluate the degree of success in reaching business goals. Steady growth paralleling increased demand for air Growth by tapping into overseas demand, especially transportation worldwide in emerging markets Kawasaki-ROIC Management, the second is to Indeed, we have been meticulous in our • System integrator, module supplier • Promoted high-value-added products, underpinned implement investments targeting medium- to approach to ROIC through Kawasaki-ROIC Man- • High profitability through after-market/MRO* busi- by technological capabilities and brand strength long-term growth, and the third is to realign our agement, even preparing balance sheets for ness • Global production structure businesses. each business unit. But we will be more Efficiency Energy & Environmental Engineering ROBO-MECH thorough in regard to risk management, • Growth fueled by wider demand for distributed power generation and oil & gas • Expanded business sectors for human-friendly robots that coexist with humans and for medical robots Fundamental Strategy 1: Further progress on Kawasaki-ROIC Management using KPI to check for unusual numbers, executing project bids and pre-order • Promoted solution-style business and system mar- keting • Promoted products maximizing synergies between robots and hydraulic components We introduced Kawasaki-ROIC Management in front-end engineering, examining Application of KPI 2013 to improve the enterprise value of the • Leader toward realization of hydrogen society • Top brand in motion control Kawasaki Group, and the concept has proven latent risks, and following up after projects are completed, which will Growth Risk management *MRO: Maintenance, Repair, Overhaul successful in strengthening our financial position strengthen risk management. and generating cash flow on a consolidated basis. But during MTBP 2016 we have to push the Quantitative View of Fiscal 2026 concept even further, with an emphasis on Above 14 11.0 9.4 Above 9 “The three fundamental strategies under 6.1 Before-tax ROIC MTBP 2016 are to promote further progress 6.2 5.7 Operating income margin on Kawasaki-ROIC Management, 3.2 to implement investments targeting medium- to FY2013 FY2016 FY2019 FY2026 long-term growth, and to realign our businesses.” (Actual) (Actual) (Target) (Ideal) Before-tax ROIC 6.1% 9.4% 11.0% 14% or higher Operating income margin 3.2% 6.2% 5.7% 9% or higher Return on equity (ROE) 9.5% 10.6% 14.0% 15% or higher Operating cash flow ¥28.1 billion ¥86.0 billion ¥140.0 billion ¥200.0 billion or higher Total asset turnover (times) 0.87 0.95 1.00 1 or more (Reference value: Net sales) (¥1,288.8 billion) (¥1,541.0 billion) (¥1,740.0 billion) (¥2,400.0 billion) 15 16
Fundamental Strategy 2: Fundamental Strategy 3: MTBP 2016 Quantitative Targets distribution of dividends. Guided by this policy, Investments targeting medium- to long-term Business realignment In our outlook for fiscal 2017, the first year of management established a benchmark of 30% for growth Two business segments—Ship & Offshore Structure MTBP 2016, we anticipate net sales of ¥1,570.0 the consolidated payout ratio over the medium During MTBP 2013, the Kawasaki Group aggres- and Hydraulic Machinery—continue to face a diffi- billion, up from fiscal 2016, but operating income to long term. sively allocated funds for capital expenditure and cult business environment, making restructuring is likely to decline to ¥70.0 billion. This reflects a investment in R&D; however, during MTBP 2016, essential. Ship & Offshore Structure will strive to shift toward yen appreciation and a temporary Environmental Management the strategy is to expand investment overall, with optimize profits by integrating the operations of decrease in Aerospace earnings, but the situation Guided by the strategies of the Ninth Environmen- an emphasis on growth fields. We will earmark NACKS and DACKS* with the Sakaide Works, which should correct by fiscal 2019, the last year of tal Management Activities Plan (fiscal 2017 to about ¥280.0 billion over three years for capital will function as a mother factory. At the Kobe MTBP 2016, and we look forward to higher sales fiscal 2019), the Kawasaki Group seeks to reduce expenditures, such as a new factory to manufac- Works, the focus will be on submarine-related and income, mainly from Rolling Stock, Motorcycle the environmental impact that accompanies busi- ture components for the Boeing 777X as well as operations in an effort to stabilize business activi- & Engine and Precision Machinery. Expectations are ness activities. Emphasis has been placed on mea- jet engine production facilities and increased pro- ties. Meanwhile, the offshore service vessels busi- for net sales of ¥1,740.0 billion, operating income sures to cut CO2 emissions and energy costs, pro- duction of robots, and about ¥150.0 billion over ness, which booked massive losses in fiscal 2016 of ¥100.0 billion and before-tax ROIC at 11.0%. mote the 3R* concept and reduce environmental three years to R&D, especially on future commer- due to issues related to a Brazilian joint venture, FY2016 FY2017 FY2019 loads (materials exerting an impact on the envi- cial aircraft as well as medical robots and hydro- will be downsized, with efforts directed mainly (Billions of yen) (Actual) (Forecast) (Target) ronment), with targets for each division set annu- gen-related businesses. toward the construction of offshore service Orders received 1,693.6 1,500.0 1,740.0 ally. All divisions are systematically engaged in Looking at investment in air transportation vessels for customers in Norway. Net sales 1,541.0 1,570.0 1,740.0 programs to achieve these targets. In addition, we systems—a key segment—as a percentage of *NACKS and DACKS: Affiliated companies accounted for by the maintain a program for registering products with Operating income 95.9 70.0 100.0 overall application of funds, you will notice an equity method as joint ventures with companies in China. excellent environmentally conscious features as increase in capital expenditures, from 38% in MTBP Operating income Kawasaki Green Products, and constantly pursue 6.2 4.4 5.7 In Hydraulic Machinery, “Kawasaki” enjoys margin (%) 2013 to 45% in MTBP 2016, and an increase in activities to lower the inherent post-sale environ- top-brand status for leading-edge technology and Before-tax ROIC (%) 9.4 8.3 11.0 R&D investment as well, from 15% to 20%, respec- mental impact of the Kawasaki products provided a high share of the market. But the goal is to at ROE (%) 10.6 11.0 14.0 tively. I trust you understand the reasons behind to customers. least maintain—but ideally expand—market share, our strategy to selectively invest in growth fields. Our lineup already includes power generation mainly by enriching the lineup and honing a Financial Strategies In the hydrogen business, we spearheaded systems that draw on waste heat from garbage sharper cost-competitive edge, and reduce reliance During MTBP 2013, we worked to significantly the establishment of CO2-free Hydrogen Energy incinerators and cement plants as well as products on the excavator market in China by developing strengthen our financial position by improving Supply-Chain Technology Research Association designed to reduce environmental impact through, business in the construction and agricultural capital efficiency through Kawasaki-ROIC Man- (HySTRA) in February 2016. HySTRA’s primary for example, the use of waste heat from gas tur- machinery markets beyond excavators. In addition, agement and ensuring good operating cash flow. objective is to establish and verify the technolo- bine and gas engine power generation facilities. this business segment will seek synergies and During MTBP 2016, investing cash flow is likely gies required throughout the hydrogen energy We are also working on the technologies of tomor- enhanced efficiency by integrating operations with to trend high, at about ¥90.0 billion per year, to supply chain, beginning with production from row that will feature in such applications as CO2 the robot business. This effort includes production fuel medium- to long-term growth; however, we source materials to transportation, storage and separation and collection systems and the above- of robots at Kawasaki Precision Machinery expect to register operating cash flow of more use. The ultimate goal, however, is to contribute mentioned CO2-free hydrogen projects. Through (Suzhou) Ltd. in China and more efficient use of than ¥110.0 billion per year and will strive to to the realization of a hydrogen energy society. these activities, we will contribute to the realiza- labor and facilities. reinforce our financial position and maintain tion of a sustainable society on a global scale. appropriate investment capacity. We are target- *3R: Reduce, Reuse, Recycle – three essential components of Changes in CAPEX (acquisition basis) and R&D investment during each MTBP (cumulative) ing a net debt equity ratio in the range of 70% initiatives to cut waste disposal Air Transportation Systems ROBO-MECH Energy & Environmental Engineering to 80% as of March 31, 2019. Land/Sea Transportation Systems Other 10% Message to Stakeholders 17% Return to Shareholders For the Kawasaki Group, the development of our 19% 24% 38% The Kawasaki Group seeks to raise shareholder businesses is built on a relationship of trust with Changes in CAPEX 45% (acquisition basis) 25% value and enhance enterprise value over the long stakeholders, including shareholders and customers. 24% 27% 27% Total Total Total term by continuously investing in the innovative I hope that Kawasaki Report 2016 helps readers ¥197.8 billion ¥244.1 billion about ¥280.0 billion 6% 5% R&D and state-of-the-art facilities needed to gain a deeper understanding of what we do as a 5% 13% 15% drive growth and by consistently generating corporate group and takes communication between income exceeding capital costs as well as a high stakeholders and the Kawasaki Group to a higher MTBP 2010 (Actual) MTBP 2013 (Actual) MTBP 2016 (Forecast) level of cash flow from operations. We believe level. Under the corporate slogan “Powering your this approach serves our shareholders’ interests. potential,” we will undertake business activities 10% 10% 15% 20% Toward this end, our basic policy is to strike designed to achieve our mission—to be a socially 13% 12% a good balance between certain corporate capital responsible corporate citizen contributing to com- 20% needs—reinforcing our financial footing by fortable lifestyles and the environment worldwide— R&D investment 22% 35% enriching shareholders’ equity and reducing and to make society a better place through ongoing 42% Total 40% Total 20% Total 13% ¥118.7 billion ¥125.6 billion about ¥150.0 billion interest-bearing debt, and improving shareholder value creation. Your continued understanding and 13% value through R&D and capital investment—and support of the Kawasaki Group and its activities will 15% the return of profits to shareholders through the be integral to our shared success. 17 18
Initiatives to Realize a Hydrogen Society Size of hydrogen market To date, uses of hydrogen have been limited to primarily industrial applications such as in oil refining, as rocket fuel, and in semiconductor manufacturing processes. But with the debut of a fuel cell system for homes in 2009 and subsequent popularity, ¥ 8trillion 8 (Trillions of yen/year) Establish completely followed by other innovative applications, including the introduction of a fuel cell vehi- CO2-free hydrogen cle in 2014, hydrogen is steadily moving toward everyday use. Kawasaki has technolo- supply system gies highly compatible with each process—production, transportation/storage and use— Hydrogen CO2-free hydrogen production and transportation/storage of the hydrogen supply chain. Our technologies link hydrogen production sites to get into full swing 6 consumer sites, and in so doing, pave a new way to the future—the Hydrogen Road. Full-scale introduction of hydrogen power generation/Establish large-scale hydrogen supply system Imported hydrogen at ¥30/Nm3 ¥ 4trillion 4 Hydrogen supply infrastructure Expand distribution of hydrogen for commercial use Hydrogen-fueled Imported hydrogen power generation becomes widely available Full-scale introduction of hydrogen for power 2 providers expand Fuel cell vehicles ......by uniting to Stationary fuel cells ¥200 billion 0 2015 2020 2025 2030 2035 2040 2045 2050 (Year) possibilities Dramatic expansion in hydrogen use Market debut of fuel cells for business/ industrial use Price of hydrogen drops Price of fuel cell vehicles drops *From “Strategic Road Map for Hydrogen and Fuel Cells (Revised, March 22, 2016), by the Ministry of Economy, Trade and Industry On February 22, 2016, four companies—Kawasaki Heavy Industries, Iwatani Corporation, Shell Japan Limited and Electric Power Development Company— established HySTRA, the CO2-free Hydrogen Energy Supply-Chain Technology Research Association. Going forward, the plan is for HySTRA to implement the Demonstration Project for Establishment of Supply Chain for Mass Marine Trans- portation of Hydrogen and Gasification of Brown Coal, a demonstration project for the New Energy and Industrial Technology Development Organization (NEDO). Kawasaki Hydrogen Road Hydrogen Hydrogen Hydrogen Hydrogen Kawasaki is keen to Production Transportation Storage Use contribute to reducing CO2 on We promote liquefi fied hyd hy rogen rog og made We are a worki rk rking king on n the developmentt Liquefied hydrogen storage tanks We are developing gas a global scale by pushing ahead ffro rom brown coal ass an un nuse usedd natural at l re resou source sou rcee,, of th the woorld d’s first firs liq iq quefi efieed hydrogen efi en caarri rrier. e and containers for on-land transport turbine power generation equipment with the development at the cr cryog yogeni yog e c temp eni temp mpeeratur mp eratur uree Con nstrruct uction n of a dem mons onstr tration vess ess ssel sse is set fo el forr 2020, of liquefied hydrogen are essential using hydrogen as the fuel source. of technology aimed of -253˚C 3˚C and thenen transpor porrt it. while whi le we w are planning pll for larg r er des rg designss as as well we . to the use of hydrogen in Japan. We are also pursuing development of technology We built a hydrogen liquefa quefaction on sys system tem m Kawasaki has proven results, built over many years, that allows mixed combustion with hydrogen at realizing tomorrow’s test facility y and marked ed a first in n Jap apan in supporting domestic storage of rocket fuel, in natural gas-fired gas turbines hydrogen society. with w witi h the successful liq liqu qu qu uefa efacti efa ction on of hyd yddrog rogen ogeen og en und under un err and thus has technologies applicable to storage tanks to lower environmental impact in addition a purely domesttic production n str stru ructu ru ctuure. re. and transport containers for liquefied hydrogen. to the development of gas turbines driven We are pursuing R&D aimed by 100% hydrogen. at making larger-capacity liquefied hydrogen storage tanks. 19 19 20 20
Hydrogen Hydrogen Production Cooled to -2253˚C and in liquefied form, -253°C cryogenic temperature achieved Kawasaki successfully developed Japan’s first industrial- hydrogen shrinks to original volume for the oce of its ean voyage to Japan Giving the world its first liquefied hydrogen carrier use hydrogen liquefaction system using entirely home- For hydrogen to have a real future as widely used, next-generation grown, proprietary technology. energy, technology is needed that will ensure safe and highly effi- The hydrogen liquefaction system we developed was cient transportation of hydrogen in large volume. Kawasaki, which installed at one of our domestic facilities and has the built Japan’s first liquefied natural gas (LNG) carrier in 1981, capacity to liquefy about five tons of hydrogen per day. enjoys a place at the forefront of cryogenic technology for This is made possible through the application of cryo- marine transport. We drew together the best in cryogenic genic materials handling technology and technical technology and shipbuilding technology accumulated over turbine expertise accumulated through the devel- many years and are applying this expertise to the devel- opment of high-speed rotating machines. opment of the world’s first liquefied hydrogen carrier. When cryogenically cooled to -253˚C, hydrogen changes from a gaseous state to a liquefied state shrinking to 1/800 of its The sh shape ap of th ape the e future, f from om Kaw Kawasa asaki ki -162˚C LNG carrier: Symbolizing 30 years of Kawasaki pride original volume. In this concentrated form, hydrogen exhibits a tremendous improvement in storage/transportation effi- Large liquefied hydrogen carrier Should Sho uld ld a so socciet ie y wher e e hydroge ogen n is is widely w use us ed beco become a reality, itt will w require e ciency, which raises the amount of hydrogen that can be distributed by marine or ground transportation. large qua large uanti ntitie tiess of hydr hydr droge ogen oge n prod prod o uce uc d inex xpen pensiv sively ively ov o ers e eas eas to be trrans nspor po ted por te to Ja apan pan.. Hydr ydroge yd ogen—t —the he ult ultima imatete clean an energy ene rgy. When sosocie c ty cie y use ses es hydr ydd oge ogen a ogen ass an an ene nerrgy g source e as maatte er-o r f-f f- act ctly ly ass it doe does coal oal, oil oil an and ndd na natur tur tu u al gas, gass, it it will be be large hyddrog rogen en car carrie rie ers de dev e elo ev loped pe p ed by Ka Kawas wassaki a th ak hat suppppor o thhydr ydroge ydr ogen oge n dist dis istrib r uti rib ution. 21 22
Hy ydrogen Hydrogen Use liquefied hydrogen coontainment system Kawasaki has cultivated cryogenic temperature –253˚C liquefied 100Hydrogen-driven gas turbine technology hydrogen power generation hydrogen storage technology through the development of lique- Chemical plants and other facilities generate large amounts of by-product fied hydrogen storage tanks installed at the Japan Aerospace gas, including hydrogen, leading to a growing need for effective ways to Exploration Agency (JAXA) rocket launch facilities. utilize the derivative gas. In response, Kawasaki is currently running Kawasaki was entrusted by NEDO to undertake R&D on peripheral verification tests on a gas turbine with a proprietary combustion technology (a hydrogen liquefaction and storage system) under a system fueled by a mixture of natural gas and hydrogen. We are cutting-edge R&D project to promote wider use of hydrogen as also engaged in the development of gas turbine combustors an energy source. We are working on a 1,000m3-class lique- optimized to the characteristics of hydrogen, namely, its fast fied hydrogen containment system featuring a vacuum rate of combustion, to generate power using 100% hydrogen. insulation structure to minimize evaporation of the stored liquefied hydrogen, as hydrogen in its liquefied state is Hydrogen mix combustion technology: Demonstration gas turbine on site of Kawasaki facility more susceptible to evaporation than LNG. (Hydrogen-only combustion technology: Pilot operation under Liquefied hydrogen storage tanks at Tanegashima Space consideration) Center, in use for more than 25 years High Hi gh-T -Teempe emmpe perature re/Hig igh-Pr ig Pres Pr essu ure re Comombu bustio stio stion T stt Facil Te iliity (RWT TH Aa Aachhen e Uniivers vers ver itty) y) Developed low-NOx, hydrogen-fueled gas turbine combustion technology Hydrogen combustion in a gas turbine tends to be unstable because of hydrogen’s fast rate of combustion, and as the flame temperature rises, NOx emissions nearly double compared with the amount released in the combustion of natural gas. To solve these issues, Kawasaki teamed up with Aachen University of Applied Sciences (FH), in Germany, to pursue basic research on hydrogen-fueled Dry Low Emission (DLE*) combustion capable of suppressing flashback and other unstable combustion events through the use of small hydrogen flames while also achieving low-NOx results. Then, commissioned by the Japan Science and Technology Agency under a strategic innovation promotion program for energy carriers—an initiative of the Council for Science, Technology and Innovation—we became involved in the development of a gas turbine combustor using this small hydrogen flame. We also conducted a hydrogen combustion test (100% hydrogen) Gas turbine Combustor using the high-temperature, high-pressure combustion test facility at RWTH Aachen University and confirmed that the use of the new technology achieved NOx emissions far below the regulation value. *A system that reduces NOx emissions by minimizing combustion temperature without the use of injected water or steam. 23 24 4
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