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© Hitachi, Ltd. 2015. All rights reserved. 1 Hitachi Rail: Business Profile and ME Strategy Vice President and Executive Officer Global CEO, Rail Systems Business Alistair Dormer 5 th October 2015
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Page 1: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved. 1

Hitachi Rail: Business Profile and ME Strategy

Vice President and Executive Officer Global CEO, Rail Systems Business

Alistair Dormer

5th October 2015

Page 2: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved.

1. Outline of Hitachi and Hitachi Rail 2. Market- Overview 3. Acquisition of AnsaldoBreda and Ansaldo STS 4. Strategy for Middle East Market

Contents

2

Page 3: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved.

1. Outline of Hitachi and Hitachi Rail 2. Market- Overview 3. Acquisition of AnsaldoBreda and Ansaldo STS 4. Strategy for Middle East Market

Contents

3

Page 4: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved. 4

1-1. Business Overview- Hitachi Revenue by industry segment

EMPLOYEES (CONSOLIDATED):

ANNUAL SALES (CONSOLIDATED):

333,150 US$ 81.3B

19%

4%

15%

11% 7%

14%

9%

7%

11% 3%

Information & Telecommunication Systems

Power Systems

Social Infrastructure & Industrial Systems

Electronic Systems and Equipment

Construction Machinery

High Functional Materials & Components

Automotive Systems

Smart Life & Ecofriendly Systems

Others (Logistics & Other Services)

Financial Services

*Revenues: FY2014, Employees: As of end of FY2014, 120Yen/US$

Rail Business

Page 5: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved. 5

1-2. Business Overview- Hitachi

Companies: 160 Employees: 11.8 thousand Sales: US$ 7.0 B

Europe

Companies: 202 Employees: 47.4 thousand Sales: US$ 8.8 B

Asia (excl. China)

Companies: 96 Employees: 20.1 thousand Sales: US$ 8.8 B

North America

Companies: 81 Employees: 11.1 thousand Sales: US$ 3.9 B

Other areas

Companies: 275 Employees: 193.2 thousand Sales: US$ 43.1 B

Japan

Companies: 182 Employees: 49.6 thousand Sales: US$ 9.6 B

China

Companies: 996 Employees: 333.1 thousand Sales: US$ 81.3 B

*Revenues: FY2014, Companies and Employees: As of end of FY2014, 120Yen/US$

Page 6: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved. 6

1-3. Business Overview- Hitachi Rail

(Overseas revenue ratio: 38%)

Source: Hitachi IR Day 2015 Presentation: http://www.hitachi.com/New/cnews/month/2015/06/150611/20150611_06e_RS_presentation.pdf

Page 7: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved. 7

RS : Rolling Stock

ECML : East Coast Main Line

LRT : Light Rail Transit

CBTC : Communication-Based Train Control

Financial Close for 65 trains for

IEP ECML

England RS/Services

29 trains for First Great Western

England RS/Services

70 trains for Abellio ScotRail

Scotland RS/Services

Part of consortium for

Qatar Rail

Qatar Doha Metro

Signalling for Yangon,

Mandalay

Myanmar Signalling

Upgrade Sentosa

Monorail with CBTC

Singapore Signalling

Inverters for St Petersburg

Metro

Russia Components

N700A for Central Japan

Railway Company and West Japan Railway Company

Japan RS

Tilt trains for Taiwan Railway Administration

Taiwan RS

Signalling for LRT in Zhuhai

China Signalling

E7/W7 for East Japan Railway Company and West Japan

Railway Company

Japan RS

1-4. Orders secured in FY2014 (Countries and Regions)

Source: Hitachi IR Day 2015 Presentation: http://www.hitachi.com/New/cnews/month/2015/06/150611/20150611_ 06e_ RS_ presentation.pdf

Page 8: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved. 8

1-5. Intercity Express Programme

Progress

Project Schedule

Project Overview (Largest UK Rolling Stock PPP) Customer : UK Department for Transport No. of rolling stocks : Total 866 cars with 27.5 years’ maintenance Delivery : 2017 - 2019 Procurement method : PPP (Public Private Partnership)

The first train is undergoing running test on Great Western Main Line. Testing will be undertaken in various train formations applicable to the delivery of the IEP fleet. The Newton Aycliffe factory has been awarded Gold at the 2015 Considerate Constructors Award Newton Aycliffe opening ceremony took place on 3rd September and train production starting by January 2016

2017 2018 2019

Great

Western

Main Line

East Coast

Main Line

Calender Year

Production

Site

2012 2013 2014 2015 2016

Design and production Test run in UK

Design Production

Product acceptance

Design and production Test run in UK

Design Production

Product acceptance

We are here

Construction Completed Production

Newton Aycliffe, IEP front mask mock-up

Car body: Under production at Kasado works

Newton Aycliffe, testing area

Prototype

Mass product

Prototype

Mass product

Page 9: Hitachi Rail - Alistair Dormer

9

Daegu Urban Railway Line 3 Monorail System (Korea): Total system integration test completed and commercial operation started on April 23rd

Project Overview(1ST Monorail System in Korea)

Monorail cars

Line Length : 24 km (Elevated double track) Number of Stations : 30 Stations Car Depot : 2 Places Contract Scope : EPC for Core E&M package (Monorail cars (84 cars), track switches, signalling system)

“Urban Railway Line 1” in Ho Chi Minh City, Vietnam: Design submitted for customer approval. Production to start from 2015.

Project Overview (1st Turn-key business in Vietnam)

Customer : Management Authority for Urban Railways of the People’s Committee of Ho Chi Minh City

Line length : 19.7km (underground and elevated line) Contract scope : Prime contractor – E & M package

17 train sets (total of 51 cars) Signalling and telecommunication system Power supply system Depot facilities, etc. Maintenance: 5 years maintenance

following the start of commercial operations

Mock up displayed

1-6. Our Turn key experiences in Asia

Page 10: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved.

1. Outline of Hitachi and Hitachi Rail 2. Market- Overview 3. Acquisition of AnsaldoBreda and Ansaldo STS 4. Strategy for Middle East Market

Contents

2

Page 11: Hitachi Rail - Alistair Dormer

Percentage of People Living in Urban Areas

Urbanisation and environmental factors continue to drive growth in the rail sector

Hitachi Rail is well placed to respond to market growth

En

vir

on

me

nta

l(1

) U

rba

nis

ati

on

(2)

2011-2013 2017–2019

Accessible World Rail Market Growth – by product(3)

Services

Rolling Stock

Infrastructure

Rail Control 3.3%

3.3%

1.6%

3.7%

CAGR

Trends: Increase Steady 2011-2013 2017–2019

3.7%

0.8%

2.2%

4.2%

CAGR

Asia Pacific

Western Europe

NAFTA

CIS Eastern Europe

MEA Latin America

1.3%

CO2 emissions targets will drive the electrification of lines and the use of rail

Denser urban areas will provide opportunities for rail, such as metro, to reduce crowding and improve predictable transit times, ensuring that density works efficiently

1.4%

5.7%

Accessible World Rail Market Growth – by region(3) Hitachi Rail – Region by Region

11

Greenhouse Gas Emissions by Travel (grams of CO2 per passenger km)

150g 170g

30g – 70g

1900 | 20%

1990 | 40%

2010 | 50%

2030 | 60%

2050 | 70%

100.7

118.7

102.2

120.7

Unit: EUR Billion

Unit: EUR Billion

© Hitachi, Ltd. 2015. All rights reserved.

2-1. Market – Global Overview -WW Growth for Rail Transportation

CAGR : Compound Annual Growth Ratio

* 1 Source:http://www.chinadaily,com.ch/ * 2 Source:http://catalystreview.net * 3 Source:UNIFE World Rail Market Study

Japan Steady but highly competitive

UK Positive - increase in renewals

China Localisation and consolidation increase

Europe Flat - although still demand for double deck coaches

India Strong potential demand

South East Asia Competition limited due to ODA loans

Middle East Large projects in progress - localisation

North America Significant potential - metro and locomotive demand

Oceania Steady with a demand for specific projects

South America / Brazil Significant potential

Russia / CIS No large projects - demand for metro

Page 12: Hitachi Rail - Alistair Dormer

Recent rail deals:

• Nov 12 – Siemens acquisition of Invensys Rail

• Oct 13 – Hyundai Rotem IPO

• Jun 14 – Alstom acquisition of GE rail signalling business

• Sep 14 – CNR / CSR Merger

• May 15 – Bombardier announced plans to IPO it’s transport division

• Jul 15 – Wabtec Corp announced plans to acquire Faiveley Transport

Near future:

1.Rail industry poised for further consolidation

2.Likely polarisation between global fully integrated rail providers and global component suppliers

12

The global rail sector is witnessing a clear trend towards consolidation (1)

Metro / Trams Locos HSR Commuter Services

Turn-key

14.8

31.7

16.9

93%

91%

95%

8.5

6.8 6.2

3.3 3.1 2.7 2.4 2.1 1.8 1.4 1.4 1.3 1.3 1.1 0.7 0.3

16%

58% 81%

n/a n/a 58%

n/a n/a n/a n/a 34% 74% 51% n/a 85% n/a

45%

68%

44%

20

14

Reve

nu

es

(Bil

lio

n E

uro

)

% Home market – Asia Pacific

% Home market – Europe

% Home market – Americas

% of sales in home market Rolling stock

Turnkey ( Full line ups)

Systems

Locomotives

Asia Rolling Stock Global Integrated Providers

Rolling stock & systems

Global Integrated Providers

(1) Source: Company Annual Reports & Hitachi Rail analysis

7.2 7.0 4.5 5.6 5.8 7.5 20.0 4.1 7.5 9.6 7.5 EB

IT (

%)

2-2. Market – Global Overview - Emergence of Huge Chinese Rail Conglomerates accelerates consolidation

CRRC CSR

CNR

Bombardier

Alstom

Siemens GE

Page 13: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved.

1. Outline of Hitachi and Hitachi Rail 2. Market- Overview 3. Acquisition of AnsaldoBreda and Ansaldo STS 4. Strategy for Middle East Market

Contents

2

Page 14: Hitachi Rail - Alistair Dormer

14

Business Segments Businesses

Signalling systems

Design and production of signalling systems and components for railways and underground infrastructure

Turn-Key Solutions

Design and production of integrated transport systems

• High Speed • Computer Based

Interlocking • Main Lines & Freight • Metros & Tramways • Planning, Supervision &

Traffic Control • Equipment & Components • Turn-Key Solutions

Businesses

Rolling Stock

AnsaldoBreda specialises in the construction of technologically advanced rolling stock.

Business Segments

• High Speed • Main Line • Mass Transit • Driverless Metros • Trams • Locos • Services

On February 24th, 2015 the Boards of Directors of Hitachi, Ltd. and Finmeccanica S.p.A. announced that they had signed binding agreements for the sale and purchase of:

•the majority of the current business of AnsaldoBreda S.p.A., with the exclusion of some revamping activities and certain historical contracts, and

•the entire interest owned by Finmeccanica in Ansaldo STS S.p.A., equal to approximately 40% of the share capital.

-Newco

Hiroaki Nakanishi & Prime Minister Renzi

Acquiring W/W customer base, Strengthen Product portfolio and Turn-Key Solution Capability

3-1. Acquisition of AnsaldoBreda and Ansaldo STS(1)

Page 15: Hitachi Rail - Alistair Dormer

15

TO Maximize Complementary Relationship

NEW HITACHI

Expands the

Revenue

Synergy

Opportunities

Excellent

Turnkey

Track

record

Robust

World Wide

Customer

Base

Strong

Signalling

Capability

Wider RS Portfolio. Strong track record on

Driverless Metros

Cutting edge

technology for

Mining Solution

Wider Product

Portfolio

(Including

ICT, IoT)

Accessibility

of Japanese

Gov. Finance Support

Robust

Financial

Capability

High

Reputation

Japanese

Quality

3-2. Acquisition of AnsaldoBreda and Ansaldo STS(2)

Page 16: Hitachi Rail - Alistair Dormer

16

Metro / Trams Locos HSR Commuter Services

Turn-key

14.8

31.7

16.9

93%

91%

95%

8.5

6.8 6.2

3.3 3.1 2.7 2.4 2.1 1.8 1.4 1.4 1.3 1.3 1.1 0.7 0.3

16%

58% 81%

n/a n/a 58%

n/a n/a n/a n/a 34% 74% 51% n/a 85% n/a

45%

68%

44%

20

14

Reve

nu

es

(Bil

lio

n E

uro

) % Home market – Asia Pacific

% Home market – Europe

% Home market – Americas

% of sales in home market Rolling stock

Turnkey ( Full line ups)

Systems

Locomotives

Asia Rolling Stock Global Integrated Providers

Rolling stock & systems

Global Integrated Providers

(1) Source: Company Annual Reports & Hitachi Rail analysis

7.5 20.0 4.1 7.5 9.6 EB

IT (

%)

To be an Global Integrated Rail Provider

3-3. Acquisition of AnsaldoBreda and Ansaldo STS(3)

CRRC CNR

7.2 7.0 4.5 5.6 5.8 7.5

CSR Bombardier Alstom

Siemens

Page 17: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved.

1. Outline of Hitachi and Hitachi Rail 2. Market- Overview 3. Acquisition of AnsaldoBreda and Ansaldo STS 4. Strategy for Middle East Market

Contents

2

Page 18: Hitachi Rail - Alistair Dormer

18 © Hitachi, Ltd. 2015. All rights reserved.

4-1. Strategy for Middle East Market

Istanbul(Monorail)

Izmir(Monorail)

Macca(Metro)

Jeddah(Metro)

Kuwait(Metro)

Dammam(Metro)

Doha(Metro) Abu Dhabi(Metro)

Bahrain(Mono) Dubai(Metro/Monorail)

Riyadh(Metro/Monorail)

Market trend: GCC plans Nation-wide

railway networks as well as Metro in major cities.

Each nation-wide railway network will be connected as GCC Internal operator

Our Strategy: Leverage HTC, ASTS &

AB’s footprint in ME Countries.

Leverage Hitachi Group subsystems

Seeking Localization Strategy based on Hitachi UK experience.

Strong Hitachi credit rating enable us to access superior finance source.

● Metro/Monorail Planned City ● Metro/Monorail ordered/opened City

Page 19: Hitachi Rail - Alistair Dormer

19

Palm Jumeirah Monorail, Dubai, UAE

Doha Metro (Systems) Phase 1, Qatar

The first Monorail System in ME (2009 in use)

Symbolic & Environment Friendly Traffic Solution in World-famous resort

Delivered within tight construction period Achieved high reliability operation in tough

environment

Contribution to Tourism Industry and Environment of Dubai

The first urban metro network in Qatar (Oct.2018 in part use)

Core Infrastructure for development of Doha, the host city for FIFA 2022

Design for sustainable, energy saving by cutting edge technologies

Contribution to Core Infrastructure and Sustainability of Doha, Qatar

4-2. Leverage HTC, ASTS & AB’s footprint in ME Countries(1)

Page 20: Hitachi Rail - Alistair Dormer

20

4-3. Leverage HTC, ASTS & AB’s footprint in ME Countries(2)

Riyadh Princess

Noura University

- 11.8 km, 14 stations - 22 trains - Capacity:5,770pphpd - Min. headway:90s - Max speed:60 km/h - Availability:99% - Breda/STS

Riyadh Line 3

- 40.7 km, 22 stations - 47 trains - Capacity:20,960pphpd - Min. headway:90s - Main equipment for Automation Train Control and Communication Based Train Control

Etihad

Rail stage 1

- 260 km - Freight transportation - ETCS L2 signalling system

Page 21: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved. 21 21

Substation TMS

Turn Key Solution

Energy Save

Passenger Service

Maintenance Management

Big Data Analysis

Facility SCADA, Flow

Management, Cyber Security

Railway asset real-time

condition monitoring

Sensing

Technique

Operation Improvement Life Cycle

Engineering

Volume

Variety Velocity

Information Share

Smart Grid

PSD

Depot Radio

BS

Point

Signal

B-CHOP, Power SCADA

Train operation,

Information control, Crew

management

Smart card, E-Ticketing,

AFC, Advertisement

Digital Train Control

Capacity Enhancement,

Safety & Reliability Benefits

Signalling

ETCS&CBTC

4-4. New business

Page 22: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved. 22

• Investment GBP 82 million including

GBP 4 million grant

• Production capacity is 40 vehicles per month

starting from February 2017

• The site includes R&D, Assembly and Testing

• 730 new jobs will be created

• Design & build contract awarded August 2012

• Construction April 2013 to July 2015

• Production commencement November 2015

• 1.1km test track with 25kVa power supply

• 6,500m2 of solar PV panels installed generating

1MW

• Factory footprint is 43,000m2

• IEP vehicles was the initial justification

• We needed the additional manufacturing capacity

• Redcing the risk around having only one factory in Japan

• Access to new markets, and talented labour pool

• European market eatimated 300-400 vehicles for next decade

• Excellent suppliers

• Excellent range of educational facilities

4-5-1. Seeking Localization Strategy based on Hitachi UK experience

Fit for Purpose Site Our background

Page 23: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved. 23

4-5-2. Seeking Localization Strategy based on Hitachi UK experience

Page 24: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved. 24

3rd Sept. 2015 UK Newton Aycliffe Factory Opening Ceremony In attendance of PM Cameron, Chancellor Osborne.

4-5-3. Newton Aycliffe opening ceremony

Page 25: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved.

UK IEP project PPP(Public Private Partnership) Transaction

UK Government Department for Transport

Special Purpose Vehicle

AGILITY TRAINS

Hitachi Rail Europe • Rolling Stock • Depot Construction

Lenders

Operators (Great Western Main Line)

(East Coast Main Line)

Hitachi Rail Europe • Maintenance Service

Availability Payment Contract

Loan Agreement

Hitachi Rail Europe (HRE)

(70%)

Master Contract Usage Guarantee 27.5 yrs

Franchise Contract

Manufacturing Agreement Train Service Agreement

Finance Scheme

• Equity Providers

• Debt Providers

Contract Scheme

4-6. Strong Hitachi credit rating enable us to access superior finance source.

Approx. 4.3B GBP Debt 1.8B GBP from JBIC

25

Page 26: Hitachi Rail - Alistair Dormer

© Hitachi, Ltd. 2015. All rights reserved. 26

4-7. Conclusion

The rail markets maintains strong

fundamental growth drivers, but Rail

industry is poised to further consolidation

“Hitachi Rail’s mission is to contribute to society through the continuous development of superior rail transport solutions”

There are many opportunities in rail

projects within Gulf countries.

Arrangements of Japanese loan by JBIC

expected

New challenges on Rail solution business; Rail + IT technologies Hitachi intends to be a major supplier in

the ME rail market

Page 27: Hitachi Rail - Alistair Dormer

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