2013 /2014 Annual Report Integrated Thermal Waste ... Zosen Inova AG | 20132 2014 Annual Report 7 Project-Highlights Poznan (PL) Client Sita Zielona Energia SP.ZO.O Start of construction

2013 / 2014 Annual ReportIntegrated Thermal Waste Treatment Solutions

2

Content | Key Figures

Waste is our Energy.

Engineering is our Business.

Sustainable Solutions are our Mission.

Hitachi Zosen Inova AG (HZI) is a global leader in

energy from waste (EfW), operating as part of the

Hitachi Zosen Corporation Group. We act as an

engineering, procurement and construction (EPC)

contractor delivering complete turnkey plants and

system solutions for energy recovery from waste.

Hitachi Zosen Inova AG

(in CHF thousand) 2012 2014*

Order intake 456,346 534,295

Order backlog 474,665 582,540

Net revenue 285,505 421,437

EBITDA 9,298 8,618

EBIT 7,959 6,098

Net income 2,636 1,818

Share capital 40,000 40,000

Net assets 35,553 45,197

Total assets 203,922 205,711

Equity ratio 17 22

Headcounts 378 391

* January 1, 2013 – March 31, 2014

04 | Hitachi Zosen Inova AG

Insight & Outlook

05 | Organization

07 | Project-Highlights

08 | System Units

09 | Hitachi Zosen Corporation

10 | Hitachi Zosen Corporation

Financial Highlights

12 | Hitachi Zosen Inova AG

Financial Statements

Cover: Hitachi Zosen Inova AG

EfW plant in Vaasa, FI

3Hitachi Zosen Inova AG | 2013 / 2014 Annual Report

Ladies and Gentlemen

Trust, openness and transparency formed the basis of Hitachi Zosen Inova's

AG ongoing development in 2013, and were central to its dealings with

clients and staff alike. In a dynamic market environment we delivered a solid

performance in the past financial year, with order intake of CHF 534,3 million

and revenues of CHF 421,4 million allowing us to further strengthen our

position as a global player in the EfW market.

Thanks to the efforts of our highly motivated team and best in class project

organization, we were able to conclude the extension of the energy-from-

waste plant in Cleveland last year, to the client’s complete satisfaction.

We also took an important step into Eastern Europe, submitting the permit

documentation in Poznan, Poland, in record time.

The start of the two major projects in Buckinghamshire and Severnside

were important milestones in 2013 and so was the return of Franz-Josef

Mengede to Hitachi Zosen Inova. He had previously worked for Von Roll

Inova from 2005 to 2008 as COO and latterly as CEO, and then headed the

Global Business Unit Power Generation at ABB. His network of worldwide

contacts and experience in managing turnkey EPC business make him ideally

suited to lead Hitachi Zosen Inova.

We streamlined our organization in 2013, while continuing to invest in our

employees. As a result, we are well positioned in terms of our current and

upcoming projects in the UK, and will be able to put the experience we

gain there to good use in the markets we are targeting for the future in the

Middle and Far East, and North and South America.

The future promises to be exciting, and we look forward to tackling the

challenges that lie ahead together with you, our clients, shareholders,

and staff.

Sincerely yours

Minoru Furukawa Franz-Josef Mengede

Chairman & CEO CEO

Hitachi Zosen Corporation Hitachi Zosen Inova AG

4

Hitachi Zosen Inova AGInsight & Outlook

Over the past year we focused more closely on bolstering our project or-

ganization. We have anchored health & safety, compliance, and integrity

even more deeply in our corporate culture to address the demands we

have to meet worldwide.

Market leader Hitachi Zosen Inova AG (HZI) delivers system solutions for

energy recovery from waste. Thanks to our corporate structure and our

outstanding expertise in all disciplines, we can ensure efficient execution

of services, ranging from EPC sections through to turnkey plants, includ-

ing construction. Our project-based organization puts the success of the

project and client satisfaction at the fore, enabling us to meet our commit-

ment to delivering plants safely, on time, and to high standards of quality.

Our System Units guarantee the best possible technology for the thermal

process, flue gas treatment, and state-of-the-art energy recovery.

Our Service unit constantly incorporates the experience gained from new

and optimized solutions in the installed base to enhance the yield, availabil-

ity, and environmental friendliness of our plants.

New anti-bribery directive

Having appointed a compliance officer and carried out a compliance risk

assessment in 2012, we took appropriate measures to verify that HZI’s

policies and procedures were adequate. The code of conduct for the

company and its suppliers were adjusted in line with the company’s policy

to ensure integrity in the way we act. As part of this, the Executive Board

issued an anti-bribery directive containing guidelines on how to manage

agents, representatives, and partners (including sub-contractors and

sub-suppliers), and rules on gifts and entertainment.

Safe and successful projects

We are in a construction-oriented industry subject to many inherent risks.

Our culture revolves around the knowledge that we can find a safe way of

carrying out any aspect of our works. In 2013, we started work on various

initiatives to raise the profile of health & safety matters, not only within our

organization but among our suppliers. In selecting suppliers, we consider

their health & safety performance and culture as well as their technical

capabilities. We look forward to introducing new initiatives in the coming

months, both on our construction sites and at head office, that will ensure

we can all keep our focus on delivering our projects safely and successfully.

As part of our commitment to continual improvement, we also intend to

take some of the best initiatives from our construction sites and introduce

them into our core processes as best practice.


Quality & Process

Management

Health & Safety

Hitachi Zosen Inova

U.S.A. LLC*

Hitachi Zosen Inova

UK Limited*

Hitachi Zosen

KRB AG*

Executive Board

Communication

HR & Infrastructure

Risk Management Shared Services

Marketing &

Sales

Project

Execution

CSP FGT Service R&D

* Hitachi Zosen Inova U.S.A. LLC is a subsidiary of the Hitachi Zosen Corporation and is operationally attributed to Hitachi Zosen Inova AG.

Hitachi Zosen KRB AG and Hitachi Zosen Inova UK Limited are subsidiaries of Hitachi Zosen Inova AG and operationally attributed to

Hitachi Zosen Inova AG.

Organization

6

Koichiro Anzai

Chairman of the

Supervisory Board of HZI

Franz-Josef Mengede

CEO

Member of the Executive

and Supervisory Board

of HZI

Seiji Shimoda

CTO*



of HZI

* 2011–2014

Katsuhisa Tsuji

CTO



of HZI

Michi Kuwahara

Member of the

Supervisory Board of HZI

Axel Greschitz

CFO

Member of the

Executive Board of HZI

The many years of experience amassed by our em-

ployees is the most valuable asset we have. This is

equally true of our Executive Board. The appointment

of Franz-Josef Mengede as CEO in August 2013 not

only brought the board back up to full strength, but

added his impressive range of expertise.

Seiji Shimoda, who had led the company prudently as

ad interim CEO since November 2012, continued to

support Hitachi Zosen Inova AG (HZI) in his original

role as CTO until March 2014, before returning to

Japan. Katsuhisa Tsuji, who has more than 30 years

experience in the EfW business, took over as CTO.

The Executive Board is completed by CFO Axel

Greschitz, who has been with the company since

2009, and the two long-standing Supervisory Board

members Michi Kuwahara and Koichiro Anzai.


Project-Highlights

Poznan (PL)

Client Sita Zielona Energia SP.ZO.O

Start of construction 10.04.2013

Start of operation 01.01.2015

Waste capacity 210,000 t/a (2 x 13,5 t/h)

Fuel Municipal solid waste

Net calorific value 7,6 MJ/kg

Severnside (UK)

Client SITA West London Ltd.

Start of construction 2013

Start of operation 2015


Fuel Municipal and commercial waste


Buckinghamshire (UK)

Client FCC Buckinghamshire Ltd.

Start of construction 2013

Start of operation 2015


Fuel Municipal and industrial waste


8

System Units

System Unit Marketing & Sales

The global trend of urbanization, the need to curb

greenhouse gas emissions, and the world’s hunger

for renewable energy are encouraging more and

more countries to build energy-from-waste plants.

The M&S team promotes EfW globally, develops

opportunities from the initial idea through to the

feasibility study and leads the tender activities until

the contract is closed.

System Unit Project Execution

They were able to further strengthen their position in

2013. Seven turnkey projects, with a total of 13 lines in

operation or under construction and a throughput of

327 t/h, confirmed their successful market presence in

the UK. They also notched up a success in Eastern Eu-

rope, as their first turnkey project in Poland was start-

ed with the engineering for the permit application.

System Unit CSP

Quality and on-time delivery – these are the two key

priorities for the 60 members of the CSP team in the

execution phase of a project. Prior to that, they work

together closely with Sales in the proposal phase to

define the ideal solution for each client on the basis

of HZI’s core technologies: combustion, boiler sys-

tems, and the water-steam cycle. In the past year, the

Cleveland 4+5 & Ferrybridge projects benefited from

their customized solutions.

System Unit Flue Gas Treatment

While HZI Semi Dry is being successfully implement-

ed in all current turnkey projects, product placement

for next HZI Semi Dry generation has already begun.

FGT is assisting their Indian partner in the execu-

tion of the first EfW project in Essel Jabalpur, and is

supporting their System Unit Service in the concept

design of wet scrubbing retrofits.

System Unit Service

With its dedicated employees and keen focus on

client needs, the System Unit Service specializes in

servicing and maintaining plants, and conducting

modernization aimed at improving throughput and

efficiency, and prolonging the life of existing facilities.

Service had a very successful year in 2013, increasing

both order intake and revenues by more than 15%.

System Unit R&D

Their R&D department is responsible for the on-

going development of their technologies, making

sure they have the expertise to optimally serve the

needs of their various markets and clients. One such

example is their rapping monitoring system. This

has impressed the plant operators in Vaasa, with the

boiler remaining very clean after more than a year in

operation.


Hitachi Zosen Corporation

Securing profitable business in overseas markets,

accelerating the speed of new product develop-

ment and commercialization, and realizing synergy

effects with acquired subsidiaries – these were the

major challenges for Hitachi Zosen Corporation

(HZC) in 2013.

After the introduction of unprecedentedly easy

monetary policy to supply liquidity to the market and

various other economic measures by the Japanese

government and the Bank of Japan, the JPY reversed

its trend and weakened against the US and major Eu-

ropean currencies. This triggered a sharp appreciation

of the Japanese stock market, and Japan’s economy

has since shown signs of recovery.

On track for No. 1 position

Within the HZC Group, Hitachi Zosen Inova AG (HZI)

obtained two major EfW projects (Buckinghamshire

and Severnside) totaling JPY 51 billion (CHF 475

million), while HZC secured order intake of JPY 150

billion (CHF 1.4 billion) in the form of the Kyoto South

Clean Center EfW project, the modernization of

existing facility and O&M contract for Kurashiki City,

and the project relating to waste and debris from the

Great East Japan Earthquake for Kawauchi Village,

and other EPC and O&M projects. As of March 2014

the consolidated sales of HZC came to JPY 333 billion

(CHF 3.1 billion) with 9,171 employees at the head

office and 79 consolidated subsidiaries.

The new medium-term management plan “Hitz

Vision II” was cited in this May, which entails a net

sales target of JPY 320 billion (CHF 3.0 billion) on a

consolidated basis in FY 2014 including JPY 196 billion

(CHF 1.8 billion) sales in the segment of Environmen-

tal Systems & Industrial Plant. By achieving these

targets, we will seek to firmly secure the position as

global No. 1 in EfW.

Asian sales activities

The Zurich and Tokyo sales teams regularly exchanged

sales and market information with a view to strength-

ening joint sales activities.

Last year, the HZC sales team pushed sales activities

in Asia, the target markets being India, Vietnam,

Thailand, Malaysia, Singapore, Indonesia, China, and

Korea. Hitachi Zosen India Private Limited (HZIND)

Hyderabad Branch sourced more than ten potential

projects jointly with local developers. At the begin-

ning of 2014, HZIND signed the first EfW project in

Jabalpur with an Indian conglomerate.

10

Financial Highlights FY 2013 Hitachi Zosen Corporation and consolidated subsidiaries

April 1 – March 31

(in JPY million)

2012 2013

Operating results

Order intake 382,848 328,433

Order backlog 450,711 445,711

Revenues 296,792 333,433

Operating income 11,362 7,879

Net income 7,411 3,720

Cash flows

Cash flows from operating activities 9,649 300

Cash flows from investing activities (13,488) (8,697)

Cash flows from financing activities (7,818) (514)

Cash and cash equivalents as of fiscal year end 56,413 49,961

Financial position

Net assets 115,126 117,565

Total assets 366,347 379,414

Investments in property, plant and equipment

and intangible assets (account balance)

130,455 129,318

Financial indicators

Shareholder’s equity ratio (%) 26.9 26.4

Debt-equity ratio (times) 1.0 1.0

Workforce as at fiscal year end 9,039 9,171


20132010 2011 2012

246

290

383

328

20132010 2011 2012

3.8

2.4

3.8

4.7

13

11 11

8

20132010 2011 2012

12.2 11.79.4

23.8

10

9

7

4

2010 2011 2012 2013

22.9

26.425.4

26.9

380 376 366379

357 344

451 446

20132010 2011 2012 20132010 2011 2012

17.3

24.9 24.2

34.8

287303 297

333

Order intake (JPY billion) Order backlog (JPY billion) Revenue (JPY billion)Export ratio (%)

Total assets (JPY billion)Shareholder’s equity ratio (%)

Net income (JPY billion)*Net income per share (JPY)

Operating income (JPY billion)Operating margin (%)

Revenue by regionRevenue by segment

Others 1.1 %

Japan 65.2 % Europe 17.1 %

Asia 8.9 %

Middle East 2.1 %

North America 5.6 % Others 2.5 %

Environmental systems & plant

61.9 % Machinery 15.6 %

Process equipment 4.8 %

Infrastructure 8.4 %

Precision machinery 6.8 %

* HZC consolidated common stocks of the company with a ratio of five shares to one share on Ocotober 1, 2013.

12

December 31, 2012

March 31, 2014

(in CHF thousand)

Assets

2012

(12 months)

2013 / 14

(15 months)

Cash and cash equivalents 87,215 107,861

Other financial assets 6,174 18,296

Trade and other receivables 18,914 11,503

Construction contracts

in progress

43,360 38,081

Inventory 3,046 2,952

Prepayments and accruals 4,097 2,880

Current assets 162,806 181,573

Employee benefits* 6,939

Other financial assets 24,172 3,840

Property,

plant and equipment

9,477 8,550

Intangible assets 3,492 3,042

Deferred tax assets* 3,975 1,767

Non-current assets 41,116 24,138

Total assets 203,922 205,711

Financial Statements 2012 and 2013 /2014 Hitachi Zosen Inova AG Consolidated statement of financial position

* Restatement of prior year figures due to retrospective adaption of IAS 19 revised.

The consolidated figures stated herein refer to Hitachi Zosen Inova AG according to IFRS standards and were audited as such by KPMG AG.

December 31, 2012

March 31, 2014

(in CHF thousand)

Liabilities

2012

(12 months)

2013 / 14

(15 months)

Trade payables 99,070 110,333

Other payables 3,904 4,679

Deferred income/revenue 35,425 26,862

Other financial liabilities 382 567

Employee benefits 5,130 5,914

Provisions 11,744 4,039

Current income tax payable 830 614

Current liabilities 156,485 153,008

Other financial liabilities 983 672

Employee benefits* 2,787 1,381

Provisions 7,780 5,123

Deferred tax liabilities* 334 330

Non-current liabilities 11,884 7,506

Total liabilities 168,369 160,514

Equity

Share capital 40,000 40,000

Hedging reserves (214) (131)

Retained earnings* (4,233) 5,328

Total equity attributable

to the shareholder of the

company

35,553 45,197

Total liabilities and equity 203,922 205,711


Consolidated statement of profit or loss and other comprehensive income

January 1, 2013 – March 31, 2014

(in CHF thousand)

2012

(12 months)

2013 / 2014

(15 months)

Net revenue 285,505 421,437

Cost of materials and services purchased (203,893) (315,603)

Personnel expenses* (54,187) (67,928)

Other operating expenses (28,456) (30,945)

Other operating income 10,329 1,657

Operating profit before depreciation and amortization (EBITDA) 9,298 8,618

Depreciation and amortization (1,339) (2,520)

Operating profit (EBIT) 7,959 6,098

Finance income 645 1,273

Finance costs (5,206) (4,998)

Profit before income tax 3,398 2,373

Income tax* (762) (555)

Profit for the period attributable to the shareholder of the Company 2,636 1,818

Other comprehensive income

Effective portion of changes in fair value of cash flow hedges (638) (751)

Net change in fair value of cash flow hedges reclassified

to profit and loss

(2,408) 856

Foreign currency translation difference (2) 7

Income tax 638 (22)

Items that are or may be reclassified to profit or loss (2,410) 90

Remeasurements of defined benefit liability (asset)* (3,295) 9,787

Income tax* 693 (2,051)

Items that will never be reclassified to profit or loss (2,602) 7,736

Other comprehensive income for the period, net of tax (5,012) 7,826

Total comprehensive income for the period attributable

to the shareholder of the Company

(2,376) 9,644

14

Consolidated statement of changes in equity

(in CHF thousand) Share

capital

Hedging

reserve

Retained

earnings

Equity

Balance at January 1, 2012 (as prev. reported) 40,000 2,194 (5,172) 37,022

Restatement due to IAS 19 revised* 907 907

Balance at January 1, 2012 (restated) 40,000 2,194 (4,265) 37,929

Profit for the year 2,636 2,636


Effective portion of changes in fair value

of cash flow hedges

(638) (638)

Net change in fair value of cash flow hedges

reclassified to profit and loss

(2,408) (2,408)

Remeasurements of defined benefit liability (asset) (3,295) (3,295)

Foreign currency translation difference (2) (2)

Income tax on other comprehensive income 638 693 1,331

Total other comprehensive income (2,408) (2,604) (5,012)

Total comprehensive income for the year (rest.) (2,408) 32 (2,376)

Balance at December 31, 2012 (restated) 40,000 (214) (4,233) 35,553

Profit for the period 1,818 1,818


Effective portion of changes in fair value

of cash flow hedges

(751) (751)

Net change in fair value of cash flow hedges

reclassified to profit and loss

856 856

Remeasurements of defined benefit liability (asset) 9,787 9,787

Foreign currency translation difference 7 7

Income tax on other comprehensive income (22) (2,051) (2,073)

Total other comprehensive income 83 7,743 7,826

Total comprehensive income for the period 83 9,561 9,644

Balance at March 31, 2014 40,000 (131) 5,328 45,197

* Restatement of prior year figures due to retrospective adaption of IAS 19 revised.


Consolidated statement of cash flows

January 1, 2013 – March 31, 2014

(in CHF thousand)

2012

(12 months)

2013 / 2014

(15 months)

Profit before tax 3,398 2,373

Adjustment for net finance (income) costs (449) (287)

Adjustment for depreciation and amortization 1,339 2,520

Adjustment for non-cash items* (3,246) (2,525)

Adjustment for exchange differences 373 (238)

Changes in inventories (305) 94

Changes in trade/other accounts receivables 11,881 12,732

Changes in trade/other accounts payables (8,930) 3,475

Changes in employee benefits* 2,739 2,226

Changes in provisions 1,139 (10,362)

Interest received 500 374

Interest paid (35) (83)

Income taxes paid (105) (640)

Cash flows from operating activities 8,299 9,659

Acquisition of property, plant and equipment (701) (391)

Acquisition of intangible assets (549) (307)

Repayment of loans 6,003

Repayment of cash collaterals 320 12,059

Purchase of term money (6,097)

Cash flows from investing activities (930) 11,267

Finance lease (33) (405)

Cash flows from financing activities (33) (405)

Net increase in cash and cash equivalents 7,336 20,521

Cash and cash equivalents at the beginning of the period 80,083 87,215

Changes in cash and cash equivalents 7,336 20,521

Effects of changes in foreign exchange rates on cash held (204) 125

Cash and cash equivalents at the end of the period 87,215 107,861

| Concept and layout

agentur-perform.ch, Switzerland

| Photos

Patrick Hofmann, Switzerland

Hitachi Zosen Inova AG | Hardturmstr. 127 | P.O. Box 680 | 8037 Zurich | Switzerland

T +41 44 277 11 11 | F +41 44 277 13 13 | [email protected] | www.hz-inova.com

Documents

2013 /2014 Annual Report Integrated Thermal Waste ... Zosen Inova AG | 20132 2014 Annual Report 7 Project-Highlights Poznan (PL) Client Sita Zielona Energia SP.ZO.O Start of construction