Business alliance between Swing Corporation and Sekisui Chemical Co., Ltd. in the water business

16.Jun.2011

June 10, 2011

Dear Sir/Madam,

Swing Corporation

Sekisui Chemical Co., Ltd.

Business alliance between Swing Corporation and Sekisui Chemical Co., Ltd. in the water business

– To be competitive with water giants by organizing a one stop comprehensive system for water treatment facilities and pipes –

Swing Corporation (President: Masayoshi Hirose) (hereinafter referred to as Swing) and Sekisui Chemical Co., Ltd. (President: Naofumi Negishi) (hereinafter referred to as Sekisui Chemical) have reached to an agreement, to have business alliance in the areas of design, construction, operation, maintenance and management of related facilities and pipes for water supply and sewerage systems in order to fulfill requirement from customers. A target of this alliance is to provide one stop solution for the management of water-related facilities and pipes in Japan as well as overseas market.

We aim to bring together Swing’s know-how in EPC works (Engineering, Procurement and Construction: design and construction of water treatment facilities) and O&M (Operation and Maintenance) in the water treatment business accumulated over the years, and Sekisui Chemical's ability to offer value chains in the pipe business (investigation, diagnosis, design, supply of products, installation, maintenance and management) in order to further enhance the competitive advantage of the two companies and to expand their water business in Japan and overseas.

1. Background

Local governments in Japan are facing difficulty in maintaining water supply and sewage treatment services due to (i) Huge financial burden caused by the maintenance and renewal of aged facilities and pipelines, and (ii) Limited human resources. In emerging and developing countries where both funds and personnel are scarce, construction of water supply and sewerage infrastructure is in demand. To solve these issues, utilization of know-how, personnel and funds in the private sector has being activated such as, increasing the number of PPP (Public Private Partnership) projects.

Meanwhile, in the global water market, French and British water giants have huge shares in PPP backed by their accumulated know-how in design, construction, operation, maintenance and management of water treatment facilities as well as in business operations and fee collection in one line. For both Swing and Sekisui Chemical, they have been seeking a partner in order to fulfill the value chain (equipment supply, design, construction, operation, maintenance and management, customer service and business operation), which is the essential condition to enter the market.

2. Aim of the business alliance

We aim to combine the knowledge of EPC, O&M, and PPP in the water treatment business that Swing has accumulated in Japan and overseas, with Sekisui Chemical's expertise in offering a value chain in water pipe business (particularly in pipe stock management) in order to provide one stop solution for the management and operation of water-related facilities and pipes to maintain water infrastructure in safe manner. As a one-stop solution provider, we will strengthen this role, not only for the market in Japan, but also for overseas market including coming PPP projects as well.

3. Details of the business alliance

Swing and Sekisui Chemical will jointly promote business as follows in the areas of design, construction, maintenance and management of water supply and sewerage pipes and water treatment facilities.
1) Sales activities aiming to secure compound consignment projects (pipe work and a processing facility are combined and outsourced) in Japan and overseas

　2) Completion of the projects secured through the sales activities

　3) Establishment and operation of an SPC (special purpose company) when required for order placement

The roles of each company in promoting the above are as follows.

<Swing's role>

　All aspects of the business that contribute to secure comprehensive orders for water treatment facilities

　(1) Investigation and diagnosis of water treatment facilities

　(2) Design and consulting service for water treatment facilities

　(3) Preparation of long-term repair plan and upgrade plan for water treatment facilities

　(4) Upgrading and new construction of water treatment facilities

　(5) Operation, maintenance and inspection of water treatment facilities, and water quality analysis

　(6) Sale of equipment and chemicals for water treatment facilities

　(7) Overall operation and management of water treatment facilities

All aspects of the business that contribute to securing comprehensive orders for pipes

　(1) Investigation and diagnosis of pipes (diagnosis of aging, deteriorating and leaking pipes)

　(2) Preparation of maintenance and management plans, and long-term plans for pipes

(3) Design work to renew, update, and newly lay pipes

(4) Building work to renew, update, and newly lay pipes

(5) Maintenance and management of pipelines (operations such as daily inspection and cleaning services)

(6) Supply of materials and equipment for pipes

(7) Supply of pipe management systems and their operation

4. Business objectives

Joint sales activities and joint order-taking activities commence in May 2011. We aim to have sales exceeding 50 billion yen (sales of two companies combined) in five years in 2016.

[Reference]

　1) Head Office 7-18, Konan 1-chome, Minato-ku, Tokyo, Japan

　2) Representative Masayoshi Hirose, President and Representative Director

　3) Date of incorporation April 1977

　4) Paid-up capital 650 million yen

　5) Business description
          ① Design, construction, operation, maintenance and management of water
               treatment facilities (water supply, sewerage, sludge treatment, industrial water)
          ② Manufacturing and sale of water treatment chemicals

　6) Sales 67.9 billion yen (in the term ending March 2011)

　7) Number of employees 2,978 (in the term ending March 31, 2011)

　1) Head Office Osaka Head Office: 2-4-4 Nishitenma, Kita-ku, Osaka

　　　　　　　　　　 Tokyo Head Office: 2-3-17 Toranomon, Minato-ku, Tokyo

　2) Representative　　　Naofumi Negishi, President and Representative Director

　3) Date of incorporation March 1947

　4) Paid-up capital　　　100 billion yen

　5) Business description ①Manufacturing and sale of materials for water supply and sewerage systems, housing materials, and functional materials

② Manufacturing and sale of high-performance plastics for automotive materials, IT-related materials, and for the medical products

　　　　　　　　　　 ③ Manufacturing and sale of modular houses, and renovation of houses

　6) Sales　　　　 915.4 billion yen (in the term ending March 2011, on consolidated basis)

　7) Number of employees 19,770 (in the term ending March 2011, on a consolidated basis)