Energy

1 4 FINANCING STRUCTURES Many hydrogen projects currently being considered are scaled for captive local usage, and thus the capital expenditure required to implement the projects cannot be supported by asset-based financing structures. Developers often seek support from national and regional government organisations to provide funding and subsidies for such projects. For the larger, more capital-intensive projects, we expect sponsors to be seeking non- or limited-recourse project financing. Naturally, such projects will need to demonstrate the right economic fundamentals, such as low-cost renewable power (in the case of green hydrogen), strong offtake arrangements and supportive regulatory frameworks. We also expect to see significant export credit agency (ECA) and development finance institution (DFI) backed funding, particularly in the early stages of hydrogen project development. In line with the Japanese government's hydrogen initiatives, we expect to see significant interest in hydrogen projects by Japanese export credit agencies and development banks, both through debt financing and equity investments. For example, the Japan Bank for International Cooperation (JBIC) Act was amended in January 2020 to enable JBIC to offer a range of financial products in support of its clients' upstream, midstream and downstream hydrogen and low- carbon ammonia projects. Further, in January 2021, JBIC established the Post Covid-19 Growth Facility, which is available to fund various projects that are expected to reduce greenhouse gases or contribute to preserving the global environment, including hydrogen projects. As part of its entry into the hydrogen industry, in 2020 JBIC invested, together with Mitsui, in FirstElement Fuel (FEF), the funds of which were used to expand FEF's hydrogen station network in the US. Similarly, in July 2019, Nippon Export & Investment Insurance (NEXI) launched its Loan Insurance for Green Innovation, which provides an increased commercial risk coverage rate of 97.5% and can be utilized for projects involving hydrogen technology. The Development Bank of Japan (DBJ) has also expressed its commitment to growing the hydrogen value chain. In February 2021, as part of METI's Green Growth Strategy, DBJ established a green investment promotion fund through which DBJ may invest equity in, or provide mezzanine finance for, certain "green" businesses and projects including hydrogen. DBJ was also involved as a research partner in the Brunei AHEAD project during its demonstration phase and has indicated its willingness to continue its involvement through to project commercialization. INSIGHTS 02 Japan – Key Link in Hydrogen Value Chain

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