"K" Line

Kawasaki Kisen Kaisha, Ltd. (“K” LINE) has conducted a comprehensive assessment of risks and opportunities by introducing the LEAP approach* proposed by the TNFD to evaluate environmental risks and nature-related impacts of our business and consider appropriate responses as part of our information disclosure under the TNFD framework.

The final version of the TNFD’s formal framework was released in September 2023. Our current analysis of biodiversity is based on the beta version of the framework (versions 0.1 to 0.4) before the official version was issued. The LEAP approach was conducted under the supervision of SOCOTEC Certification Japan. The results of the assessment and analysis, as well as the measures taken, have been compiled and disclosed as information.

Our business is dependent on natural capital, mainly in the oceans, and we consider efforts to address not only climate change issues but also biodiversity conservation, mainly in the oceans, to be one of the important themes in our business activities.

Based on a comprehensive understanding of climate change and natural capital, we will continue to enhance our assessment, analysis, and disclosure of information in order to strengthen risk and opportunity management and build a sustainable future.

* It consists of four phases: Locate (discover points of contact with nature) Evaluate (assess dependence on and impacts on nature) Assess (evaluate significant risks and opportunities) Prepare (prepare responses and reporting), an integrated assessment process for managing nature-related risks and opportunities advocated by TNFD for information disclosure. Please refer to our website for details on LEAP analysis.

https://www.kline.co.jp/en/sustainability/environment/impact_mitigation.html

On October 12th, 2023, “the Emergency Response Exercise” was carried out as a part of training of optimum emergency response prepared for any major maritime accidents. The scenario of the exercise developed that an LNG vessel owned by our subsidiary has run aground in Tokyo Bay while attempting to avoid a fishing vessel suddenly approaching in Uraga Channel. We confirmed a series of emergency response process by setting crisis-management headquarters upon receiving an incident report, establishing communication channel with Ship Management company and conducting a mock press conference at the end of the exercise.

Contact procedures including with online tools were confirmed as well, and a mock press conference on the accident was held simultaneously in person and online. During the press conference, journalists asked many questions, which made a tense atmosphere as if it were a real one.

While growing interest on safety and environmental impact reduction over the world, we are preparing for any unexpected circumstances through the “Emergency Response Exercise”. Furthermore, we will continue our commitment to safe operations to contribute to society by providing industry-leading safe and optimal services with putting our customers first.

Japan Suiso Energy, Ltd.

Kawasaki Kisen Kaisha, Ltd.

Mitsui O.S.K. Lines, Ltd.

Nippon Yusen Kabushiki Kaisha

On September 12 2023, Japan Suiso Energy, Ltd. (JSE)*, and three Japanese shipping companies, Kawasaki Kisen Kaisha, Ltd. (“K” LINE), Mitsui O.S.K. Lines, Ltd. (MOL), and Nippon Yusen Kabushiki Kaisha (NYK), have agreed to join JSE Ocean, Ltd. (JSE Ocean), a subsidiary of JSE. JSE remains the majority shareholder with 50.2% of stock, whilst the shipping companies hold 16.6% each.

Hydrogen in Japan

The expectation for hydrogen as a clean energy is increasing worldwide as we strive to achieve a decarbonized society. Japan’s Basic Hydrogen Strategy, revised by the Japanese government in June 2023, identifies hydrogen as the alternative to fossil fuels as it targets decarbonisation. In the Strategy Japan commits to a target of 3 million tons/year of hydrogen by 2030, 12 million tons/year by 2040, and 20 million tons/year by 2050.

The target hydrogen supply cost is approximately JPY30 /Nm3 in 2030 and JPY20 /Nm3 in 2050 at the point of arrival in Japan. To achieve these price and volume targets, and create a secure global supply chain, transport by ship is crucial.

Background

In August 2021, Japan’sNew Energy and Industrial Technology Development Organisation (NEDO), allocated a grant from the Japanese government’s Green Innovation Fund to JSE, Iwatani Corporation and ENEOS Corporation for the “Liquefied Hydrogen Supply Chain Commercialization Demonstration Project”.

In this project, JSE will establish the world’s first large-scale hydrogen liquefaction and transportation technology, involving an initial 30,000 tons of hydrogen per year before upscaling. JSE will also demonstrate a comprehensive and reliable global liquefied hydrogen (LH2) supply chain, covering hydrogen production, liquefaction, export from Australia, marine transportation, and import.

About JSE Ocean

JSE Ocean was established in January 2023 to research the marine transportation of LH2 by using a large-scale LH2 carrier. JSE, and the three Japanese shipping companies with extensive knowledge and experience in the energy transport business, will establish the marine transport of LH2 at a commercial scale through JSE Ocean.

We will collaborate to explore the safety and efficient operation of the world’s first large-scale LH2 carrier by 2024, as well as develop a viable marine transportation business scheme. Furthermore, the LH2 carrier will be powered by hydrogen, significantly reducing CO2 emissions during operation.

* JSE was established in June 2021 with the main objectives of research, planning, management, and investment in the international supply chain of LH2. Current shareholder composition is Kawasaki Heavy Industries, Ltd. 66.6% Iwatani Corporation 33.4%.

Overview of Each Company

JSE Ocean, Ltd.

Established: January 2023

Address: 14 5, Kaigan 1-chome, Minato-ku, Tokyo

Representative: Kenjiro Shindo, President and CEO

Japan Suiso Energy, Ltd.

Established: June 2021

Address: Toranomon Seiwa Building 10 F, 1-2-3 Toranomon, Minato-ku, Tokyo

Representative: Eiichi Harada, President and CEO

Kawasaki Kisen Kaisha, Ltd.

Established: April 1919

Address: Iino Building, 1-1, Uchisaiwaicho 2-chome, Chiyoda-ku, Tokyo

Representative: Yukikazu Myochin, Representative Director, President and CEO

Mitsui O.S.K. Lines, Ltd.

Established: May 1884

Address: 2-1-1 Toranomon, Minato-ku, Tokyo

Representative: Takeshi Hashimoto, President and CEO

Nippon Yusen Kabushiki Kaisha

Established: September 1885

Address: 2-3-2 Marunouchi, Chiyoda-ku, Tokyo

Representative: Takaya Soga, President and CEO

Kawasaki Kisen Kaisha., Ltd. (“K” LINE) carried out a test operation of the “K” LINE-operated supramax bulker “ALBION BAY” using marine biofuels last year, with the cooperation of JFE Steel Corporation and Sumitomo Corporation. “K” LINE has now established a system for certifying the amount of CO2 reduction from marine biofuels and issuing certificates, in association with Nippon Kaiji Kyokai（ClassNK） and has now certified the amount of CO2 reduction (heavy oil comparison) achieved during this test operation and issued a certificate.

Going forward, “K” LINE will continue to enhance corporate non-financial information disclosure to respond the needs from stakeholders, which is increasing year by year, as an initiative to quantitatively indicate the degree of environmental contributions of our customers’ supply chains (Scope 3 emissions).

“K” LINE group will continue to promote our low-carbon/decarbonization and low-carbon/decarbonized society in order to realize a sustainable society and increase its corporate value, based on its corporate principle of “Trust from all over the world as a logistics company rooted in the shipping industry, we help make the lives of people more affluent.”

*1: August 26, 2022: “K” LINE Conducts Trial Use of Marine Biofuel for Decarbonization on Supramax Bulker

https://www.kline.co.jp/en/news/drybulk/drybulk-4419591465105910059/main/0/link/220826EN.pdf

Kawasaki Kisen Kaisha, Ltd. (“K” LINE), TIS Inc. (“TIS”) and Miotsukushi Analytics Inc. (“Miotsukushi”) are pleased to announce that we have jointly developed a draft survey application. The application is designed to use artificial intelligence (AI) to recognize the water surface and the draft mark from the image captured with a smartphone and to display the accurate draft level with the impact of waves removed on the screen to help accurately measure the draft*¹. At the end of July, the three companies jointly filed a patent application for this newly developed application.

The draft is measured to calculate the weight of cargo loaded onto dry bulk carriers. Today, it is done by crew members and surveyors using the naked eye. It is possible to survey the draft with the human eye. However, it is done at the anchorage, which in some ports may be susceptible to waves. There have been cases where draft measurements even by experienced maritime professionals display a greater margin of error than expected.

The jointly developed automatic draft survey application makes use of the “AI and data analysis service” offered by TIS and Miotsukushi and combines smartphones with the AI to supplement draft measurement that traditionally depended on the experience of maritime professionals with the AI. That helps equalize the degree of safety in navigation and cargo operations and maximize the cargo transportation volume.

At “K” LINE, digitalization is underway as a functional strategy for realizing the business strategy in the medium-term management plan*² announced in May 2022. With the use of data and digital technologies, “K” LINE will enhance the core values of safety, environmental conservation and quality in a bid to boost its competitiveness and corporate value.

*1:The vertical distance from the bottom of the hull to the water surface when the vessel is afloat

*2: Medium-term Management Plan (announced on May 9, 2022)

https://www.kline.co.jp/en/ir/management/strategy.html

Reference

DX Strategy 2023 (announced on December 22, 2022)

https://www.kline.co.jp/en/sustainability/dx_strategy.html

About TIS Inc. (https://www.tis.com/)

TIS Inc., a member of TIS INTEC Group, is a business partner to more than 3,000 companies in various sectors, including finance, industry, public services, and distribution services. It provides IT to support growth strategies, tackling various management challenges faced by its customers. Leveraging the industry knowledge and IT development capabilities it has cultivated over more than 50 years, TIS aims to realize a prosperous society by providing IT services that have been cocreated with society and customers in Japan and Asian region.

About Miotsukushi Analytics Co., Ltd. (https://mioana.com/)

Miotsukushi Analytics is a consulting firm that specializes in data analysis that combines statistics, machine learning, data mining, mathematical optimization and many other approaches with a focus on solving business problems. As a group of specialists that bring value to big data, it has an advantage not only in analytical processes but also in creating benefits for clients through the application of data sciences to business.

Features of the application

• A model of high-accuracy detection of the draft mark and the water surface with the use of deep learning technologies.
• A coordinate computing algorithm developed for calculating the draft through image detection.
• Finally calculating an accurate draft through different approaches including leveling of continuously measured draft levels.
• Designed for smartphones, the app can be used at sea where Internet access is unavailable since the processing is completed locally at the terminal.

Sumitomo Corporation (Sumitomo), Toho Gas Co., Ltd. (Toho Gas), Kawasaki Kisen Kaisha, Ltd. (“K” LINE) and Woodside Energy Ltd (Woodside) have signed a non-binding memorandum of understanding (MOU) to jointly conduct a feasibility study to establish a CCS (*1) value chain between Australia and Japan.

This study is to investigate the feasibility of establishing an entire CCS value chain among the four companies, whereby CO2 emissions from various industries and companies in the Chubu region, Japan, are hoped to be captured/accumulated, and liquefied by using such technology as CO2 separation and capture using unutilized LNG Cryogenic Energy” (*2) being developed by Toho Gas and transported to Australia by a low-temperature, low-pressure liquefied CO2 carrier for injection/storage at Australian storage site. Through this study, we will estimate the amount of CO2 to be captured, examine the optimal CO2 capture, accumulation and transportation methods, estimate the amount of CO2 that can be stored at storage sites in Australia, evaluate the necessary storage technologies and monitoring systems. In addition to the technical requirements, we will assess the relevant regulatory frameworks and the costs in each segment of the CCS value chain. The four companies aim to work together to assess the commercial viability of the CCS business.

The Japanese government has set a goal of reducing overall greenhouse gas (GHG) emissions to Net Zero by 2050 and implemented a policy to develop a business environment to initiate CCS projects by 2030 in its “Basic Policy for the Realization of GX” (*3). CCS is expected to play a very important role in achieving GHG emission reduction targets as one of the primary decarbonization solutions.

Sumitomo Corporation, Toho Gas, “K” LINE, and Woodside plan to exchange information, knowledge, and experiences through the progression of this CCS initiative.

■ Sumitomo Corporation
Sumitomo Corporation has highlighted mitigation of climate change as one of its key areas of focus and has committed to being carbon neutral by 2050. Sumitomo Corporation recognizes that CCUS (*4) is a key technology to combat climate change, and in January 2023 established a dedicated global CCUS team within the Energy Innovation Initiative. This new team will capitalize on existing resources to establish new business along the whole CCUS value chain, including CO2 separation and capture, transport and storage and utilization of the captured carbon.

■ Toho Gas
Toho Gas Group is now accelerating efforts to reduce carbon emissions and even support decarbonization of its customers based on the ‘Toho Gas Group 2050 Carbon Neutrality Initiative’, centered on the use of three energy sources of gas, hydrogen and electricity. In the field of CCUS, Toho Gas Group is focusing on the development of technologies, including CO2 separation, and capture, and will contribute to the realization of a sustainable society by implementing CCUS in society across the full value chain, including CO2 separation/capture at the customer’s site, utilization and storage.

■ “K” LINE
“K” LINE group is promoting a variety of initiatives to support the low-decarbonization of its own operations and the low-decarbonization of society in accordance with its long-term environmental policy, “Environmental Vision 2050”. In the field of CCS, we are planning to start the world’s first full-scale carbon capture and storage (CCS) transport from next year. We will apply the knowledge gained through the operation of these vessels, which will be launched sequentially in Japan and overseas, to future business development, including this project, with the aim of realizing a sustainable society and enhancing corporate value.

■ Woodside Energy
Woodside Energy is an Australian energy company that is progressing CCS initiatives

*1 CCS: Carbon Capture, and Storage.

*2 CO2 separation and capture technology using unutilized LNG cryogenic energy
Technology to separate/capture CO2 contained in factory exhaust gas by chemical absorption method using a small amount of energy by using unutilized LNG cryogenic energy. This technology was adopted by the New Energy and Industrial Technology Development Organization (NEDO) as a “Green Innovation Fund Project / Development of Technology for CO2 Separation, Capture, etc.”

*3 “Basic Policy for the Realization of GX” (Released as of Feb 10th, 2023 by METI (Ministry of Economy, Trade and Industry, JAPAN)

*4 CCUS: Carbon Capture, Utilization and Storage.

Kawasaki Kisen Kaisha, Ltd. (“K” LINE) is pleased to announce that in Japan it has today started using AIplicity Chat Powered by ChatGPT API (hereinafter “AIplicity Chat”) provided by Japan Business Systems, Inc. across “K” LINE offices in Japan.

It is an AI chat service based on the Azure OpenAI Service which Microsoft offers on its Azure cloud.

“K” LINE has been proactively assessing the various latest technologies to provide superior services in the rapidly-changing business environment. In this, it has studied ways to use ChatGPT. It has decided to quickly introduce this service for several purposes including the streamlining of employees’ operations, encouraging the utilization of technology, supporting the implementation of duties in a secure and reassuring environment and piquing employees’ curiosity and their spirit of trying new things.

To prevent data leaks, AIplicity Chat is designed in consideration of security. For example, it does not make secondary use of the information entered. It stores the information exchanged on an internal network of offices in Japan in the Azure tenant. “K” LINE has prepared guidelines for the use of generative AI and made them accessible across the company to make its personnel aware of the risks involved in inputting and outputting data and to draw their attention to these risks. In the future, it will discuss the utilization of AI from different perspectives and test the service itself to continually upgrade AIplicity Chat.

At “K” LINE, digitalization and efforts to actively use data and digital technologies are underway with a view toward laying a solid business foundation for the realization of the business strategy in the medium-term management plan announced in May 2022*¹. Through this digitalization, “K” LINE will continue to enhance its business processes and support its core values of safety, environmental conservation and quality to achieve continuous growth and increase its corporate value.

References

*¹Medium-term Management Plan (announced May 9, 2022)

https://www.kline.co.jp/en/ir/management/strategy.html

(Reference)

DX Strategy 2023 (announced on December 22, 2022)

https://www.kline.co.jp/en/sustainability/dx_strategy.html

Kawasaki Kisen Kaisha, Ltd. (“K” LINE) has adopted NavFleet as a fleet monitoring system platform provided by NAVTOR A.S. (NAVTOR), and witnessed by Norwegian Embassy in Japan, “K” LINE signed a MoU with NAVTOR regarding the development of “K” LINE 24/7/365 global fleet monitoring and support system through the use and functional expansion of NavFleet on August 25.

NAVTOR is Norway-based company developing the maritime DX business that is well known as a provider of electronic navigational charts, who has advanced software development capabilities and extensive experience.

NavFleet a total ship operations platform that provides a monitoring of vessel position, weather and route information on shore through automatic and seamless data communication via the cloud, and automatically alert users potential navigational risks to prevent navigational accidents. Future, NavFleet is capable to unite business critical data from various systems and provide overview of the fleet operation at a glance, while assisting to automate tasks, simplify regulatory compliance and ensure safe navigation of the fleet at all times.

“K” LINE is promoting the strengthening of a worldwide organization system covering Safety and Quality Management to achieve the business strategy in its medium-term management plan announced in 2022. “K” LINE will continue to develop its competitiveness and corporate value by targeting supremely safe navigation and transport quality management supported by the contributions of the knowledge and experience of competent human resources and the technologies complementing the human factors.

References

Business Briefing (Released on May 26, 2023) p. 57, 58

https://www.kline.co.jp/en/ir/library/event.html

Medium-term Management Plan (Released on May 9, 2022)

https://www.kline.co.jp/en/ir/management/strategy.html

Kawasaki Kisen Kaisha, Ltd. hereby make amendments to “Allocation of Treasury Stock to Board Benefit Trust” announced on August 2, 2023.

Reason for amendment

The amendment was made because the wording could have led to a misunderstanding that the stock repurchase and the allocation of treasury stock to the Board Benefit Trust were a series of events.

Details of the amendment (excerpt)

The amendments are underlined in below.

(Before amendment）

Kawasaki Kisen Kaisha, Ltd. (hereinafter referred to as “the Company”) stated in the “Notice Regarding Cancellation of Treasury Stock” announced on March 14, 2023 that, the Board Benefit Trust that was established for officers’ performance-based share remuneration was scheduled to acquire the Company’s stock by underwriting the disposal of the treasury stock for its expanded cap of funds around August, 2023.

However, the Company hereby announces that it plans to delay the allocation of treasury stock to the Board Benefit Trust stated above to around November 2023 following the completion of the stock repurchase by the Company during the period from August 3 to October 31, as announced today in the “Notification of Stock Repurchase and Share Buyback through Off-Auction Own Share Repurchase Trading (ToSTNeT-3)”

(After amendment)

Kawasaki Kisen Kaisha, Ltd. (hereinafter referred to as “the Company”) stated in the “Notice Regarding Cancellation of Treasury Stock” announced on March 14, 2023 that, the Board Benefit Trust that was established for officers’ performance-based share remuneration was scheduled to acquire the Company’s stock by underwriting the disposal of the treasury stock for its expanded cap of funds around August, 2023.

However, the Company hereby announces that it plans to delay the allocation of treasury stock to the Board Benefit Trust stated above until after the completion of the stock repurchase by the Company announced today in the “Notification of Stock Repurchase and Share Buyback through Off-Auction Own Share Repurchase Trading (ToSTNeT-3)”. The method and timing of the allocation will be announced as soon as it is decided.

Kawasaki Kisen Kaisha, Ltd. (“K” LINE) currently uses the Port of Kobe Rokko Island RC4-5 container terminals leased from Kobe-Osaka International Port Corporation. Talks with Kobe-Osaka International Port Corporation and Mitsui O.S.K. Lines have resulted in the conclusion of a written basic agreement on the relocation from the RC4-5 container terminals to PC14-17 container terminals (PC14-17), among the PC13-17 container terminals of the southern pier in the Port of Kobe Port Island (Stage 2) area, which is currently undergoing construction for expansion and functional reinforcement. We are coordinating the timing of the relocation with the parties involved by the end of fiscal year 2025, at which the construction will be completed.

The relocation will enhance the specifications of the terminals, thereby building an environment where large containerships can be accepted. With the relocation, we also expect to offer shipping companies and customers more flexibility for berth arrangement and for more convenience with transship containers.

After our involvement, PC14-17 will be among the largest container terminals in West Japan, handling nearly 40% of foreign trade containers at the Port of Kobe. The “K” LINE Group will offer high-quality services with Nitto Total Logistics Ltd., a company of the Group that operates the facilities.

Through this project, “K” LINE will actively and flexibly respond to customers’ needs, including the expected rise in demand for environmental and DX-related action. Based on the “K” LINE Environmental Vision 2050, we will also seek to preserve the environment through business activities and contribute to sustainable economic and social development in an effort to enhance our corporate value.