Kawasaki's Environmental Plant Division to Become a Subsidiary

Jan. 31, 2006


 Tokyo, January 31, 2006 – Kawasaki Heavy Industries, Ltd. today announced that its Environmental Plant Division will be separated and merged with a wholly owned subsidiary, Kawasaki Environmental Plant Engineering, Co., Ltd. (KEE), on October 1, 2006.

 Since entering the eco-market, Kawasaki has actively developed technologies to treat an increasing amount of diversified municipal and industrial waste, as well as developing recycling facilities and equipment. The Company has also been enhancing the operational structure and cost-competitiveness of its environmental business, as outlined in its medium-term business plan, established in November 2000.

 However, the business has faced diminishing orders and fierce price competition in Japan, its main market. Although Kawasaki foresees a gradual recovery, in part due to the demand for replacements of existing plants, harsh market conditions are expected to continue for several more years. As a result, the Company has decided to separate the business.

 The bolstered KEE, which will be renamed on October 1, will pursue greater management agility and efficiency to boost operations and achieve greater cost competitiveness, as well as to pursue greater selectivity and focus by concentrating corporate resources into the development of new and core technologies. As environmental conservation becomes an increasingly important issue in society, the new company is committed to contributing to the prevention of global warming and to building a sustainable society through its recycling technologies and more effective use of the waste heat generated during treatment processes.

 Kawasaki will provide management support, including business opportunities, technology and funds, to the new company. Kawasaki has begun implementing policies that demonstrate the collective strength of the Kawasaki Heavy Industries Group, with the aim of further increasing the value of the Group as a whole.

Overview of New Company

Businesses to be transferred to the new company: Design, construction, sales and repair of municipal refuse incineration plants, industrial waste treatment plants, recycling facilities, water treatment plants (businesses under the Environmental Plant Division of the Gas Turbine & Machinery Company)
Sales in the fiscal year ended March 31, 2005 ¥42.3 billion
Date of separation: October 1, 2006 (plan)
Scheme of separation: Summary absorption-type demerger.
Business will be acquired by the successor corporation, Kawasaki Environmental Plant Engineering Co., Ltd., a wholly owned subsidiary of Kawasaki. (planned)
Name and Representative: TBD
Capital: Approx. ¥8.5 billion (funded 100% by Kawasaki)
Projected Sales: Approx. ¥42 billion for the fiscal year ending March 31, 2007