Delayed Customer Acquisition Due to Price Competition with Major Electric Power Companies and Others

「In addition, a quantitative supply capacity obligation is scheduled to be imposed in 2030. This will require electricity retailers to secure, using physical power sources, 50% of forecast demand three fiscal years before the actual supply-demand period and 70% one fiscal year before it, suggesting that smaller operators may find it difficult to continue operating.」

「The Act on Sophisticated Methods of Energy Supply Structures requires electricity retailers above a certain size to procure non-fossil certificates according to their sales volume. It sets a target of at least 44% non-fossil power sources in supplied electricity by 2030, and the government sets interim targets for each operator every year to increase the likelihood of achieving that target. As electricity retailers above a certain size, including us, must procure non-fossil certificates according to the volume of electricity sold, we are currently developing Non-FIT small-scale solar power plants. However, as our electricity retail business expands, our burden of procuring non-fossil certificates may increase in the future. In addition, electricity retailers must bear capacity market contribution payments to secure the overall supply capacity, or power generation volume, required nationwide, and the costs required for them to continue operating are expected to increase going forward.」

「The estimated total capacity market contribution payment to be borne by us for the fiscal year ending March 2025 is approximately ¥1,486 million. During the six-month period of the current interim consolidated fiscal year, approximately ¥745 million, representing six months' worth, was recorded as cost of sales and became a factor depressing profit.」

「The Act on Sophisticated Methods of Energy Supply Structures requires electricity retailers above a certain size to procure non-fossil certificates according to their sales volume. It sets a target of at least 44% non-fossil power sources in supplied electricity by 2030, and the government sets interim targets for each operator every year to increase the likelihood of achieving that target. As we do not own renewable energy power sources, procuring non-fossil certificates could become an excessive burden for us in the future. In addition, electricity retailers must bear capacity market contribution payments to secure the overall supply capacity, or power generation volume, required nationwide, and the costs required for them to continue operating are expected to increase going forward.」

「Wholesale electricity market trading prices surged abnormally for two consecutive periods, in winter 2020 and winter 2021. Going forward, there are concerns that electricity trading prices may surge, particularly when electricity supply and demand are tight, or that it may not be possible to procure the volume of electricity required to meet demand, due to factors including continued high fuel prices.」

「In addition, costs required for electricity retailers to continue operating are expected to increase going forward, due to requirements to decarbonize the electricity business toward carbon neutrality by 2050 and the emergence of capacity market contribution payments needed to secure the overall supply capacity, or power generation volume, required nationwide.」

「Following the enforcement of the amended Financial Instruments and Exchange Act, registration as a financial instruments business operator became necessary to handle crypto-asset (cryptocurrency) derivatives transactions. In addition, changes in the market environment, including these regulations and lower leverage limits, have led some existing crypto-asset (cryptocurrency) exchange operators to withdraw from crypto-asset (cryptocurrency) derivatives transactions.」

「In the financial-related business, operators must register as cryptocurrency exchange operators under the Payment Services Act and the Cabinet Office Ordinance Concerning Cryptocurrency Exchange Operators in order to conduct a cryptocurrency exchange business. As of 31 March 2019, there were 19 registered cryptocurrency exchange operators. However, while new registrations by major capital groups and others began in 2019, deemed cryptocurrency exchange operators have also withdrawn from the business, and the industry is rapidly undergoing selection and consolidation.」

「In addition, there has been an increase in cases in which, when a customer applies to switch to a new electricity retailer, the incumbent retailer attempts to prevent the switch by offering the customer special rates or contacting the customer to demand a cancellation fee. This practice is known as customer win-back sales. “As a result of this competitive environment, not only may our group’s share fail to grow as expected, but electricity procurement prices may rise while electricity selling prices decline.”」

「The Company pursued various measures, including reviewing its cost structure and developing agency sales channels, but the number of electricity supply-and-demand contracts and the contracted electricity volume both fell short of the initial plan due to intensified price competition with major electric utilities and other new electricity providers, as well as customers' cautiousness about switching contracts.」

「In addition to external factors such as intensifying price competition among electricity retailers and weak customer sentiment toward switching electricity supply contracts, our inability to sufficiently implement effective agency initiatives resulted in electricity trading business revenue falling significantly short of the initial budget.」

「We are reviewing our cost structure, developing agency relationships and expanding our sales area to rebuild our sales operations, but new customer acquisition did not progress as initially planned due to price competition with major electric power companies, including new power providers.」