Sales and cost structure reforms to offset the decline in revenue from the electricity trading business

「For high-voltage customers, total contracted capacity at the end of the current consolidated fiscal year increased approximately 16.4% from the end of the previous consolidated fiscal year as a result of strengthening the sales agency network. For low-voltage corporate customers, whose acquisition efforts have been strengthened, new orders exceeded expectations through measures including developing new sales agencies and strengthening relationships with existing agencies, increasing approximately 77.2% from the end of the previous consolidated fiscal year. For individual low-voltage customers, although the number of contracts had continued to decline, the company actively conducted promotional activities to acquire customers, increasing the number of contracts approximately 79.2% from the end of the previous consolidated fiscal year and steadily building its contract base.」

「Electricity sales volume increased by approximately 12% year on year and continued to progress steadily. New orders from low-voltage corporate customers, whose acquisition efforts have been strengthened, exceeded expectations through measures including developing new sales agencies and strengthening relationships with existing agencies, enabling the company to steadily increase the number of contracts.」

「For high-voltage customers, the company fully transitioned to new plans in July 2023 in response to the start of capacity contribution payments in the current fiscal year. This increased cancellations during the same period and temporarily reduced total contracted capacity (kW) for high-voltage customers. However, as a result of strengthening its sales agency network and actively launching new plans, total contracted capacity at the end of the current consolidated fiscal year exceeded the level at the end of the previous consolidated fiscal year and reached a record high.」

「For high-voltage customers, the company fully transitioned to new plans in July 2023 in response to the start of capacity contribution payments in the current fiscal year. This increased cancellations during the same period and temporarily reduced total contracted capacity (kW) for high-voltage customers. However, as a result of strengthening its sales agency network and actively launching new plans, total contracted capacity had recovered by the end of the interim period to a level above that of the previous interim period. For individual low-voltage customers, the company resumed accepting new applications in April of the previous year, but contracts have continued to decline because measures to acquire new customers through web marketing were implemented and strengthened later than initially expected. Meanwhile, new orders from low-voltage corporate customers, whose acquisition efforts have been strengthened, have exceeded expectations as a result of developing new sales agencies and strengthening relationships with existing agencies, enabling the company to steadily increase the number of contracts.」

「From the current consolidated fiscal year, we established a structure capable of responding to fluctuations in JEPX market prices without using futures by appropriately combining three pricing plans, namely market-linked, fixed-price and mixed market-linked/fixed-price plans, and enabled profit and loss recognition unaffected by gains or losses on futures valuation.」

「Through the previous consolidated fiscal year, the company used electricity futures to fix the price of a certain proportion of procured electricity to hedge the risk of surging JEPX market prices, resulting in substantial accounting fluctuations in profit and loss due to changes in electricity futures prices. During the nine-month period of the current consolidated fiscal year, however, the company combined market-linked, fixed-price and mixed plans for customer contracts, making it possible to appropriately pass the risk of JEPX price fluctuations through to retail electricity prices without trading electricity futures. In addition, JEPX prices remained low, keeping procurement costs on JEPX under control, and the company was able to secure stable profit. Accordingly, segment sales were ¥14,205 million, down 20.8% year on year, while segment profit (operating profit) was ¥1,708 million, compared with a segment loss (operating loss) of ¥1,166 million in the previous year.」

「During the six-month period of the current consolidated fiscal year, the company secured a certain level of profit by promoting the shift in customer contracts to market-linked plans and allocating power procured through always-on backup to fixed-price plans. By appropriately passing the risk of electricity market price fluctuations through to retail prices without trading electricity futures, it was able to secure a certain level of profit. Accordingly, segment sales were ¥9,703 million, down 16.3% year on year, while segment profit (operating profit) was ¥1,222 million, compared with a segment loss (operating loss) of ¥414 million in the previous year.」

「Through the previous consolidated fiscal year, the company used electricity futures to fix the price of a certain proportion of procured electricity. However, as customer contracts increasingly shifted to market-linked plans, and power procured through always-on backup was allocated to fixed-price plans, it was no longer necessary to fix procured power through electricity futures.」

「In the energy business, following the surge in electricity trading prices on the Japan Electric Power Exchange (JEPX) from mid-December 2020 to late January 2021, the company has diversified its power procurement methods, including the use of bilateral transactions and electricity futures, to ensure stable electricity supply to customers.」

「From the third quarter of the current consolidated fiscal year, the company established a policy for responding to the capacity market and promoted sales activities in light of capacity market charges being determined based on maximum future supply and demand volumes. Although total contracted capacity temporarily declined because the company did not extend some contracts with customers whose contract periods had expired, both sales and profit exceeded the previous year. Accordingly, segment sales were ¥9,356 million, up 114.1% year on year, and segment profit (operating profit) was ¥501 million, up 387.6%.」

「During the six-month period of the current consolidated fiscal year, the retail electricity business increased the number of contracts, partly because development of low-voltage customers continued to progress steadily. The company also responded appropriately to the surge in electricity prices on the Japan Electric Power Exchange (JEPX) from mid-December 2020 to late January 2021, allowing the total contracted capacity of high-voltage customers to remain stable. In addition, the company recovered part of the costs of responding to the electricity price surge from customers, resulting in sales and profit both exceeding the previous year. Accordingly, segment sales were ¥6,121 million, up 118.2% year on year, and segment profit (operating profit) was ¥708 million, up 251.3%.」

「The number of contracts increased, partly because development of low-voltage customers continued to progress steadily. In addition, the company responded appropriately to the surge in electricity prices on the Japan Electric Power Exchange (JEPX) from mid-December 2020 to late January 2021, allowing the total contracted capacity of high-voltage customers to remain stable. Because the company also recovered part of the costs of responding to the electricity price surge from customers, both sales and profit exceeded the same quarter of the previous year.」

「These initiatives may cause the full-year gross margin to decline, but we believe they will also help smooth cash flows from electricity procurement and limit fluctuations in customers’ electricity costs, providing benefits to the company as well.」

「In the retail electricity business, electricity consumption declined as factory operating rates fell due to the impact of COVID-19. However, the number of electricity contracts increased steadily as the company accelerated development of low-voltage customers, and it also increased contracts with high-voltage customers.」

「In the retail electricity business, electricity consumption declined as factory operating rates fell due to the impact of COVID-19. However, the number of electricity contracts increased steadily as the company accelerated development of low-voltage customers, and it also increased contracts with high-voltage customers. In addition, summer electricity procurement prices remained lower than usual, resulting in sales and profit both exceeding the same quarter of the previous year. Accordingly, segment sales were ¥3,117 million, up 6.1% year on year, and segment profit (operating profit) was ¥283 million, up 29.3%.」

「In the retail electricity business, the number of electricity contracts increased steadily as the company accelerated development of low-voltage customers, while it also increased contracts with high-voltage customers. As a result, both sales and profit exceeded the same quarter of the previous year. Accordingly, segment sales were ¥1,291 million, up 4.7% year on year, and segment profit (operating profit) was ¥152 million, up 91.4%.」

「In the electricity trading business, we will further advance our entry into the low-voltage market by offering a variety of plans and will continue working to optimize unit electricity procurement costs.」

「In the electricity trading business, the company continued to focus on high-voltage customers while developing low-voltage customers through activities including exhibiting at the Rental Housing Fair. In the previous year, extremely hot weather increased electricity demand, driving up procurement prices and pressuring profit. During the nine-month period of the current consolidated fiscal year, however, weather was milder than in the previous year even during summer, electricity demand did not increase, and the company worked to contain electricity procurement prices. As a result, procurement prices remained relatively stable. Accordingly, segment sales were ¥4,455 million, down 13.7% year on year, while segment profit (operating profit) was ¥368 million, up 95.9%.」

「In the energy-related business, the company operates electricity trading and energy-saving consulting businesses, and has generated synergies between them by expanding the solutions it provides. Specifically, it proposes energy-saving consulting and sells energy-saving equipment and facilities to electricity trading customers. Conversely, it proposes electricity supply and demand contracts and sells energy management systems to energy-saving consulting customers.」

「In the electricity trading business, the company continued to focus on high-voltage customers while also developing low-voltage customers through activities including exhibiting at the Rental Housing Fair. In the previous period, electricity demand increased in the first quarter amid signs of extremely hot weather, but demand was subdued in the first quarter under review. In addition, the company fundamentally reviewed its business partners from a profitability perspective, resulting in sales and profit below the same quarter of the previous year.」

「In the electricity trading business, the company continued to focus on high-voltage customers while launching “Remix Denki” as a brand for low-voltage customers such as households and small businesses, and worked to raise awareness by exhibiting at events including the Rental Housing Fair. Credit card payment of electricity bills was already widespread among low-voltage customers, but from November 2018 the company also made it available to high-voltage customers to differentiate its service. It further expanded the service by introducing a points program offering rewards based on transaction amounts. These initiatives increased the number of electricity supply and demand contracts and contracted electricity volumes. The company also revised its contract structure and took other measures to level out seasonal fluctuations in profit, resulting in sales and profit both exceeding those of the previous consolidated fiscal year.」

「In the electricity trading business, the company targeted low-voltage customers while continuing to focus on high-voltage customers, and sales exceeded the same period of the previous year as a result of efforts to increase the number of electricity supply and demand contracts and contracted electricity volumes. Although procurement prices had stabilized after rising due to extremely hot weather, profit fell below the same period of the previous year because of a temporary increase in costs associated with reviewing electricity contracts. Accordingly, segment sales were ¥5,159 million, up 25.1% year on year, and segment profit (operating profit) was ¥187 million, up 7.4%.」

「In the electricity trading business, the company supplied retail electricity mainly to high-voltage customers and also to low-voltage customers. As a result of efforts to increase the number of electricity supply and demand contracts and contracted electricity volumes outside its main target areas as well, sales exceeded the same period of the previous year.」

「In the electricity trading business, the company supplied retail electricity mainly to high-voltage customers and also to low-voltage customers. As a result of efforts to increase the number of electricity supply and demand contracts and contracted electricity volumes, both sales and profit exceeded the same quarter of the previous year. Accordingly, segment sales were ¥1,606 million, up 115.5% year on year, and segment profit (operating profit) was ¥199 million, compared with a segment loss (operating loss) of ¥32 million in the same quarter of the previous year.」

「In the next period, we will work to expand recurring revenue opportunities by providing comprehensive energy solutions consistently and differentiating ourselves, particularly through our services. As part of these efforts, and to make effective use of customer contact opportunities and prepare for intensifying competition, we integrated the divisions responsible for energy-related businesses into a single division. We have thereby moved to an organizational structure capable of providing total energy solutions more smoothly than before, from retail electricity sales through the sale of energy-saving products and energy-saving consulting.」

「The electricity trading business primarily supplies retail electricity to high-voltage customers. During the cumulative third quarter under review, the Company began retail electricity supply operations in the Chugoku Electric Power, Shikoku Electric Power and Kyushu Electric Power service areas, and also began sales to low-voltage customers, working to expand the number of electricity supply-and-demand contracts and contracted electricity volume.」

「During the cumulative second quarter under review, the Company began retail electricity supply operations in the Chugoku Electric Power, Shikoku Electric Power and Kyushu Electric Power service areas. It also introduced its own fuel cost adjustment mechanism and switched to a pricing structure linked to the Company's electricity procurement costs. As a result, it promoted the stabilization of electricity supply prices for customers and secured and stabilized the outlook for earnings from the business. Although revenue from the business fell slightly short of the initial plan, performance remained solid. In addition, profit margins temporarily declined during the cumulative second quarter under review due to a seasonal increase in electricity procurement costs in summer. However, because the electricity trading business is a recurring-revenue business and the contract renewal rate among existing customers remained high at over 90%, the Company secured profits that exceeded the initial plan overall.」

「During the cumulative first quarter under review, the Company began retail electricity supply operations in the Chugoku Electric Power, Shikoku Electric Power and Kyushu Electric Power service areas. In addition, partly because its agent strategy, on which it had focused since the previous fiscal year, proved effective, the number of electricity supply-and-demand contracts and contracted electricity volume grew substantially.」

「In its energy-related business, against the backdrop of full electricity retail liberalization in April 2016, the Company successively expanded its electricity retail supply areas from the Tokyo Electric Power and Chubu Electric Power service areas to the Kansai Electric Power and Tohoku Electric Power service areas, and worked actively to acquire electricity supply-and-demand contracts.」

「In its energy-related business, the Company sought to acquire electricity supply-and-demand contracts in the Tokyo Electric Power, Chubu Electric Power and Kansai Electric Power service areas through a review of its cost structure, development of agents and other measures, in order to offset the decline in revenue from its electricity trading business resulting from the termination of its business alliance with Japan Logitec Cooperative Association in November 2015. It also continued to enhance and strengthen its electricity supply-and-demand management structure in preparation for an increase in such contracts.」

「In its energy-related business, the Company sought to acquire electricity supply-and-demand contracts in the Tokyo Electric Power and Chubu Electric Power service areas through a review of its cost structure, development of agents and other measures, in order to offset the decline in revenue from its electricity trading business resulting from the termination of its business alliance with Japan Logitec Cooperative Association in November 2015. At the same time, it continued to enhance and strengthen its electricity supply-and-demand management structure in preparation for an increase in such contracts. In addition, it began retail electricity operations in the Kansai Electric Power service area in September 2016 and expanded its sales area.」

「In its energy-related business, the Company sought to acquire electricity supply-and-demand contracts in the Tokyo Electric Power and Chubu Electric Power service areas through a review of its cost structure, development of agents and other measures, while actively developing customers for energy-saving consulting services, in order to offset the decline in revenue from its electricity trading business resulting from the termination of its business alliance with Japan Logitec Cooperative Association in November 2015.」