Growth and Monetization of the Biomass Gasification Power Generation Business

「In addition, with the liquidation of the overseas subsidiary PJB completed in April 2022, we were able to substantially complete during the current consolidated fiscal year the restructuring of unprofitable businesses in which we had invested in the past without producing results, an initiative pursued since the previous consolidated fiscal year. These businesses included the renewable energy-related business operated by ZEエナジー, the overseas financial instruments trading business operated by PJB, and overseas investment projects of Traders Investment, among others.」

「At a meeting of the Board of Directors held on 13 July 2021, we resolved to transfer all shares in ZEエナジー, an equity-method affiliate, and carried out the share transfer on the same date. As a result, ZEエナジー has been removed from the scope of application of the equity method.」

「At a meeting of the Board of Directors held on 13 July 2021, we resolved to transfer all shares in ZEエナジー, an equity-method affiliate, and to waive the receivable, and carried out the share transfer and debt waiver on the same date. As a result, ZEエナジー was removed from the scope of application of the equity method.」

「From the first quarter of the current fiscal year, figures relating to the renewable energy-related business have been presented under "Other" in the segment information.」

「However, the woody biomass gasification power generation systems delivered had not reached profitable operation and remained under improvement. Accordingly, we determined that accepting external funding, whose collaboration effects were expected, to establish a new management structure aimed at further growth of ZEエナジー and technological improvement, while allocating more management resources to the growing FX business and financial systems development business, would contribute to increasing the corporate value of the group as a whole. We therefore resolved to transfer part of the shares.」

「Meanwhile, the renewable energy-related business operated by the subsidiary ZEエナジー continued improvement work on the woody biomass gasification power generation system at the Mogamimachi Satoyama Power Plant so that it could generate electricity at a level sufficient to secure profitability, but the target power output was not achieved. However, operating revenue for the cumulative third quarter increased to ¥99.470 million, up ¥89.754 million, or 923.8%, year on year, due to sales of carbonisation equipment and other products.」

「We continued improvement work on the woody biomass gasification power generation system at the Mogamimachi Satoyama Power Plant so that it could generate electricity at a level sufficient to secure profitability, but the target power output was not achieved. In addition, delivery and sales of the carbonisation equipment had been scheduled for the cumulative second quarter, but delivery was delayed until October 2019」

「The renewable energy-related business operated by the subsidiary ZEエナジー continued to focus on operating adjustments and improvement work aimed at achieving stable operation of the woody biomass gasification power generation system at the Mogamimachi Satoyama Power Plant, as electricity sales had still not reached a level sufficient to secure profitability. As a result, operating revenue from external customers for the cumulative first quarter was limited to ¥3.538 million, an increase of ¥0.937 million, or 36.0%, year on year. Although no large-scale orders for woody biomass gasification power generation systems or other equipment were won during the period, the company also focused on winning orders for mid-sized projects involving carbonisation equipment and worked to restore revenue.」

「With regard to securing dried wood chips with the low moisture content required for electricity sales, an installation project is under way for a new, high-capacity wood-chip dryer. As for current power generation, electricity is being sold intermittently when dried wood chips with a low moisture content are available, but sales volumes remain minimal.」

「Electricity sales from the Mogamimachi Satoyama Power Plant to the power company began in July 2017, but the plant has not yet achieved continuous operation on a profitable basis. Work is therefore proceeding to resolve, one by one, the issues that must be addressed for continuous operation. One particularly important issue was securing dried wood chips with a low moisture content, as required for electricity sales. To address this issue, construction of a new, higher-capacity wood-chip dryer is scheduled to begin in October 2018.」

「At Mogamimachi Satoyama Power Plant, electricity sales to the power company began in July 2017. We are focusing on improving the processing method for woody chips and installing new dryers so that sufficient quantities of woody chips with low moisture content can be secured for continuous operation. Regarding current power generation, electricity is being sold intermittently when woody chips with low moisture content are available. During the six months ended the first quarter, no new orders were received because work on the existing projects above was ongoing, and completed construction revenue remained at ¥2.415 million, down ¥25.563 million, or 91.4%, year on year.」

「During the nine months ended the third quarter, no new orders were received because work on each of the existing projects above was ongoing, and completed construction revenue remained at ¥51.999 million, down ¥552.298 million, or 91.4%, year on year.」

「Construction of company-owned power plants, which had been planned to be funded by proceeds from the exercise of these stock acquisition rights, will be put on hold for the time being due to the change in the intended use of the funds. However, because power generation using woody biomass power generation equipment with a capacity of less than 2,000 kW qualifies for a feed-in tariff of ¥40 per 1 kWh, higher than the purchase prices for other renewable energy sources such as solar power, it is a business capable of securing stable profits over the long term. We therefore plan to revise and implement the plan again once our cash flow position improves.」

「For Azumino Biomass Energy Center among the projects above, we received notice of contract termination from the ordering party, AIR WATER INC., on 31 July and are currently removing the woody biomass gasification power generation equipment at the site for reuse in the next project. At Mogamimachi Satoyama Power Plant, electricity sales to the power company began on 18 July.」

「Additional improvement work and adjustment operations are being carried out at each of these three woody biomass gasification power generation equipment sites, but none has yet reached completion and handover.」

「At Kabuchan-mura Mori Power Plant and Azumino Biomass Energy Center, we are currently selling electricity generated by woody biomass gasification power generation equipment on an ongoing basis while carrying out partial modifications and commissioning adjustments, with the customers' consent, to maximize and stabilize output. At Mogamimachi Satoyama Power Plant, the woody biomass gasification power generation equipment was connected to the power grid in January, and electricity sales are scheduled to begin after customer acceptance.」

「Delays in delivery of the woody biomass gasification power generation equipment at Kabuchan-mura Mori Power Plant and Azumino Biomass Energy Center, which had been scheduled for completion and handover by the end of the second quarter of the current consolidated fiscal year, as well as the resulting delay in the construction period for the equipment at Mogamimachi Satoyama Power Plant, caused completed construction revenue to remain at ¥495.273 million.」

「Because delivery of the biomass gasification power generation plant (1,900 kW), scheduled for completion and handover by the end of the first quarter of the current consolidated fiscal year, was pushed back to the second quarter, completed construction revenue was limited to ¥211.763 million, below the forecast.」

「In the next fiscal year, we expect ZE Energy's biomass gasification power generation plant business, which became a subsidiary during the current consolidated fiscal year, to enter a full-scale growth phase as the Group's second earnings pillar and contribute to consolidated results.」