Regulatory, wholesale electricity price and forecast-variance risks in the electricity retail business

「As the volume of fixed-price contracts has increased, we have used electricity futures transactions for a certain portion of the contracted electricity volume to stabilize future earnings against a potential rise in market prices. Realized gains on electricity futures during the current consolidated fiscal year were ¥397 million, resulting in a profit of ¥107 million after taking into account the loss in this business segment.」

「To mitigate the risk of higher procurement prices for electricity sold, we used electricity futures derivatives, which resulted in valuation gains and losses becoming a factor that reduced ordinary profit during the current interim consolidated accounting period.」

「In the electricity retail business, electricity procured at market prices is subject to price fluctuations. In particular, when market prices surge, electricity procurement costs increase and worsen cash flow. To stabilize procurement, we use electricity futures transactions through the Tokyo Commodity Exchange, Inc. for a certain portion of the electricity volumes covered by sales contracts. Accordingly, differences between the market price at the fiscal year-end and the prices of electricity futures transactions that have not yet matured may affect our Group's operating results and financial position.」

「Operation of the capacity market, in which future electricity supply capacity is traded, has begun. The introduction of this system, which requires electricity retailers to bear the cost of maintaining power plants, will increase the burden on electricity consumers.」

「During the current quarterly accounting period, we focused on market-linked electricity sales and achieved a return to profitability.」

「We focused on acquiring sales contracts linked to the increasingly stable electricity market price and achieved a return to profitability.」

「In the electricity retail business in the Other segment, we focused on acquiring market-linked electricity supply contracts and achieved a certain level of results.」

「Accordingly, the suspension of new supply-and-demand contracts by the suppliers of this electricity has continued.」

「Under these circumstances, our electricity retailing business has been promoting the sale to customers of electricity generated at Group power plants as green electricity combined with traceable non-fossil certificates, but the suspension of aggressive contract expansion due to persistently high market prices has continued.」

「Under these conditions, our electricity retail business is promoting the sale to customers of power generated by Group power plants as green power bundled with traceable non-fossil certificates. However, the suspension of proactive contract expansion has continued because market prices have remained high.」

「In this industry, trading prices on the Japan Electric Power Exchange remained high, forcing electricity retailers that use market-based electricity to withdraw from the business.」

「Due to persistently high market prices, we decided to temporarily suspend proactive efforts to acquire contracts.」

「The electricity retail business is governed by the Electricity Business Act. If amendments to that Act or other laws and regulations related to electricity retailing change the systems governing electricity sales and purchases and cause a material change in the business structure, if trading prices on the Japan Electric Power Exchange, which underlie electricity trading, fluctuate substantially, or if electricity volumes traded with general transmission and distribution operators differ materially from planned values, the Group's results and financial position may be affected.」