Chubu Electric Power Co.,Inc. | April 2019 Regular Press Conference : President Katsuno's Message - Key Point of President's Regular Press Conference (2019)

Key Point of President's Regular Press Conference (2019) April 2019 Regular Press Conference : President Katsuno's Message

April 26, 2019

Chubu Electric Power Co.,Inc.

  • I will be discussing the following matters today:
    • Financial Results for FY2018
    • Executive appointments
    • New sales target

Financial Results for FY2018

  • Let me begin with our financial results for FY2018.
  • Our consolidated operating revenues for FY2018 totaled 3.35 trillion yen. Despite a decline in electric energy sold, Chuden has increased operating revenues by 181.7 billion yen year-on-year mainly due to an increase in fuel cost adjustment charges as well as an increase in surcharge and grant associated with the use of renewable energy.
  • Consolidated ordinary income came to 112.9 billion yen.
  • The figure represents a decline of 15.6 billion yen. Main contributing factors include expansion of time lag loss and a decline in electric energy sold despite a reduction in fuel cost attributable to the Nishi-Nagoya Thermal Power Station, cost reduction achievement in fuel procurement and other efforts to streamline our base costs.
  • When the effect of time lag loss is removed, the consolidated ordinary income totals around 163 billion yen, an increase of approx. 16 billion yen. This means Chuden have achieved the business goal of “achieving a consolidated ordinary income of 150 billion yen or more by FY2018.”
  • As for business outlook for FY2019…
  • We are anticipating a year-on-year increase in consolidated ordinary income to 185 billion yen in view of a drop in fuel cost and anticipation that the time lag loss will turn into time lag gain next year.
  • We strive to achieve a 150-billion-yen level for consolidated ordinary income excluding the effects of time lag gain by making Group-wide efforts to streamline our management and expand business income, even though we are fully aware of very tough cashflow status amidst the increased sales competition and an adverse accounting impact of the transfer of our thermal power generation business to JERA.
  • Next, I would like to talk about dividends.
  • With regard to returns to shareholders, as announced last month, Chuden strives to maintain stable dividend payout as the basic stance, while working toward achieving the consolidated payout ratio of 30% or greater, passing on our income growth to shareholders.
  • Chuden plans to pay 25 yen per share as a year-end dividend for FY2018 in view of our success in achieving the business goal and in consideration of mid- to long-term cashflow and fiscal conditions in general. The payout ratio excluding the effects of time lag adjustment is expected to be 29.4%.
  • As for year-end dividend for FY2019, in line with Chuden’s basic policy of providing shareholder returns that reflect income growth while maintaining stable dividend payout, we plan to pay 50 yen per share per annum. The payout ratio excluding the effects of time lag adjustment is expected to be around 32%.
  • This is all from me about our financial results.

Executive appointments

  • Let me now move onto executive appointments.
  • Chuden shifted into a new executive structure on April 1. Candidate directors and auditors have been selected, pending approval by the regular general shareholders’ meetings to be convened on June 26.
  • The latest round of executive appointments includes the creation of a new external director position to harness a greater scope of expertise so as to gain capability in swiftly and accurately addressing rapid changes in our business environment. The new management team has been designed to achieve solid corporate governance, providing adequate supervision over business execution.
  • We plan to reappoint ten directors and appoint two new directors.
  • New director candidates are Mr. Hiraiwa as a senior managing director and Daido Steel Chairman, Mr. Tadashi Shimao, as an external director.
  • Mr. Shimao has rich experience and extensive knowledge as a corporate executive, having served as Daido Steel’s President and now its Chairman and also heading the Chubu Association of Corporate Executives.
  • Mr. Yoshinori Masuda, who is leaving the directorship, will continue to serve Chuden as the Executive Vice President, Executive Officer and the head of the Business Creation Division to promote initiatives for exploring new businesses in our commitment to fulfilling our growth strategy.
  • As for auditor appointments…
  • New auditor candidate, Mr. Shuichi Terada, was our former Executive Officer in charge of the legal department, and is currently serving as director of Chuden Group company, Chubuseiki.
  • Our current full-time corporate auditor, Mr. Kenichi Suzuki, is leaving the position.
  • Under the new management team, Chuden will continue to pursue its unflagging mission of delivering environmentally-considerate high-quality energy safely, affordably and stably, while exploring further evolution by working on creating new value that reflects the changes of the times.
  • Your continued support is appreciated.

New sales target

  • Moving on, I will now talk about our new sales target in the residential segment.
  • Competition is intensifying with new players entering the market, offering diverse service options combining energy sale with their own non-energy services.
  • At the same time, the world is moving toward an ultra-smart society, dubbed “Society 5.0,” amidst social calls for low-carbon living and advancement in digital technology.
  • Shift from the IoT to IoH in digital technology is enabling the delivery of services that can cater to a variety of customer-oriented needs, e.g. offering a comfortable indoor environment at homes, assisting energy saving and facilitating households to band together for community-based crime prevention, emergency preparedness and security monitoring.
  • Having customers use these services would further improve ESG activities.
  • We call Chuden’s infrastructures that enable these services as “community support infrastructures.”
  • In terms of sales strategy, it is crucial to offer various services that utilize new infrastructures and points of customer contact they provide, in addition to existing contact points.
  • From this perspective, Chuden has decided to direct its emphasis on sales activities that combine energy supply with new services, in addition to the existing energy-trading program called “Korekara Denki.” Accordingly, we have set a new target of selling “100,000 contracts packaging electricity / gas together with services in the Chubu area by the end of FY2020.”
  • In delivering these services, we are reinforcing the structure of our new sales subsidiary, Chuden Energy Services, with a view to offer services that contribute to energy saving, energy management, crime prevention and security monitoring as well as other services such as house cleaning and sales / leasing of electrical and gas equipment.
  • Chuden will continue to combine the sale of electricity and gas with services that facilitate the establishment of a low-carbon society and resolve social issues, and offer them as community support infrastructures, thereby building more in-depth ESG management while enhancing our sustainable growth and corporate value.

Conclusion

  • Finally, let me offer a few words about our company split.
  • In April 2020, Chuden will undergo legally-mandated separation between power transmission / distribution business and retail electricity business. This fiscal year, we have embraced a business approach of managing power generation and retail businesses with greater autonomy with the aim of establishing a business model for the arrival of a new age in the energy industry.
  • Accordingly, we are making steady progress in preparation for the company split in April next year, today signing absorption-type split agreements with preparation companies established for setting up spinoff businesses for handling general power transmission / distribution and retail electricity.
  • Chuden itself will evolve into new forms but we will continue to uphold our mission of delivering environmentally-considerate high-quality energy safely, affordably and stably.
  • Even after the company split, we will be fulfilling our unflagging mission by organizing the collaboration of separated business operations to ensure supply stability. Furthermore, we will offer services that transcend the framework of the energy supply business to create new business, thereby achieving sustainable business growth.
  • This ends my presentation.