FY2021 Financial Results and April 2022 Regular Press Conference: President Hayashi’s Message

• Consolidated revenues for FY2021 totaled 2,705.1 billion yen. Application of accounting standard for revenue recognition and other factors pushed revenue down by 230.2 billion yen year-on-year.
• Although the accounting standard application offset expenses and revenue associated with the Feed-in Tariff Scheme for Renewable Energy and operating revenues declined significantly, there was no effect on income.
• Excluding the impact of the application of accounting standard, the revenue increase was 374.5 billion yen, mainly due to an increase in fuel cost adjustment resulting from higher fuel prices.
• Ordinary income recorded a loss of 59.3 billion yen. This is the first time in 8 years that the company has experienced a deficit since FY2013.
• The most prominent factor leading to this loss was the effect of 149 billion yen reduction in income that resulted as fuel prices rose, turning the time-lag gain into a loss, despite the increase in income that JERA achieved in its LNG and coal trading business.
• In addition, Chubu Electric Power Miraiz saw increases in power procurement costs as wholesale electric power exchange prices surged. The power transmission and distribution company, Chubu Electric Power Grid, also faced increasing costs associated with regulating power demand and supply. These and other factors led to a substantial 251.5 billion yen reduction in ordinary income year-on-year.
  
• Consolidated ordinary income excluding the time-lag was about 67 billion yen, a decrease on the order of 102 billion yen year-on-year.
• Net loss attributable to owners of the parent company was 43 billion yen, a decrease of 190.2 billion yen from the previous year, which was mainly due to a 20.2 billion yen reversal for fluctuation in water levels to curb the damage to net assets in Miraiz caused by the decline in profit and loss.

(Business forecast for FY2022)

• Our business forecast for FY2022 is undecided. Due to the impact of the Russian invasion of Ukraine and other factors, the trends in resource prices and wholesale electricity market prices, on which are our business forecast based, are uncertain and therefore it is difficult to predict the impact on the Group's electricity sales and procurement.
• We will promptly announce the forecast as soon as reasonable assumptions can be made.

(Dividends)

• Next, regarding dividends, the year-end dividends for FY2021 will be 25 yen per share, the same as the interim dividend, based on our policy of returning profits to shareholders, considering our profit growth and maintaining stable dividends.
• Based on the above policy, the annual dividends for FY2022 are expected to be 50 yen per share, a level that will continue as a stable dividend for FY2021.
• The Group's income and expenditures are in a very difficult situation due to the global surge in energy prices affected by the conflict between Russia and Ukraine, but we will make all-out efforts to improve our profit and loss, and aim for early recovery of profits in our core areas. 

• In order to overcome the extremely difficult situation of balance of payments we are currently facing, and to boldly take up the challenge of achieving the profit targets set forth in Management Vision 2.0, the Group has formulated today the medium-term management plan that outlines new medium-term management goals for the target year of FY2025 and initiatives in each business area.
• As a milestone toward achieving the goal of consolidated ordinary income over 250 billion yen by 2030, which was set in the previous management vision, our group had set the mid-term management goal of 170 billion yen in consolidated ordinary income for FY2021.
• We made steady progress toward this goal in FY2019 and FY2020, but in FY2021, as I mentioned earlier in the financial results, we fell far short of our goal, with consolidated ordinary income of about 67 billion yen, excluding time-lag effect.
• The Group has set a new mid-term management goal of aiming to quickly recover its current significantly deteriorated income and expenditure to around 150 billion yen, the level of profit before FY2020, and then achieve consolidated ordinary income of 180 billion yen or more in FY2025.
• In addition, we have set a target of ROIC of 3.0% or more in FY2025 to practice management with the awareness of capital efficiency.

(STEP 1: Profit recovery in core areas)

• To achieve our new goals, for STEP 1, we will work to recover profits in the domestic energy business, which is the foundation of our group.
• In order to cope with the current situation of soaring market prices, it is an urgent task to strengthen our ability to respond to the market. Chubu Electric Power, Miraiz and Power Grid will work together to enhance risk management and to strongly promote the cycle of risk identification, evaluation, countermeasures and monitoring.
• As a specific measure, Miraiz has been reviewing its power procurement portfolio, which includes expanding procurement volume through bilateral contracts to reduce procurement from the soaring wholesale power market.
• In addition, we will strengthen our resilience to fuel price fluctuations through the effective use of Demand Response, which optimizes the supply and demand of electricity by utilizing the energy resources owned by our customers.
• Regarding the reduction of power supply and demand adjustment costs in Power Grid, we will continue to examine the sharing of supply and demand adjustment costs in cooperation with Organization for Cross-regional Coordination of Transmission Operators, JAPAN and Transmission and Distribution Grid Council, and then work to reduce the volume and unit price of procurement.
• Meanwhile, JERA has been steadily profitable in the recent past and will continue to earn profits with appropriate risk management against market fluctuations.
• As another initiative of STEP 1, we will strengthen the "Kaizen activities" which have been promoted throughout the Group since FY2018, such as improving the efficiency of inspection work at hydroelectric power plants, to ensure cost reductions.
• Under the leadership of the dedicated organization established this month, the Group will promote streamlining and standardization of all operations from on-site work to desk work, hold "Kaizen Review Meetings", and conduct "Kaizen Competition" to commend good practices, thereby establishing and expanding Kaizen activities. 
• By a fundamental change in the awareness of each and every employee, we will thoroughly and deeply investigate cost reduction and productivity improvement through efficiency improvement measures based on ideas beyond the boundaries of conventional thinking, to increase earning power and make the Group lean but strong.

(STEP 2: Acquisition and expansion of new revenue sources)

• In order to achieve the profit target for FY2025, we intend to generate 30 billion yen of profit compared to FY2021 by acquiring and expanding new revenue sources through strategic investments and acquiring growth potential through shareholdings as STEP 2, while steadily recovering the profit level in our core areas.
• Regarding strategic investments, we will deliver new value to our customers and society by investing in growth areas such as global business and renewable energy business, and by providing customer-oriented services.
• Moreover, as for acquiring growth potential through shareholdings, we will strive to increase earnings through autonomous business operations of JERA and ES-CON Japan along with appropriate management of the Group as a whole.

(Transition to efficiency-oriented management)

• As the Group expands its strategic investments to achieve its mid-term management goals, we will place greater emphasis on the efficiency perspective including within the existing business areas, and as I mentioned earlier, we aim to achieve ROIC of 3.0% or more in FY2025.
• From now on, while setting targets tailored to the characteristics of each business, including Miraiz and Power Grid, and promoting efficient and autonomous management, Chubu Electric Power intends to generate returns that exceed the cost of capital by examining its business portfolio based on the risk and return characteristics of each business and by optimally allocating management resources.
• The initiatives in each business area for realization of Management Vision 2.0 focus on the ones that have been commercialized or initiated, and the Group will continue to expand and accelerate these initiatives toward realization of Management Vision 2.0.
• The Group is committed to achieving the profit goals set forth in Management Vision 2.0 and will work together with all stakeholders to achieve sustainable growth, starting from the resolution of social issues.
• To clarify the path to achieve the goals and move forward strongly, we have formulated the medium-term management plan targeting FY2025.
• We recognize that the road to achieving the goals set forth in the plan will be very steep, but first we will respond flexibly and appropriately to changes in the external environment and firmly establish the system that can expand profits in any business environment, to quickly recover the current account balance.
• On top of that, for achieving steady growth in the future, each and every employee of our group will enhance their autonomy, exercise their originality and ingenuity, and work to reform our business structure by maximizing their capabilities, thereby ensuring the achievement of our mid-term management goals and making every effort to realize our Management Vision 2.0.

• Chubu Electric Power has been transitioning to a new executive structure since April 1, and today, we are pleased to inform you that the candidates for the Board of Directors have been decided, which we will seek approval for at the Annual General Meeting of Shareholders on June 28.
• As we aim to expand the acquisition of new revenue sources in addition to recovering profits in our core areas, we have increased one more external director to four, since it has become increasingly important to receive opinions from external directors with diverse knowledge, experience, and abilities to reflect them in our business.
• The candidate for a new external director is Ms. Yoko Kudo of Ernst & Young ShinNihon LLC.
• Ms. Kudo has a wealth of experience and a wide range of insight, having worked in accounting and auditing at major accounting firms in Japan and the U.S., as well as in the financial accounting advisory division of Ernst & Young ShinNihon LLC., where she led support for M&A and business restructuring at client companies.
• Under the new management structure, we will do our utmost to overcome the waves of change in the business environment and continue to be a corporate group indispensable to our customers and society.