Press Conference on FY2010 Second Quarter Financial Results (and Regular Press Conference for October 2010)

• First, I would like to talk about Chubu Electric's second quarter financial results for FY2010.

(Summary of financial statements)

• In our electricity business, while there was a decline in retail unit prices, we recorded an increase in revenue due to factors including an increase in service charges resulting from an increase in the volume of power sold.
• Ordinary income, on the other hand, declined. In the electricity business, despite factors that contributed to the increase in revenue, such as increases in the volume of power sold and increases in the amount of power generated by our nuclear facilities, other factors including a decline in retail unit prices and rising fuel costs led to the decline in income.
• As a result, both the consolidated and non-consolidated financial statements reported increases in revenue, but decreases in income.

(Consolidated)

• Regarding the Chubu Electric Group's consolidated financial statements for the second quarter, please refer to page 2 of Reference 1 entitled "Quarterly Financial Report for the Six Months Period Ended September 30, 2010."
• Here are some highlights:
  Operating revenue: 1,157.5 billion yen (up 2.9% YoY)
  Operating income: 145.3 billion yen (down 7.2% YoY)
  Ordinary income: 128.3 billion yen (down 9.7% YoY)
  Net income: 74.2 billion yen (down 18.1% YoY)
  Thus, the Group ended the second quarter reporting increased revenue but decreased income for the first time in two years since the second quarter of FY2008.
• In addition, due to factors including an 8.6 billion yen loss on adjustments for changes of accounting standard for asset retirement obligations that was reported as an extraordinary loss, we recorded a 16.3 billion yen reduction in net income.

(Non-consolidated)

• Next, please refer to page 3 in the reference for Chubu Electric's non-consolidated financial results.
  Operating revenue: 1,093.4 billion yen (up 3.0% YoY)
  Operating income: 139.8 billion yen (down 6.5% YoY)
  Ordinary income: 122.0 billion yen (down 10.1% YoY)
  Net income: 69.8 billion yen (down 27.2% YoY)
  As in the case of the consolidated results, the Group ended the second quarter with increased revenue but decreased income for the first time in the two years since the second quarter of FY2008.

(Interim dividend)

• We intend to pay an interim dividend of 30 yen per share for this quarter.

(Financial results forecast for FY2010)

• Regarding the forecast for the full fiscal year 2010, please see page 10 and page 11 in the reference.
• At present, although we are not yet able to offer a clear indication of when Hamaoka Nuclear Power Station Reactor No. 5 will recommence operations, we will seek to recommence operations of the reactor as quickly as possible following our explanation of the situation to the residents of the region.
• Given the present situation, our forecast results assume that the reactor will remain shut down until the end of December.
• This will result in a decline in our utilization rate of nuclear power, but given factors such as increases in the volume of power sold and reductions in fuel prices, we have revised upwards the forecast results published on July 30.
• I will discuss the forecast for the full fiscal year 2010 in comparison with results for FY2009.
• We anticipate that the volume of electric power sold will be 128.8 TWh, 4.8% higher than the previous year.
• We forecast that consolidated operating revenue will rise to about 2,310 billion yen with the growth of service charges due to an increase of electric power sold in our electricity business and other factors.
• On the other hand, while we expect factors such as an increase in the volume of power sold in our electricity business to increase revenue, we forecast that our consolidated ordinary income will decline to about 115 billion yen due to factors including a decline in retail unit prices and an increase in fuel costs.
• As for non-consolidated cash flow, we are forecasting that operating revenue will be about 2,160 billion yen and ordinary income about 100 billion yen.
  We therefore expect that both the consolidated and non-consolidated financial results will be characterized by increased revenue and decreased income, compared to the previous period.
• The business environment for the Group remains severe, with concerns existing over a number of factors that have the potential to negatively affect the trend towards economic recovery, including the recent rapid appreciation in the value of the yen.
• Chubu Electric will continue to pursue maximum cost savings and will take measures for further streamlining and greater efficiency in all areas of management.
  In addition, with the understanding of local residents, we will work to further advance our nuclear power generation, including recommencing operations of Hamaoka Reactor No. 5 at an early stage, in order to ensure a stable supply of power and to expand our business activities while giving serious consideration for the protection of our global environment.

Reference

• 2nd Quarter Financial Report[PDF:130KB]

• Next, I would like to discuss our conclusion of a basic agreement with BG Group plc for the purchase of liquefied natural gas.
• Chubu Electric has today concluded an agreement with the British energy corporation BG Group plc for the purchase of liquefied natural gas (LNG).
• This contract specifies the purchase of up to 120 shiploads of LNG in a 20-year period from FY2014. Calculated at a rate of 70,000 metric tons per shipload, Chubu Electric will purchase a maximum of 8.4 million metric tons of LNG over the 20-year period.
• The new contract has two major distinctive features.
• First, it specifies a new method of increasing the stability of procurement.
  Specifically, Chubu Electric will purchase LNG from the multiple LNG projects operated by BG Group plc, without indicating a specific source of supply.
• While our existing long-term contracts for the purchase of LNG specify the sources of supply, the new contract offers a framework for long-term purchase of LNG without such specification.
• We are the first of Japan's electricity utilities to introduce a framework enabling the purchase of LNG from multiple sources, and we believe that such a framework will contribute to supply stability.
• The other distinctive feature of the new contract is that in order to increase flexibility in procurement, it specifies LNG produced from unconventional gas resources as one source of supply.
• Specifically, this refers to LNG produced by the Queensland Curtis LNG Project being operated by BG Group plc in the state of Queensland in eastern Australia. This project produces light LNG from natural gas with a high concentration of methane known as coalbed methane.
• Chubu Electric is the first of Japan's electricity utilities to agree to the long-term purchase of light LNG sourced from unconventional natural gas resources such as coalbed methane.
• We believe that the purchase of LNG sourced from unconventional natural gas resources such as coalbed methane in addition to conventional LNG will expand our range of options and increase our flexibility in procuring LNG.
• In future, we will engage in discussions with BG Group plc towards the conclusion of a purchase and sale contract in the first half of 2011.
• Unprecedented changes are occurring in the international energy market, including fluctuations in the balance of supply and demand for fossil fuels and ongoing increases in costs.
  Based on an accurate understanding of these changes, Chubu Electric will seek to ensure stability and increase economy in the procurement of fuel, and also to increase flexibility in procurement in order to enable us to respond to fluctuations in demand.
• We are pushing ahead with a variety of initiatives in the area of fuel procurement, including diversifying our procurement sources, combining a range of contract periods, and ensuring flexibility in terms of quantities and destinations in our LNG purchase contracts.
• In addition, we are also mounting efforts to upgrade our fuel-related infrastructure, as a facility-based initiative to support LNG procurement.
• Specifically, we are laying gas pipelines across Ise Bay, and we are working to reinforce LNG receiving docks to receive shipments from larger tankers, as well as to build more LNG tanks.
• Regarding the pipelines that we are laying across Ise Bay, we completed construction of the shield tunnel without incident on the 25th of this month. Looking towards completion of the project by FY2013, we will now proceed to other stages of construction, including the actual laying of the pipelines.
• Chubu Electric will continue to formulate innovative schemes and adopt aggressive measures in every aspect of our business management, including fuel procurement and facility formation, in order to ensure that our customers are able to use energy into the future with a feeling of security.

• This concludes my remarks for today.

Reference

• Press Release "Chubu Electric and BG Group sign HOA for LNG sale and purchase"