Chubu Electric Power Group Report 2021(Integrated Report)

Business and Other RisksOf all the variables affecting the Chubu Electric Power Group’s performance and nancial standing, the primary factors most likely to have a major effect on investors’ decisions are listed below. Forward-looking statements in this report are based on facts and conditions as of the date of the nancial statement report (on June 28, 2021). Actual results may differ, affected by the govern-ment’s future energy policy and revision of electricity business system and others. (1) Changes in the business environmentThe business environment surrounding the Chubu Electric Power Group is undergoing major changes. These include the legal unbundling of the power transmission and distribution busi-nesses, the incremental establishment of markets and rules for vitalization of competition, the increased introduction of distrib-uted power sources beginning with renewable energy, acceler-ated efforts toward decarbonization in energy policies, and the advance of digital transformation (DX). In response to such changes in the business environment, from April 2020 the Chubu Electric Power Group began operating under a structure centering on three companies. Specically, Chubu Electric Power Group spun off the power transmission and distribution division into Chubu Electric Power Grid Co., Inc. and the sales division into Chubu Electric Power Miraiz Co., Inc. while JERA Co., Inc. was added to these businesses. Under this three-company structure, along with efforts to “fulll our unwavering mission” of delivering eco-friendly, good-quality energy safely and stably at an affordable price, we also “create new value” that involves providing new services that get close to our customers and becoming a “Total energy service corporate group that is one step ahead” by providing services that are a step ahead and exceed customer expectations. With the ow of electricity changing dramatically due to the expansion of the introduction of renewable energy, we will promote the provision of resilient and optimal energy services by deploying aggregate services that utilize distributed power sources such as power sources, storage batteries, EVs and solar power and by developing a next-generation power grid that balances wide-area utilization of power sources and the advance of local production for local consumption. However, if there are changes in business environment surrounding the Chubu Electric Power Group, such as delays in the establishment of markets and rules or changes to systems that differ from expectations, nancial standing, operating results and cash ow could potentially be affected. (2) Response to competitionIn the energy business, including electricity, competition is intensifying against a backdrop of expanding electricity transac-tions at variable cost equivalents through JEPX (Japan Electric Power Exchange) and price declines accompanying the mass introduction of renewable energy. To prevail in this competition, Chubu Electric Power Miraiz will strive to procure stable and affordable electricity and gas, while deploying services that enrich the lives of its customers and support their businesses based on the keywords of “delivering,” “focusing” “connecting.” Specically, in the future, in addition to electricity and gas, the company will provide services such as energy management and healthcare upon personalizing these in accordance with each customer by utilizing digital technology. JERA optimally operates a series of value chains that extend from upstream procurement of fuel to power generation and sales of electricity and gas. At the same time, JERA will strive for efcient operation of its thermal power generation business by taking advantage of its economies of scale. However, further intensifying competition, economic trends and temperature uctuations could potentially affect nancial standing, operating results and cash ow. In addition, the amount of yearly precipitation affects the amount of hydroelectric power output, which impacts our power-generating costs. Chubu Electric Power, however, has set aside a reserve for uctuation in water levels, which allows the company to make a certain adjustment against such impact with in balance of the reserve, thus limits the effect on performance.(3) Commercialization of New Growth FieldThe Chubu Electric Power Group will combine resilient and optimal energy services with data services that enrich and enhance convenience in people’s lives and deliver these as a Community Support Infrastructure. Specically, with the key-words “customer-oriented,” “decarbonization,” and “digitization,” besides the energy business, we will accelerate the commercial-ization of new growth elds as we support society and the economy and provide “widening value by connecting” in elds ranging from energy saving and comfortable living environments to medical care, long-term care, watching over,, as well as the safety of people and communities such as disaster prevention and crime prevention. In overseas business, we aim to contribute to solving social issues in each country and region and increase prots, with these efforts centering on businesses that support local communities by providing stable and affordable infrastructure services and busi-nesses that contribute to the realization of a decarbonized society. However, if these businesses are unable to produce the results expected by the Chubu Electric Power Group due to the progression of competition with other operators, nancial standing, operating results and cash ow could potentially be affected.(4) Global environmental conservationUnder Japan’s 2050 Carbon Neutral Declaration, a review of the next energy basic plan is progressing and making efforts for global environmental conservation such as considering various policy goals is an urgent issue. In accordance with the Chubu Electric Power Group Basic Environmental Policy, the Chubu Electric Power Group has summarized its efforts to achieve carbon neutrality as Zero Emissions Challenge 2050. Together with customers, we aim to simultaneously achieve “decarbonization” and “safety, stability, and efciency” through innovation of the energy infrastructure. Specically, we intend to mobilize all measures. These include new development of renewable energy (2,000 MW or more by around 2030), the use of the Hamaoka Nuclear Power Station in a manner to prioritize safety improve-ments and the trust of local residents, fade-out of inefcient coal-red power generation, further enhancement of the ef-ciency of thermal power generation, co-combustion of non-fossil fuels such as ammonia, sophistication and widening of supply and demand operations, and diversication of CO2-free energy choices. In doing so, by 2030 we will reduce CO2 emissions derived from electricity sold to customers by 50% or more compared with scal 2013. “Furthermore, through the practical application and adoption of innovative technologies through innovation, we will “take on the challenge of attaining net zero CO2 emissions for our entire business by 2050.” However, if the Chubu Electric Power Group is unable to properly reform its business model based on trends in non-fossil values and technological innovation in addition to responding to future regulatory measures, nancial standing, operating results and cash ow could possibly be affected. (5) Changes in fuel and electricity prices, etc.Regarding the group’s power procurement costs, they may be affected by market price such as liqueed natural gas (LNG), coal and crude oil and uctuations in the currency exchange market, however, the uctuations of fuel prices within certain range could potentially be reected in electricity rates under “Fuel-cost Adjustment System”, the impact of these factors on performance should be mitigated. Regarding fuel procurement by JERA and other group companies and electricity procurement through the market, etc. by Chubu Electric Power Miraiz and other group companies, the Chubu Electric Power Group has taken measures to diversify procurement sources and to secure exibility. However, fuel supply-demand conditions and fuel market prices may uctuate signicantly due to, for example, supplier facility and/or opera-tional issues and changes in political, economic, or social situa-tion. In this case, our nancial standing, operating results, and cash ow could potentially be affected due to, for example, changes in fuel procurement cost, the difference between fuel procurement price and fuel selling price, and changes in market selling/wholesale selling prices of electric power.(6) Changes in interest ratesThe balance of interest-bearing debts of the Group is 2,333.6 billion yen at the end of March 2021, an amount equivalent to 41.0% of the group’s total assets. Interest payments on this debt are susceptible to market interest rates, and thus the perfor-mance could potentially be affected. However, the impact of these debts on our nancial standing, operating results, and cash ow would be limited because 87.6% of the outstanding balance of interest-bearing debts consists of long-term fund such as corporate bonds and long-term loans, and most of them were procured at xed interest rates. However, interest expenses on corporate bonds and borrow-ings procured in the future and some corporate pension assets held by the Chubu Electric Power Group will increase or decrease Top CommitmentValue CreationClimate ChangeStrategyBusiness ActivitiesGovernanceHuman ResourcesFinancial / Corporate Data85Chubu Electric Power Group Report 2021

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