Chubu Electric Power : Initiatives for Achieving Medium-term Management Plan and Reevaluation of Management Targets

Chubu Electric Power Group's Initiatives for Achieving Medium-term Management Plan and Reevaluation of Management Targets

April 26, 2024

Chubu Electric Power Co., Inc.

Chubu Electric Power Group's Initiatives for Achieving Medium-term

Management Plan and Reevaluation of Management Targets

		Item	Page
	Introduction	2
	Toward Providing Value Demanded by Stakeholders	3
	Ⅰ Review of the Medium-term Management Plan (FY2023) and Direction of Responses	4
		Review of FY2023 and Reevaluation of Medium-term Management Targets	5
		Reevaluation of Medium-term Management Targets and Financial Indicators	6
		Changes in the Business Environment and Chubu Electric Power's Strategies	7
		FY2023 Results/Issues and Direction of Responses	8
	Ⅱ Initiatives for Achieving Medium-term Management Targets	9
		-Chubu Electric Power's strategies for responding to changes in the business environment
		Priority Items for FY2024	10
		Providing Prices and Services Closely Tailored to Customer Needs	11
		Build Optimal Facilities Tailored to Regional Characteristics	12
		Contributing to the Realization of a CN Society by Developing and Expanding Decarbonized Power Sources CN：Carbon neutral	13-15
		Initiatives for restarting the Hamaoka Nuclear Power Station	16
		Providing New Services that Respond to Customer Needs and Local Issues	17
		Regional Revitalization through Real Estate Business	18
		Contributing to Customers and Local Communities by Providing Multi-utility Services	19
		Realizing Management with an Awareness of Cost of Capital and Raising PBR	20
		Further Increase the Value of Human Capital	21
		Compliance and Governance Initiatives	22
	Management Vison 2.0 and Medium-term Management Plan	23
		C o p yr i g h t © C h u b u E l e c t r i c P o w e r C o . , In c . A l l r i g h t s r e s e r v e d .	1

Introduction

In its Medium-term Management Plan announced in 2022, the Chubu Electric Power Group established Medium-term Management
Targets for FY 2025 as the midpoint up to Management Vision 2.0. In FY2023, the second year of the Medium-term Management Plan,
consolidated ordinary income* amounted to approximately 371 billion yen owing to such factors as a decrease in supply and
demand adjustment costs at Chubu Electric Power Grid and a decline in power supply procurement prices at Chubu Electric
Power Miraiz.
Nonetheless, current conditions are unpredictable, as the business environment remains uncertain amid resource price volatility
and revision to system, while profits in the previous fiscal year were also due to one-timeprofit-boosting factors. Meanwhile, we must
firmly respond to the diversifying needs of customers and society that include achieving carbon neutrality, transitioning to a
circular economy, and resolving regional issues as well as address demands of capital markets such for improving PBR.
In response to these shifts in the environment, we will transform and accelerate its growth initiatives to maximize the value
it provides to stakeholders.
To fulfill our "unwavering mission" of providing high-quality energy in a safer, more affordable and more stable manner, we will
promote DX and realize stable supplies for a new era such as by building optimal facilities tailored to regional characteristics.
Concurrently, we will respond flexibly to changes in the environment while leveraging the strengths of our model that splits off
power generation and sales.
On a different front, we will promote decarbonization from both the supply and demand sides. These efforts will include
developing and expanding renewable energy power sources, restarting the Hamaoka Nuclear Power Station based on the
premise of assuring safety and gaining the understanding of local residents, and offering customers proposals that contribute to
energy conservation and electrification. Additionally, we will contribute to decarbonization globally
through our global business.
We also aims to "create new value" by providing services that enrich the lives of its customers
and contribute to solving local issues and revitalizing communities.
Realizing these initiatives is contingent on strengthening our management foundation. With this in
mind, we will work to bolster various initiatives that include undertaking management with an awareness
of the cost of capital, raise the value of human capital, and further promote thorough going compliance.
The Chubu Electric Power Group believes that growing together with all stakeholders that include
customers, shareholders/investors, local communities, business partners, and employees as well as
contributing to the development of a sustainable society will lead to increased corporate value. As a new
resolution, we have raised our Medium-term Management Targets to "consolidated ordinary income
of 200 billion yen or more and ROIC* of 3.2% or more."
We will continue to work in unison as a group to steadily realize Management Vision 2.0, which lies	April 2024
further into the future beyond these targets.	President and Director
*Consolidated ordinary income and		Chubu Electric Power Co., Inc.
ROIC exclude the time-lag impact	C o p yr i g h t © C h u b u E l e c t r i c P o w e r C o . , In c . A l l r i g h t s r e s e r v e d .	2

Toward Providing Value Demanded by Stakeholders

• The Chubu Electric Power Group regards the further advance of GX/DX along with changes in customer needs, systems and the competitive environment as opportunities. By reliably meeting the expectations of our stakeholders, we aim to be a corporate group that achieves continuous growth and that contributes to the development of a sustainable society.

Local Communities

We are determined to contribute to sustainable local development in partnership with local communities.

Shareholders and

Investors

We are striving to maintain and increase profits for our shareholders and investors through efficient management and effective investment.

Employees

We respect individuals and are endeavoring to create a cheerful and motivating workplace in which diverse human resources take active roles.

Global Environment

Each and every employee acts with self-discipline and accurately implements environmental management

Business Partners

We promise to deal fairly with business partners on even ground and work together to increase the transparency and soundness of the entire supply chain.

Customers

We are committed to providing our customers with safe, reliable, convenient, and affordable energy services, as well as other services of value that meet their needs.

C o p yr i g h t © C h u b u E l e c t r i c P o w e r C o . , In c . A l l r i g h t s r e s e r v e d .	3

• Review of the Medium-term Management Plan (FY2023) and Direction of Responses

C o p yr i g h t © C h u b u E l e c t r i c P o w e r C o . , In c . A l l r i g h t s r e s e r v e d .	4

Review of FY2023 and Reevaluation of Medium-term

Management Targets

 In FY2023 consolidated ordinary income*1 amounted to approximately 371 billion yen, which exceeded our Medium-term Management Target of 180 billion yen. Nonetheless, this amount includes one-timeprofit-boosting factors that are subject to system-relatedpost adjustment at Chubu Electric Power Grid. Accordingly, consolidated ordinary income is forecast to decline to around 190 billion yen in FY2024.

 Even amid ongoing uncertainty in the business environment that includes resource prices, we will strive to further strengthen our market response capabilities and added-value-services. Concurrently, we have raised our Medium-termManagement Targets to "consolidated ordinary income of 200 billion yen or more and ROIC*1 of 3.2% or more" in accordance with our aim to increase earnings through strategic investments.

 Chubu Electric Power will continue to respond appropriately to changes in the business environment while working to attain its Management Vision 2.0 target of

"consolidated ordinary profit of 250 billion yen or more in 2030" and realizing an evenly balanced profit portfolio*2. *2 Domestic energy business: New

Growth Areas/overseas business = 1:1

Approx. ¥371 billion

Reevaluation of Medium-Term

Management Targets

・One-timeprofit-boosting factors for

Consolidated ordinary

ROIC

Chubu Electric Power Grid that are subject to

income

system-relatedpost-adjustments

¥200 billion or

3.2％ or more

Management

・Profits arising from a decrease in power

more

supply procurement prices for Chubu

Vison

Electric Power Miraiz

Approx. ¥190 billion

Approx.

1

¥156 billion

¥180

¥200

¥250

billion or

Approx.

billion or

billion or

more

more

more

¥67 billion

1

Respond to wide fluctuations in income

and expenditures in the

Adapt to further changes in the environment in the Energy Business Area

Energy Business Area arising from fuel price fluctuations, new market

introductions, etc.

and expand New Growth Area toward realization of the Management Vision

2021

2022

2023

2024

2025

2030

•

Large deterioration in income and

•

Increase in costs

Energy

expenditures due to rising fuel prices• Improvement in income and

•

Deepening market response capabilities

combined with the start of the

expenditures due to lower fuel

due to soaring

Business Area

operation of an underdeveloped

prices, progress in reviewing

prices, etc.

•

Strengthen added-value services

supply and demand adjustment

systems and sophistication of

amid ongoing system changes (liberalization of

market

risk management

power source selection, etc.)

New Growth

•

Strategically deploy management resources (funds and personnel) taking into account the cost of

capital, financial base, etc.

• Growth

through meeting

Area

•

Increase contribution to profits from real estate,

customer needs and

global business, etc.

resolving regional issues

*1 Consolidated ordinary income and
ROIC exclude the time-lag impact	C o p yr i g h t © C h u b u E l e c t r i c P o w e r C o . , In c . A l l r i g h t s r e s e r v e d .	5

Reevaluation of Medium-term Management Targets and

Financial Indicators

：Management Targets

：Rough Guidelines

	Management	FY2023 results	Current target	Reevaluation of target
	indicators	FY2025	FY2025
	Consolidated	Approx.	Management Targets	Management Targets
	ordinary income*1	¥371 billion	¥180 billion or more	¥200 billion or more
	Chubu Electric Power	¥191 billion		¥20-30 billion	¥40-50 billion
		Miraiz
	Chubu Electric Power	¥95.6 billion		¥20-30 billion	¥20-30 billion
Growth		Grid
	¥54 billion		¥70-80 billion	¥70-80 billion
potential		JERA
	Global and Group companies)	¥30.9 billion		¥50-60 billion	¥50-60 billion
	Others (Renewable energy,
	CF from Operating	Approx. ¥640 billion	Approx. ¥900 billion	Approx. ¥1,100 billion
	(cumulative from FY2022 to
	Activities	FY 2025)	(cumulative from FY2022 to FY 2025)	(cumulative from FY2022 to FY 2025)
	Strategic	(cumulative from FY2022 to	Approx. ¥900 billion	Approx. ¥900 billion
	investment*2	Approx. ¥190 billion	(cumulative from FY2022 to FY 2025)
	FY 2025	(cumulative from FY2022 to FY 2025)
Efficiency	ROIC*1	5.5%	Management Targets	Management Targets
3.0% or more	3.2％ or more
Financial	ROE*1	11.6%		Approx. 7%	Approx. 7％
Shareholders' equity ratio	36.4％		30% or more	30% or more
health
	*1 Excluding the	*2 Reevaluation of the breakdown of investment destination	Before	After
	time-lag impact	fields (cumulative total from FY2011 to FY2025)		reevaluation	reevaluation
			Global		¥250 billion	¥150 billion
			Renewable energy	¥100 billion	¥100 billion
			New form of community, Resource	¥100 billion	¥200 billion
			recycling businesses and etc.		6
			C o p yr i g h t © C h u b u E l e c t r i c P o w e r C o . , In c . A l l r i g h t s r e s e r v e d .

9

• Zero Emissions

Challenge 2050

Changes in the Business Environment and Chubu Electric Power's Strategies

2016

2018

• Respond directly to market with a model that splits off power generation and sales for electricity system reforms, including full liberalization
• Seek expansion of business areas to realize Management Vision

2021 2022 2023

 Recognize the risk of fluctuations in income and expenditures in the electric power business and work toward stable business operations

Expand strategic investments to realize the Management Vision

2024

2025

• Regard the advance of GX/DX and changes in customer needs, systems, and the competitive environment as opportunities and shift gears to realize our Management Vision.

Changes in the Business Environment

Resource prices/ Interest rates/Exchange rates

Capital markets

System reform

Environment

(GX)

Lifestyle

DX

Governance

		• Global monetary		• Wide fluctuations in
		1	resource prices
		easing			• Rise in interest rates/weak
							yen/inflation		• Demand for management with an awareness of
							2
	• Unbundling electric			cost of capital and stock price
• Full liberalization of					•	Liberalization of power source
	generation and transmission			3
electricity retailing		services							selection due to system changes, etc.
• Demand for realizing a			4	• 2050CN Declaration, policy shift for
low carbon society				realizing GX		• Renewable energy market becomes a "red
							5
								ocean" characterized by fierce competition
• Changes in lifestyles due to COVID-19			6	• Need for circular economy and resolving
• Rising need	for	safety and	security			local issues	• Increase in
									• Intensifying competition to acquire
		7	• Permeation of DX into society	8	human resources	power demand
		• Diversification of work consciousness	spurred by GX
									and values		and DX

• Decreased trust due to violations of antitrust laws, etc.

Chubu Electric Power Strategies

Vision/

Targets

Strategies

Human

resources Finance

• Management Vision/ Management Vision 2.0

• Splits off	• Split off
power
generation
and sales

• 2025 Medium-term			•
Management Targets		Acceleration of added-value-services in
•	Review the standard			energy sales
•	rate menu			•	Provide value toward solving local issues and
Measures for reducing		revitalizing local communities
• Expand strategic	the burden of	•	Accelerate initiatives for restarting the Hamaoka
investments	electricity charges		Nuclear Power Station
	• Human resources strategy that adapts
	to changes in the business environment
• Increased volatility in income and		•	Respond to increased demand for funds
		accompanying acceleration of strategic investments,
expenditures due to resource prices			etc. (strengthening of ROIC management, etc.)

C o p yr i g h t © C h u b u E l e c t r i c P o w e r C o . , In c . A l l r i g h t s r e s e r v e d .

7

FY2023 Results/Issues and Direction of Responses

Area

Energy

Business

Area

New

Growth

Area

Manage-

ment

Foundation

Results

Issues

Results

Issues

Results

Issues

Results and Issues

• Provide affordable energy by implementing measures for reducing the burden of electricity
• Realize stable supplies by managing optimal facilities tailored to regional characteristics
• Contribute to CN by expanding zero-emission power sources
• • Progress with new regulatory standard conformity review for the Hamaoka Nuclear Power Station
  • Steadily develop renewable energy power sources and execute M&A
• Power procurement considering fuel price volatility and system changes
• Growing complexity of electricity flows due to increase in renewable energy source
• Steady implementation of initiatives, including globally, toward CN
• Diversify business areas by upgrading and expanding service lineup
• Promote creation of regionally based communities, including the development of "iiNE town Mizuho"
• Collaborative agreements for resource recycling with local governments and companies
• Quickly secure earnings and provide value to customers and local communities
• Build a new business foundation toward becoming a multi-utility
• Formulate human resource strategies for the utilization of diverse human resources
• Enhance management efficiency through the advancement of DX that utilizes AI and other technologies
• Responses for realizing management with an awareness of cost of capital and stock prices
• DX and safety initiatives in collaboration and coordination with business partners
• Responses with consideration of compliance violation events

Direction of Responses

(Refer to Chapter Ⅱ)

• Offering prices and services closely tailored to customer needs

• Building optimal facilities tailored to regional characteristics

• Contributing to the realization of a CN society by developing and expanding decarbonized power sources

• Initiatives toward restarting the

Hamaoka Nuclear Power Station

• Provide new services that respond to customer needs and regional issues

• Regional revitalization through the real estate business

• Contribute to customers and local communities by providing multi- utility services

• Realizing management with an awareness of cost of capital and raising PBR

• Further raising the value of human capital

• Compliance and governance- related initiatives

C o p yr i g h t © C h u b u E l e c t r i c P o w e r C o . , In c . A l l r i g h t s r e s e r v e d .

8

ⅡInitiatives for Achieving Medium-term Management Targets

Chubu Electric Power's strategies for responding to changes in the business environment

C o p yr i g h t © C h u b u E l e c t r i c P o w e r C o . , In c . A l l r i g h t s r e s e r v e d .	9