HOKURIKU ELECTRICAL CONSTRUCTION CO.,LTD.

The volume of construction orders received from government agencies is heavily influenced by national and local government policies, and if public investment is reduced beyond expectations, this could affect business performance. The Group is working to reduce its dependence on government agencies by strengthening its share in the Hokuriku region and enhancing its order-taking and construction capabilities in metropolitan areas.

Orders received from the Hokuriku Electric Power Group, centered on Hokuriku Electric Power Company, Incorporated, an other affiliated company, account for a significant proportion of the Group's net sales, and if the Hokuriku Electric Power Group reduces its capital investment in electrical facilities, this could have a material impact on business performance. Although the Group is working to secure and expand orders from other customers, the structural dependence on specific business partners continues.

In the construction industry, contract amounts per project are large, and payment is often received after work completion, so if a client's cash flow deteriorates or the client goes bankrupt before payment is received, there is a risk that construction payments become uncollectible. The Group works to strengthen information gathering on and credit management of business partners, but if the amount of uncollectible receivables becomes substantial, this could affect business performance.

If the prices of construction materials rise sharply, and it is difficult to pass these costs on through contract amounts, profitability may be squeezed, potentially affecting business performance. The Group seeks to mitigate price fluctuation risk through diversification of procurement sources and selection of alternative materials, but there may be cases where responses cannot keep pace with rapid price increases.

The Group's business is subject to legal regulations such as the Construction Business Act, the Building Standards Act, the Antimonopoly Act, and the Companies Act, and abolition or amendment of these laws, introduction of new regulations, or changes in applicable standards could affect business performance. The Group has positioned the provision of safe and secure facilities as its unchanging mission and continuously works to ensure legal compliance.

If large-scale natural disasters such as earthquakes and typhoons, or the spread of infectious diseases, cause interruptions or significant delays to construction work, or damage to offices, facilities, and equipment, business activities could stagnate, affecting performance. The Hokuriku region also carries a high earthquake risk, and there are concerns that a wide-area disaster could simultaneously impact multiple projects.

If unauthorized access or cyberattacks result in the leakage of confidential information or the shutdown of core systems, this could lead to damages arising from the leakage of customer information and business disruption due to delayed system recovery, thereby affecting business performance. The Group has established an