TOKYO ENERGY & SYSTEMS INC.

If risks in businesses in which the Company invests or provides financing materialize, this may result in the recognition of substantial losses. The impact is rated as "extra-large," raising concerns about a material effect on the financial position. The Company addresses this risk through risk confirmation and monitoring of operational status at meetings held by management.

Heightened international conflict and geopolitical risk could necessitate the evacuation of employees stationed overseas or employees of overseas subsidiaries, and could cause delays in the procurement of equipment, materials, and fuel or sharp price increases, potentially affecting business continuity. The impact is rated "extra-large" and likelihood "high," with particularly severe effects on overseas business anticipated. The Company is working to reduce this risk through measures such as strengthening international intelligence gathering, reviewing local evacuation criteria, assuming multiple scenarios, forward foreign exchange contracts, and diversifying procurement sources.

There is a possibility of serious accidents such as fatal accidents occurring, and the impact is rated "large" with likelihood "high." The Company investigates and analyzes risks that could lead to serious disasters, even from minor incidents, from the perspective of the "sangenshugi" principle, and works to prevent serious accidents through corrective measures and horizontal deployment of lessons learned.

There is a possibility that knowledge and skills will not be successfully passed on, hindering business operations, and the impact is rated "large" with likelihood "high." The Company has launched the "Career Platform Building Project," which reviews career paths and educational curricula from the ground design stage, and is working to rebuild its training system and promote qualification acquisition among younger employees.

Cyberattacks could result in the leakage of important information such as customer data, suspension of internal systems, or ransom demands via ransomware, and the impact is rated as "extra-large." The Group as a whole is strengthening security through the adoption of a zero-trust model and conducting training for all employees, while also enhancing backup systems as a resilience measure.

The occurrence of nonconformities such as construction defects could lead to increased costs, and the impact is rated as "extra-large." To thoroughly implement the "sangenshugi" (on-site, on-object, on-fact) principle, the Company conducts education and awareness activities for relevant personnel and strengthens its quality assurance system to prevent the occurrence of nonconformities.

Legal violations could lead to administrative sanctions, suspension of business activities, or loss of social credibility, and the impact is rated as "extra-large." The Company is working to raise compliance awareness through thorough education and awareness activities and case studies for relevant personnel.

Given that explosion and fire accidents have occurred at biomass power plants operated by other companies, similar accidents could occur at biomass power plants in which the Company is involved, and the impact is rated as "large." The Company works to prevent explosion and fire accidents through measures such as improving equipment configurations for greater safety, providing education to relevant personnel, conducting equipment patrols, and performing planned inspections and cleaning.

Major natural disasters such as large-scale volcanic eruptions or earthquakes could cause employee casualties or damage to business site facilities, resulting in business interruption, and the impact is rated as "extra-large." In addition to evacuation drills and safety confirmation drills at each business site, the Company implements resilience measures such as management-level training based on disaster scenarios.

Tighter regulations such as environmental protection measures could increase the cost of procuring biomass fuel, potentially worsening earnings, and the impact is rated as "large." The Company addresses this by procuring fuel in compliance with laws and regulations and making appropriate price adjustments in response to market conditions.