TOKYO ENERGY & SYSTEMS INC.

Business Details

This segment handles the construction and maintenance of thermal, nuclear, hydroelectric, cogeneration, solar, and biomass power generation facilities, as well as the design and construction of substation, general electrical, information and communication, and air-conditioning equipment works. It comprises the Green Energy Business Division, Energy Division, Nuclear Power Division, Welding & Inspection Center, and Overseas Business Division, accounting for approximately 93% of consolidated revenue as the core segment. Major customers include the Tokyo Electric Power Company (TEPCO) group, Mitsubishi Heavy Industries, and JERA.

Recent Overview

Achieved substantial performance improvement, with revenue up 25.3% and segment profit up 155.7%

In the Facility Construction Business segment for FY2026 (ending March 2026), revenue rose 25.3% year on year to ¥77,297 million, and segment profit surged 155.7% year on year to ¥10,688 million, marking substantial improvement. Revenue increased across all divisions: the Nuclear Power Division up 32.6%, the Energy Division up 24.4%, and the Green Energy Business Division up 17.0%. The profit margin improved substantially from 6.5% to 13.3%, driven by a growing focus on profitability in order-taking activities and productivity gains. The backlog carried forward to the next period reached an all-time high of ¥144,574 million (up 19.7% year on year), providing high visibility for future revenue. Orders received in the renewable energy-related market roughly doubled to ¥27,656 million (up 109.1% year on year), and the Green Energy Business Division's backlog carried forward to the next period expanded rapidly to ¥26,150 million (up 93.4% year on year).

Key Products

Growth Drivers

• Full-scale progress of safety-enhancement and maintenance work toward the restart of nuclear power plants (Nuclear Power Division orders received of ¥20,924 million, up 21.0% year on year)
• Expansion of new construction and expansion work for substation facilities amid rising electricity demand driven by new data center construction, among other factors
• Rapid expansion of the renewable energy-related market backed by government decarbonization policy (orders received of ¥27,656 million, up 109.1% year on year)
• Progress in commercializing the solar and biomass businesses through use of the long-term decarbonized power source auction and PPAs (power purchase agreements)
• Expansion into general industry and other markets (electric furnace-related work at steelworks, rebuilding of waste incineration plants, resident maintenance services at oil refineries, etc.)
• High visibility of future revenue supported by the backlog carried forward to the next period of ¥144,574 million (an all-time high)
• Substantial improvement in profit margin (from 6.5% to 13.3%) driven by a focus on profitability in order-taking activities and productivity gains
• Optimization of the business portfolio and strengthening of human capital based on the FY2024 medium-term management plan (FY2024–FY2026)

Risks

• Cost increase risk from chronic labor shortages and rising prices of materials, equipment, and labor
• Customer concentration risk stemming from reliance on sales to the Tokyo Electric Power Company Holdings group
• Risk of fluctuations in construction volume due to delays in nuclear power plant restart schedules or regulatory changes
• Risk of deteriorating profitability from provisions for construction contract losses (balance of ¥718 million at end of FY2026, up ¥373 million year on year)
• Impact on overseas business and materials procurement from foreign exchange fluctuations and instability in the Middle East situation
• Impact on construction progress from extended materials procurement lead times
• Difficulty securing construction workforce and mobilization capacity amid order growth (securing mobilization capacity, including partner companies, is a key priority in the medium-term management plan)
• Expansion of loss in converting segment profit to consolidated operating profit due to rising companywide costs (from ¥4,045 million in the prior period to ¥5,258 million in the current period)