Aggregation Services business turns quarterly profit with record-high contract capacity; revenue diversification initiatives including power futures hedging proposals and wind power AI forecasting are clearly taking shape

Summary

H1 revenue of JPY 3,328M (53.0% progress vs. full-year guidance) was accompanied by operating income of JPY 1,536M (65.0% progress) and net income of JPY 1,216M (82.4% progress), demonstrating notably strong profit-side momentum. During the briefing, management highlighted their intensifying efforts to propose power futures hedging to offtakers in light of heightened geopolitical risks, and emphasized their outlook for expanding demand for supply-demand management with co-located battery storage as output curtailment begins within the TEPCO service area. The AS (Aggregation Services) business turned profitable on a single-quarter basis, with capacity market main auction awarded volume reaching approximately 6x YoY at 147MW — demonstrating a clear growth trajectory toward the third pillar envisioned in the medium-term plan.

Key Points (Earnings Highlights And Growth Initiatives)

• Business Strategy And Market Assessment
  • Accelerating futures hedging proposals to offtakers vulnerable to fuel price volatility amid rising geopolitical risks
  • Solar output curtailment is beginning this month in the TEPCO service area, foreshadowing nationwide expansion of co-located battery storage demand
  • Management expressed the on-the-ground view that domestic renewable energy procurement appetite remains robust, unaffected by changes in government
• Current Business Progress And Drivers
  • Q2 revenue decline was primarily driven by factors other than DGP commission income (transmission/distribution settlement adjustments and a prior-year J-Credit booking reversal); DGP commission income is tracking to plan
  • The -1.9% decline in commission unit price was within expectations; further declines are anticipated at April contract renewals but remain within full-year guidance
  • The capacity contribution refund (~JPY 130M) is a penalty refund associated with the transitional phase of the capacity market and is not a recurring revenue item
• Strategic Initiatives And Inflection Points
  • Leveraging improved liquidity on EEX and TOCOM to launch full-scale bespoke power procurement using futures for hospitals and pharmaceutical companies
  • First supply-demand management contract secured in conjunction with the December 2025 commissioning of a solar plant with co-located battery storage owned by Kyushu Ohisama Power Generation Inc.
  • RE Bridge 6th auction reached 73 offtaker members and 426 registered power plants, maintaining a high matching rate

Outlook And Strategy

• Full-year guidance maintained (revenue JPY 6,281M, operating income JPY 2,363M); profit progress rates of 77–82% suggest high probability of achievement
• April 2026 contract renewals are largely settled, and management views the impact of early March market disruptions on next-period contracts as limited
• Against the medium-term plan target (~FY07/28) of 383MW combined AS and AM (Asset Management), current progress of AS 62MW + AM 0.2MW is tracking to plan, albeit still in the early stages
• In line with the 3-year JPY 10B battery storage investment plan, DGAM is concurrently sourcing multiple proprietary battery storage development projects
• OPM is expected to temporarily dip below 40% due to unit price declines in the near term, but the company targets a return above 40% over the medium term through contract capacity expansion and incremental contribution margin growth

Positive Factors

• Contract capacity reached a record high of 1,177MW (+25.1% YoY), with a low monthly average churn rate of ~2.76%
• AS business achieved quarterly profitability (revenue JPY 88M, profit JPY 41M), capturing an 18.7% awarded share in the supply-demand adjustment market primary offline segment
• Renewable Energy PF business posted +42.8% revenue growth YoY and +294.1% segment profit growth YoY, with a growing stock of 20+ year long-term contracts
• Headcount expanded to 88 (+35.4% YoY), strengthening the sales organization, while SG&A was held to 45.8% of plan
• Econohashi membership reached 205 companies, with cumulative FIT non-fossil certificate transaction volume expanding to 2,485 GWh
• The patent-protected DGP model and the DORA-survey Elite-rated engineering team form significant barriers to entry

Concerns / Risks

• The declining trend in DGP commission unit prices persists, with management itself anticipating further declines at annual contract renewals in April
• Power PF business revenue declined -19.3% YoY, with residual impacts from unit price declines and seasonality
• Fuel price spikes driven by geopolitical risks could elevate churn risk among customers on 100% JEPX-linked contracts
• A time lag of up to 5+ months from grid-scale battery commissioning to revenue recognition introduces uncertainty around investment payback timing
• Following media reports of DG Capital Group's bankruptcy, the company disclosed its relationship with the entity, stating there is no direct financial impact
• Risk of the dynamic pricing market becoming a red ocean due to emerging competitors

Earnings Highlights

H1 FY07/26 revenue of JPY 3,328M (53.0% progress vs. full-year guidance) represents somewhat modest top-line progress, while a 46.2% OPM secured solid profit-side performance. Recurring profit of JPY 1,651M (77.6% progress) was boosted by a one-time factor — the ~JPY 130M capacity contribution refund — which inflated progress rates at the recurring profit level and below.

• Contract Capacity (Total): 1,177MW (+25.1% YoY)
• DGP Commission Revenue: JPY 2,293M (H1 cumulative)
• Electricity Handled: 1,493 GWh (46.2% progress vs. full-year guidance)
• Grid-Scale Battery Capacity (AS Business): 62MW (+38MW QoQ)