NIPPON GAS CO.,LTD.

LP Gas is premised on imports, while city gas (LNG) and power sources are procured from the TEPCO group, so raw material price and foreign exchange rate fluctuations arising from geopolitical risks (Russia's invasion of Ukraine, situation in the Middle East) affect business performance. LP Gas responds through selling price revisions, limiting the mid- to long-term impact, but city gas and power sources are reflected in rates up to 5 months later under the raw material cost adjustment system and fuel cost adjustment system, so impacts on annual profit may arise when this spans fiscal years. The Company addresses this through diversifying procurement across multiple suppliers and utilizing price revision systems.

The Company does not engage in upstream business and is a retail-specialized operator that procures the entire volume of gas and power sources externally, making stable supply chain assurance a key management issue. LP Gas achieves risk diversification by procuring from multiple suppliers, and city gas and power sources achieve stable procurement based on an alliance with the TEPCO group, but procurement disruptions may occur during geopolitical risks or supply-demand tightness. The Company responds through diversifying procurement sources and building long-term partnerships.

Against the backdrop of climate change response, growing energy-saving awareness, and rising raw material prices, customer energy consumption may decline over the mid to long term. The Company formulates its business plan based on this trend, and seeks to secure new revenue sources through the spread of distributed energy such as hybrid water heaters, solar power generation, and storage batteries, as well as through the provision of energy solutions. The Company promotes support for customers' optimal energy use through combined electricity and gas proposals.

The intensification of natural disasters such as large-scale earthquakes and heavy rainfall may disrupt stable energy supply. The Company has implemented preventive measures such as 100% installation of microcomputer meters, seismic shutoff valves, continuous monitoring via the smart meter "Space Hotaru," and replacement with polyethylene gas pipes, but restoration may take time during wide-area disasters, potentially affecting business results. The Company responds by establishing restoration cooperation frameworks with construction companies and manufacturers, and by introducing drone-based facility inspections.

If a gas explosion accident occurs due to insufficient confirmation during inspection, or if incomplete combustion or CO poisoning accidents occur due to equipment deterioration over time or construction defects (inadequate air supply/exhaust), this may affect business results in addition to direct damages, through loss of customer trust and decline in social reputation. The Company has built a system for automatic presentation of inspection items via its smart safety system, hourly grasp of gas usage status via its proprietary smart meter, and a gas leak detection framework. Monthly safety education and mandatory qualification acquisition (such as Class 2 Sales Supervisor) are required for safety personnel.

The Company bears safety responsibility for gas pipelines in city gas supply, and if gas pipeline damage occurs due to road cave-ins or similar events, gas leaks or gas supply disruptions could extend over a wide area. Such situations could not only result in social responsibility being questioned but also lead to loss of trust from the local community. To minimize damage, the Company is promoting a plan to install valves along the pipeline at regular intervals.

If defamatory rumors spread, compliance violations occur in sales activities, or vehicle accidents caused by employees occur, this may significantly affect business operations through decline in corporate image, loss of customer trust, and damage to social reputation. The Company has implemented measures such as mandatory bidirectional training supervised by lawyers with required test passage for all outsourcing partners, follow-up confirmation calls after contracts, and introduction of AI drive recorders. In FY2026 (ending March 2026), the Company conducted company-wide training sessions in response to the revised Act against Delay in Payment of Subcontract Proceeds.

The worsening labor shortage due to the declining birthrate and aging population, the 2024 issue (work style reform) in LP Gas logistics, and significant wage increases by other companies amid rising prices may affect the Company's ability to secure personnel. As countermeasures, the Company is promoting improvements in operational productivity and labor-saving through IT adoption (such as building a remote safety operations framework), while implementing average wage increases of 4.5% in FY2026 (ending March 2026) and 4.0% in FY2027 (ending March 2027). The Company is focusing on building an environment where personnel with diverse backgrounds can utilize their abilities, through the development of diverse working styles and personnel systems.