ENVALITH
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The Chugoku Electric Power Company, Incorporated

9504・Prime Market・Electric Power & Gas

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中国電力株式会社 logo
The Chugoku Electric Power Company, Incorporated9504

Business

The Chugoku Electric Power Company, Incorporated was established in 1951 and is the largest electric power company in the Chugoku region, comprising a total of 58 companies consisting of the Company, 28 subsidiaries, and 29 affiliated companies. It has designated three strategic business areas—the Integrated Energy Business (power generation, electricity sales, gas supply), the Transmission & Distribution Business (general transmission and distribution), and Information & Communications—and develops a total solutions business. Its main customers are electricity consumers in the household, industrial, and corporate sectors within the Chugoku region, with major industrial customers centered around the Setouchi industrial complex also forming an important customer base. Listed on the Prime Market of the Tokyo Stock Exchange.

Business Model

The company holds an integrated electricity value chain spanning generation (hydro, thermal, nuclear, and renewable energy) through to retail and wholesale sales, with retail electricity charges, revenue from Electricity Sold to Other Companies, and transmission & distribution wheeling revenue as its main revenue sources. The Transmission & Distribution Business secures stable earnings based on a regulated tariff structure, while the Integrated Energy Business generates earnings through competition in the liberalized market. The Information & Communications segment creates supplementary revenue through contracted services both within and outside the group.

Company Strengths

Shimane Nuclear Power Station Unit 2 restarted in FY2024, causing nuclear power generation volume in FY2025 to surge to 6,315 million kWh, up 319.0% year on year. This significantly reduced fuel costs, resulting in cash flow from operating activities of ¥2,372 million (up ¥51.2 billion year on year), and free cash flow turned positive at ¥1.0 billion.

Through The Chugoku Electric Power Transmission & Distribution Company, Incorporated, the company exclusively operates the general transmission and distribution business in the Chugoku region, holding a regulated asset base with segment assets of ¥1,239,029 million. Against a backdrop of anticipated demand growth from new and expanded data centers and semiconductor plants, the company has a stable earnings base that can benefit from expansion in Standard Connection Wheeling Service revenue.

As of the end of the consolidated fiscal year, the number of registered patents stood at 1,965, maintaining a top-level position in the energy industry. The company continues to build up its intellectual property activities, with 221 patent applications and 116 new registrations, and has established industry-academia-government collaborations with Hiroshima University and the Netherlands Organisation for Applied Scientific Research (TNO). Annual R&D spending of ¥5.5 billion is being invested to promote the practical application of decarbonization and digital technologies.

ENVALITH's Perspective

Operating profit for FY2026 (ending March 2026) fell approximately 30% year-on-year to ¥90,216 million from ¥129,148 million, while net income also declined to ¥68,539 million from ¥98,474 million in the previous period. As an external factor, the timing lag effect of the fuel cost adjustment system is believed to have pressured revenue. This marks a third consecutive year of profit decline since the peak in FY2024 (ended March 2024), with the maintenance of the nuclear capacity utilization rate and fuel cost trends holding the key to future earnings recovery.

As of June 9, 2026, a correction was made to the segment information (increase in tangible and intangible fixed assets) in the earnings report. The increase amount for the Integrated Energy Business was revised from ¥167,522 million to ¥172,742 million, and the consolidated total was revised from ¥275,832 million to ¥280,688 million. While the monetary impact is limited, given the company's history of compliance issues, continuous improvement in disclosure quality is essential for restoring the confidence of institutional investors.

While consolidated segment assets stand at ¥4,620,500 million, reflecting a large asset base, the increase in tangible and intangible fixed assets remains elevated at ¥280,688 million after correction, indicating continued high levels of capital investment. As an external factor, there is a risk of rising fundraising costs amid a rising interest rate environment. Although progress has been made in recovering the financial base since the substantial net loss of ¥155,378 million recorded in FY2023 (ended March 2023), the expansion of investment amid an ongoing profit decline trend makes managing the level of interest-bearing debt increasingly important.

Growth Strategy

Advancing nuclear restart, decarbonized power source enhancement, and financial base recovery as an integrated three-pronged strategy

Maintain stable operation of the already-restarted Shimane Nuclear Power Plant Unit 2, contributing to the stabilization of the earnings base as a low-carbon, low-cost power source. This was the main factor behind the return to profitability in FY2024 (ended March 2024), and continued maintenance of the operating rate will support ongoing business performance.

Aim to secure additional low-carbon, low-cost power sources through the early operation of Shimane Nuclear Power Plant Unit 3. Realization of operation is expected to significantly improve the profitability of the Integrated Energy Business, positioning it as a key driver of medium- to long-term earnings recovery.

Improve the efficiency and reliability of thermal power sources through the replacement of the aging Yanai Power Station Unit 2 series. This is a medium- to long-term investment aimed at strengthening the future power source portfolio and ensuring supply stability.

Implement preemptive investment in decarbonized power sources, including preparations for hydrogen and ammonia implementation and consideration of CCUS utilization, in preparation for future tightening of environmental regulations. The aim is to establish a competitive advantage in the context of carbon pricing implementation.

Continue active capital investment in transmission and distribution facilities (increase in tangible and intangible fixed assets of ¥100,551 million) to meet new and expanded demand from data centers, semiconductor plants, and other facilities. This also addresses increasing grid connection demand accompanying the expansion of renewable energy adoption.

Last updated: July 19, 2026