The Chugoku Electric Power Company, Incorporated

There is a risk that plant shutdowns or delays in the start of operations may become prolonged due to conformity reviews for new regulatory standards, the occurrence of additional safety measures, extensions of construction periods, and judicial rulings on the lawsuit seeking to halt operation of Units 2 and 3 of the Shimane Nuclear Power Station. This could result in increased costs for procuring substitute thermal fuel/electricity from the market and costs for addressing greenhouse gas emissions, potentially having a material impact on business performance. In the event a serious accident were to occur, it could also lead to facility damage, external compensation liabilities, and loss of social credibility, and the Company is therefore systematically advancing safety measures, schedule management, and litigation response.

A wide range of market fluctuation risks affect business performance, including fluctuations in procurement and sales prices of electricity and fuel, timing-related losses from fuel cost adjustments, exceedance of the fuel cost adjustment cap price, and increased procurement costs due to fluctuations in wholesale electricity market prices. The increasing complexity of derivative transactions can make risk identification and evaluation more difficult, potentially resulting in losses exceeding expectations. As countermeasures, the Company is implementing price fixing through the use of derivatives, quantitative management of market risk, and the introduction of market price adjustment systems.

There is a risk that the progress of electricity market liberalization will lead to an increase in the departure of extra-high-voltage and high-voltage customers, worsening earnings. The Company is working to maintain demand and prevent customer attrition by leveraging its existing sales capabilities and business foundation in the Chugoku region while expanding energy solutions, including rate menus utilizing renewable energy, solar power PPA services, and energy-saving/CO₂ reduction consulting.

Amid uncertainty in global affairs, including the situation in the Middle East, if fuel supply and demand become tight, the Company may be forced to procure relatively higher-cost electricity from the market, potentially adversely affecting business performance. The Company prioritizes securing fuel at an early stage, and works to reduce supply-demand fluctuation risk through renewing purchase and sale contracts on favorable terms, diversifying the timing of price fixing, fixing prices through financial transactions, and building a flexible procurement and transportation system.

There are risks including an upward revision in the amount of funds to be raised due to increased costs associated with responding to new regulatory standards at the Shimane Nuclear Power Station, difficulty in fundraising due to the occurrence of improper conduct incidents, changes in credit ratings due to deteriorating financial condition, and increased fundraising costs due to rising interest rates. The Company is diversifying its fundraising methods through the use of transition loans from the GX Promotion Mechanism and the revision of its Sustainable Finance Framework, while also building a system of regular dialogue with major financial institutions and rating agencies.

There are concerns over increased costs due to stricter greenhouse gas emission regulations (such as paid auctions under the emissions trading system and fossil fuel levies), as well as declining profitability due to reduced competitiveness and utilization rates of fossil-fuel power sources. Under the

There is a risk that cyber attacks including ransomware, information security incidents, and system failures could lead to leakage of confidential information, disruption of operations, and service outages, resulting in loss of social credibility and deteriorating business performance. The Company implements multi-layered information security measures, including early detection of unauthorized intrusions and development of backup environments from a technical standpoint, and continuous education and training from a human resources standpoint.

If power generation facilities and transmission/distribution facilities are damaged by large-scale natural disasters such as earthquakes, typhoons, or heavy rain, this could result in prolonged widespread power outages, increased costs for procuring substitute thermal fuel/electricity from the market, and increased facility restoration costs, potentially leading to deteriorating business performance and loss of social credibility. In addition to facility design and planned repairs in compliance with laws and regulations and the formulation of disaster prevention operation plans, the Company is working to strengthen its disaster response capabilities through cooperation with local governments, other electric power companies, the Self-Defense Forces, and others, as well as through disaster prevention drills.

There is a risk that declining birthrates and intensifying competition in the labor market will make it more difficult to secure personnel, leading to stagnation in personnel development and increased employee turnover, which could hinder sustainable improvement in corporate value. The Company is working to secure diverse personnel through stable and continuous recruitment, curbing turnover, and actively conducting career-track hiring, while also promoting personnel development and improvement of the internal work environment on a group-wide basis under its

There is a risk that violations of relevant laws and guidelines, such as the Electricity Business Act, the Antimonopoly Act, and the Act on the Protection of Personal Information, could result in administrative dispositions or guidance, a decline in social credibility, and costs for after-the-fact response. Based on the Compliance Management Promotion Declaration, the Energia Group Charter of Corporate Conduct, and the Chugoku Electric Power Compliance Code of Conduct, the Company thoroughly enforces business operations that prioritize compliance above all else, with officers taking the lead by example, and also provides support and guidance to group companies.