Shikoku Electric Power Company, Incorporated

In responding to the Nuclear Regulation Authority's new regulatory standards and changes to various standards and laws, if operation of Ikata Power Station is restricted or additional safety measures become necessary, increased alternative thermal fuel costs and capital expenditures could have a significant impact on business performance. The Company is working to ensure safe and stable operation in compliance with various laws and regulations, including conformity with the new regulatory standards, but regulatory response remains an ongoing challenge. Both the likelihood of occurrence and the degree of impact are assessed as high.

Regarding nuclear fuel cycle costs, such as reprocessing of spent fuel and disposal of radioactive waste, and decommissioning costs for nuclear power facilities, if institutional measures are revised, this could impact business performance through increased estimated future costs or delays in the start of reprocessing facility operations. Uncertainty has been reduced to a certain extent by institutional measures established by the national government, but long-term risk from institutional changes remains. Both the likelihood of occurrence and the degree of impact are assessed as high.

If competition further intensifies with the progress of electricity market liberalization, this could significantly impact business performance through a substantial decline in electricity sales volume or falling retail/wholesale unit prices. The Group is working to expand profit opportunities and reduce supply costs by enhancing measures on both pricing and services and by maximizing use of new markets. Both the likelihood of occurrence and the degree of impact are assessed as high.

If stable fuel procurement becomes difficult due to equipment trouble at suppliers, natural disasters, or heightened international tensions, or if fuel prices or exchange rates fluctuate significantly, fuel procurement costs for thermal power generation could increase, impacting business performance. Risk is being mitigated through long-term contracts and diversification of procurement sources, and the impact of price fluctuations on business performance is mitigated to a certain extent through application of the fuel cost adjustment system. Both the likelihood of occurrence and the degree of impact are assessed as high.

If the securing and development of personnel necessary for stable electricity supply, carbon neutrality response, and business creation in growth areas does not proceed smoothly, or if a large number of personnel leave, this could hinder sustainable business operations and impact business performance. The Group is working to secure and develop personnel based on future staffing projections, and to build a vibrant workplace environment that respects diversity. Both the likelihood of occurrence and the degree of impact are assessed as high.

If facility damage or operational trouble occurs due to large-scale natural disasters such as earthquakes, tsunamis, or typhoons, or due to equipment failures or accidents, this could have a significant impact on business performance through suspension of electricity supply or increased restoration costs. The Group is working on steady implementation of facility maintenance and inspection, safety measures reflecting the latest knowledge, strengthened cooperation with local governments and other operators, and joint restoration drills. Both the likelihood of occurrence and the degree of impact are assessed as high.

If increasingly sophisticated cyberattacks or system trouble cause critical systems to stop or data to be lost, this could hinder business operations and impact business performance. The Group is implementing organizational, human, physical, and technical measures, along with equipment redundancy, data backup and remote storage, and governance in system development and maintenance. Both the likelihood of occurrence and the degree of impact are assessed as high.

If the Basic Energy Plan is revised or major changes are made to the electricity business system, this could have a significant impact on the business environment and profit structure of the Group. The Company is working to build a well-balanced energy supply system and respond appropriately to regulatory reviews, but depending on the content of policy changes, an impact on business performance is unavoidable. The likelihood of occurrence is assessed as medium, and the degree of impact as large.

Tightening of environmental regulations aimed at realizing a decarbonized society may lead to operational constraints on thermal power plants, increased investment in low- and decarbonized power sources, and increased burden from carbon pricing, potentially raising supply costs. The Company is responding through the introduction of LNG combined cycle generation, efficiency improvements via USC (ultra-supercritical) upgrades of coal-fired plants, and maximum utilization of zero-emission power sources, but depending on the degree of tightening, the impact on business performance could be significant. The likelihood of occurrence is assessed as medium, and the degree of impact as large.

In businesses other than the electricity business, mainly the Information & Communications and international businesses, if profits from individual businesses or projects fall significantly below initial expectations due to rapid changes in domestic and overseas market conditions including price fluctuations, heightened international tensions, or the materialization of country risk in countries of operation, this could impact business performance. The Group is working to expand its market areas and business domains while carefully examining future potential and profitability, but the risk of sudden changes in the external environment remains. The likelihood of occurrence is assessed as medium, and the degree of impact as large.