Kyushu Electric Power Company, Incorporated

If changes in laws/standards or litigation outcomes force the suspension of nuclear power plant operations, this could significantly impact business performance through the incurrence of alternative power source costs and increased capital expenditures. The Company holds guarantee obligations of ¥77.9 billion to Japan Nuclear Fuel Limited as of the end of March 2026, and there is a risk that the Company could be required to fulfill its guarantee obligations if that company's financial condition deteriorates. In response, the Company is appropriately advancing government reviews and safety measure construction work, and has fully asserted its position in litigation.

Procurement prices for LNG and coal, the Company's main fuels, are affected by equipment/operational troubles at fuel suppliers, natural disasters, international market fluctuations due to political and economic trends, and foreign exchange rate fluctuations. A Middle East crisis occurred in February 2026, but since the Company does not procure fuel from that region, the impact is limited; however, the risk of LNG price increases due to a prolonged crisis remains. The impact on business performance is mitigated to a certain extent by the fuel cost adjustment system, and the Company also utilizes diversification of suppliers and foreign exchange forward contracts/fuel price swap transactions.

Large amounts of funds are required for construction and renewal of facilities in the domestic electricity business, and the balance of interest-bearing debt as of the end of March 2026 reached ¥3,697.0 billion (equivalent to 62% of total assets). Future increases in market interest rates could impact business performance through increased costs of new fund procurement. Currently, 97% of the interest-bearing debt balance is procured at fixed interest rates, limiting the risk of fluctuation, but the Company strives for timely and appropriate procurement for new financing while monitoring interest rate trends.

The government is advancing institutional design and market development of energy policy under the "7th Strategic Energy Plan" and "GX2040 Vision," and system changes could impact business performance through increased capital expenditures/costs, declines in power generation facility utilization rates, and revenue fluctuations from various electricity trading markets. This includes the risk that if additional burdens are imposed on fossil fuel use due to stricter carbon pricing systems (fossil fuel levies, emissions trading systems), investments/costs for power supply facilities could increase. In response, the Company actively collects relevant information and considers strategies and specific responses in coordination with relevant departments.

If natural disasters such as earthquakes, tsunamis, typhoons, or torrential rains occur, power supply facilities such as power generation, transmission/substation, and distribution facilities, as well as the supply chain, could be damaged, potentially causing significant impacts on socioeconomic activities through widespread and prolonged power outages. This could impact business performance through decreased revenue and the incurrence of substantial restoration costs, while also raising concerns about a decline in social trust. In response, the Company is strengthening facility resilience, securing restoration materials/equipment in advance, building cooperative frameworks with local governments and the Self-Defense Forces, and establishing a rapid restoration framework through the "Disaster Response Cooperation Plan" jointly formulated by 10 general transmission and distribution utilities.

Cyber attacks against the Company's group are increasing year by year, with attack methods becoming more sophisticated and malicious, raising the possibility of leaks of confidential/personal information, business disruptions, and power outages caused by attacks on power supply facilities. In June 2024, a group company actually experienced an incident involving unauthorized access by a third party, with the possibility that personal information was leaked. In response, the Company is implementing organizational, human, physical, and technical multi-layered defenses centered on the Cybersecurity Countermeasures Office, working to maintain and improve information security levels across the entire group.

In March 2023, the Company received a cease-and-desist order and surcharge payment order from the Japan Fair Trade Commission for violation of the Antimonopoly Act, and in July of the same year received a business improvement order from the Minister of Economy, Trade and Industry based on the Electricity Business Act (currently under dispute in a rescission lawsuit). Additionally, Kyushu Electric Power Transmission and Distribution Company received a business improvement order and guidance from the Personal Information Protection Commission due to information leakage/unauthorized access related to conduct regulations, and in May 2026 an incident occurred where the whereabouts of an external storage medium containing personal information became unknown. If a legal violation is determined or the Company acts contrary to social expectations, administrative dispositions, loss of trust, and post-incident response costs could occur, impacting business performance; the Company is working on recurrence prevention based on its business improvement plan.

In overseas business, diverse and complex risks exist, including intensifying competitive environments, country risk, market fluctuations (soaring prices, electricity/fuel prices, interest rates, exchange rate fluctuations), and revisions to environmental/energy policies, which could impact business performance if the initially expected returns are not obtained. Following the outbreak of the Middle East crisis in February 2026, the Company evacuated all employees and accompanying family members dispatched to the United Arab Emirates, but at this time no significant impact on business continuity or project profitability has been confirmed. The Company aims to reduce risk through establishing management frameworks for each project, confirming profitability, conducting risk assessments, and optimizing its portfolio through asset sales and replacements.

If the declining working-age population due to the falling birthrate makes it difficult to acquire and develop the diverse talent necessary to realize business strategies, or to stably secure personnel across the entire Kyuden Group, this could impact business continuity and mid-to-long-term corporate value. Failure to respond to the diversification of employees' work attitudes and values could lead to declining engagement, resulting in stagnant productivity and talent outflow. In response, the Company is working to expand recruitment of experienced and highly specialized personnel, introduce multi-track treatment systems, roll out QX (Qden Transformation) company-wide, enhance flexible work systems, and promote DE&I to create an environment where diverse talent can thrive.

At large-scale power plants and ultra-high-voltage transmission lines, the probability of failure due to aging deterioration is increasing, and if a major facility accident occurs, this could result in economic losses and a decline in social trust due to widespread and prolonged power outages. Additionally, if DX initiatives utilizing technological innovations such as AI stagnate, there is an increased risk of missed profit-generating opportunities and declining productivity. In response, the Company is advancing facility inspections, meticulous maintenance, and planned renewal of aging facilities, while promoting the use of generative AI, strengthening data analysis infrastructure, and developing DX talent under the DX Promotion Headquarters, ensuring governance through the company-wide IT Promotion Committee chaired by the Vice President (CIO).