Hokkaido Electric Power Company, Incorporated

Tomari Nuclear Power Station is undergoing conformity review under the new regulatory standards; while approval for the reactor installation change for Unit 3 was obtained in July 2025, review of detailed design approval and safety regulation change approval remains outstanding. In addition, seawall construction work, which began in March 2024, is expected to take three-plus years to complete, and if the suspension is prolonged due to review progress or construction delays, continued increases in fuel costs could have a material impact on business performance. The company is considering measures to shorten the process and is advancing construction work based on its safety improvement plan.

Fuel procurement costs are affected by fluctuations in fuel prices and exchange rates, while electricity purchase costs are affected by fluctuations in wholesale electricity market prices; prices have continued to rise recently against the backdrop of heightened tensions in the Middle East. The company works to diversify and hedge price fluctuation risk through a combination of long-term contracts and spot procurement, diversification of procurement sources, and use of derivative transactions, and the impact on business performance is mitigated to a certain extent through the application of the fuel cost adjustment system and the fuel cost, etc. adjustment system. However, if price fluctuations occur beyond the scope covered by these systems, business performance may be affected.

Changes to national systems, such as the development and revision of markets and rules aimed at further stimulating competition in the electricity business, may affect business performance. In addition, if the contribution system related to nuclear back-end business (spent fuel reprocessing, radioactive waste disposal, decommissioning costs) is revised, uncertainty over the very long term could increase, potentially affecting business performance. Under the current system, a contribution scheme based on unit prices and amounts stipulated by laws and regulations is in place, which mitigates operator risk.

Strengthening of environmental regulations related to global warming countermeasures, such as carbon pricing, may lead to increased costs and reduced competitiveness. The Hokuden Group has set targets of reducing Scope 1+2+3 emissions by 46% by FY2030 and 60% by FY2035 compared to FY2013 levels, and is working on restarting all units at Tomari Nuclear Power Station, expanding renewable energy, and decarbonizing thermal power plants; however, delays in responding to these initiatives could result in a loss of competitiveness. The company continues its efforts toward achieving carbon neutrality in Hokkaido by 2050.

If power generation or distribution equipment is damaged by natural disasters, malfunctions, or other causes, or if operation and maintenance of equipment become difficult due to disruption of fuel supply or the equipment and materials supply chain, restoration costs and increased costs from ramping up output at other power plants may increase, potentially affecting business performance. The company strives to maintain equipment reliability through steady inspection and maintenance, secure stable fuel procurement, and maintain the supply chain, but there are limits to addressing external factors such as large-scale disasters.

If electricity demand declines due to economic downturn and reduced economic and production activity, progress in energy conservation, population decline, temperature fluctuations, or other factors, or if sales volume declines due to intensified competition with other operators, business performance may be affected. In the competitive environment following full retail electricity market liberalization, the company faces risks arising from a combination of demand-side and supply-side factors.

Rising market interest rates may increase the cost of new fund procurement, but since the majority of interest-bearing debt consists of fixed-rate corporate bonds and long-term loans, the impact of interest rate fluctuations on business performance is considered limited. On the other hand, if procurement costs for equipment and materials increase due to rising prices and labor costs, business performance may be affected; the company is working to improve efficiency and reduce costs through measures such as improved procurement of equipment and materials.

If business information such as customer data is leaked, or if a system failure occurs due to a cyberattack, business operations may be disrupted and social credibility may decline, potentially affecting business performance. In addition to ensuring information security, establishing internal rules, and providing employee training, the company strives to improve its incident response level through measures to prevent unauthorized intrusion, establishment of early detection and rapid response systems, and cyberattack response training.

If a serious labor shortage occurs, business operations may be disrupted, potentially affecting business performance. Based on the "Hokuden Group Human Resources Strategy," the company is promoting initiatives to develop personnel capable of autonomously taking on challenges and adapting to change, and to create an environment where diverse personnel can thrive; however, securing human resources is becoming increasingly difficult against the backdrop of the declining birthrate and intensifying competition in the labor market.

Fluctuations in annual rainfall and snowfall may affect business performance, as hydroelectric power generation decreases during droughts, increasing fuel costs, while it increases during periods of abundant water, reducing fuel costs. The impact on business performance is mitigated to a certain extent through the "drought reserve provision system," but cost increase risk remains if an extreme drought occurs that exceeds the adjustment scope of the system.