Electric Power Development Co., Ltd.

Mandatory participation in GX-ETS is scheduled to begin in FY2026, a fossil fuel levy is planned to be introduced from FY2028, and a paid auction system is scheduled to be introduced from FY2033, all of which could have a significant impact on the Company's power generation costs and capital investment plans given that it owns numerous coal-fired power plants. In addition, if new greenhouse gas reduction regulations are introduced, this could result in significant changes or constraints to business plans and operations. The Company is working to expand its introduction of CO2-free power sources and to improve the efficiency and reduce the carbon intensity of its coal-fired power generation, but risks remain due to the concretization of the regulatory system's operation and revisions to its levels.

Since the full liberalization of retail electricity sales in 2016, price regulation for the power generation business has been abolished, resulting in a market competitive environment in which prices are determined through negotiations with sales counterparties. Because the majority of operating revenue depends on sales to former general electric utilities, depending on long-term trends in electricity demand and the progress of market competition, the Company may be unable to secure earnings commensurate with its power generation costs. The Company is working to strengthen its competitiveness through appropriate price negotiations with sales counterparties, diversification of electricity sales, and enhanced maintenance of power generation facilities.

The Ohma Nuclear Power Plant, for which an application for conformity review was submitted to the Nuclear Regulation Authority in December 2014, is targeting completion of safety enhancement construction work in the latter half of FY2029, but given the status of the review and additional required responses, achieving this target is difficult. In addition to the initial construction cost of ¥469.0 billion, a substantial increase from the approximately ¥130.0 billion for safety enhancement construction work stated in the application is expected, and there is a possibility of further increases depending on the results of schedule review. There is a risk that a prolonged review process and expansion of additional safety measures could adversely affect the Company's financial position and results of operations.

Significant changes in the regulatory environment surrounding the nuclear power business, including revisions to national nuclear policy, responses to new regulatory standards, and the obligation to pay contributions to the Nuclear Damage Compensation and Decommissioning Facilitation Corporation, could affect business plans. After the Ohma Nuclear Power Plant begins operation, there will also be risks related to the storage and handling of radioactive materials, natural disasters, and unforeseen accidents. The Company's policy is to respond sincerely to the Nuclear Regulation Authority's review and steadily implement necessary safety measures, but the financial impact if such risks materialize would be significant.

The Company operates overseas power generation businesses including IPP projects, and country risk arising from political instability in the relevant countries, as well as foreign exchange risk, exists. In addition, for businesses operated in joint venture form, in cases where the Company remains a minority interest holder, situations may arise in which it cannot participate in management control, and the results of joint venture businesses may not necessarily make a beneficial contribution to the Company's performance. If significant changes in the business environment result in changes to or discontinuation of business plans, the incurrence of related expenses and additional capital contributions could adversely affect the financial position.

Continuous fund procurement is required for investments in Japan and overseas, including the development of new renewable energy power generation facilities and the Ohma Nuclear Power Plant, as well as for the redemption of existing debt, and the Company relies primarily on borrowings and bond issuance. If changes in financial conditions or a deterioration in the Company's creditworthiness prevent it from procuring necessary funds in a timely manner and on appropriate terms, this could adversely affect business development as well as the financial position and results of operations. In particular, as an increase in construction costs for the Ohma Nuclear Power Plant is expected, an increase in funding needs could be a factor that heightens procurement risk.

Fluctuations in the price of overseas coal, the main fuel for coal-fired power plants, the supply-demand conditions of transport vessels, and equipment or operational troubles at suppliers affect fuel costs. Because electricity rates for major coal-fired power plants have a mechanism that reflects market fluctuations in the portion corresponding to fuel costs, the impact on business performance is limited; however, when coal prices rise sharply, a temporary deterioration in business performance may occur due to the time lag before this is reflected in rates. In addition, when coal prices fall significantly, this could adversely affect the financial position through a deterioration in the performance of coal mines in which the Company holds interests.

If a serious accident occurs at power generation facilities, transmission and transformation facilities, or operational control information systems due to natural disasters, human error, terrorism, interruption of fuel supply, or other causes, this could disrupt business operations and adversely affect the surrounding environment. There is also a risk that securing the personnel, raw materials, and equipment and materials necessary for facility operation and construction/repair work could become difficult due to an epidemic or other unforeseen circumstances. The Company is working company-wide to establish safety and disaster prevention systems and implement preventive measures against accidents and disasters as well as emergency response and recovery measures.

The Company is subject to business regulation and safety regulation under the Electricity Business Act as well as various other laws and regulations, and failure to comply with these laws and regulations, or amendments to them, could adversely affect business operations and the financial position and results of operations. In particular, the obligation to pay contributions to the Nuclear Damage Compensation and Decommissioning Facilitation Corporation will arise after the Ohma Nuclear Power Plant begins operation, and depending on the amount, this could affect the financial position. With the continued progress of electricity business system reform, revisions to the regulated retail electricity rates (transitional measures) for former general electric utilities are also planned, which could affect the Company's business environment.

The Company holds a large amount of highly confidential important information, including personal information, and if an external leak occurs, this could adversely affect the Company's reputation and business performance. Similar risks also exist if a compliance violation, including human rights violations, occurs. The Company is taking measures such as promoting information security measures and conducting employee training, establishing the "Code of Corporate Conduct" and "Compliance Action Guidelines," and establishing the J-POWER Group Compliance Committee.