OSAKA GAS CO., LTD.

There is a risk that fuel and raw material costs could fluctuate significantly due to changes in foreign exchange rates and crude oil prices in LNG procurement, as well as trends in contract renewals and price negotiations with LNG suppliers. The company depends heavily on overseas imports for the majority of gas and electricity fuel and raw materials, and increases in procurement costs directly squeeze profitability. The company works to mitigate the impact through diversification of contract price indices, hedging, and adjustment of unit gas rates under the raw material cost adjustment system.

There is a risk that changes in domestic and overseas regulations accompanying the transition to a carbon-neutral society, as well as changes in customer and investor preferences, could lead to increased response costs and a decline in gas sales volume. Continued warming trends and delays in technological development could also make responses more difficult. The company addresses this through promoting fuel switching to natural gas, introducing renewable energy, and developing technologies and building supply chains toward carbon neutrality.

With the expansion of the Overseas Energy business, there is a risk that project delays, cancellations, or deteriorating profitability could occur due to changes in policy or regulation in countries where the business operates, worsening economic or social conditions, fluctuations in crude oil and gas prices, natural disasters, and other factors. This includes geopolitical and country risks, and there is a possibility that investment recovery could become difficult. The company is addressing this risk through proactive business management, rigorous project evaluation, and building cooperative relationships in the projects it participates in.

There is a risk that core IT systems related to gas manufacturing, power generation, and supply could stop or malfunction, or that customer information or technical information could leak outside the company, due to external factors such as advanced cyberattacks or intrusion into facilities, or internal factors such as loss of documents or data. Attacks on energy infrastructure could have significant societal impact and could seriously disrupt business continuity. The company addresses this through promoting and monitoring security measures, thorough information management education, and formulating BCPs in the event of a cyber incident.

Since the company depends heavily on overseas imports for the majority of LNG and other fuels and raw materials, there is a risk that raw materials cannot be procured as planned due to equipment troubles at suppliers, natural disasters, country risk, and other factors. Disruption in procurement directly affects the stable supply of gas and electricity, leading to supply disruptions for customers and deteriorating profitability. The company aims for stable and flexible procurement through diversified procurement from numerous producers and supply-demand adjustment through LNG trading.

There is a risk that customer attrition and declining sales volume could occur due to intensifying competition with new entrants following full liberalization of electricity and gas retail markets, competition with other fuels, and relative decline in competitiveness due to technological innovation. The structural contraction of the domestic market due to population decline is also a factor squeezing profitability over the medium to long term. The company works to strengthen market competitiveness through enhancing added value, reducing raw material costs, and promoting technological development and DX.

There is a risk that large-scale earthquakes, natural disasters, terrorism, unforeseen large-scale power outages, accidents, and similar events could disrupt natural gas production and liquefaction facilities, as well as gas manufacturing, supply, and power generation facilities. This also includes operational troubles at overseas participating projects, and could have a serious impact on business continuity and financial condition. The company addresses this through intensive facility inspections and continuous improvement, various insurance policies, formulation and review of BCPs, and building cooperative relationships in domestic and overseas projects.

There is a risk of adverse effects on profitability and financial condition when there are large fluctuations in foreign exchange rates or procurement interest rates, or when it is difficult to adequately reflect price increases in selling prices. There are many foreign-currency-denominated transactions in overseas business and LNG procurement, making the company structurally susceptible to the effects of exchange rate fluctuations. The company works to mitigate the impact through hedging against fluctuations in foreign exchange rates and procurement interest rates, foreign currency procurement, and reducing costs such as raw material and logistics costs.

There is a risk that troubles related to gas manufacturing, power generation, and supply, or serious troubles with gas consumption equipment and facilities, could occur due to natural disasters, accidents, or technical issues exceeding expectations. Supply disruptions have a direct impact on customers, in addition to leading to a decline in social credibility and the incurrence of substantial response costs. The company is advancing efforts to prevent accidents and supply disruptions through conducting emergency drills, regular facility inspections and renewals, and earthquake and tsunami countermeasures.

There is a risk that it will become difficult to secure the human resources necessary for business operations due to the declining working population and increasing labor market fluidity. A shortage of human resources could become a factor hindering technology transfer and business growth, potentially leading to a decline in competitiveness over the medium to long term. The company is promoting human resource acquisition measures that respond to changes in the labor market environment, but the annual securities report provides only limited detail on specific countermeasures.