TOHO GAS CO., LTD.

Sales volumes in the City Gas, LPG, and Electricity businesses may fluctuate due to climate change (extreme heat or mild winters), intensifying competition following full liberalization of retail sales, progress in energy conservation, changes in industrial structure, and shifts in customer energy preferences, potentially impacting business performance. Developments in the Middle East situation also pose a risk of spillover effects on energy demand in the region. In response, the Group is promoting the development of new demand and expanding its total energy share through the use of digital technologies.

The price of LNG, the feedstock for city gas, is affected by economic conditions including geopolitical risks, as well as fluctuations in crude oil prices and exchange rates. The feedstock cost adjustment system mitigates the impact to a certain extent by reflecting cost changes in sales prices, but the time lag before reflection results in residual impact on period earnings. In addition, feedstock prices may also fluctuate depending on the status of contract renewals and price negotiations with LNG suppliers.

Electricity procurement is conducted through a combination of purchases from power generation companies and the wholesale electricity market, along with the Company's own power sources. If procurement prices fluctuate due to economic conditions including geopolitical risks, this may impact business performance. In response, the Group is working to balance reduced procurement costs with stabilized earnings by improving the flexibility of bilateral contracts with power generation companies and optimizing the procurement ratio.

If new environmental regulations or systems introduced toward achieving carbon neutrality by 2050 result in additional response requirements or cost burdens, this may impact business performance. In March 2026, the Group updated the "Toho Gas Group's Challenge Toward Carbon Neutrality by 2050" and is promoting specific initiatives such as e-methane demonstration projects, development of CO2 separation and capture technology, and creation of hydrogen supply and demand.

In March 2024, the Company received a warning from the Japan Fair Trade Commission based on 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 Gas Business Act, as well as business improvement guidance from the Electricity and Gas Market Surveillance Commission. The Company has formulated and submitted a business improvement plan and has implemented a system of prior approval and post-facto reporting for contacts with competitor companies, along with intensive training; however, if a recurrence were to occur, it could result in tangible and intangible damages.

If a large-scale natural disaster causes extensive damage to manufacturing facilities, supply facilities, or customer facilities, or if an unforeseen large-scale power outage occurs, this may have a material impact on business performance. In response, the Group is working to improve the seismic resistance of manufacturing and supply facilities, including installing in-house power generation equipment and fire prevention/extinguishing equipment, establishing disaster response systems, stockpiling industrial water and other resources, and reinforcing the earthquake resistance of gas pipelines.

Since LNG is imported from overseas, if feedstock cannot be procured over an extended period due to country risk in the exporting countries, operational troubles at natural gas production and liquefaction facilities, or issues with LNG vessel operations, this may impact business performance. In response, the Group is working to build a stable procurement system through diversification of procurement regions, flexible operation of receiving terminals, and strengthening its involvement in the value chain through investments in upstream interests, midstream businesses, and LNG vessels.

If a system failure or cyberattack causes a serious disruption to core information systems, this may impact business performance. In response, the Group is thoroughly maintaining and managing its systems, implementing various security measures, continuously conducting cyberattack response training, and performing checks based on security regulations.

Changes in market conditions such as crude oil prices and economic trends may reduce the future profitability of domestic and overseas investments, potentially preventing proper recovery of such investments. In addition, for overseas investments, there is a risk that changes in laws, regulations, and business customs in each country could delay or stagnate business operations or increase costs. In response, the Group carefully examines profitability and risk for each project, and when there are indications of impairment, determines the necessity of recognizing and measuring impairment losses.

If customer personal information acquired and managed by the Group is leaked externally, this could result in tangible and intangible damages, including social responsibility issues. In response, the Group is committed to thorough information management through deliberations on personal information protection activity plans by the Internal Control and Social Committee, education and awareness activities, and promotion of self-audits.