SAIBU GAS HOLDINGS CO., LTD.

LNG is procured from overseas, and costs may increase due to exchange rate fluctuations and rising crude oil prices. There is also a risk that raw fuel may not be procured as planned due to equipment troubles at suppliers, natural disasters, or country risks such as tensions and conflicts in the international situation. As countermeasures, the company is promoting diversification of supply sources, price reduction through contract renewals, and building a spot procurement system.

Gas demand for hot water supply and heating may decrease due to the effects of climate change such as extreme heat and warm winters, and in the medium to long term, there is a risk that existing gas demand, including natural gas and LPG, will shrink due to progress in decarbonization toward carbon neutrality by 2050. The company is responding by strengthening sales to industrial and cogeneration customers, expanding sales of carbon-offset city gas, and introducing methanation technology.

Since the full liberalization of gas retail sales, competition with other energy operators and new entrants has intensified further, and if competition progresses further, it may affect business results and financial condition. The company aims to maintain and expand its market share through the active development of combined gas and electricity sales, enhancement of value-added services, and provision of energy solution services.

Tight electricity supply-demand balance due to extreme heat, cold waves, natural disasters, or power plant troubles may cause electricity procurement prices from the Japan Electric Power Exchange to surge. The company is working to fix procurement costs through bilateral contracts with power generation companies and electricity futures trading, and is securing stable power sources through the expansion of the Hibiki Power Plant and renewable energy businesses.

Large-scale natural disasters such as earthquakes and typhoons, or terrorism, may damage gas manufacturing facilities and supply facilities such as pipelines at LNG terminals, causing significant disruption to business operations. In addition, if gas leaks, explosions, or other accidents occur at any stage of manufacturing, supply, or consumption, direct damage may occur along with social responsibility. The company continuously implements safety measures such as improving earthquake resistance, formulating and reviewing BCP, conducting practical training, and developing the gas pipeline network.

If a serious failure occurs in core systems such as gas manufacturing and supply systems or customer information systems, gas supply and various operations may be disrupted, causing tangible and intangible damage. In addition, leakage of customer information due to cyberattacks or system deficiencies may cause serious impact on the business and a decline in social credibility. The company continuously provides information security education to all employees, implements various security measures, and conducts information sharing and response training with related organizations.

In growth investments in the gas energy business, real estate business, and other areas, if future income and expenditure projections cannot be achieved due to changes in economic conditions after large-scale investments, business performance may be affected by the recognition of impairment losses or valuation losses. The company has established a careful investment decision-making process in which profitability and risk are evaluated by the Investment Evaluation Committee before being submitted to the Management Committee and Board of Directors, and conducts regular verification and business reviews as necessary after investment.

The real estate business is susceptible to economic trends, interest rate trends, real estate market conditions, and oversupply. If economic conditions worsen, interest rates rise significantly, or sales prices decline, business performance may be adversely affected by deteriorating consumer purchasing sentiment and declines in land prices and rental prices. The company responds by making land acquisition decisions that take into account the sales conditions of competing properties and market conditions, making business decisions based on strict profitability evaluation, and appropriately monitoring ongoing projects.

Insufficient efforts or disclosure regarding sustainability issues, including climate change, may lead to distrust among stakeholders and hinder sustainable growth. In addition, if the company is slow to respond to energy-related policies or changes in laws and regulations both domestically and internationally, business operations and performance may be significantly affected. The company is advancing its response through the setting of 2030 targets based on the "Saibu Gas Group Carbon Neutral 2050" initiative and the implementation of its carbon neutrality action plan.

The company is promoting overseas expansion in both its energy and real estate businesses, but country risks such as political and economic factors, deteriorating social conditions, changes in laws, regulations, and tax systems, and human rights issues and conflicts in the relevant countries may lead to project cancellations, delays, or deteriorating profitability. The company aims to reduce risk through early information gathering using specialized consultants and advisors, partnerships with local companies well-versed in local laws and regulations, and thorough financial due diligence on partners.