HOKURIKU GAS CO.,LTD.

There is a risk that the number of customers and gas sales volume will decrease due to the emergence of new entrants resulting from full retail liberalization and changes in energy policy, the Gas Business Act, and other laws and regulations. The Company is appropriately responding to system changes and closely monitoring the moves of competitors, while working to secure new sources of revenue and increase sales per household through the examination and implementation of new businesses and new services.

There is a risk that the number of customers and gas sales volume will decrease due to the tightening of environmental regulations and the progress of electrification aimed at achieving carbon neutrality by 2050. The Company is responding through efforts toward decarbonization such as the supply of e-methane and other measures, sales of Carbon-Offset City Gas, and reflecting the role of City Gas in local decarbonization initiatives undertaken by municipalities and other regional bodies.

There is a risk that gas sales volume will fluctuate significantly due to abnormal weather such as cool summers and warm winters, and will also decrease due to reduced operation of customer equipment during economic downturns. The Company is working to acquire new demand across a variety of applications, including promoting the benefits of City Gas through the quantitative and qualitative expansion of customer touchpoints and expanding sales of equipment with less demand variation throughout the year.

There is a risk that the number of customers and gas sales volume will decrease due to the decline in population and number of households within the service area, changes in lifestyles, and progress in energy conservation. The Company is working to increase gas usage per household by strengthening sales of gas water heating systems and gas clothes dryers, among other products, while also promoting regional revitalization initiatives in collaboration with local governments.

There is a risk that the Company will be unable to secure the planned number of necessary personnel due to intensifying competition for talent, or that unexpected departures of employees with specialized knowledge and skills will hinder business operations and affect performance. The Company is utilizing diverse recruitment methods, including career-track hiring in addition to new graduate recruitment, and is working to enhance employee engagement through system reforms that enable flexible working arrangements.

There is a risk that rapid increases in prices, personnel expenses, and other costs will increase repair expenses and outsourcing costs, and that rising acquisition costs of equipment will increase the burden of depreciation expenses and affect fundraising, thereby impacting operating results and financial condition. The Company is working to reduce costs through operational efficiency improvements and to enhance profitability through pricing measures, while thoroughly verifying the appropriateness of equipment acquisition prices.

There is a risk that if manufacturing and supply facilities suffer significant damage due to a large-scale natural disaster or accident, gas supply will be affected, resulting in restoration costs and losses associated with responding to supply disruptions. The Company is responding by improving its earthquake resistance rate through the spread of polyethylene pipes, building a supply backup system, and conducting regular disaster response training.

Raw material prices are affected by external factors such as fluctuations in exchange rates and crude oil prices, and although these can be reflected in gas rates through raw material cost adjustments, there is a risk that time lags will cause impacts on performance across fiscal periods. The Company monitors exchange rate and crude oil price trends on a daily basis, tracks and forecasts actual LNG prices, and considers reviewing procurement volumes and gas rates as necessary.

There is a risk that if the Company suffers a cyberattack, it could result in tangible and intangible losses such as loss of control over City Gas manufacturing and supply control systems leading to production halts and large-scale supply disruptions, as well as leakage of personal information, delays in customer response due to core system outages, and a decline in social credibility. The Company is responding by gathering the latest information, implementing various information security measures, conducting cross-departmental incident response training, and submitting implementation plans for specified critical facilities in accordance with the Economic Security Promotion Act.

There is a risk that if acts in violation of laws, the articles of incorporation, or corporate ethics are discovered, this could result in tangible and intangible losses, including response costs and a decline in social credibility. The Company is working to raise compliance awareness through timely and appropriate compliance education for employees, timely provision of information and awareness-raising using groupware, and confirmation of legal compliance status through internal audits.