Challenge. - Toward the growth of the Group in a new energy era -

Transcription

1 Challenge competition. Challenge uncharted territory. Challenge with fresh ideas. Challenge. - Toward the growth of the Group in a new energy era - Kansai Electric Power Group Medium-term Management Plan ( ) April 2016

2 1 1. Introduction 2. What We Aspire to Become in 10 Years 3. Our Efforts towards Realizing What We Aspire to Become (1) Enhancement of competitiveness in comprehensive energy business (2) Establishment of new pillars for growth (3) Strengthening Group Management Foundation 4. Financial goal and policy of return to stockholders

3 Introduction 2 Thank you very much for your continuous support for the business operated by the Kansai Electric Power Group. For the past 65 years since our founding, our Group has been operating business by continuously serving our customers and communities, including providing a safe and stable supply of electricity, as our mission of primary importance. The full liberalization of retail electricity sales starting in April 2016 ushers in a new energy era in which the business environment will dramatically change from a regional monopoly and fully distributed cost model which has lasted since the day of the Group s establishment, to a free competition model. We are going to enter an age of full-fledged competition with the participation of new rival companies from other industries, while at the same time expansion of business domain/area resulting from the liberalization will also be an opportunity for us to achieve fresh growth. Our Group sincerely hopes to keep serving our customers and communities by responding to the rapidly changing environment in a proactive and flexible manner and by providing our own value not just in conventional ways but with fresh ideas. To this end, now that we are standing at the turning point of an era, we have formulated our Management Philosophy and Kansai Electric Power Group Vision in March 2016, which clearly show how our Group should operate our business under new management circumstances to proactively respond to the changes and achieve long-term sustainable growth. Under our new philosophy and vision, what should we do to be continuously selected by our customers and bring further growth to our Group? How should we make our way to become what we aim to be as stated in our vision? As the first step of the way our Group must proceed, we have now developed the Kansai Electric Power Group Mediumterm Management Plan ( ). Our determination underlying the Medium-term Management Plan is represented by the word Challenge. We Challenge competition, Challenge uncharted territory and Challenge with fresh ideas; in doing so our Group will make a concerted effort to meet your expectations. As the newborn Kansai Electric Power Group, we will accomplish our Medium-term Management Plan with unwavering resolve and continue to forge ahead toward the growth of our Group in a new energy era. We ask for your continued support and patronage. April 2016 Makoto Yagi, President and Director

4 Formulation of Medium-term Management Plan 3 Formulating a medium-term management plan to achieve fresh growth in a new energy era While the environment surrounding the electricity business is changing dramatically as exemplified by the full liberalization of retail electricity sales, business opportunities are expanding owing to full liberalization of retail gas sales and other factors. In order to proactively respond to such environmental changes and realize What we aim to be in the future as stated in the Kansai Electric Power Group Vision developed in March 2016, we formulated a new medium-term management plan. Kansai Electric Power Group Philosophy System By giving top priority to safety and fulfilling social responsibilities as the axis of business management and upholding our mission of continuing to serve our customers and communities, we at the Kansai Electric Power Group will realize a bright, affluent future and keep close relationship with our customers and communities into the future. [What we aim to be in the future] We will provide a wide range of safe, comfortable and convenient services from a viewpoint of our customers and business partners, and gain their trust to be selected as the best partner in everyday life and business so we keep growing at home and abroad while fulfilling our resolve to play expected role as Japan s leading company in the energy sector. Kansai Electric Power Group Vision Management Philosophy Brand statement Medium-term Management Plan Guidelines for Action Based on the concept of valuing people, the Kansai Electric Power Group will contribute to sustainable development of communities through fair business activities. Each one of our directors and employees will demonstrate a sense of mission and spirit of challenge which have been cultivated so far and give our best in our duties as a good member of society and also fulfill the following fundamental responsibilities. [Fundamental Responsibilities] Give top priority to ensuring safety. Surely implement CSR. Keep changing to accomplish our abiding mission..

5 3-year Steps to Realize What We Aspire to Become 4 Medium-term Management Plan is What we aspire to become in 10 years toward what we aim to be in the future, which is described in the Kansai Electric Power Group Vision, and 3-year Action Plan to realize it. What we aim to be in the future (Term after next) Medium-term Management Plan (Next term) Medium-term Management Plan [ ] (Current term) Medium-term Management Plan [ ] [ ] Expansion of revenue sources Establishment of a new revenue structure What we aspire to become in 10 years Now Regeneration and pursuit of fresh growth Now (2016) After 3 years (2019) After 6 years (2022) After 10 years

6 (Term after next) Medium-term Management (Next term) Medium-term Management Plan (Current term) Medium-term Management Plan (Reference) Positioning by Step 5 [ ] Regeneration and pursuit of fresh growth Restart of our nuclear power plants as early as possible to fulfill our responsibilities to our stakeholders, such as lowering electricity rates and resuming dividend payments. Enhancement of competitiveness and firm establishment of a profit-making structure at the same time. Consider a broad range of approaches toward commercialization and future growth, without being bound by conventional frameworks. [ ] Expansion of revenue sources Increase the scale of business and profit level by further enhancing competitiveness through resumption of successor nuclear reactor operations and implementation of cost structure reform, as well as by intensively devoting managerial resources to highly profitable businesses. [ ] Establishment of a new revenue structure Secure stable profits from multiple revenue sources as the outcome of efforts accumulated so far. Establish a new business portfolio (revenue structure) that matches the new energy era and does not solely depend on the electricity business within the Kansai Region, thereby realizing what we aspire to become.

7 Our Determination to Move Ahead with the Medium-term Management Plan 6 Challenge. - Toward the growth of the Group in a new energy era - Challenge competition. Amid full-scale competition resulting from full liberalization of retail electricity sales, we will do our best in every process to deliver our products and services so customers will select the Kansai Electric Power Group. Challenge uncharted territory. Actively operate businesses in domains and areas we have not previously entered to achieve growth and expansion beyond the conventional business framework. Challenge with fresh ideas. In light of environmental change from a regional monopoly and fully distributed cost model to a free competition model, we will keep challenging positively with fresh ideas without being bound by conventional thinking or frameworks.

8 7 1. Introduction 2. What We Aspire to Become in 10 Years 3. Our Efforts towards Realizing What We Aspire to Become (1) Enhancement of competitiveness in comprehensive energy business (2) Establishment of new pillars for growth (3) Strengthening Group Management Foundation 4. Financial goal and policy of return to stockholders

9 Recognition of Business Environment 8 Advent of a new energy era and opportunities for fresh growth As the managerial environment changes dramatically from a regional monopoly and fully distributed cost model to a free competition model we are entering an era of full-fledged competition. Since no significant increase of electricity demand can be expected in the domestic market, growth will be limited if we depend solely on the electricity business within the Kansai Region. Meanwhile, full liberalization of the energy business will allow us to expand our business domain/area including the gas business. Additionally, overseas energy consumption is on the increase, suggesting growing business opportunities. Changes in the energy market Changes in the needs of customers and communities As no significant growth of domestic electricity demand can be expected from now on due mainly to decreasing population, crossarea competition in the electricity market will get more serious along with the full liberalization of retail sales. The gas market will become more competitive as well, lowering barriers between energy markets. The world s energy consumption will increase, keeping pace with economic growth. In particular, energy consumption in developing countries will increase notably. In terms of securing further neutrality of the power transmission and distribution sector, the power transmission and distribution business will be legally separated. Customers/communities needs for energy use and supply method, such as smart communities and demand response, will be further diversified. To attain the national goal of global warming gas reduction, the need for CO 2 emission reduction will keep on increasing, promoting further dissemination of renewable energies. While further improvement is required for nuclear safety, the Strategic Energy Plan has defined nuclear power as a low-carbon quasi-domestic energy source and positioned it as an important base-load power source with excellent supply stability and efficiency.

10 Management Direction and What We Aspire to Become in 10 Years 9 Challenge. Management Direction What We Aspire to Become in 10 Years Challenge competition. 1. Become a highly profitable business group. We have achieved high profitability through realization of an increase in business efficiency and enhancement of competitiveness, provision of new products and services, proactive use of alliances, business activities focused on our competitors movements, profitability and so on. Challenge uncharted territory. 2. Expand business fields. Through our efforts to boldly expand our business fields (business domain/area) without being tied to existing businesses, in pursuit of fresh growth for our Group, the entire Group has grown into a business group much larger than it was before the Great East Japan Earthquake. Challenge with fresh ideas. 3. Build a robust management base. We have established a robust management base which enables agile and effective response to environmental changes, and have also been moving forward tirelessly as Japan s leading company in the energy sector.

11 Business Portfolio after 10 Years 10 With a balanced Group-wide business portfolio, we aim to achieve ordinary income of at least 300 billion yen. We will achieve a Group-wide profit which exceeds the pre-earthquake level. We will expand our business scale through proactive investment in international and Group businesses, thereby creating a balanced Group-wide business portfolio. After 10 years (2025) International/Group businesses 1 Comprehensive energy/power transmission and distribution business : 2 Before the Earthquake 1 : billion yen 1.5 times or more Investment of 1,500 billion yen in international/group businesses over 10 years 300 billion yen or more

12 Breakdown of Business Portfolio after 10 Years 11 Business portfolio after 10 years Group Support Business Real Estate/Life Business 20 billion yen 30 billion yen Comprehensive Energy Business/Power Transmission and Distribution Business 200 billion yen or more Information and Communications Business 30 billion yen 300 billion yen or more International Business 30 billion yen

13 12 1. Introduction 2. What We Aspire to Become in 10 Years 3. Our Efforts towards Realizing What We Aspire to Become (1) Enhancement of competitiveness in comprehensive energy business (2) Establishment of new pillars for growth (3) Strengthening Group Management Foundation 4. Financial goal and policy of return to stockholders

14 Pillars of Approach and Prioritized Measures 13 Challenge Management Direction Pillars of Approach and Prioritized Measures Challenge competition. 1. Become a highly profitable business group. (1)Enhancement of competitiveness in comprehensive energy business [1] Enhancement of marketing and sales strategies [2] Strengthening of competitiveness in power supply (realization of a power structure achieving S + 3E) [3] Active expansion of the gas business [4] Active promotion of alliances among operators [5] Further promotion of reform of cost structure Challenge uncharted territory. 2. Expand business fields. (2) Establishment of new pillars for growth [1] Dramatic growth of international businesses [2] Further growth of Group businesses [3] Promotion of innovation to accelerate growth Challenge with fresh ideas. 3. Build a robust management base. (3) Strengthening Group Management Foundation [1] Promotion of stable transmission and distribution services [2] Reform of organization and governance [3] Strengthening foundation of human resources

15 14 1. Introduction 2. What We Aspire to Become in 10 Years 3. Our Efforts towards Realizing What We Aspire to Become (1) Enhancement of competitiveness in comprehensive energy business (2) Establishment of new pillars for growth (3) Strengthening Group Management Foundation 4. Financial goal and policy of return to stockholders

16 Direction of efforts (1) Enhancement of competitiveness in comprehensive energy business 15 Recognition of the business environment Significant future growth in demand for electric power cannot be expected due to enhanced awareness of power saving/energy saving, declining population, etc. Full deregulation of the electricity/gas markets allows competitors from various fields to rush into the energy market, giving customers free choice of a larger number of retailers and intensifying their demand for reduced energy cost. Unpredictable trend of nuclear power plants and input amount of renewable energy. The estimated 2030 percentages of energy mix supply sources are as follows: Nuclear: 20 22% / coal: 26% / LNG: 27% / oil: 3% / renewables: 22 24% Ordinary income (including the power transmission & distribution business) Thorough management streamlining to enhance our price competitiveness 160 billion yen 170 billion yen 200 billion yen Enhancement of marketing & sales strategies Providing and expanding products and services by making full use of both the internal and external alliances Expansion of the integrated business combining electricity and gas with the group service. Full-scale entry into markets outside the Kansai Region focused on the metropolitan area. Strengthening of competitiveness in power supply Promotion of efforts towards strengthening of competitiveness to achieve S+3E. Restart of nuclear power plants Secure promotion and streamlining of electric power development towards enhanced competitiveness. Active development of hydro- and renewable-energy power supplies. Active expansion of the gas business Expansion into the home sector. Active promotion of alliances among operators Active promotion of alliances among operators to improve their enterprise value and solve problems common to operators. Before the Earthquake Further promotion of reform of cost structure Thorough streamlining to enhance competitiveness.

17 Common Business sector Home sector (1)-[1] Enhancement of marketing and sales strategies 16 We will restart nuclear power plants and promote thorough streamlining of management to enhance our price competitiveness and make full use of alliances to provide and expand products and services. Within the territory Provide a price menu capable of satisfying customers needs. Hapi e-time e-smart 10, etc. Provide value-added services by making full use of the community-based business base. Hapi e-living Support Run-to-You Service regarding Electricity Hapi e-points, etc. Provide the living platform (Hapi e-miruden) service and enhance the functions. Promote integrated business by making full use of bundled sales with electricity and gas ( ), as well as utilizing alliances with companies within and outside of the group to combine their products and services together. eo electricity au electricity, etc. Promote an integrated business by combining electricity/gas supply service with other group services including utility services. Promote the proposition of optimal energy system operation. Outside the territory Full-scale entry into markets outside the Kansai Region focusing on the metropolitan area. Provide a price menu capable of satisfying customers needs. Business tie-up with other companies, for example an electricity-other product bundled service. Set our target to 1.0 TWh sales in 10 years around the metropolitan area. Expand sales activities making full use of new power sources, etc., around the metropolitan area. Promote an integrated business combining electricity supply service with other group services including utility services. Coordinate local/area development through participation in smart communities, etc.

18 Effort in these three years (1)-[2] Strengthening of competitiveness in power supply (realization of a power structure achieving S + 3E) 17 Along with the efforts towards the strengthening of competitiveness, we will provide electricity, for which high safety, energy security, economy, and environmental conservation are assured, to be the best choice for our customers. Comparison of power output among various energy sources 12 % 17 % 46 % 24 % : Nuclear : Coal : LNG : Oil : Hydro-/renewal Active development for increase Promotion of the development of power supply sources to strengthen competitiveness taking the demandsupply balance into consideration. Early restart for increase Hydro-/ renewable energy Thermal Nuclear Nuclear Thermal Hydro- /renewable energy Make our best efforts for early restart of nuclear power plants, which are the driver for competitiveness and make full use as the base-load power source in the future. Strive to persistently improve the safety of nuclear power generation to far higher than required by the regulations. Promote efforts to operate the nuclear power business as a private operator in the competitive environment. Promote decommissioning of nuclear power plants with both safety and efficiency ensured. Secure promotion and streamlining of the development of electric power sources to strengthen our competitiveness. Promote fuel-conversion work (Aioi Power Plant/Ako Power Plant) Develop power supply sources outside the territory by Kanden Energy Solution Co., Ltd. Fully streamline operations to become the leader in the industry. Flexibly ensure the demand-supply operation function taking a large amount of renewable energy input, etc., into consideration. Make use of the FIT program and promote streamlining to strengthen the competitiveness in existing hydro-energy generation and promote new development. Make use of the FIT program and alliances to actively develop renewable energy power sources including in areas outside the territory. 0 % Reduced CO 2 Promote nuclear power generation, develop renewable energy power sources, and efficiently operate thermal power plants to reduce CO 2 emissions.

19 Effort in these three years Efforts towards promotion of nuclear power generation 18 Recognition of the business environment Positioning nuclear power generation in the Strategic Energy Plan Nuclear power s energy output per amount of fuel is overwhelmingly large and it can continue producing power for several years only with domestic fuel stockpile. Nuclear power is an important base-load power source as a low carbon and quasi-domestic energy source, contributing to stability of energy supply-demand structure, on the major premise of ensuring of its safety, because of the perspectives; 1) superiority in stability of energy supply and efficiency, 2) low and stable operational cost and 3) free from GHG emissions during operation. Nuclear energy will amount to an estimated 20 to 22% of the energy mix in The provisional disposition of the banned restart of Units 3 and 4, Takahama Nuclear Power Plant was decided. (The Otsu District Court: March 9, 2016) We will make our best efforts to restart four units as early as possible, which is essential to the recovery of the business base and make full use of them as the important base-load power source in the future including succeeding units from the standpoint of S + 3E. Untiring efforts toward pursuing nuclear safety Enhancement of public recognition of our efforts Make sure to promote, on a company-wide basis, the efforts defined in Road map depicting the independent and continuous improvement of safety (worked out in June 2014), which has been prepared taking into consideration the reflection, lessons, etc., associated with Fukushima nuclear accident. Regularly announce the progress of the aforementioned efforts. Further enhance timely provision of information and communication activities so that the people in the locations of nuclear power plants and the social community may understand our efforts to improve the safety of nuclear power generation. Achievement of early restart Responses to lawsuits Response to new regulatory requirements Do our utmost to argue and verify that nuclear power generation is safe to promote cancellation of the provisional disposition of banned restart of the plants. Prepare for the conformance review for the new regulatory requirements sincerely, rapidly, and accurately. Prepare for the review for operation of power plants aged 40 years or more including Units 1 and 2, Takahama Nuclear Power Plant, sincerely, rapidly, and accurately. Refinement of business environment Promotion of the nuclear fuel cycle Solid action for reactor decommissioning Promote efforts to operate the nuclear power generation business as a private operator in the competitive environment. Steadily promote the nuclear fuel cycle, such as the plutonium-thermal type of reactor and immediate nuclear waste storage facility. Strive to gain approval for the decommissioning plan and establish a safe and efficient work system.

20 Effort in these three years (1)-[3] Active expansion of the gas business 19 We will strive to actively expand the business including entry into the home-use gas market to double sales. Gas sales Strive to at least double current gas sales 1.7 million t 1.0 million t Strengthening of marketing & sales strategies Expansion of the integrated business combining electricity/gas supply service with other group services. Sales tie-up with gas appliance dealers, etc million t Enlargement of sales target ( ) Start of entry into the home-use market. Enlargement of the sales target up to the customers in the new range of deregulated gas 100,000 m 3 /year in the corporate-use market Business base Improvement of gas consignment infrastructure (new construction of the facility for adjusting gas calories). Improvement and strengthening of gas/lng sales by introducing independent gas supply lines, tank lorries, etc. Training of personnel working on gas sales.

21 Solution of common problems Improvement of company s value (1)-[4] Active promotion of alliances among operators 20 We will actively promote alliances among operators by making full use of the individual advantages to improve the company s value and solve the problems common to us. Strategic alliance with Tokyo Gas Promote discussion about strategic alliance with Tokyo Gas in various fields including fuel procurement, power plant operation/maintenance, power source development, and joint participation in overseas businesses. As part of a course of efforts: Alliance in LNG procurement to improve the capability to address changes in demand-supply and market. Strive to promote Alliance in technology for LNG thermal power plant operation and maintenance to operate them safely and efficiently. and achieve a low-cost and stable energy supply through the discussion about the issues in a wider range of fields. Alliance involved in nuclear power generation business among operators To further improve the safety and reliability of nuclear power generation and smoothly operate and develop the nuclear power generation business, we strive to build a framework, which enables mutual cooperation with Chugoku Electric Power Co. Inc., Shikoku Electric Power Co. Inc., and Kyushu Electric Power Co. Inc. by making full use of the individual properties and knowledge related to nuclear energy and close geographical proximity. Specifically, we will work cooperatively in the event of a nuclear power plant accident, decommissioning of a nuclear power plant, and establishment of the facilities for specific major accidents.

22 Effort in these three years (1)-[5] Further promotion of reform of cost structure <management streamlining plan> 21 We will promote thorough streamlining by reforming the cost structure to enhance our competitiveness. Procurement/ logistics reform Further reduction in cost by achieving industry-leading efficient procurement and expanding procurement reform to the entire group Further improvement and streamlining of logistics by 3PL(Third-Party Logistics) Business process reform Promotion of business process reform to enhance our competitiveness Streamlining of sales tasks including the fee collection task Operational reform in thermal power plants, etc. (Reference) Business process reforms made so far: Offshoring BPO (Dalian, China) of personnel/labor affairs functions Review and integration of responsibilities for indirect management functions among group companies (accounting, general affairs, information equipment management, company houses/dormitories management, etc.) Continuous promotion of streamlining Continuation and pursuit of the sustainable efforts made after the Earthquake Review the equipment inspection method and construction method Correct determination of the timing of repair through the remaining life assessment, etc. Further thorough streamlining Consideration of power source streamlining based on the correct determination of demand-supply balance Promote the above-mentioned streamlining and increase the revenues for individual businesses to improve productivity (*) by 50% or more by (*) Ordinary income/employee

23 (Reference) Efforts to streamline management made so far <management streamlining plan> 22 Efforts for streamlining From 2013 to 2015, we generally achieved not only the target amounts described in the management streamlining plan which was issued when two raises in fees were applied, but also the target amounts for management streamlining including the assessed value suggested by making best efforts as a whole of the group to fully streamline management. In 2016, we will review the existing streamlining policies, employ new construction methods and business operation methods, as well as strive to reduce the material and equipment costs to thoroughly streamline management. Results of 2013 to 2015 management streamlining (unit: one hundred million yen) Cost involved in demandsupply Target Result Target Result Target Result Cost of capital investment Repair cost Personnel cost Overhead Total 1,667 1,833 2,060 2,553 2,355 2,481 (Target amount = management streamlining plan + assessed value) (The total figures are not always correct due to rounding.) Descriptions Combined cycle in the Himeji No.2 Power Plant Purchasing of inexpensive electric power from Japan Electric Power Exchange Reduced procurement cost Review of construction timing and contents Reduced procurement cost Reduced smart meter price Further reduced board members and advisors compensation Reduced basic salary and non-payment of bonus Reduced procurement prices Promoted streamlining policies for each cost All the target amounts for streamlining have been achieved.

24 Streamlining cases (Reference) Main streamlining cases <management streamlining plan> 23 Main cases <Fuel conversion> Fuel conversion in thermal power plants Efforts The thermal fuel cost has been reduced in Units 1 (start of operation in Sep., 1982) and 3 (start of operation in Jan., 1983), Aioi Power Plant using natural gas, which is inexpensive and environmentally-friendly, in addition to heavy oil and crude oil since Before renewal of facilities After renewal of facilities (2016 ) Rated output 375 thousand kw each 375 thousand kw each Fuel Heavy oil, crude oil Natural gas, heavy/crude oil *1 (*1) Since supply stability may be further increased, the specification allowing for the use of heavy and crude oil is employed even after natural gas becomes available. <Review of specifications> Newly adopted aluminum wires To supply power safely and stably, as well as reduce the material cost, newlydeveloped low-wind-pressure aluminum wires are used instead of copper wires. At present, the new wires have been introduced in some areas and will be expanded in all the areas within the territory starting from It is expected that the introduction of new wires may reduce wire cost by about 20% (depending on the wire sizes) as streamlined material cost and avoid the risk of stress-corrosion breakage of wires. <Review business operation method> Outsourcing of printing work Conventionally, we managed and used our own printers internally. At present, MPS (Management Print Service *2 ) is used to reduce the total cost associated with the printing work. (*2) Without owning printers internally, building and operation of the printing environment is outsourced. Specifically, the total cost was reduced by optimizing the number of printers and layout taking the number of printed sheets into consideration, using one supplier for all the in-house printers, and outsourcing of routine work such as consumable goods management and procedure for lease/purchase of individual equipment.

25 24 1. Introduction 2. What We Aspire to Become in 10 Years 3. Our Efforts towards Realizing What We Aspire to Become (1) Enhancement of competitiveness in comprehensive energy business (2) Establishment of new pillars for growth (3) Strengthening Group Management Foundation 4. Financial goal and policy of return to stockholders

26 Effort in these three years (2)-[1] Dramatic growth of international businesses 25 Recognition of business environment It is expected that the demand for electric power will continue to largely grow in the developing countries including the countries in Southeast Asia, Middle East, Latin America, and India. The technological capability for hydro- and thermal-power generation, as well as power transmission and distribution, is our competitive advantage in expanding our business abroad. It is necessary to strengthen the network with the local governments and companies and train and recruit the human resources who are skilled in information collection. We will expand the investment fields and regions to become a leading international IPP business player in Japan. Profit Target of International Business 30 billion yen 3 billion yen 5 billion yen About 10,000 ~ 12,000 MW is assumed as a target for the equity portion as of Cumulative Amount of Planned Investment New businesses Strengthening of the capacity of creating and processing businesses to ensure new businesses Tie-up and building alliances with trading houses, etc Strengthening of the local network through deployment of overseas offices Expansion of investment fields and regions (renewable energy, North America/Europe, etc.) (Three years) 140 billion yen Existing businesses Steady promotion of developing businesses and securement of revenues from the existing projects (Ten years) 500 billion yen Business base Training and recruitment of global human resources who have special expertise and wealth of experience

27 Effort in these three years Existing businesses New businesses (2)-[2] Further growth of Group businesses <information and communications business> 26 Recognition of Business environment For the FTTH business and corporate line business, the trend toward reduced prices has advanced due to market saturation. The MVNO and Cloud markets have been expanding rapidly. Tie-in sales, for example communications-electricity, are expected to penetrate through the complete deregulation of the electric power/gas retail markets. We will strive to strengthen our customer base and create value-added services to become an information and communications service provider, who is selected also by customers outside the Kansai Region. Direct sales 170 billion yen 220 billion yen 270 billion yen MVNO To be classified in the top-share group, intensive input of operational resources and strengthening of promotion activities Ordinary income Energy Expansion of tie-in sales of electricity and gas for FTTH users 30 billion yen 15 billion yen 16 billion yen Cumulative Amount of Planned Investment FTTH Business sector Development of new businesses by making full use of our customer base Reform of the business structure focusing on solutions and strengthening of marketing outside the territory (Three years) (Ten years) 160 billion yen 500 billion yen Common Expansion of new businesses through alliances and the creation of value-added services

28 Effort in these three years (2)-[2] Further growth of Group businesses <real estate business> 27 Recognition of business environment For the housing market, it is estimated that the number of newly-built houses has reached its peak as the number of households approaches its peak, while the trading of used houses has gained momentum. The rental office market has hit a plateau in the Kansai Region due to reduction in the working-age population and continued heavy concentration in Tokyo. We will actively expand our businesses as a comprehensive real estate business group meeting the needs for real-estate in metropolitan areas, as well as in the Kansai Region. Direct sales 90 billion yen 100 billion yen 150 billion yen Housing business (house and lot) Active expansion of the business in metropolitan areas based on the Kansai Region by strengthening the brand strength, etc. Ordinary income 11 billion yen 15 billion yen 30 billion yen Lease business Investment/ development business Steady expansion of the business throughout Japan, as well as in the Kansai and Metropolitan areas by ensuring sites suitable for business and excellent properties. Well-balanced expansion of the business by combining rental/sales/fee businesses. Cumulative Amount of Planned Investment (Three years) (Ten years) 150 billion yen 500 billion yen Others Development of complex construction projects including offices/houses/hotels/shopping centers, etc. Enter into the stock-related markets (reform of used houses, renovation, etc.) Steady scale expansion of office buildings and apartment custodial services * The figures listed above include those of the business related to living.

29 Examples of technology Examples of models Examples of strengths (2)-[3] Promotion of innovation to accelerate growth 28 We will make novel efforts not seen in the existing ones to realize What we aspire to become in 10 years to actively and resolutely challenge new businesses and the development of new products/services. Conventionally Regeneration and pursuit of the possibility of fresh growth Pursuit of all the possibilities towards innovation promotion Expansion of revenue sources Establishment of a new revenue structure Establishment of the group-original innovation promotion scheme What we aspire to become in 10 years Electricity business focusing on the improvement of existing products and services Group businesses make effective use of our know-how and properties Taking an inventory of cultivated strengths Making active use of external ideas and resources Making use of the mostadvanced technology and develop a new business model Creating the framework for innovation promotion Discovery and collection of seeds of new businesses, etc., in the group Better relationship with our customers and the communities to listen to various opinions Technology related to electrification (heat pumps, etc.) Design of energy-supply facilities and know-how of maintenance/operation of them Knowledge and know-how cultivated by the group businesses Building of a network with other companies for making full use of external ideas and resources to improve the required time and quality for development Building of a business model to achieve a new type of growth different from the existing one Utilize energy technology including distributed power sources, batteries, and hydrogen-power Expansion of the use of biomass energy Making full use of IoT, AI, and sensor technology With the widespread use of electric cars, entry into their peripheral businesses, such as power-supply stands Monetization of demand response and energy-saving trade Establishment of an innovation promotion organization, expansion of an in-group innovation network, and sharing of group resources Efforts to train and ensure the human resources responsible for innovation

30 29 1. Introduction 2. What We Aspire to Become in 10 Years 3. Our Efforts towards Realizing What We Aspire to Become (1) Enhancement of competitiveness in comprehensive energy business (2) Establishment of new pillars for growth (3) Strengthening Group Management Foundation 4. Financial goal and policy of return to stockholders

31 Effort in these three years (3)-[1] Promotion of stable transmission and distribution services 30 Recognition of business environment Introduction of license system associated with electricity system reform, full liberalization of electricity retail and legal structural separation (Security of neutrality and fairness, security of coordination for safe and stable power supply, duty of ultimate secure supply) Development of facilities high aging Major expansion of demand for power supplied by our transmission and distribution facilities (*) cannot be expected due to energysaving, population decrease, and popularization and expansion of regenerated energy and private power generation (*) Demand for electric power in the entire Kansai Region supplied by our transmission and distribution facilities As a leader of the social foundation, we try to provide new services by utilizing our technology and know-how, as well as supplying electric power at a low price safely and stably to contribute to communities. Safe and stable supply of electric power and meeting customers needs Supply of appropriate transmission and distribution services on the premise of secured neutrality Vision of transmission and distribution services Base field Steady implementation of countermeasures for high aged facilities by utilizing sensors and diagnosis technologies Restructure of transmission and distribution network for improvement in utilization rate of facilities Promotion of access to streamlining services Electric utility field Safe and stable supply Meeting customers needs All needs including pursuing lower prices are satisfied for customer satisfaction. New business fields Provision of new services Growing field Promotion of smart use of power system corresponding to popularization of regenerated energy Expansion of smart meter introduction Effort to meet demand for electric power supplied by transmission and distribution facilities and challenge to provide new services Sending accessible system information to society Increase in overseas transmission and distribution business consulting High quality electric power is kept to be supplied safely and stably for customers use with a feeling of trust. Corporate culture of safety and reform Sense of mission is developed with prioritizing safety, and keeping the challenge to reform actively in the workplace with feel of growth. Contributing to local communities Duty of a sensible member of society is fulfilled to contribute to local communities. Making effort to provide new services for further growth. Sound financial strength Appropriate interests are secured and financial strength is improved to continue stable business toward a clear financial goal. Advancement of transmission and distribution network utilizing storage batteries Our business foundation

32 (3)-[2] Reform of organization and governance 31 Actively promoting medium-term management plan for construction of organization and governance system allowing maximized group value. To realize What we aspire to be in 10 years and to build a system for maximizing group value, we will revise our management system from the current system centered on the electricity business to a new system aiming at the comprehensive growth of the entire group in June, Specifically, the top management and staff organization are defined as the Group Head Office to strengthen group management as well as to define companies operating the business of the pillar of growth [Transmission and distribution (after legally separated), Kanden Energy Solution Co., Inc., K-Opticom Corporation, Kanden Realty & Development Co., Ltd.] as the Core company to build a system materializing the high profitability of the entire group. Image of future organization and governance system * The chart below shows the image in case the transmission and distribution business is owned by the operating-holding company after the legal unbundling. Kansai Electric Power Co., Inc. Group Head Office ~ ~ Comprehensive energy International Transmission and distribution Comprehensive energy (Kanden Energy Solution) Information and communications (K-Opticom) Real estate (Kanden Realty & Development ) Group companies Core companies

33 Effort in these three years (3)-[3] Strengthening foundation of human resources 32 Promoting reform, strengthening the foundation of human resources suitable for the new energy era and establishing a new corporate culture Fostering an organization and human resources able to compete in the new era with the two wheels of Speciality and Diversity Switching to a Strong and flexible corporate culture to promote challenge for materialization of further growth Human resources reform To improve competitiveness and productivity, the entire group promotes the fostering and deployment of human resources to increase the skills and abilities of human resources. (Securing highly specialized human resources, promoting activities in new fields such as international business and group business) Further improvement in personnel and wage system for employees Way of working reform Realizing highly productive working in a manner with well-modulated on/off by Arranging comfortable work environments and Reforming sense of efficient use of time Developing a competitive corporate group allowing creation of new value by respecting Differences in each person, and strengthening the organization by varied sense of values and ideas Realizing way of work enabling people to use their abilities to the maximum regardless of their sex and age Diversity promotion [Targets for further active participation of females] By the end of FY 2020, the ratio of females in managerial positions shall be double that of FY Ratio of females recruited for office work shall be at least 40%. Corporate culture reform Clarifying the important sense of values and behavior patterns and promoting reform to aim for a Strong and flexible corporate culture

34 33 1. Introduction 2. What We Aspire to Become in 10 Years 3. Our Efforts towards Realizing What We Aspire to Become (1) Enhancement of competitiveness in comprehensive energy business (2) Establishment of new pillars for growth (3) Strengthening Group Management Foundation 4. Financial goal and policy of return to stockholders

35 Financial goal and policy of return to stockholders 34 Financial goals [Consolidated base] Item 2018 fiscal year (3 years later) 2025 fiscal year (10 years later) Ordinary profit 200 billion Yen 300 billion Yen Capital-to-asset ratio Approx. 20% Approx. 30% (*) ROA Approx. 3.5% Approx. 4% (*) Business profit [Ordinary profit + Interest expense] Total assets [Average of beginning and end of term] Policy of return to stockholders Our policy of return to stockholders is to secure sound financial strength and maintain stable dividends in order to distribute surplus to all stockholders appropriately as the Kansai Electric Power group. Currently, we are making efforts to restart our nuclear power plants and streamline management for the early resumption of dividends.

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