The Kansai Electric Power Stock

Since it is now the scheduled time, we will now begin Kansai Electric Power's Kanden Investor Day. Thank you very much for taking the time to join us today despite your busy schedule. We would also like to express our sincere gratitude to everyone who are attending the event in person as well as to those who are participating online. I am Tanaka, Executive Vice President of Kansai Electric Power Company. Today, the presentation will be given by Mr. Toru Kuwahara, Managing Executive Officer, Kansai Electric Power; and Mr. Kenichi Fujino, Executive Vice President, Kansai Electric Power; and I myself, Toru Tanaka, Executive Vice President.

Now we'd like to start. Before going into each of the sessions, I'd like to share my thoughts on the current situation. We have the screen. We have disclosed the management plan at the end of April. And what I would like to emphasize is the third bullet point here, creating investable energy and T&D businesses. As of the end of April, at the explanatory session, we received questions, and we had explained on that occasion. So here, we are going to be making the investments. And against the WACC, ROIC should be 100 to 150 basis points. We had to secure such spread. 5.5% was the ROIC for 2025. ROE was 11.3%. But from fiscal 2026 to 2028, we are aiming for 3.3% or more, ROE of 8% or more. And this is not incorporating the inflationary price hike.

We are not going to stop at 3.3%. We will review prices, refine our business, be selective with investments, and continue to secure spreads. 2040, it's a bit ahead, but ROIC 7% and ROE 12% or more, we will be achieving this. And rather than simply being mindful of cost of capital, we aim to generate returns that exceed the cost of capital through our business operations. And of course, it's not just energy and T&D, we will pursue upside in ROIC and ROE across all our businesses. As Japan's industries grow and electrification and decarbonization advance, we foresee an increase in electricity demand in the years to come. That is why we are investing in power source and network.

We have a long history of developing power sources, including nuclear power, establishing networks, and managing operations. We have also strengthened our financial foundation. We will take on the responsibility of making the energy investments necessary for Japan's growth. We will demonstrate this through the quality of our investments and their returns. The key is capital allocation. We choose investments based on profitability, risk duration, and financing. And by no means is our goal to use up the entire investment amount set forth in the pillar. Rather, we will allocate capital where it will generate value that exceeds the cost of capital. This is our capital allocation.

In August, we revised the wheeling charges and the standard rates for the extra-high voltage and high voltage. If WACC rises, so of course, we will be raising WACC. We will be generating cash, making investments sustainable, and make the business investable. This is by no means just a matter of onetime rate adjustment. We must simply take action to keep pace with inflation. Another area is the system that supports investment in power generation. This is an area we've been focusing on quite heavily for several years now. We have been making proposals to the government. I wouldn't say it's fast, but with the understanding of the authority, we are making progress. I really feel that way.

And we are starting to see results, or maybe you have started to notice that wheeling charges, long-term decarbonized power source auctions, offshore wind power, the regulatory framework, and business environment are evolving toward a state where these are investable. We will continue to build on this momentum. Rather than continuing to wait for the system to be put in place, we will make it a system that allows for investment. If the conditions for investment aren't met, we will not make investments. That much is clear. At long last, it's nuclear power and hydrogen's turn to take the stage. For the participants today, for the long-term investors who will be able to hold our shares for a long time with a sense of security and peace of mind, Japanese electric power companies are the companies to put the funds in. And otherwise, we will not be able to cover the energy needed for Japan.

And without that, we will not be able to grow. In Japan, the industries will not be able to grow. And what should be the return that we should be making for the investors to be able to make a decision to make investments? So we are on our way, and we are currently having discussions. Japan's energy business, we'd like to make it sustainable and investable. We have a strong intention and will, and we have the capability to realize this, we believe. On the other hand, looking at the profit for near term, as for the near-term profit, so 2026, 2028, how is it going to be? So Unit 3 at Ohi and Mihama, as you already know, have been shut down and the situation in the Middle East remains uncertain.

Therefore, it is difficult for me to state with a reasonable degree of certainty right now what our profits will be for this fiscal year or over the next 3 years. I will wait until the second quarter earnings report is finished, and we will let you know as soon as we are able to discuss it. Again, we do not intend to settle for the profit and ROIC levels outlined in our business plan. We will strive to achieve even better results and aim for upside. Since the capital increase, I had numerous discussions with investors, both in and out of Japan. We will share the feedback we received with our executive officers and Board members, and we will implement any suggestions we agree with as part of our management strategy. Engaging with the market is the essence of the business. For us, it's as natural as breathing.

So today is an Investor Day. And last year, we explained about nuclear power, IT, and real estate. Today, so this is the content of the management plan. The second from the top, we will be covering overseas energy and BESS. These 2 will be the featured topics today, JPY 100 billion for overseas energy, JPY 20 billion for energy storage facilities, such investments will be made. And how does this capital allocation translate into profits? How does it contribute to ROIC? Is our capital allocation truly investable? I hope that by taking a closer look at our specific business operations, you will gain a clear understanding of this. And we would like to talk about these topics. So we'd like to start with overseas energy. Mr. Kuwahara, please. First, presentations will be made by two persons, then after that we have secured time for a Q&A later. Thank you very much.

Good afternoon, everybody. This is Kuwahara speaking. So this is -- well I'm the in charge of the overseas energy business. And the overseas energy business of KEPCO, so I haven't had the opportunity to talk with you in this kind of a manner, so today, I'd like to have a very frank discussion and also that you can receive the information about our business. All right. So I'd like to go on to explanation about the Overseas Energy business at 3 points. So the first point is about what Tanaka-san has said about the vision for the Overseas Energy business in the management plan. And the second point is the business overview, what kind of the overseas business that we have been undertaking. And the third point is about the plans that we have for the future.

So first, we start about the management plan. Tanaka-san has already talked about the positioning. But in the 3 years' term, the Overseas Energy is going to be JPY 100 billion in growth investment in FY '26 to '28. So the capital efficiency is going to be pursued. So the return is the thing that we would put in motion so that the disciplined investment and the Overseas business, I think you might have concerns about it because compared to the domestic business, there are other risks that we have to undertake in the Overseas business, but we will be looking at that very carefully and then proceeding with the Overseas business by disciplined investment. And I don't know whether we have talked about it, but there is a new committee that we have the discuss about the new investment.

And so the Global EX business operation. And then within the company before it is going to the committee for investment, we would be internally discussing about it. So that is what we begin with. And then there are the projects that cannot go to the investment committee, so that we are quite severe in selecting what investments that we will pursue. And this is for the financial planning. And in 2040, so by FY 2040, so JPY 40 billion and ROIC is at the bottom, but the 6%. And this is, if you make the calculation, so it is going to be like JPY 660 billion. And then for the asset and then about JPY 400 billion, and then it is going to grow to 1.5x. So that is the kind of the activities we have in mind.

And in this graph, the dark part is the portfolio, the base earning power that we have in the portfolio. And by keeping this portfolio, yes, we can have the earnings coming so that in '24, it's JPY 152 billion (sic) [million] . So in '25 is JPY 175 billion (sic) [million] and about JPY 200 billion (sic) [million]. And then in 2040, it's going to be JPY 440 billion (sic) [million]. So the light colored is the asset management, the part that can come from the asset management so that we recycle by selling or, well, this is from the foreign exchange. I don't think we have it here, but by the foreign exchange fluctuations, then we can have the gains. And then, so this is different from the base portfolio power that we have, but then we can have those. So in the future, so we can have 6% plus return that we have in ROIC basis. So that is what we are aiming for.

And here, by the selling of the assets, so one example here is in '24, fiscal '24, we had a very big profit. But one of the breakdown of this is from the ENW in the Manchester area so that this is about 1/5 of the scale of a Kansai distribution -- distributor. And then we have 22% and then Nikkei course, we had [Nikkei consort] had a 40% share in the Japanese consortium. But then after that, in 6 years have passed, so that a part of that has been sold. So there had been people who had asked us to sell. So Iberdrola is the company that we decided to sell to. And Iberdrola, so with the other shareholders as well, we decided to sell our stake. So we sold one half the stake. And then Iberdrola Group, then we are going to do it together with them.

But then this is strategically speaking that we are going to learn from how this Iberdrola Group is going to manage the company. So I think there's a timing for the sales, so selling the stake so that we were able to sell at quite a high price compared to where we bought. So the asset management, if we do it in the right way, we can have the profit depending on the market, so we have the timing is right. So that is quite important. That is the lesson that we had about the sale of the stake in ENW. So this is what we mean by plus alpha. So this, we say plus alpha, but it's not just at us. So even if we want to sell at a certain timing, it's not necessarily true that we can sell at that timing. So it's something that we have to do flexibly looking at the situation.

And then this is the business overview. So this is the total picture of how we have been managing our Overseas Energy business, all right? So how we have been in history. So in 1998, we participated in the San Roque Hydropower project in the Philippines. So becoming the first Japanese utility to enter the overseas power generation business. And then in 15 years' time, so if I say very bluntly, we have been doing at quite a low level. So if there are a good project, we can do it selectively, but it's rather that we were on the passive side that we have the projects that are consulted and we take what we think are good. But after 2016, so at this kind of a timing, so we have the midterm business plan at that time so that in the 10 years' time, so that we decided that we're going to have the growth investment.

So this is the 3 pillars. One pillar of the 3 pillars is the Overseas business. That is what we have decided. So the quantitative expansion so that we expanded investment targets and geographies, pursuing quantitative expansion. And for the scale, it did not go as rapidly as we thought that we had a certain amount of results so that we decided to do that for about 5 years. And then at that time, so it's not just a quantitative expansion we thought, but we have to have the content. So then for the 5 years term, so we shifted to qualitative growth. So not just to pursue the scale, but to look at the quality of the portfolio to build a more profitable portfolio.

So as I've been saying, so about JPY 400 billion asset and 11 countries, we have 53 projects. So the power generation, the gross is -- net is 2,500 megawatts. And the power generation in the overseas, the other companies do that also, but we have the transmission and distribution as well. So that is 3 projects across 3 countries. So here, that's the locations that we have in the Overseas Energy business. And the table, so this is from the old. This is the kind of a history we had in the blue part, the hydropower was the major ones. But then the thermal power, the orange color. But then we have also the decarbonization so that we have the wind power and renewable energy. And then the renewable energy by introducing that, then we would need to have the T&D transmission distribution. So that we think is the investment opportunity for us.

Okay, also, as for the locations, in the beginning, we were focusing on assets. We were acquiring assets in Asia mainly. And then we held some assets in the U.S. and now there's more opportunity. So we are seeing an increase in assets in Europe. But it's not that we have a decision made beforehand to invest in certain geographies. We will look at each of the business opportunities. And I will talk about this more. What kind of business is possible where we are covering the whole world to search. And we want to be able to leverage our capabilities and make sure that we are able to generate returns. And as a result, these are the assets that we own. And I'm looking at the concept now. So we are electric power sector, and that will be the core of the business.

Overseas, local economy, would we be able to provide value locally, we'd like to focus on such businesses. And through that, we'd like to be able to become establish one of the foundation basis of Kansai Electric Power. So risk return characteristics of the project, we look at our strength, and we would like to participate in the most optimal way. What I want to say is that diagram, on the X-axis, we have the age of the projects. So this is the stage of development, initial development, late development, construction, and then operation, different stages are described. And Y-axis shows the profitability and risk value. So as there's more advancement in the project, the risk goes down and profitability goes up.

So the idea is that we'd like to focus on high-return projects, but the risk is high. And we look at the area and our capability, we try to strike a balance. And where shall we focus on, we are exploring that. And as a result, we have the distribution as described in the prior page. When we go to an area for the first time, other company has developed and we buy such a project or we joined together with the fund at the time when the construction is about to start or if we do believe that we can access higher risk, we can do development together with the developer. So in the end, we would like to be able to receive order and do development. So I will show you a video later. Hydroelectric power, we started this from scratch, and there is such a case.

This is an ultimate project. But if you focus just on that, it will take so much time. It takes so much money. And the returns to investors will take a lot of time. So there are projects we take time and there are others where we will be able to get returns quickly. So that will be a combination of the two. And that is how we build our portfolio. This is our basic concept. And looking at the portfolio from a different perspective, this diagram is exactly what it is. But area here accounts for more than 50%. Wind power is increasing, and that is why the mix is like this. And Asia, North America, about the same size. And investment time, including hydro, we have wind. So renewable energy exceeds 50%. We are running on the recent trend.

But thermal power has decreased very much compared to before, but thermal, depending on the project, we do believe that there is still possibility, as a transition energy, we do believe that gasified thermal power can be utilized. So we will continue to make investments and also T&D. So as green energy expands, T&D investments will be needed. And we would like to leverage our strength and to grow these as well. And the point is earnings stability. On the right side, we have a graph. Overseas business, there are various types of projects. So we trade in the market and enjoy the volatility of the price and make profits. That could be one possible business that we can have. But looking at the stability of the portfolio overall in the earnings, we'd like to secure that. So 70% to 80% should be long-term contracts, plus market-based products.

So we would like to realize this kind of a balance in earnings stability. And last of all, the strategy going forward is what I'd like to talk about, are to be stated in 2040 is we'd like to become a major player in energy transformation overseas. In other words, no matter where we go, "Oh, we know Kansai Electric Power, they do good work. We'd like to work with them." So we'd like to continue to carry out such activities to be evaluated that way. And looking at the size of the investment in the coming 3 years, it's around JPY 100 billion. And this is basic profit of JPY 220 billion (sic) [million] and plus some alpha with asset management. So currently, our ROIC is around 4.5%, so I will mention it now, but this is a bit low ROIC of 4.5%, I do believe it's low.

What we are doing is infrastructure business. And also, many of the projects, we have to take out a loan. And therefore, in the first part of the project, if you look at the cash flow, we have to make repayments for the loans. That comes first. And then we will, as a business operator, we will be able to enjoy profit later on, maybe 10 years or after that. Those are the main project -- types of projects. And please try to recall the history. So it's only been just 10 years since we have started to expand. So we don't have so many projects that have come to a recovery phase. And, but going forward, there will be accumulation of such projects. And naturally, this ROIC should improve. So as of now, it's small, but please bear with us. And as time passes, we will be able to see improvements.

But of course, it's boring to just wait, sit and wait. So we will divest some of the assets and generate profits for today. So this is all within the judgment and trying to strike a balance within the portfolio. And as for the strategy to achieve the to-be stage, we have 4 strategic pillars. One is we do already have some stable earnings. We'd like to use this as a foundation. And without undermining it significantly, we would like to increase the number of projects little by little. If we continue to make investments, the profitability might drop significantly. We would like to avoid that. So while generating stable earnings, we would like to accumulate profits little by little. So renewable energy and this battery storage and T&D, we'd like to set them as the core.

Also, in some cases, we will choose gas thermal power to make investments. And then discipline, investment discipline, this is important to identify risks. We'd like to be very strict. And also within the portfolio, what is the role of each of the projects? So what I mean is that in our discussion of the portfolio, all the portfolio, how much profit would they be able to generate in the future? We have a long-term perspective. How would they be if we continue until 2040 and beyond. And we would like to deliberate on the role of each of the projects and make a decision to make investments. And we would like to rotate assets and to capture earnings and fund higher return projects.

And number three, this is also very important, a partner with local partnerships, collaboration with them. So if you go overseas, we are nonlocal. So of course, there are some parts where we can leverage our know-how in the business, but what is difficult is having dialogue with the locals or having dialogue with the local authorities is a challenge for us. Unfortunately, I should say or maybe fortunately, so electricity business is regulated business. So it has been relaxed, but we need to gain deep understanding of the local rules, and we need to be able to have a partner who will be able to work on such rules. And we have some cases where we are collaborating with local companies. For example, Medco in Indonesia or in Spain, we are collaborating with Iberdrola.

And the fourth is capability to build in-house development. So left top in the previous page, I think we need to be able to carry out projects ourselves, develop projects ourselves. This will be the essence of our capability to develop projects. We will show you a video at the end. Laos hydropower generation projects will be shown in the video. We sent a number of people, and we are operating that business, but people who return they look totally different, young people, they are sent for a short period of time, and we like to give them opportunities to learn and take a look at the business now. And when they return, they are totally a different person. So we need to, we do believe that there are such capabilities and potential for projects that we build and operate ourselves.

So profitability will come later. But our execution to carry out business, I think this is something that's very important, which we need to carry out. And a case in point is what we are focusing on right now is Indonesia. It's inter-island connection transmission. From 20 years ago, many companies have tried that between Java and Sumatra Island, they were trying to connect the 2 islands, but it was extremely difficult. So we want to take on this challenge now anew. As I mentioned earlier, these businesses we need to communicate very well with the local authorities. And therefore, Indonesia, Jakarta office members and also local electric power company, PLN, we are collaborating with them to start to create a framework. This is a long project, but we would like to be able to develop our capability to originate projects.

And this is my photo, sorry. So this is Iberdrola. This is a strategic collaboration with them. Last year, I think we signed an agreement, MOU. And Indonesia, Island -- inter-island transmission is described here in Japan, METI, we are collaborating with them strongly. AZEC, this is Asia's decarbonization activity framework. And within such a framework, we would like to realize this project. On the Indonesian side, government and also EPCO, we are collaborating with them. So this is a very big long-term project. We are combining this kind of a project as well in our portfolio. And last of all, this is Nam Ngiep video. I'd like to show you this video now. It's called the Second Kuroyon Project, Kurobe Number Four Power Station. This is a project that really suits us.

And in the video, there will be some narrations and it's AI that is speaking. And therefore, maybe it might be a little bit hard for you to hear. We have subtitles as well in Japanese, but please bear with us. And please watch the video. We have our spirits in the video. So please watch it. I'd like to start the play.

[Presentation]

So, thank you very much. So that is my presentation. Thank you so much.

All right. So next, we would go to BESS. And of course, so this is not just BESS, but it has the inclusive of the retail so that we would like to have the Representative Executive Officer, Vice President, Kenichi Fujino explain about this business.

Yes. Good afternoon, everybody. So that I'm the Head of Solutions, and my name is Fujino. So I'd like to talk about BESS. And today, so since I have this opportunity to talk to you, so I'd like to talk about the solutions headquarters also and to talk about the overview of the Solutions business as well. All right. So today, first, I start with the midterm business plan and the solution service initiatives. So we say toward Energy 3.0, but we will give you examples of solution services toward Energy 3.0, then I go into BESS and market outlook and then our group's BESS business model, our competitive advantage and then to achieve our management plan. So that's the order that I'll be proceeding today.

First, so the solution, how do we go about it? So the overview of the solution service initiatives. And first, in the midterm business plan, so to answer the need, we give the optimal products to our customers. And for the energy as an axis, the solution services and also to the new business areas that we would be having a challenge so that we're having the best of those 2 so that we have the Energy 3.0 the plan that we're pushing forward so that we can grow with the partners, customers in a long-term business. And building long-term partnerships. As you know, so the needs of the society and the needs of the customers, decarbonization and also the lowering of the energy costs and against such needs, so the gas and electricity power, then we want to have the new services as the added value.

So the Energy 3.0, what is it you might ask me? So well, this is our definition, but Energy 1.0 is the energy sales, and then we can have business to help customers. But then Energy 2.0 is the solution services that is developed and also to be expanded. And now, so currently is Energy 3.0 so that we can have the linkage of the 2 and to put it in the optimal shape to the customers, deliver optimal solutions to customers. So the energy business, the strategy that we have. So as you know, so not just in the Kansai area, but to go all over Japan and also in the world to become a service provider. So not just Kansai area and not just electricity. So that's our Vision 2040. For customers across Japan and overseas. So energy and the solutions is in a one shape.

So this is the kind of a concept that we have. So we had electricity in the middle and electricity or the retail in the middle. But then we had various services around that circle. But from now on, we have the energy management system is in the middle so that not just that electricity and gas, those kind of a power, but those are going to be a supportive area -- supportive and that's the definition we changed. So the energy, then we have the air conditioning and the hot water supply and BESS. So those are the surrounding part of the energy management system at the core. So in the 3 years' time, so I go to the BESS business and also energy peripherals are new businesses we were going to expand. And then so for, across Japan and overseas customers. So solution service based on the scale, we will be using the project financing to have the capital efficiency maximized. So that is what we want to aim in the 3 years to come.

Then for the Energy 3.0, the solution service, what kind of concrete examples do we have? So I'll give you the example of the solution service towards Energy 3.0, the on-site solar since May 2019, we had decided to go into this business. So the initial, no initial cost, we provide one-stop service from installation to post-installation operation and maintenance. So as this diagram shows, so to have the solar power within the customers, corporate customers, and then we would have the service fee and then from the customers. So we have 700 locations as a track record and more across Japan. And then the overseas solutions, as Kuwahara-san has explained, so this is different from the overseas business that has already been explained.

So this is rather customers -- for the customer service. So from Thailand, Vietnam and Indonesia, so we have the local entity that we have set up from 2018, we had started overseas solutions business. So the solar power generation, cogeneration systems and high-efficiency chillers so that we do from installation to operation and maintenance so that what we had done in Japan, we go to Southeast Asia, from Thailand, Vietnam and Indonesia. So we have a track record of more than 100 locations. Then next, I talk about the CQ BANK, and this we started since November of 2025. So a green bank that invested all of its deposits to projects that contribute to achieving net zero emissions. So it's a green bank. So Tokyo Kiraboshi Financial UI Bank, so we are partnering. So this is what's called BaaS business.

And then, so this is the, what is called the -- for the average of the deposits, that's about JPY 7.21 billion eligible investments and loans allocated and equivalent to the average deposit balance. And then this is growing nicely. So this is the newest one. Since July 2026, we have what's called Moact. And Moact is a service designed to promote social contribution activities by raising awareness and driving behavioral change among consumers such as available on smartphones and other devices. So the press release time, so we had 110,000, but in the 3 months, we have 170,000. So we had grown from 110,000 to 170,000. So this is also growing quite nicely. Then today, I go into this agenda, of BESS business. So it started since December of 2024.

So this is what the solution service of the Energy 3.0. So from here, I talk about BESS. And here, as you know already, so the environment has changed very drastically surrounding electric power system with the more having a regenerative renewable energy. And suspension and decommissioning of thermal power plants. So there's a structural shortage of balancing capacity and worsening due to the rise of variable power source. So left-hand side, we have the change in the power generation mix of 2023 is the left-hand side and the 2040 on the right-hand side in the energy basic plan. So this is the thermal percentage is like one half from 2023 to 2040. And then we have the variable power source like wind and solar and biomass, that variable power source is going to increase in 2040. So that is -- there's increased risk of supply disruptions due to insufficient balancing capacity.

So then the BESS market outlook, how is it? So the current -- so we have the polices work like new market entries and the long-term decarbonization auctions and subsidies. So last month, at the Makuhari, we had a so-called expo in Makuhari. So many BESS businesses came to that expo in Makuhari, but it's like a bubble. I think you know that we are currently in a bubble. So in 2030, it's 6.3 gigawatt. But in 2035, it's going to be the double 12.6 gigawatts. So that is the estimate that we have. So the market will develop in the beginning with the support from the government. And then the market will continue to grow with the renewable market growth. That is the expectation.

And now let me explain about the business model that we have for BESS business. Our business model, it might be the same with others, but there is -- so there's different markets of -- the capacity market, supply-demand market and wholesale market and adjustments are made between the 3. And E-Flow company in order to contribute the most for adjustment to have an optimal trade for the first time in Japan, this company has been established in 2023 to specialize in DER.

So from 2023, they are accumulating experience, trading, know-how, and they are now utilizing this. And now looking at the revenue and cost structure of the BESS business, high profitability can be expected in high voltage, and we will lower the cost and maximize the earnings. So looking at the revenue and cost structure, we have the image here. In order to create optimal plans, we would like to optimize that revenue. And we would like to also maximize the group revenue by fully leveraging group functions.

And also, we would like to utilize competitive procurement of materials, BESS capabilities. These would be the key points for us to be successful in this business. And I mentioned about competitive procurement of markets materials, and I'd like to elaborate on this a bit. Looking at the price level of the grid. So please take a look at this part. For storage battery, the battery itself and power price accounts -- cost accounts for 70%. So how can we reduce that? That would be a very big point. And also another point is this is by size.

This is kilowatt hour installation cost. And the larger scale kilowatt hour cost will go down naturally. And therefore, even if the technology level is difficult, we would like to be able to utilize our know-how in this business, and we would like to focus on grid-scale BESS to do the development. And together with that, we would like to be able to have a top-class development capabilities, and we would like to be able to -- so we would like to be able to secure high cost competitiveness with one of the largest development scale in Japan.

And now next, I'd like to talk about our development history and competitive advantages. First, starting with the history. Looking at BESS, we became very much aware of BESS need at an early stage. And ahead of others, we have considered promoting this business. And in December 2024, we collaborated with ORIX and started operation of Kinokawa BESS plant. So we were able to start operation in December 2024. And that is ensuring our competitive edge.

And then after that, BESS business has been rolled out widely. And in 2024, '25, we have launched Kan-denchi Service. I will talk about this later. We are utilizing the group companies to maximize revenue from the group companies. And at the most recent, this year, 2026, we have established Kan-denchi Fund. And this is a topic for today. This is to maximize capital efficiency and also swiftly establish development foundations. So with these purposes, we have established Kan-denchi Fund. And let me talk about Kinokawa BESS plant.

As I mentioned earlier, this is supply and demand adjustment market. So all products' trade started in 2024. And in line with the start of the trading market, we started operation of Kinokawa BESS plant, which is the largest in Japan. Rated output is 48 million watts. And as an operating BESS plant, this is the largest in Japan. And IRR at this time was more than high single digit, high single digit and above. And as I mentioned earlier, we have extensive data, and therefore, we are able to optimize operation with AI and humans. we create operation plans to maximize revenue.

So we will be managing, and we are cooperating with a venture and introduce the cutting-edge technology by using AI, how should we do the best market bidding. And we are utilizing data equivalent to a total of 65,000 days to verify -- and this is Kan-denchi Services. This is a service that provides one-stop solution for everything in this project. At Tanagawa BESS plant for the first time in jump, we have utilized a project financing by a large bank. Tanagawa BESS Plant, this is a part of the plant that we had for some other purposes and the rated out 99 MW and the scheduled operation to start in February 2028.

And our IRR is aiming for 10% for our group. or more. And this is Kan-denchi overview. We are utilizing group companies to maximize revenue. For example, in EPC, we have Kinden and for O&M and battery diagnosis, we have established a new company together with Kinden. It's called K2-BatOM. We established this company in December 2025, battery diagnosis and also analysis of the operation risk, and we would like to sell this to be able to reduce the risk.

And also E-Flow will be doing the operation. And for asset management, we have Kanden Real Estate subsidiary, Kanden Asset Management. So we will be able to appeal this service to the outside saying you would be able to rely on best plant operation utilizing the Kanden Group. And we have newly established Kan-denchi Fund this year. So needless to explain, in order to improve investment efficiency and also to optimize the funding. So we have established a fund. And as a major electric power company, we are the first in Japan. It was established in March 31, 2026, and we will be focusing on grid scale BESS and fund size, JPY 6.5 billion, fund duration, 26 years.

This is what we are thinking of. And to maximize capital efficiency and swift business development, -- these are the characteristics of Kan-denchi Fund. And together with Kinden, there is unlimited partners and EPC, we will be offering them in the group. And also through funding from outside, we will be maximizing the capital efficiency. And by originating the projects, we would like to -- in an efficient way, we would like to originate the projects. And this is Kan-denchi Fund's first fund. This is Kasugai BESS plant.

We have published that this will be incorporated as a part of the fund. And Kasugai BESS plant, the scheduled operation start is April 2028. Rated output is 39 million watts. After Fund 2 and onwards, we are aiming to start operation by 2030, and we are currently in the process of promoting consideration for projects. And last of all, to achieve our management plan, I would like to touch on this. First of all, as of now, looking at the development status.

So we have announced the development of 9 BESS plants across 8 locations nationwide, securing a top-tier position in development capacity from Sapporo in the North and Aso in the South, so we have all over Japan, and we had started development. And so we are having a total 455 million watts. As a total of those 9 best plants across 8 locations. So what is the characteristic of this is that we have Kinokawa, so we are doing together with ORIX. And for Sapporo, we have JA Mitsui and with SPARX Group, we are collaborating with them. And for Chikugo, we have Tokyo Century as a partner.

And about Aso also BESS plant, Mitsui and SPARX Group, we have Kyushu, Mitsui, Fukuoka Jisho as well. So various partners we are collaborating with in order to develop those BESS plants. I think that is our characteristic. And here, initiatives to achieve our management plan, we had already talked about that. So let's skip upon that. And lastly, the future direction that we want to take. So here, the objective is to have -- this is a high-yielding business and consistently high-yielding business, thereby contributing to further improving profitability across the group and actively expand operations nationwide and aim to become Japan's top player in the BESS business.

And on the left-hand side, so this is improving ROIC. And currently, so until 2030, we want to have ROIC 5% or more. In 2035, ROIC 10% or more. And the scale, we want to expand also so that currently, we have 455 million watts. And in 2030, early 2030s or maybe a little earlier than that, we want to approximately 1,000 million watts. That's what we'd like to have.

So that's all for myself. Thank you very much.

Yes. Thank you so much. All right. So as such, we had concluded the explanation about the -- all right. So I'd like to start the Q&A session now.

And first, we will take questions from those who are here with us in this room. And then after that, we'll take questions from those who are participating via Zoom. [Operator Instructions].

I'm from Morgan Stanley, MUFG Securities. My name is Ogino. So for both the businesses, I'd like to have about the numbers -- questions about the numbers for the both businesses. So about the overseas business, first of all, so that the current status by the free cash flow, so that JPY 100 billion and the base profit, I don't know about the depreciation. But first -- so the 3-year term of the midterm business plan, the free cash flow, how is it?

So if the free cash flow is in the black, so after the 3 years' time, is it going to go up? Or is it in the red now, but then it's going to go into black after 5 years. So how is it going to be about the free cash flow? And about the numbers, -- so 2040 perspective, so the ROIC over 7% on the consolidated business, so 7%, right? And overseas business was 5% or 6%, I heard. But the return for the overseas business, is it what you're aiming for, for the management request? Or how is it from the image? So the overseas business, so risk and return, is it going to be higher? 7% is going to be higher. That's my personal comment. But then for the management side, they feel it's 6% is okay. So they don't expect to have more than 7%. So can you talk to me about that.

All right. Thank you for the question. So about the free cash flow, yes. So investment free cash flow also. So in that sense, I don't have the numbers with me now, so that I think I would answer separately about that later on. But the project, it depends on the project. The free cash flow is quite diverse. So there can be a negative in some years and positive in some years so that this is a stage that we are increasing the assets. So that's not something that we are particularly concerned about.

And then in 2040, the return perspective. So ROIC, 7% yes, overall company. So we say 6%, but then that's for the baseline number. So as I said, so we want to go higher than that. So that is the baseline, and we want to go higher than that. So I think you want us to show the numbers, but -- well, this is something that we cannot go into specifics, but because we are still at an early stage so that by having this numerical target, maybe we can bind the timing to sell the assets. So there are some deadlines for the time-based funds, but we are doing as a going concern, and we would sell at the best possible time.

So I think the current way of our planning is the best way. So for those who are following the numbers, maybe you might think that this is a rather frustrating kind of a way for me to answer. All right. And then as what you say, yes, well, I'd like to say thank you to you for that answer. So you say you have a plus alpha. And for the track record, you had this in the current stage, and then we want to aim for higher in the future. Yes. So that's how it is. All right. So this is my comment on that, but the 5% for the long-term rate in the United States.

So the time that you buy the U.S. securities, long-term bonds, government bonds. So just in terms of money. But by listening to you, I thought that the free cash flow, you don't -- you're not so concerned about the level of the free cash flow. So this is the external numbers that we can follow from the outside so that, yes, I understand that you want to aim for higher, but you say that it's a risky thing. But from the outside, it's even more risky so that we won't feel it's very attractive. So example, the American investors, well, you might think it is much better to invest in this rather than the U.S. government bonds.

Well, for the IR Investor Relations for the overseas investors, maybe you might think about change of presentation to make it more attractive. But in the 3 years' time, JPY 100 billion investment. So I think -- well, in your case, KEPCO, well, in the overseas business, if that kind of scale, then you don't need to have much of a performance on that. But of course, every yen is precious, so that I think you need to show the presentation in a different manner because if you really want to go into the overseas business, you can't find the passion.

Thank you very much for the comment. Yes, I take it seriously, and I reflect on that. But -- well, so about the presentation, as I said, so to have the Plus Alpha, it's cannot -- we cannot go into this detail about the Plus Alpha number because I don't want to go into that in an irresponsible way. So the timing, we don't know, and it depends on the market. So what I want to say is that this year, how much is it? That kind of a discussion is quite meaningful because for the long term, we want to have kind of a breadth to take a look at it. So I think that's the way it should be to look at this from the management perspective.

Thank you for the question. But since you are going into this, so as a corporate, the cash flow, yes, we are looking at it from a corporate segment, but how can we go into more detail?

Well, as of now, I think you can imagine this, but the depreciation is going on quickly and the ROICs are quite high for the uptake and the information communication. So we have a plus positive cash flow. So how are we going to do it? So I think the structural stage, I think you can understand. But then how should we show this in the different businesses? Then yes, I want to take a look at it. Thank you so much for the question.

And then about the BESS business, so for the BESS, so I think everybody wants going into BESS like it's like a mega-solar in the past kind of a boom. So what I want to ask from you is that your company, the current stage, so the BESS business -- so I want to -- I don't -- I won't say to have your numbers for the business of just BESS. But just BESS, yes, so in the future, you say that you're going to make money, profit on this. But then the boom is now here so that everybody wants to go into BESS.

So as much as possible in the current stage, the ones that are already in operation, can you tell us about the return? So is it IRR? It's a higher single digit. So is it an actual number? Or since this is a boom kind of, maybe you already have 2 digits already, but then there are already a boom. So I don't know how much is the Kinokawa profitability.

And then another thing I want to ask is the ROIC objective. Yes, of course, I would like to say, please do BESS about it. But for the risk side, what is the one factor that you fear the most? And so you have decided to have the investment already. And then in the project that you're considering, these are the risks that you have in mind. So now it's kind of like a bubble and kind of like a boom so that maybe you are looking at the risk not too seriously.

Okay. Thank you for the question. And one thing -- so everybody is going into this so that you don't see the business plans. So because people have not started in earnest, so that the investment cash flow is there, but then the return is not there. So those are the situation of most of the players. So well, we haven't given the concrete detailed numbers from us, but higher single digit is for the Kinokawa BESS is the objective that we have.

So actually, I cannot say this for myself, but as you have said, well, IRR, yes, we can have that you have alluded to higher than that. So the risk, what are they? So the future risks. So I talked about the 3 markets. So about the design of the 3 markets has -- is going to change. In '30s, 2030s, we have the simultaneous market and also in the demand supply. So the auction price, the higher limit is coming down -- upper limit is coming down. So we have the BESS, but then we have the buffer as well.

But then for the high voltage or the low voltage, so those BESS that are very much in a bubble. So maybe the upper limit is coming down. So it's not very easy to just make money in the market. So I think that is the biggest risk that we can foresee at the moment. And another thing, if I may allude to is that this is something of an issue in the data center as well. So for those that we have the connectivity, so that the bubble, yes, everybody wants to have the connectivity and the interlinked T&D, so transmission and distribution. So the businesses are not able to catch up with that. And for the power plant, so we have the decarbonization auction. There are plans like that. But for the T&D -- to increase the T&D under the current system is quite different -- difficult. So how we can increase that is, I think, one big challenge going forward.

My name is Shinya from Mizuho Securities. And I would like to ask one question each for each of the businesses. First, starting with the overseas business. Profitability, ROIC was mentioned a little bit. And I would like to talk about the asset recycle. What would be the alpha. So in this diagram, I got the impression that it will grow bigger as time passes. And as a sustainable target, is this feasible? And I would like to hear your thought on this.

So this is my own interpretation of that diagram. It seems like it's growing, asset management. So that the asset that you have and you'll be selling at the right timing and it's supposed to increase, I think. And while increasing the basic profit, is it possible to do that at the same time?

If you have many projects, that could be possible maybe. But compared to real estate, the lead time is longer, and I think you'll be divesting taking more time. And for asset recycling, you will be generating profit.

And how realistic is that? I would like to gain understanding of this.

Okay. So looking at asset recycling, how that will be, the to be state is we have not yet been able to understand the full model of this yet at this stage. But as I mentioned earlier, the base profit level, so out of the total portfolio, it's still in the growth phase, the portfolio. So we need to pay repayment of the loans that we have borrowed. And when the profit increases, then the base will increase. And we would like to accelerate that.

And if you think about that, I think this is possible. And we talked about needing to do the simulation about this a few days ago. So looking at the portfolio overall, how would the portfolio be? We need to gain better understanding of this. But qualitatively, it was, as I just explained, the basic profit. So this is before being able to exert our full capability yet. So please understand that and keep that in mind.

Okay. And one more question. Just one more, please, but you talked about Iberdrola. You have a business alliance. You had your picture here with the President and CEO of Iberdrola. So there aren't so many people who is able to have a picture with the CEO. This is the biggest player in Europe, I think. So how have you been able to do that? But when you made this announcement, I'm surprised looking at the title, it was just too rough, and I wasn't sure what you were trying to do. So could you give a bit more comment on this?

So this is Mr. Ignacio, who is the Chairman, famous CEO. I believe he is a very famous top CEO in the world. And originally, the relationship started with ENW. They -- well, we -- at the time when we started to participate, we were competing against them. And the reason is because we were interested in the project. We wanted to join, and they were already taking part in the distribution and they were already in the -- participating in the North and West T&D -- sorry, transmission.

And I was sure that they wanted to get somewhere in the middle as well. And we were able to win this project. But then after that, Iberdrola -- they wanted to become a part of Iberdrola. And they approached us saying, why -- please sell a part of your shares. And there were other inquiries and their proposal was the most attractive in terms of the financials and also, it was very clear what they were trying to do. They wanted to cover the 3 areas. And they wanted to operate the 3 areas, north, south and the middle.

And that's what we were expecting, and that's what came. And that's why we decided to partner with them. And this was the -- so we sold them. And then this was the basis and they -- we talked about doing some other business together as well. So this is a business alliance in Europe. And at this stage, the current style is that they are doing some operation and they're asking us to participate as well.

And lastly, I'd like to ask about BESS business. I'd like to focus on the E-Flow. Many operators say that E-Flow has a lot of know-how accumulated and is very competitive. But the business is very harsh. They're doing a very harsh business. It's expensive. That's what I'm saying. So maybe I should not say this, but this is just a rumor that I'm hearing about E-Flow, supply and demand adjustment. Well, I think you were talking about first-mover advantage or a sort of that. Where is your competitive edge? Is it difficult for others to catch up?

And for you to scale up this business, well, thinking about the solar history, this might be a bit challenging. So the companies that have know-how that other companies will not be able to catch up, I think that's critical. And E-Flow, where is the competitive edge? And would that be maintained as a competitive edge going forward as well? So these are my questions.

As for E-Flow, let me explain the history. After Great East Japan earthquake, we have established a regional energy headquarter. We established an organization called regional energy and demand response. Nowadays demand response -- but so demonstration in 4 areas that started by the government and virtual power plant, VPP, discussion emerged.

So resource aggregation business, we wanted to try this on our own once. So within the local energy, regional energy, resource aggregation project team was established. So that was the starting point of E-Flow. And as we were operating, we felt that we will be able to grow this business because there will be an increase in solar and storage battery will continue to increase. So we will be able to utilize the know-how that we accumulated. Maybe we will be able to generate earnings coming from this.

And based on this idea, so rather than putting it in an inside organization, we wanted to put this outside of our organization and giving them the right for decision and let them run the business on their own. And therefore, in 2023, E-Flow, this company was established. So at the time of the establishment, resource aggregation business, they had already accumulated so much knowledge and they were doing the programming on their own, and they were able to operate. And along with that, battery storage business storage.

So this is different from Kan-denchi scheme. So E-Flow will be able to take part in the supply-demand adjustment part only. And whether E-Flow is expensive or not, I'm not sure. But resource aggregation Chairman company, we are an advanced company. So in terms of the policy creation, we have contacts and touch points with METI. And that is the biggest strength of E-Flow now. We have track records with many, many customers, a variety of customers. And plus, we have a strong pipeline with the central government. This is the difference compared to other resource aggregation companies.

So because you're competitive, so that is why you're getting a value worth that. I would like to change my expression.

My name is Yamazaki from Nomura Securities. So I'd like to ask one question each for each of the 2 business. So I want to start with the BESS business first. So for the BESS, as we have been saying, so 2030, 1 million, so 450,000 now. So in '30, '31, '32, so how do you see it is the first question. And the other one is about the makers.

So I think you had been commenting about this, but you have the strength of having the competition split. But what kind of manufacturers do you want to select or are you going to select? So I want your opinion on that.

Okay. First, -- so in the very honest basis, so '31, '32, so what the DOC is not in the 450,000, so that we are going to plan and then it's going to be included in '31, '32. But now in the '30, year '30 is the longest, let's say, of what we are planning now. So now what we are doing is what we had already started. So as I have said, but in the early part of the '30s, but we want to go first. So rather early stage, we want to go.

And then another thing is about the manufacturers. So well, honest basis, so here, the China, in China or Tesla -- so that kind of batteries, overseas made batteries we have introduced. And then -- so this is a price competition. We had looked at the price competitiveness. But well, for the economic security, I think we have much talked about. And so we should take a look at that. So for the domestic manufacturers, if possible. So that's how I feel about it. So Tesla, well, this is the United States. So maybe not much of a problem issue here. But then we want to have domestic manufacturers as well. So utilizing subsidies and other means, if we can include the domestic makers as well.

So in a very honest basis, well, as a unit price, so compared to the Chinese made, the domestic ones are quite a severe situation. And even if you take into subsidies, maybe we are at a par or not quite at par with cheaper Chinese manufacturers.

Okay. About the overseas business. So overseas business, so I looked at the list of the overseas business that you are going in. But I think it's rather skewed. So it's Asia and Europe, 2 places in the United States, but predominantly Asia and Europe, how is it because it's unbalanced like this so that if you go into places where you can have a return. So in the United States, well, maybe you don't want to go into the United States because you already have a rather much about trading.

So how do you look at the United States market in terms of electric power is one question. And I think it's going back to the basic discussion. So ROIC, 6%. So the target is 6% or higher than 6% for ROIC is what you're aiming for. And after you accumulate it, so that's the 6% basis that you can have. You are now in an investment phase so that -- well, so how should I put it? So 6% is there. And yes, you're going to aim higher than 6%. But for the Plus Alpha is what I want to ask about. So it's 6% because everybody else is 7%. So how can you explain about that? Or how do you think per project basis? So yes, there are some over 6% or 7%. Okay. About the United States, how we take a look at the United States market.

So our portfolio, as you have looked at. So the United States, we don't have much of an asset here. But -- well, that is as a result by region. So yes, we do feel quite difficulty in the United States market because it's very competitive. And there are many excellent companies so that we don't have much of a space to go into that kind of a competitive space. So that's the challenge that I share with the management.

So it's not that we don't want to go into the United States, but you want to go into the United States, but because the power demand is going quite strong. And yes, we'd like to join that market as well. But we are looking for how we can get into that. But we have several projects that we are trying to have. But I don't know the timing, but I think I can announce about that. But -- so I don't think that we are in quite a growth stage for the United States yet. But about the ROIC, yes, as I've been saying, 6% is the current number that we are seeing now. So 6% is not that we are comfortable with the 6%. But if we have more projects, then yes, of course, we can say higher than 6%. So I think that this is a current stage that we are in. And the infrastructure -- so about the first 10 years, we cannot have much of a growth. So we are currently sitting at 6%.

My name is Nishikawa from Daiwa Securities. I have one question for each of the businesses. Starting with this plant business, Page 23, the future direction is shown. And ROIC and development size is explained. You developed the storage battery and you're not particular about owning this business. So including small- to large-sized companies, many companies want to have the ownership, but your idea is good. And balancing the Kan-denchi ROIC can be enhanced very much.

So not only ROIC, but profit size or profitability, I think you need to have such targets. And at the same time, on the right side, is that the development size on the right side? So it's not that 1 million kilowatts, it's not that you will be owning them, but you have been engaged in development. So the border line between flow and stock will be difficult. But ROIC can be increased, I think, with the initiative. But what about the size of profit? How are you going to try to measure that?

It's difficult to comment, so maybe it's not written here. But maybe you have a strategy built assuming certain profit internally? Or are you thinking about the combination with solution and not only storage battery, but 2030 or 2035, how much you'll be able to generate profits in solutions? Maybe this is a part of that solution number. So this is an advanced initiative. So I can imagine that ROIC can be enhanced, but there's not much profit after off balancing and ROIC improving. So what is your idea?

Thank you for the wonderful question. As you pointed out rightly, ROIC will be enhanced naturally. But are we going to be using Kan-denchi Fund all the time only? Or is it going to be project financing only? No, that is not the case. There will be different combinations. As I mentioned earlier, together with ORIX or JA Mitsui Leasing or Fukuoka Jisho, we do believe we have the potential to partner with many other companies.

And depending on the partner, there will be different patterns and which land and what will be the size of development, which pattern would that imply? So if we set a profitability and profit target, so this would be very similar to overseas business. But as a result of the combination, ROIC is expected to be 10% or more and development size, as you rightly mentioned, so ones that we have been engaged in, in the development would be 1 million kilowatt.

And as of 2040, a Solution business, the profit target, we do have a target for 2040. And out of that, BESS business, we would like to accumulate this kind of a profit. So we do have that number internally, but we do not disclose. So I'd like to refrain from mentioning that. But we have some sizable amount in mind. And the fund business, we have originated the fund, and we will pursue ROIC. And at the same time, if you try to pursue profit, we need to have and maintain a certain size of assets. Otherwise, it cannot generate profits. It's exactly the same as real estate business. So I was engaged in real estate business. So what will be the best combination that will be the challenge we need to address going forward.

And the second question is overseas business. Overseas business in operating this business, company or the investment size. So can you carry that out by yourself? So if it's JPY 200 billion, you can spend that amount, and that is the size, I believe. But you talked about Iberdrola earlier. If you partner, you will be able to be engaged in projects and overseas energy business current size, can we think that you will be able to compete within the world global market.

But when we think about LNG or others, maybe you need to have a very big size to start with. Otherwise, you cannot get any projects. And so there are so many companies that want to be engaged in energy business overseas. But maybe a bigger company, you want to make investments in overseas with a bigger company size, so you need to ask the corporate to give some money or for globally. If you want to leverage your strength in renewables, is that enough? Or what do you think -- what should I think about the size of the company or the business?

Well, thank you. That's a very good question. We don't believe the current structure is the best. In investment projects that we see, it is true that there are opportunities that are beyond our size that are not possible with our size. And it's not that we don't want to take on such challenge. It might be covered by Tanaka-san. But within the portfolio of Kansai Electric Power, the balance will be decided. So I don't think it's the right timing for us to bet so much on overseas right now.

And with the size of the business we have right now, are we facing a problem? Well, with the current size, we do have been -- we have been able to capture a sufficient level of business opportunities. And I don't need to -- I don't intend to complain that we cannot do much because of our small size. Is that okay?

Yes, I was able to understand very well. Well, JPY 100 -- JPY 100 billion that can be used, he said Mori san mentioned. And I wanted to object, but I didn't say anything. We don't -- I'm not thinking that way at all.

Annualized, a few tens of billions of yen of investment. And rather, overseas business -- if you look at the profile of the businesses and if you bid against the overseas companies, but still want to secure spread. That's what everybody is intending to do. So we want to bring this kind of a sense to domestic to Japan. And this is what we need to appeal to the government. Other markets are doing it this way. So regardless of whether it's offshore or wind, they are competing in the global. And if we cannot capture enough spread in Japan, we need to go overseas. So this is something we need to discuss with the government. So I don't want to talk about the size too much because there will be too much pressure on him. So I wanted to say that, too. From my position or looking at it from the company's perspective, overseas business, it's maybe missed to put a border line and say overseas business, we are saying going beyond Kansai and going beyond electricity. So outside of Kansai, it doesn't matter whether it's in Japan, outside of Kansai or whether it's outside of Japan. And we need to be able to gain proper correct understanding of where the business opportunities are.

I don't think overseas business is something that's special. But as [ Tanaka-san ] mentioned, what is important is Japan's electricity business is no longer a Japan original business model anymore. It's not electricity business only, but various businesses, players from outside are coming in. The supply chain are all connected, and we need to play in Japan. So we need to be connected to overseas. Otherwise, the domestic business itself will face a risk. So I do believe that we need to appropriately develop overseas business. And as for the size, this will be -- has to do with the balance of the overall portfolio. And one more point, I wanted to talk about this from before, but so when this was talked about, so ROIC is good, but profit that was mentioned earlier.

This is the most exciting challenge, I feel. There's so much leverage. ROIC is very high. It is true. And from a corporate perspective, as of now, this is great in the management plan. We will be pursuing capital efficiency, and that has been pursued. The staff that are originating this, people around them are saying profit should be pursued. So within the company, so it was mentioned earlier as well.

So this market, we don't know how the market will be in 5 years' time. And supply and demand market adjustment market, we don't know how it will be. And then we -- so it's too early for us to decide whether we should go right or left. So we should pursue ROIC at this moment. So [ Fujo-san ] will might be thinking we should pursue profit as well, but this is something we need to continue to discuss. Sorry for the [indiscernible] redundancy.

My name is Kamichika from SMBC Nikko Securities. So I want to ask one question each for the overseas business is also best. So about the overseas business, so the base profit, so what are you making the profit by is one thing. So is it the thermal or T&D or is it hydroelectric? So 152 or 170. So who are the earners for this business? And then the plus alpha part is what I am concerned about. So now -- so on Page 4, you say about the asset rotation, and you have one concrete example about that, but if you can allude to the background a little bit more. So I think that you were able to sell at a high price. But -- so the timing was right. Or is it because you have the value raising or value up plus alpha kind of sales? So is it something that have implications for the future? Okay. So this '25 or '24, the profit, where are we getting the profit? So it's an accumulation of various. So 22 projects. So one thing is coming from the gas and thermal. And so it's different year-by-year, but one thing. No, not gas thermal, but gas thermal and also coal thermal. And these 2 are the big blocks.

And in '24, so I think I don't see E&W here. So '23 E&W was also earning much up until '23. Okay. And one thing, San Roque, it was in '23 versus San Roque Yes. And I think that past the peak year, San Roque. But in 2 years' time, it's going to be finished so that the profit contribution is not too high now, but it is having a decent figures, Although it is in the last stage. So it's not just that we are having big ones that is -- but we have small ones that accumulate to this. And then about the asset rotation about the E&W, I think your question is related to that. But -- well, the one biggest factor about that is inflation and the rise in interest rate. So in 2019, we went into a geopolitical kind of a shake, then the interest rate had gone up, but the British power distribution is connected to that.

So it's the market traded T&D businesses, the stock price is automatically calculated based on that. So honestly, so if you ask me whether we added value, yes, we think we did, but the index kind of a hike was bigger than what we had, pushed up by the added value. And so we have the Iberdrola strategy, we were able to understand that very well, and we had the good timing also. So what is our lesson that we learned from here is that we see the market and seek the proper right timing and to have very fast response.

So for all the assets, we have to have that is the lesson learned at that time of the partial sale of E&W shares. Okay. And then the second question is about BESS. And here, what you had to [indiscernible], the IRR target, you talked about Kinokawa and Tanagawa. So on Page 15 about Tanagawa, so the, it's 10% more, but from compared to Kinokawa, it is higher. But what is the difference? Where does the difference come from? So is the difference in the scheme? Or is it because the procurement of the batteries went well? So if you can have explanation about why those 2 are different in terms of the IRR. About Tanagawa, as I had said, so this is from the project finance. That's one thing I can say about that utilizes project finance. And at the same time, we have started the Kanden service. So in the IRR, so in the group companies so that we can have the group companies earn profit on that. So that is different from Kinokawa. And having said that, Kanden and [ K2, Boton ], those kind of companies and Kanden Asset Management and E-Flow also. So those are making profit. So our Kinokawa also has E-Flow.

My name [indiscernible] is from JPMorgan. I would like to ask one question about overseas business. Listening to your presentation today, IRR thinking about IRR, I think that fits better. So rather than looking at ROIC lower IRR, including divestment, maybe you're thinking about the return of the project as a whole. So from that perspective, IRR when you make an investment or after the investment in managing, you are using IRR. If you're using that, please share the IRR. And maybe I don't have sufficient level of understanding, but in overseas business, your competitiveness, how is it?

You make minority investments and you have partners that you have introduced today and you have relationship with them, business relationship with them and you have a discerning capability as a power company. And you want to join in projects at low cost and you join at low cost and sell at high price or generate stable earnings. Can I understand that, that is your strength? Or is there anything else that I should understand? This is about overseas business. So he may add, but overall, as a first step, whether we make investment, whether it's a go or no go, that internal decision is based on IRR. So what is the spread against the WACC and the hurdle rate is set by combining various risks, and we do make a judgment for investment.

So we're talking about ROIC today, but the staff are looking at IRR and I believe each of the projects are considered from IRR perspective. But from management plan perspective, when we think about JPY 100 billion of investment from his perspective, he should chase after ROIC or ROE committing to these numbers, it would be correct. So I think this is how we look at it as a company. Yes, that is totally right. For individual project selection, IRR is the priority, and that comes first.

But as I mentioned from before, the portfolio overall, what should be the profitability and that is managed utilizing ROIC for ordinary profit. I think that is very important. It's not just one time. So how does it change over time? We need to gain an understanding of that. And how would this project contribute to that? That's how we look at the investment chart -- investments that we make. And also as for competitiveness, we are a minority shareholder. And for such cases, it is right, as you mentioned, we are an ECO. And for the market or the business, we do have full understanding. So compared to those who don't have such capability, we do have higher discerning capability.

And if we're not a minority for projects, where we will be leading the project, we would like to run such projects in parallel. And for such ones, we would like to promote the business. In Japan, all businesses from 0 to 100 has been done. So utilizing such capability, we will do development and construction overseas. It's a combination depending on the project, how we are involved is different. But because we have both, the minority investments can make difference. And also the know-how that is required by partners, we can contribute to live up to their expectations.

So can I ask another question? So IRR and asset recycling. let's say, IRR is set at 10%. And in the middle, compared to your IRR, if you sell higher, maybe you can achieve 15%. So in such a case, do you decide to divest? Is there such a possibility? Is there such a logic?

It's not such a logic is not that strong in our culture, IRR instance or profit at one moment, trying to capture that is not -- would not be our first priority. So in the portfolio overall, what is the meaning of the project? So in terms of the significance in terms of the money and also the cash flow and the profit after that, So I think the judgment will be made from that perspective. So just because we want to increase IRR one at one moment, we will not sell. That is not what I am thinking. It's a bit complicated. But -- so in case of the E&W in selling that share in having such a discussion to sell, so how much should we hold, how much shall we sell, that is comes visible from IRR perspective. So your question, your intention is, are you trying to target that and create a formula and sell if it goes beyond a certain level? That is not the case.

That was his answer. And whether recycling will be done when we make such a decision so what we -- if we sell, what will be the IRR and we continue to hold how much of the IRR. Of course, we will be comparing that. So this is something like a real estate business. We do look at it that way. Well, he may say it's different, I wouldn't say that. So when we participate in E&W, we discussed about that.

So I forgot in what year, but we are making investments assuming exit. And with that cash flow, we calculate the IRR and made judgment to make a decision. And we sold partially much earlier than we had expected, but we still keep the remaining half. So I think we'll be making a judgment about the divestment going forward, looking at the situation. So this is very similar to data center. So they are not -- they don't intend to hold for 40 years. So at a certain point in time, they probably have the intention to do capital recycling and IRR logic will change depending on that.

So we need to look at things from multiple perspectives. And as was mentioned, overseas business, how much IRR, how much spread can be captured. And then we can also think about how much can we get for a zero carbon auction. So we will be able to compare very clearly with domestic business. In T&D, what will be the IRR? We need to have that kind of a perspective going forward. We need to be able to compare. We need to have such an indicator. So we have been engaged in overseas business, which was beneficial from that perspective. So in the investment committee, whether it's overseas or it's a large grid or not, we are comparing evenly [indiscernible].

Yes. Fisanaset, my name is Domon. Well, I want to ask a question about the overseas business. And well, in the presentation material on Page 8, so that the diagram on Page 8, on the left-hand side is a high risk, high return. And on the right-hand side, it is a low risk, low return. So in your company, so you have the development expertise, then you want to go to the high return and then to go for an exit. I think that's how you go about it if you have expertise. But for your company, for the higher left-hand corner to -- is there businesses that's easier to go into, for example, the ones that you have expertise about the development so that you can lower the risk. So you are confident in lowering the risk.

Well, if that is, for example, the power generation, about the hydroelectric power, I think you have much knowledge and expertise about it so that you go into that market with much expertise. And about wind power as well, so you have the knowledge and expertise. But on the other hand, the gas thermal, well, I think it's more of a standardized kind of equipment. And EPC is -- well, everybody is -- well, many people are doing it. So there's much competition and not such a high return. And if that happens in the kind of a project that you want to go into, I think in the region as well. So I think you have kind of a perspective as to where you want to go in. It doesn't necessarily go the way you want.

But the ENW in that sense, so for the T&D and also for the public transmission and the regional transmission, I think it's different. But for your company, how much was it that you had much expertise or strength? And for the Indonesian submarine cable for the transmission. And I think those are not the things that you do domestically. I don't have much strong feeling that you go into these in Japan market. So why did you want to go into it? So that's what I want to ask about ENW. So for the -- this is the British power distribution. So it's renewable energy, and I think they have ahead of us, but how is the transmission there that I wanted to see. And as you said, IPP compared to IPP, well, rather IPP is limited. But transmission business is going concern. So we wanted to have the portfolio stability so that we wanted to have this portfolio something from a going concern.

So that's why we went into ENW. So whether we had any strength, well, we didn't have any particular strengths that we can, but this is how we have fared. But as for T&D transmission, Well, in Indonesia, we are doing this project. But before that, we had in U.K. and Germany, we had the NeuConnect. So I think it's in the presentation materials. But then the NeuConnect is the DC transmission. I don't think that there are many have that kind of an expertise. So then in our case, so we have in Tachibana-wan in Shikoku to Kansai, we have the DC transmission. So we do have that kind of expertise. So we wanted to use that expertise in doing this business so that in the NeuConnect business, yes, we went into that. And the NeuConnect business in France and Germany, well, it's really joint venture with those financial companies.

But in the technology, we are leading this group. So we can have our own originality, and we can leverage our expertise. So next, we go into Indonesia. So in that sense, we can leverage on the capability that we have. Yes. So I think you can understand like that. But on the other hand, in the hydroelectric power, in the past, for the [indiscernible] also had much of a track record, but the very large-scale hydroelectric development, it's difficult in Japan. But in overseas, well, there can be more projects that can happen faster than in Japan.

But in Asia, I think there are issues with the environment and also the political situation as well. But if you go into those kind of projects, are there any that you can increase more of? Yes, we want to increase those projects. But I think it's true for any country, we do need time. And Nam Ngiep, we took 20 years in the making of this Nam Ngiep. And that kind of a time we do need. to put into the project. Otherwise, we will not be successful. So we have the expertise, and we want to make full use. I think that kind of a perspective is quite important so that continuously we want to pursue opportunities like that around the world, but it might be that we are not going to make any profit. So we are limiting the projects that we decide to go into.

And on the list, the very end is the Philippine power project. So the other business is doing that, so that it's in the midst of construction so that we are going to this and in the last stage of that, but if we go into it, it's really different variable speed pumped storage. So the pumped storage, how we can do that, we can leverage the pumped storage knowledge that is what we had in our domestic business. So that's why we were to go into this. So in that sense, we can use leverage in our hydroelectric business.

Any more from the venue? My name is Miyajima from Norin Valley Investments. And I would like to ask one question about overseas business. Page 8, in the same diagram, left up your own development, the profit is higher it says. And I don't have enough knowledge. So I'd like to ask, but the return is higher because you do the development on your own. And why is that? Of course, if it's greenfield and if you develop from a scratch, the asset value can go up. But this profit cannot be realized unless you sell and long-term holding and we continue to operate the power generator. And how is the return higher in such a case? Could you explain? Yes, thank you for the question. We can say in many different ways, but this is relative. This is relative. So please look at it that way. So developers, the return that they get is based on the cost that was invested. But for players that join later, they pay premium to join the business.

And for the first mover, they need to give profits to the first movers and their profit will be limited. So relatively, the return to the latecomers will be lower. And of course, depending on the project, whether the return for the greenfield is higher or not, it depends on the cost of development and the power rate that you get. So it's case by case. But if it's the same project, whether you should join later or first, it's from the risk and return perspective, it is balanced. I think this is how it works. Did this answer your question?

Yes. I understood.

All right. So we take another question from the venue and then we go on to the Zoom participants. All right. So one more question from [indiscernible]. My name is Tota from Eliot. So 2 questions on the overseas. And first is about the future [ assets ]. I do understand that it's difficult to see forward. But in the track record of the past, I like to ask about that. So you had been telling about E&W -- but until now, so the ones that you had been investing, so how much was the exit? And for the exit, how long did you hold until you exit? So by looking at the project, then -- so more than 10 years, I think, or more than 10 -- 15 years. So I think there's a few numbers. So maybe 15 years is something that you look for the horizon to make a sale. Is that correct? -- is one question, the first question.

The second question is about ROIC, how the ROIC has progressed. And on the Page 3, if I take a look at it, in 2030 to 2026 and 2028 average, -- so it's JPY 20 billion. So the operating profit has not -- business profit has not grown. So the asset scale probably has grown larger. But -- so can you tell us about the background? But in 2040, so 6% ROIC in order to have that. So how much is the ones that you had already invested and that you can go into a good state? Or -- but is it that you need to increase the quality of the investment so that you can attain this figure? So can you give us a breakdown how you think about it?

Okay. Thank you for the question. So first of all, about the exit, what we had already exited as a track record. Other than E&W, we had in the past in the Thailand, the IBP -- SPP project. So the this is a thermal plant. And this, I forgot when it was, but we did exit that. And the holding period was 10-plus years. Yes, I think 10-plus years. And that project, when we participated, then it had increased in equipment. So maybe it came to like 3x the original scale, and then we exited at that point. So we did have sufficient profit and to make an exit. But -- so what we had thought. But in the Thailand, we thought that this is all right that we had already enough. So that was kind of a decision that we made so that we don't have any project in Thailand now, but we were able to sell at an adequate price, and we did take a look at the future prospect of the market as well.

And when we went in, so we did not have any perspective as to when we want to sell. And then Senoko, in the Singapore thermal power, we did have a Senoko in Singapore. But this we had sold several years ago. And in Singapore, the power market is quite difficult. It's a small market and the volatility is high. And the COVID and then Ukraine situation after that, -- so the market has become quite high, expensive. And so we thought that is the time to sell. So we did exit the market. Yes. So these are the examples of exit. And then maybe I shouldn't say this, but the secretary might say you shouldn't say this, but there are exits that we made because we were not able to make a success. Yes, there are failures. I'll be frank about it. So that's the kind of a track record we have.

So it's not that we made a very detailed plan as to when we want to exit. No, we don't have that kind of a beautiful story in our track record. So it's different from the funds, I think. So we go into the adequate timing and -- okay, about the ROIC, the figures. In 2030, it has come down a little bit. Yes, that's quite right because the denominator is larger. And in 2040, it's going up. And then -- yes, so the projects can be sold can be harvested. So this is the accumulated figure and actual figures. So it's not that we had came at the figure because we wanted to come to this level. But in the future, how we want to have the portfolio and then the assets that we hold, then -- but to add it, it's a natural kind of a stage.

So is that right? Okay. In 2030, we have the assets accumulated. Yes, I do understand that. But the base, the business profit is JPY 20 billion, that kind of a level, right? So then you would sell partially and then the base profit can be subtracted a certain amount. So what is the background to it? So JPY 20 billion in 2026 to 2028 is the average. But in 2030, it's JPY 20 billion. But then it's not changed. Does that mean that you are going to make investments so that it's going to go up a little bit, but it's JPY 20 billion and it's constant. Okay. So here, in '26 and '28, so it's not that we expect to have a profit in 2030. So those kind of projects would have a profit much more longer term. So in '28 to 2030, so there are projects that can be a source of profit that may not have much that can produce profit. So do you understand what I'm saying? So this is an infrastructure return that takes time in order to have a return on the [ PF ] basis on ROIC?

Yes. Okay. Maybe this is similar to Kauchka-san's question, but on the Page 4. So we do have the 23 projects that we have on Page 7. So Kamichika-san, as you said?

Well, these are the projects -- well, I don't know -- well, so the transparency is quite high. So in 2030, so maybe we can have JPY 250 million? No, it can't go like that. If we accumulate this, you cannot have the profit higher than that. So you have to have the accumulation and to look at each of those projects. I'll be very honest about that. Yes. So you invest, but then you cannot have a profit from the next year. If you have such an idea, please tell us about it.

No, it's not possible to make profit the next year immediately.

Okay. Here. So these are the project finance. So debt finance is now finished, and then we have the equity return. So those are the contributing projects. So we are finally at that kind of a stage so that we can have those profitable projects. So for example, the [indiscernible] -- so in 2030, we cannot have profit.

Yes.

Okay. So here, we would like to go to those participants via Zoom.

So are there anybody on the web who has questions? [Operator Instructions] Does anybody have any questions? As of now, there seems to be no questions. No questions. Is that okay [Operator Instructions] -- it seems like there are no questions from the web. So we'd like to go back to the venue. So please bring a microphone.

My name is [ Eto ] from Simplex. I have 2 questions. The first question is about overseas business, your strength and your profitability and the scale. From these 3 perspectives, going forward, which market is the sweet spot? Which would be your target market? For example, for strength, maybe hydro and price, the capital cost concept is easy to capture, but Asia is different. And in terms of scale, T&D has shrunk compared to before. So maybe wind can scale, but profitability, how is it? So strength, price and scale, what will be the sweet spot for you? What will be the sweet spot?

Very difficult question to answer. I cannot organize my thoughts right away and answer your question straight away. Europe, let's say, wind on offshore market. If you look back in the past 5 to 10 years, the situation has changed very much. Therefore, this market is like this. So we don't want to have a fixed concept. We want to look at the changes and the speed of change is different depending on the country. And therefore, what we are doing right now is regulation or rate changes and business opportunities, which phase is each of the country in. We are focusing on this, trying to find a sweet spot. What I'm trying to say is that I think it will be very different depending on the policy. So let's say, a country has a policy to promote offshore wind. And there are some countries that want to accelerate this. There are a number of countries like that. And how fast can we enter into such market, this agility.

This is an approach that we can take, and we need to make this our strength. So this is the approach we take in Europe. And in Asia, on the other hand, so it was the case in T&D earlier. We need to grow the T&D. We need to initiate it, discuss with the government without competing against other companies. We'd like to have us designated as a player by collaborating with local players. And we cannot compare apple-to-apple. We're not looking at things that way. So I don't think this answered your question at all, but this is a very difficult question to answer. It's not that there is a clear formula. It's difficult for us to explain.

So what kind of projects would enhance our value was the question. So our value -- so from the perspective of how we have been able to raise our value. So I think our value will be enhanced through projects that we took the lead and that we developed. In Europe, unfortunately, we are involved in projects with partners. We may be able to get a certain level of return, but it's not that our -- we can say with confidence that our value has been enhanced. Naturally, the skills of our teams are on par with overseas partners. We are acquiring rights based on the discussion. I think this kind of a skill has been enhanced very much.

It's improved. But creating a business ourselves, having such originality or securing high margin, I think this is very difficult to achieve. Asia, Southeast Asia, unique projects. We'd like to be successful with these projects. That will clearly create value for us. And also, sorry for jumping around, but for T&D business, in Europe, there aren't so many players who are involved. So we currently do have our projects where we have the lead development. And if we have if we have realized this and then people will think that you are a great company, but that will take time. So it may be -- may not be able to live up to your return expectations.

But over the long term, such projects will be the projects that will enable us to increase the value.

So what kind of a company so [indiscernible] was mentioned earlier. But is it a relationship where you can join just a little bit and have a small stake or you are a real partner, very important. So I think this is one perspective. The level of involvement is what you can look at. There are more than 20-some projects in the table. And 3 years ago, -- so let's say, we got a project 3 years ago, and it was great, but maybe it's not generating so much profit now. So that's what makes the judgment different. But from how should be our stance, that was answered by him earlier. And from the corporate perspective, so in terms of relationship with Iberdrola, I think we can take a look at it that way.

My second question is about IRR. What is your concept, Vice President and business unit. Between the 2, how much gap is there in the concept? When you talk to investors, you say IRR will be used as a decision-making. But when we talk to BU, you never know until the end. That is the majority of the case. BESS maybe is easy to calculate. So you may be aligned, but is this just about BESS or overall, scientifically, is it adopted in the BU? Is there a gap between and the BU? Well, as [ Kuwahara-san ] mentioned earlier, we have investment criteria committee, investment assessment committee, and they use IRR to make decisions. So not only limited BESS or even if you want to do solar or even if you want to engage in overseas solutions, IRR is submitted, and we need to clear the hurdle. Otherwise, it's not going to be discussed. We have such a mechanism in place.

But you -- as you mentioned, for real estate business, it takes a long time to develop or it takes 3 to 4 years until the development can start. So there might be times when IRR cannot be cleared. And in such a case, we need to discuss separately and have a different perspective. So if we do this, IRR can improve this way. But the concept of IRR is the same for all businesses. And also, once a year, all the Board members said once a year is too few, but screening is done. And how is the IRR? So of course, after 1 year, the situation changes and also interest rate has been going up. So we have a mechanism in place where things are reviewed every year. So our intention is in corporate and BU for the indicator that we need to clear. I don't think there are any gaps. Otherwise, we cannot make investments.

Yes. So I think we are past the scheduled time, but if there's anybody who would like to ask a question, I would like to entertain your question, but is it right? Nobody else? All right. So thank you very much for your cooperation. And so we'd like to conclude the meeting as such. So Kanden Investor Day, so I'd like to conclude this. And so for those of you who had participated here and for those of you who participated online, thank you very much for coming today. So this is the end of today's session. Thank you so much.

It is now the scheduled time. We will begin the Kansai Electric Power Company Fiscal 2025 Financial Report and Fiscal 2026 Management Plan Investor Briefing. Please allow me to introduce our participants. Mr. Mori, CEO.

This is Mori. Thank you very much.

Mr. Tanaka, Executive Vice President.

My name is Tanaka. Thank you very much.

Mr. Kikuoka, Executive Officer, Office of Accounting and Finance.

Hello. Thank you.

First, CEO, Mori, will give his presentation first.

So I'm going to start my presentation. This is Mori. Thank you very much for joining us today for our company briefing. Yesterday, we announced our results for fiscal year 2025. We posted consolidated revenue of JPY 4,056.6 billion and recurring profit of JPY 518.5 billion. This represents a decrease in both revenue and profit from FY '24. For FY '25, the dividend remains unchanged from the revised forecast announced at the second quarter. We will pay an annual dividend of JPY 75 per share.

Looking ahead to fiscal year 2026, we expect a recurring profit of JPY 290 billion. This represents a decrease of JPY 228.5 billion. The main factors for profit declines are foreign exchange movement, fuel price fluctuations, lower nuclear capacity factor and higher costs. These include inflation-driven expenses and increased maintenance and construction costs. Although earnings conditions remain challenging, we will continue steady investment. This includes maintenance investment for safe and stable supply and disciplined growth investment for the future. For FY 2026, we plan to -- an annual dividend of JPY 80 per share. This is an increase of JPY 5 from FY '25. Last October, we presented the status of our new management plan. Since then, we have engaged in dialogue with shareholders and investors, incorporating the feedback we received with further discussions. Yesterday, we announced Kansai Electric Power Group Management Plan 2026.

Looking towards 2040, our group aims to prioritize safety above all, lead Japan's energy sector and go beyond Kansai Electric Power to provide a vital platform for a sustainable society. The environment surrounding us is changing rapidly. Geopolitical risks, inflation, rising interest rates and the population decline are progressing simultaneously. At the same time, DX and AI are transforming industries. Power demand is also likely to increase over the medium to long term. In such an era, a vital platform for sustainable society is essential to support the Japan's growth in people's daily lives. At the core of it is energy.

While decarbonization remains a major trend, we believe that energy security, stable and secure supply is now more critical than ever. While achieving S+3E simultaneously is a fundamental prerequisite. elevating its delivery to meet the demand will support Japan's sustainable growth. In addition to energy and transmission distribution, we will expand into ICT, real estate and new businesses to provide a vital platform for sustainable society. Beyond the Kansai and Electric Power, we will deliver new value to customers and society in a timely manner. As one group, we will advance the strengthened KX Kanden Transformation towards 2040 and realize our vision for 2040. We will implement disciplined investments totaling JPY 15 trillion on a cumulative basis by 2040. Across the group, we aim to secure a ROIC WACC spread of 100 to 150 basis points. We will also take immediate action to strengthen balance sheet management, human capital and supply chains.

The next 3 years are period to accelerate growth towards our vision. Continuous investment is essential for businesses that provide a vital platform for sustainable society. While building new facilities takes time, 2040 is not a distant future. Although earnings conditions remain challenging from where we are, we will, with a long-term perspective, steadily move forward with investments for safe and stable supply as well as disciplined growth investment. For that, we will generate over JPY 380 billion in cash through asset recycling, including the divestment of our shareholdings. This will enable us to balance investments to shareholder returns.

From FY '26, we will revise our shareholder return policy. We will target a consolidated payout ratio of 25% to 35% and to maintain or increase dividends. More than JPY 270 billion is to be returned over the next 3 years. We aim to achieve key targets, including ROE of over 8% on a 3-year average. Together with our diverse stakeholders, we will create new value, share empathy and growth and achieve sustainable enhancement of corporate value. That concludes my presentation.

Next, Mr. Kikuoka, General Manager of Accounting, will explain the details of the financial results. Please refer to the materials in front of you or the projector.

This is Kikuoka. I will provide supplementary explanations regarding fiscal 2025 fiscal results. Please go to Page 4. We have generally achieved the financial targets for fiscal 2025 set out in our midterm management plan. Page 5. The projected figures for fiscal 2026 based on earnings forecast for each of the financial goals outlined in the Management Plan 2026 are shown in the table below.

Please go to Page 8. Track record of growth investments for fiscal 2025 totaled approximately JPY 185 billion. Although the actual results fell short of projected JPY 300 billion, this was the result of thoroughly reviewing each project and making investment decisions with the aim of achieving the expected returns.

Please go to Page 14. These are major factors for fiscal 2025. Retail electricity sales volume amounted to 116.3 billion kilowatt hour, an increase of 800 million kilowatt hours. Electricity sales volume to other companies decreased by 4.6 billion kilowatt hour. Nuclear capacity factor decreased by 4.4% to 84.1%. Two lines below is Japan CIF crude oil price, which decreased by $11.0 per barrel to $71.4 per barrel. Exchange rate was JPY 151 to $1, appreciation of JPY 2.

Please go to Page 15. Ordinary profit by segment increased year-on-year on all segments, except the Energy segment. I will explain only about the Energy segment on the next page. Please go to Page 16. Profit decreased by JPY 33.9 billion year-on-year to JPY 377.3 billion for Energy segment. This is due to negative impact resulting from a decline in nuclear capacity factor and increases in other expenses and maintenance costs despite the positive impact of increased profits from lower fuel prices.

Please go to Page 2022 -- Page 22. This shows the financial forecast. Major factors on fuel prices incorporate the situation in the Middle East. Page 23. We expect consolidated ordinary profit for fiscal 2026 to be JPY 290 billion, a decrease of JPY 228.5 billion. The main factors affecting this are decrease in nuclear capacity factor due to prolonged large-scale maintenance works. increase in fuel costs due to the Middle East situation. The third is due to factors such as inflation and an increase in maintenance work. We anticipate an increase in corporate maintenance costs in Energy and T&D segments. While the situation in the Middle East remains unpredictable, if fuel prices rise more than anticipated, our fiscal year 2026 results will be further impacted by time lag-related losses. We will, therefore, closely monitor the situation and update our outlook as necessary. This concludes my part.

Thank you. Next, Executive Vice President, Tanaka, will explain the management business -- management plan 2026. Please take a look at the Kansai Electric Power Group Management Plan 2026 or the trajectory in the front.

So I am Tanaka. I will provide additional details on the management plan 2026. Page 24. This page shows the cumulative capital allocation from fiscal '26 to '28. 2040. So this is placed as a Merck mile. This is not the endpoint. So this is a vision we have towards 2040. And there's no time to wait when it comes to investment for advanced KX Kanden Transformation toward 2040. We'd like to grow together with the Japanese industry. We are serious. And therefore, please allow us to accelerate investments so that we can grow alongside Japanese industry.

To that end, of course, we will pursue upside in the operating cash flow. But on top of that, we plan to generate cash through asset replacement and steadily execute a total of JPY 2.5 trillion of investments over 3 years, JPY 1.5 trillion for maintenance investments to ensure safe and stable supply and JPY 1.0 trillion for growth investments. Naturally, we have no intention to make investments with that spread. We want to secure appropriate level of spread. And therefore, we would like to make disciplined investment that carefully assess profitability and business risks. we need to make investment to be able to secure this level of spread. And as for shareholder returns in the coming 3 years, we would like to provide shareholder returns of at least JPY 270 billion over the next 3 years, and we'll strive to maintain or increase dividends.

Please go to Page 25. This is about asset recycling initiatives. So we cannot be optimistic. And therefore, we will do asset recycling and generate cash. And this is how we want to go about in our real estate business, I talked about this in the IR Day last December. We would like to increase the proportion of assets subject to asset recycling and aim to recycle more than JPY 550 billion in assets over the next 3 years. And we are thinking overseas JPY 50 billion and others, and we do believe that we will be able to achieve that. So holds JPY 300 billion. And on the 27th on Monday, we announced the notice of tendering shares and the tender offer for own shares by Kinden Corporation. This was a homework for us that we had held, and we have been talking about this constantly, and we have made this announcement for the shares we own, we will look at the market situation in the coming 3 years. We plan to divest at least JPY 380 billion, including Kinden shares this time.

Please go to Page 26. This shows the illustrative impact of growth investments. I believe you can see the differences in the characteristics of each business, particularly the time it takes for profits to materialize. And in domestic energy sector, where projects have long durations, it takes 20 years or so to recover. And there's real estate and ICT below where you can recover in a short period of time. So by combining them, we would like to achieve growth. Furthermore, for domestic energy sector whose duration is long, we would like to choose the appropriate financing instead of just focusing on corporate financing, we will be engaged in joint development and capital recycling to accelerate profit generation and improve capital efficiency. And this was a short presentation, but this is all for me. That concludes our explanation.

We will now take questions. First, we will take questions from participants in the room and then from those joining via Zoom. When asking a question please first state your company name and your name. Now we would like to take questions from participants at the venue. Can you raise your hand?

I am Shinya of Mizuho Securities. I have 2 or 3 questions, please one by one. So on Page 5 of the financial results presentation, you are showing your guidance for this fiscal year and your management plan KPI. The President has been saying the next -- the 3-year is going to be a challenging period. You have been repeating that. So you have been given us some level of warning. But in terms of recurring ordinary income, the numbers look more challenged than what I had expected. So for the net profit and ROE of 8% and more, by looking at, I think that you are expecting to book some of the profit from the sales of assets to achieve a net profit. But in terms of ordinary profit, the target seems to be rather challenging. So after the adjustment of time lag, your profit is going to be lower on a 3-year average.

So I would like to ask what your -- the assumption is and background is. And towards the later part of the management plan, outside of the non-energy -- sorry, nonenergy businesses, for real estate and ICT, you are showing some aggressive ambitious target for profit for international real estate and communication, you are showing us an ambitious profit target. But it seems as if you are taking a rather cautious approach for your energy business, your power generation and the sales in T&D. By looking at the ROIC target, I don't think your target is that bad. But for the next 3 years, mainly in your energy business, it seems -- I get the impression you are expecting rather challenging business environment. And I think you do have some assumptions for the capacity -- nuclear capacity factor, too, but can you share what your thoughts are?

Thank you for the question. Yes, as you mentioned, I have been saying we will be facing some more challenges in our businesses. And this time, if we are going to put that in our language, this comes to the guidance we are showing you now. If I look at the details of various factors, we could not really we -- naturally, we came to this kind of conclusion. Of course, I personally wanted to show higher profit target. But as we are seeing the decline in nuclear capacity factor, and we are seeing the increase in the energy cost now and with the higher inflation, maintenance kind of works we are implementing now the cost for them are having more negative impact to our profit than we had initially expected.

So including those factors, we are now showing you the outlook. However, we will be taking necessary measures to achieve growth in the future. So even though we will try to make our business structure more lean, we will be focusing more on balance sheet, and we will be focusing on generating more cash. So we will do our best to make improvement as much as possible. And as time goes by, by looking at how -- what kind of progress we will see, if there are revisions or changes needed, we will adjust our plans. But as of now, with certain assumptions, we are showing you the outlook.

So I can add some more information about some of the numbers. Can you look at Page 23. So this is a comparison against the 2025. As shown here, from 2026 over the next 3 years, as we will have the 7 nuclear reactors, we will try to improve nuclear capacity factor to improve our profitability. We will implement the work for next 3 years. So it will be -- we will have a concentration of the maintenance work. And for the foreign exchange adjustment, prices, it is still uncertain what will happen to the Middle East situation. But until the fuel cost stabilizes, JPY 66 billion for FY '26, we will need to assume that kind of impact. But once it stabilizes, most of that will be seen in time lag. So we should be able to collect that in FY '27.

And other than that, as Mori-san mentioned, there will be an increase in other cost items and the maintenance-related cost. As you can imagine, we are seeing impact from inflation. But as for our nuclear business, the maintenance work will be a rather long period. So we -- as we implement the thorough maintenance work, we are going to enhance our maintenance. So there will be an increase in the volume of maintenance work. And for our thermal plants. So for coal and LNG, thermal plants, in order to avoid long-term shutdown, operational shutdown, we are also going to enhance our maintenance work, too. So as of these cost increases, of course, there will be some impact from inflation, but we are going to make sure that there will be enough maintenance work done over the next 3 years.

And for our T&D business, including our expenses, there will be some impact from higher inflation, but there will be a replacement of a tower. When we were achieving the high economic growth, there was a concentration of construction. So there will be a certain level of CapEx included there. So we will just make a steady progress to implement these plans that those are all included in our CapEx plans.

And my second question is as you are going to face some difficulty over the next 3 years. So that means when do you -- when do you think will be the time where you can pursue to improve your profit or grow your profit? So I think you will be preparing yourself to improve your profitability later on, and there will be a JPY 2.5 trillion of investment, including replacement and growth investment altogether. So including the returns coming from those investments, you will be going back to your profitability and try to further improve your -- the improvement -- your profitability with the investment, when do you think that can happen?

So on Page 25, your -- the management plan, I think Tanaka-san had explained about this. So the profitability and the returns from the investment in each sector, I think you are giving us some hint of what kind of returns you are expecting. But beyond medium-term plan in 2028 or '29 to '30 with the higher capacity utilization, you are going to see an increase in the profit. And in the early 2030s, you will -- are you expecting to benefit from the returns from the investment? Is that the kind of time frame you have in mind? When do you -- or does Mori-san think when you can achieve the growth in your profit?

Thank you for the question. So for the next 3 years, in terms of the profit, the numbers will look quite challenging. So if we look at the numbers, they look -- remain sluggish. We call it a plateau situation internally. And we may say these numbers are not meeting your expectation. But beyond next 3 years, we will start to generate more return with the better turnover.

As for large-scale power generation investment that will take place further out in the future. But there will be some of the investment that can generate the more profit before that. So we will start to make investment for those over the next 3 years. As there are so many centred factors, next 3 years can be the only visibility we can show. But beyond the next 3 years, we are expecting to present some returns from these investments. From the past, everybody has been asking us what our normalized profit level is. So our intention is to bring our profit level back to a normalized level that should happen over the next 3 years.

And my third question is about the dividend and shareholder returns. I understand the profit situation is challenging. But as of your dividend, you may send us clear message and you are expecting to increase your dividend per share. So do I understand you're more catered toward increasing your dividend? You are saying you will either maintain or increase dividend, but what is your intention?

Yes, what you said is correct. So the profit we can -- profit outlook we can show is as it is. But in order to achieve our vision for the future and as we as we try to get understanding from our shareholders of what we are going to do to achieve that. So now we are going to increase our dividend per share to JPY 80. We think it's appropriate to increase our dividend per share to JPY 80. There are different perspectives. But as of our dividend policy, we have been presenting our policies. And if we think about our policy, we would like to show JPY 80 per share to be a start line.

Next, Yamazaki-san, please.

My name is Yamazaki from Nomura Securities. And I have 2 questions I would like to ask you. First, that investment timing, this time, you are planning to make JPY 1 trillion of investment for growth. Is this evenly distributed? Or is it -- is there going to be more weight on the latter years? Is it going to increase year after year? And also, the asset replacement initiative. And you will be taking initiatives here to generate more cash. And what is the timing you're assuming? Asset replacement, asset recycle, you will be doing that in the beginning and then generate cash and then make investments later. That's what I assume. But how should I think about the timing? So this is my first question.

So I would like to give a response. As for the timing or the schedule of investment, the forecast of investment, already for thermal power replacement, this is a large-scale investment that is required. And we have already started taking initiatives here. We are doing this already in Aramco. And after that, there will be another replacement. And so large-scale growth investment will start one by one. And nuclear power as of now, we need to change the steamer. We are doing a major investment, and this is a maintenance investment that we need. And this is the current needs.

Going forward, the investment in power source, we have multiple ones coming up, and that's what we are assuming. Therefore, in that sense, it's very big in the beginning, too, but it will increase and that trend will continue. And as for asset recycle, so it's not a question of which comes first. But at each timing, we will do what we can. So we will capture the best timing to do the asset recycle. So there is a Kinden case as well this time. And including this, we will take the opportunity. And it's not that we have the order in place already in our mind, but we will take the opportunity as they arise.

And as for the investment amount, it's significant amount. Thinking about gas turbine alone, it's like for multiple hundreds of billions of yen. So with difference in a few months, it could go into the next fiscal year or so. And that has happened in the past as well. So it's not something that we can control in a stable manner. There's inflation as well. So we are thinking 3 to 4 years' time span. Otherwise, it's very difficult. It's difficult for us to say specifically which year we will be making investment.

As for overseas energy business, there's bidding, and it's a few tens of billions of yen. So we have no intention to not be able to secure a spread. So of course, there has been cases where we had to give up in participating and that may happen in the future as well. So I think it's very difficult for us to be able to control cash every year for taking that policy shareholding. If we are negotiated or discussed with the counterpart or even if we are not, we will -- our shareholders that own within the 3 years. So this is where we have better control. The debt financing, it's a significant amount as shown in that chart. And that may be erasing everything. So this is my answer, but did this answer your question? So in terms of the level for the coming 3 years, growth investment, maintenance investment. So there's not much fluctuation between the 3 different years. We are assuming similar level of investments for the coming 3 years, roughly.

And my second question is -- so Shinya-san just asked the question and expenses and maintenance costs are increasing. So putting aside maintenance, there's impact coming from inflation. I think it's the same for every company. And against such a backdrop, passing on the price, what are the measures you are going to take in some of the companies, they are doing it in a different form, but they're reviewing the electricity fee, and they are trying to cover that inflation with that. So if the profitability is difficult, is challenging in the coming 3 years, maybe you need to take such actions.

And what is your thought on the inflation? And also, this is an issue that has existed from before, but Iranian situation. And because of that, the regulatory price seeming as a result, every few years, some issue like this happens. So what are your thoughts? Maybe you need to make improvements or revise prices. So what is your thought on this topic?

So impact of inflation. First of all, we need to analyze the impact of inflation. We have a rough image, but we need to understand much more in detail to be able to decide what we can do. So we'd like to continue to reduce costs with whatever we can and also the services we are offering in many ways, including value add by delivering value to customers, we will be the one to be chosen by customers. And I think it's difficult -- important for us to create such a cycle. And so we do believe that we will be able to increase profits as a result and price hike.

So this is a regulated price. And understand that this is being deliberated in the National Committee. So of course, demand is very important. But putting that aside, this temporary measure by when this should be -- price hike should be implemented. This should be -- continue to be deliberated with the liberalization, the system is established and this price is remaining still. So at some point in time, discussion should be held thoroughly. And the policy should be decided by the government, I think, at some point in time.

Next, please.

Nishikawa of Daiwa Securities, asking 2 questions. So my question is extension of what Yamazaki-san mentioned. So I understand there's a regulated charges and you are not able to increase the price for low voltage, but for high voltage and the auto high voltage, the Kyushu Electric Power is already increasing it. And because you have the high mix of the nuclear power, and that's the situation with the Kyushu nuclear power and you're also facing inflation. So including the standard the menu, I do understand you are planning to increase the prices for the high voltage or the ultra-high voltage the charges to improve your margin. I should not be using the word price increases, but rebalancing the charges for the high voltage and ultra-high voltage. What kind of measures are you expecting to implement? And what kind of improvement can I expect?

I talked about the Kyushu Electric Power, but when we look at the total electric power and true electric power, they are also talking about the shrinkage of a slight time lag on top of the high voltage in the ultra-high voltage. And because we are talking about slight time lag, we cannot ignore it because it should have certain impact to your accounting numbers. So the time lag to pass through the fuel surcharges adjustment. So are you thinking of revising that?

So for liberated the prices, each KEPCO companies are developing the schemes so that they can address the changes of the business environment. I understand that. But how we are going to set liberated price. we do need to have a good way to think about those prices. We cannot really specify what directions we will head to. But I think it's important as we will monitor what the other KEPCO companies do, we will compare our -- where we stand, and we will try to determine what kind of choices we should take. And please allow me, I cannot say when and what we will do.

And my another question is the ROE of 8% that we are showing for your management plan. Can you tell me why you set that price and how committed you are and you are now saying 8% of ROE or more for 3-year average. Why did you determine 8% should be the 3-year average? What kind of discussion did you have? And you are saying the 3-year average of 8% or more. So are you saying after 3 years, the average should be 8%? Or are you aiming to achieve more than 8% every year? Or on a cumulative basis, if you are not able to achieve 8% ROE because of your profit level, by looking at your shareholder return policy, I don't think you will have other options to improve your ROE. So should I understand that you are going to implement some other capital measures or policies and that you are committed to achieve 8% ROE as a 3-year average?

For our target, if you are asking if we -- this is a committed target. As we are facing various uncertainties, so many uncertain factors, I cannot say we are committed to achieve this target. What we are saying is this is an aimed target. We will take on our challenges to get there. We wanted to present our intention with this target. Including our capital policies, we will try to improve our profit first to achieve our ROE target. That will be the basic principle. But we will always consider taking some kind of the measures in our capital policy to improve our ROE. So when we think about the next 3 years, we don't -- I said that we only have intention to accelerate our investment, and we will sell our Kinden shares and strategic shareholdings. Even with that, we need to accelerate our investment.

And on top of that, we don't think there will be a case that we will lose our debt capacity. So we are not going to think about changing our -- the equity side. But if we don't have any opportunities to make investment, and then we will think about what we need to do because we need to be aware of our share price, too. But the fact that we prepared this plan this time, with the investment we will implement, we are going to achieve growth in the future. So by lifting our profit, we aim to achieve ROE of 8%. And you're asking me why 8%? I thought 8% will be the minimum level that everybody or investors and shareholders can be satisfied. This is the kind of investment discussions we have.

Any other questions? Kamichika-san, please.

My name is Kamichika from SMBC Nikko. I have 2 questions. First, about the profit for -- during the 3 years. I'd like to deep dive into this. Profit-wise, you mentioned it's in a plateau. But on the other hand, you would like to aim for higher. And you also mentioned that. What kind of upside can we expect from the capital market? So could you elaborate on this? So from before, rebalancing is an option maybe? And other than that, what kind of potential upside could there be? This is my first question. And on top of that, and related to this, ROE, 8% in order to achieve this and also net profit, JPY 270 billion in average. So looking at equity capital, equity ratio, maybe your ROE is not enough, is not the level you can achieve, I think. So could you explain this?

First of all, basically, we want to improve our profitability. This is something we have been doing, and this will become more important going forward. First, what we can do right away is to reduce cost and improve efficiency of our business operation. So we'd like to be able to generate higher profits. As was mentioned earlier, the passing on the cost increase to the price, this is not something we are thinking of. Rather than that, we would like to make efforts ourselves to improve profitability. And the specifics, could you add anything?

So after calculation, maybe it's not sufficient. So I understand what you're saying. We understand that. But still, we'd like to aim for ROE 8%. And we'd like to accumulate profits to be able to achieve ROE of 8%. And Nishikawa-san's question earlier or it's related to what President Mori has mentioned. In the coming 3 years, we don't have the intention to stay in a plateau and just wait -- sit and wait. So T&D, ICT, real estate, energy, all the businesses for the investors as well as debt investors as well. We'd like to make the businesses investable. That's what we are keeping in mind. And based on that concept, we'd like to take action. So this is the prerequisite for growth, I think. This is abstract answer, and it's very difficult for me to say anything concrete. But we'd like to make our business investable and this is our intention.

I have one more question. This is about the forecast for next year, Page 23 of financial results. So minus JPY 16 billion decrease in electricity sales. Could you explain about this? So it's negative. So maybe competition is severe. But in the previous page, so total electricity sales is expected to increase. So what is the breakdown of negative JPY 16 billion? How should I understand the image of the breakdown?

So I would like to talk about the numbers. As Kamichika-san mentioned, Page 22, please take a look at Page 22. Retail is minus 2 and impact of temperature, fiscal 2025 comparing to that, it's minus 1.4 billion kilowatt hour decline and increase due to customer acquisition, it's positive -- increased by JPY 1.5 billion and also inspection time lag, negative JPY 200 million, and that is the result. So that is the intention. And also sales to other companies, it's plus JPY 108. It's a significant increase. And we have discussed about this internally, but it's difficult to explain the details because of competition. But JPX transaction value is expected to increase going forward and that is where the increase is coming from. But in terms of profit and loss, Page 23, retail decline in hour, that is generating impact.

Are there any other questions?

I am from Morgan Stanley, Ogino Reiji. So I have the 3 questions. So for 2040, just like what the energy agency plan that shows, I don't think it's trustworthy because you cannot really foresee what will happen by 2040. I understand it's the same situation for you. I didn't expect this medium management plan to be such a long duration period. So we -- what we need is to see what your vision is for 2030 rather. You are now saying you're in the plateau situation.

If we assume the plateau situation will continue for 3 years beyond the plateau, after you normalized the profit level going down. And without your growth investment, you can expect your profit to go back. But then you can -- if you say your profit will be in the plateau situation for 3 years. So by 2030, I understand there will be several years where you will need to implement some investment works for the nuclear power plant. And then if you are showing us what your assumption will be for 2030 and if you can present your expected ROE for 2030, I will have a better understanding of what I am about to ask. So you're saying next several years, you're going to face challenges as you are in the plateau. And you said 15 years later, you are going to improve your profit. I don't think that is trustworthy or that's meaningful.

So if we have a vision for 2030, we will be sharing that today. But after going through various internal discussions, and we also discussed what we are going to achieve, and then we are presenting what we have concluded. And so as we look at what we will do in the future, we decided to show what our vision for 2040 will be. And if you are not satisfied with that, we can only share what our outlook is for the next 3 years.

I don't think that's sufficient. So because you are now in the plateau situation, and we don't really know what will happen after that we are not sure if you're okay. So if you're going to see the recovery after you get out of the plateau, you are not saying at what level of the increase you are going to see, and you are saying that is the right way of presenting your outlook. I'm not saying that this is right. No, if you -- can you show the number by the time you announce your first half results, your -- this should be your task to do your analysis, okay. So as a company, you should be despising information. So you should be sharing what your -- the results of the analysis is for investors. It's not really a task of the sell-side analyst.

So as Ogino-san said, what you are saying and what other investors and shareholders are saying really they are meaningful to us, we do listen to what everybody is saying.

So what I am asking is, please show us as a reference what your outlook for 2030 is and what you are going to do to get there over the next 3 years? That is my first request. And my -- the second part of the question is your outlook for the next 3 years. So in your management plan, you said you're going to use your cash for investment and the shareholdings and the Kinden share. Even without your growth investment, these are things you should be doing. That should be the message of the equity market. But I get the impression you are going to do this because you are going to implement the growth investment. Even without the growth investment, the equity market thinks you should do that because there could be an issue of a parent subsidiary, the listing companies -- listed companies, okay.

So for the next 3 years, can you share what your assumption is for next 3 years? Especially ours for the next 3 years, what is your assumption? And in case of a 3-year medium-term plan, if you assume crude oil price to be $70 or if you can share the assumption for foreign exchanges, if you are going to share the outlook for next 3 years, not the average, but I will be -- I will appreciate if you can show us in breakdown. So on average, if average is going to be JPY 780. And this time, the recurring profit will be at JPY 20. And this year, it's going to be JPY 340 and the average will be JPY 270. It seems like you will see your -- the ordinary profit to decline over time. Because you are in the plateau situation, this is the kind of image you're going to show. That's okay.

But for the next 3 years, against this platform plateau situation, as you will implement certain growth investment, under normal situation, you will see your recurring ordinary income to decline, but you will be making an effort to achieve a certain growth. Apart from the rebalancing, I would like to hear what you're going to do to improve your ordinary income level for the next 3 years. So I would like to receive here your assumptions and the sensitivity for 3 years and for next -- for this fiscal year.

And my third question, I don't really want to get into details. But for energy business, for power generation and retail, I would like to see the breakdown what the situation is for each businesses, either on the power generation side or on the retail side, what kind of challenges you are identifying and what kind of measures you are taking to improve that? I want to see that. I understand core business of energy is important for you. So for power generation and retail, I would like to see more the quantitative data for that. Okay.

So for assumption, we can share some assumptions. So from Secretariat, we can communicate what the assumption is. So we understand under the Iranian situation over the next 3 years, on the note says we are not including the Iranian situation or the situation in the Middle East. So without that, we are assuming some of the assumptions.

Is that the kind of document that you can share on the website?

No, we can only share it on Q&A.

I don't really want you to share this information to all the non-Japanese investors from me. So can you share that information on the website?

No. We are able to share the information. If necessary, we can provide the information through separate and individual communication.

And for power generation and the retail business breakdown.

We understand we should be aware of that perspective too. Internally, we are taking those approach, implementing our businesses. And for our results for FY '25 and our forecast for '26, internally, we are doing analysis of what kind of progresses we are making. And how much we can disclose is something we need to discuss, but we do have our internal analysis already.

Are there any other questions? Okay. The third row, person sitting in the middle, in the third row.

My name is [Tanata] and 2 questions. First, your capital equity ratio. In fiscal 2026, you are forecasting 37% equity ratio. And related to that, the midterm plan, when I look at the numbers, net profit forecast and assuming the debt, I believe the capital equity ratio is expected to increase. So from mid-30%, there might be some deviation and difference. And how are you going to control your equity? So you have described about doing buyback as well. Are you going to take a more aggressive measures?

First of all, for this question, for equity ratio, we have a relatively high equity ratio. And this is to prepare for future investments. Whether it will be maintained at a high level, we don't. That might not be the case. And naturally, buyback, it's not that we are eliminating the possibility of buyback. This is something we are thinking of as one of the options. But as I have been -- we have been mentioning from before, we have significant amount of investment for growth and maintenance. So we will use both equity and debt to make investments. That is our stance.

My second question is related to Page 24 of the midterm plan, this capital allocation chart, operating cash flow and asset recycle, this is cash in and cash out is shareholder returns. And based on that, so passing on the cost increase and profitability increase is upside. So upside from the cash out is the shareholder returns. And is that the right way to look at things or each.

So higher or it might be blurry at the bottom. And growth investment, maintenance. Investment, we are assuming JPY 1.5 trillion, JPY 1 trillion. And as the bar graph is made blurry. It's not that there's already a lineup of growth investments and that we have things decided already. Each, there might be some changes, some might increase or decrease for each one of them. So it's not necessarily the case that our operating cash flow increase will lead to increase in shareholder returns. So we have discussed about sharing the details of everything. So JPY 270 billion or more of shareholder returns, it is described in the second page. And we want to make efforts to increase shareholder returns. And operating cash flow, when it increases, would it be reflected straight away into shareholder returns, but I would think I want to reduce debt. because the free cash flow is very bad. So we need to strike a balance.

Do we have any other questions from participants at the venue? We are going to take questions from participants on Zoom.

So a couple of questions. So the first, on Slide 22 of the annual results. So I just wondered how have you managed to reduce your earnings sensitivity to changes in the oil price? And do those assumptions still hold even in such a volatile market as today. So I think it's JPY 0.2 billion earnings impact per dollar. Is that still valid even with oil at $100 per barrel?

So Kikuoka will be answering to your question. So the impact from this as when we see the fuel cost to increase with the time lag, there will be a fuel adjustment. And there will be -- we do the calculation based on the 2 factors. So as we are showing that we believe this can be the sensitivity we can achieve.

Therefore. At this moment, if I can add some information, even though we have seen a deterioration of the situation in Middle East in early March. So in the month of February and March, if we take the average of the future price, we use that as the annual assumption. So to answer your question, going forward, if the situation continues to deteriorate or the deteriorated situation prolongs, negative impact of JPY 0.2 billion can be adjusted or changed going forward. And did I answer to your question?

Yes. Just following on that. Are you very much more hedged than you were before?

Yes, I would like to answer to your question. So how much we hedge. We do not have an answer to give you the details. But because we have the fuel adjustment of the system, so for the fuel required for power generation, we are not making a major change in our policy to change our hedging.

And some of them related to mid-term to that of 2026? So just looking at the 2026 from the period was reasonable? What was the policies behind the allocation to investment and this is more one-off or more and more investments?

So for each of the businesses, the amount of investment allocation, policy of allocation. We don't really start our process by thinking about the allocation, but we will try to identify the investment opportunity, which will allow us to achieve the growth. So over the next 3 years, we came to the conclusion this will be the amount of investment for each region. It's not like we prioritize at a certain business segment, but in order to maximize our profit, we determine what the growth investment opportunities will be.

And if I can add some more, when we determine the allocation, that is a critical part of our management. So over the last several years, before we prepared this plan, we have been focusing on our discussion. Mori-san said profit is, of course, what we need to achieve. But we also need to consider what the spread will be at the total group level, what the level of spread we can achieve at the ROIC level or ROE level as we have gone through the various discussions of what the spread we can achieve by using project financing or co-development project scheme. Basically, we are showing the ROIC number as the ROIC we will achieve by just engaging in our business on our own. But obviously, we can like sell our asset to REIT or they will take the various actions, and we will make necessary adjustment to achieve our target. So Mori is answering to your question.

I said that the profit, and so that's important. But as Tanaka has mentioned, we need to evaluate our returns from various measures. So on Page 45 of the appendix. So the policy of the allocation, Tanaka-san always said we will just thoroughly and aggressively as discussed. We did have a very detailed discussions. So we will not simply look at the ROIC and WACC, but we will look at the expected growth and the business-related the risks and how much time will require to generate return. By looking at the various aspects, we will also determine what the investment should be prioritized. And we will need to continue to brush up these plans. We understand that's important.

One final question. So just in relation to those midterm targets to what extent do they do it with new nuclear and your transactions with new investments or is that the additional environmental for 2026?

Yes, your understanding is correct. It is included.

Congratulations to Tanaka-san on your promotion.

Do we have any other questions? So there seems to be no more questions from anybody on Zoom or in the venue. And therefore, with this, we would like to close the briefing for today. Thank you very much.