Tokyo Electric Power Co. Holdings Inc.

Overview Key strengths Key risks Leading position in greater Tokyo's electricity market, accounting for roughly a third of national electricity sales Exposure to large contingent liabilities related to the disaster at the Fukushima No. 1 nuclear power plant and off-balance sheet liabilities Highly predicable cost recovery in power transmission and distribution thanks to monopoly under existing regulations Strong pressure on earnings and cash flow due to fiercely competitive retail electricity market Stable profit thanks to electricity price hikes in 2023, despite fuel prices remaining volatile Low likelihood of a material improvement in stable electricity supply and profitability amid uncertainty over the restart of the Kashiwazaki-Kariwa plant and continuing costs related to the Fukushima accident Quasi-vertically integrated business model with close

...Tokyo Electric Power Co. Holdings Inc.'s (Tepco Holdings) consolidated ordinary profit will likely remain over Ñ200 billion in the next year or two. This is the threshold we consider commensurate with the rating. It booked an ordinary profit Ñ425.5 billion in fiscal 2023 (ended March 31, 2024) and an ordinary loss of Ñ285.3 billion in fiscal 2022. The group is now able to pass on a large part of higher fuel costs to customers. This is because electricity rate hikes in 2023 coincided with a lift in the maximum limit in the prices of fuels such as liquid natural gas (LNG) and coal that the group was permitted to pass on to customers. In addition, the group narrowed the differences between its actual fuel mix and that used for rate calculations. This has mitigated the impact of fluctuations of fossil fuel prices and electricity wholesale market prices on company performance. Given these factors, we expect group profit to remain stable. Its monopoly on power transmission and distribution will...

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