Chubu Electric Power Company,Incorporated FY2026 FY Earnings Report

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Executive Summary

For the fiscal year ended March 2026, Chubu Electric Power posted a decline in Revenue and Operating Income, while Ordinary Income and Net Income increased due to the expansion of equity-method investment income, primarily from JERA. Thus, the Company reported a decline in Revenue but an increase in earnings, rather than the conventional combination of higher Revenue and lower earnings. Revenue was 3 trillion 5,460B yen (-3.4% year on year), and Operating Income was 2,300B yen (-5.0%), resulting in lower Revenue and Operating Income. However, Ordinary Income increased to 2,911B yen (+5.3%), while Net Income attributable to owners of the parent increased to 2,278B yen (+12.7%). The improvement in non-operating income and expenses, particularly equity-method investment income of 947B yen (+54.9% year on year), reflected JERA’s earnings recovery and offset the decline in core operating earnings.

Factors Affecting Earnings

【Revenue】Revenue declined 3.4% year on year to 3 trillion 5,460B yen. By segment, Miraiz, the core business accounting for 79.4% of Revenue from external customers, recorded 2 trillion 8,151B yen (-3.3%), Power Grid recorded 403.5B yen (-1.6%), and Other recorded 327.4B yen (-5.9%), with all segments reporting lower Revenue. In Miraiz, subsidy income related to electricity and gas price support declined to 69.6B yen from 93.3B yen in the previous year, indicating that fluctuations in fuel cost adjustments and government support programs affected the decline in Revenue.

【Profit and Loss】Operating Income declined 5.0% year on year to 2,300B yen, while Ordinary Income turned to an increase of 5.3% to 2,911B yen. The primary factor was a 54.9% increase in equity-method investment income, from 611B yen to 947B yen. JERA’s segment profit contributed significantly, reaching 942B yen (+39.8%). Miraiz’s segment profit improved 17.9% to 1,380B yen despite lower Revenue, indicating improved profitability, while Power Grid remained almost flat at 476B yen. The extraordinary loss of 161B yen consisted entirely of impairment losses and was a temporary factor. The difference of 633B yen between Ordinary Income of 2,911B yen and Net Income of 2,278B yen was primarily attributable to these impairment losses and the 409B yen burden of income taxes and other taxes. In conclusion, the Company reported lower Revenue but higher earnings.

Segment Analysis

Miraiz, with Revenue of 2 trillion 8,151B yen, a year-on-year decline of 3.3%, and a profit margin of 4.9%, is the core business, accounting for 79.4% of consolidated Revenue. Its segment profit increased 17.9% to 1,380B yen, reflecting ongoing profitability improvements. Power Grid recorded Revenue of 403.5B yen (-1.6%), segment profit of 476B yen (approximately flat from the previous year), and a profit margin of 11.8%, maintaining a stable profit margin above that of Miraiz. Because JERA is an equity-method affiliate, its Revenue is not recorded on a consolidated basis; however, it generated segment profit of 942B yen (+39.8%) and made a significant contribution to consolidated Ordinary Income. The Other segment recorded segment profit of 1,270B yen (+55.9%) on Revenue of 327.4B yen (-5.9%), representing a high profit margin of 38.8%. However, caution is required when making simple comparisons with other businesses because this figure includes the effects of investment gains and losses. Segment profit is calculated on an Ordinary Income basis and therefore differs from consolidated Operating Income in terms of its basis of calculation.

Key Financial Indicators

【Profitability】The Operating Income margin was 6.5%, almost unchanged from 6.6% in the previous year, while the Net Income margin improved to 6.4% from 5.5%. ROE was 7.3% (equivalent to 7.5% in the previous year), with the increase in Net Assets (+12.4%) exceeding the increase in Net Income and thereby exerting downward pressure. 【Cash Flow Quality】Operating Cash Flow (OCF) was 3,344B yen, or 1.47 times Net Income of 2,278B yen, indicating solid cash backing for earnings. 【Investment Efficiency】Capital expenditures were equivalent to 1.82 times depreciation expense of 1,723B yen, indicating a phase of investment exceeding maintenance and replacement requirements. Total asset turnover is low, reflecting the business characteristics of owning transmission, distribution, and power generation assets. 【Financial Soundness】The Equity Ratio improved to 42.0% from 39.1% in the previous year, while Net Assets expanded to 3 trillion 2,128B yen. Interest-bearing debt increased primarily through long-term borrowings of 1 trillion 9,714B yen and bonds of 696.7B yen. Debt/EBITDA remains relatively high, and the extent of reliance on debt financing warrants ongoing monitoring.

Cash Flow Analysis

Operating Cash Flow was 3,344B yen, up 11.0% year on year and equivalent to 1.47 times Net Income, indicating solid cash backing for earnings. A decrease in trade receivables of 391B yen and an increase in trade payables of 244B yen supported cash generation, while an 8B yen increase in inventories partially offset this effect. Investing Cash Flow amounted to an outflow of 3,508B yen, reflecting continued investment burdens centered on the acquisition of fixed assets. As a result, Free Cash Flow (OCF + Investing CF) was negative at 163B yen and was covered by a financing cash inflow of 874B yen, primarily reflecting excess proceeds from long-term borrowings. Equity-method investment income of 947B yen was deducted in the calculation of OCF as a non-cash item. The timing of actual cash collections from JERA is therefore an important point to verify when assessing consolidated liquidity.

Earnings Quality

The difference of 633B yen between Ordinary Income of 2,911B yen and Net Income of 2,278B yen was primarily attributable to the extraordinary loss of 161B yen, consisting entirely of impairment losses, and income taxes and other taxes of 409B yen. The effective tax rate was low at 14.8%, as the recognition of a negative deferred tax expense reduced the tax burden. The core component of non-operating income of 1,092B yen was equity-method investment income of 947B yen. This income is affected by fluctuations in JERA’s fuel prices, wholesale electricity market conditions, foreign exchange rates, and other factors, and does not flow through to consolidated Revenue or Operating Income. This point warrants attention. OCF exceeded Net Income, and no material concern was identified regarding the accrual quality of current-period earnings.

Shareholder Returns

The annual dividend was ¥70 per share (¥35 interim and ¥35 year-end), representing a substantial increase from ¥30 in the previous year. The Payout Ratio was 23.2%, substantially below the generally accepted guideline for sustainability, indicating sufficient earnings-based capacity for shareholder returns. The consolidated Payout Ratio after adjustment for timing differences was 23.9% (24.1% in the previous year), a slight decline, while the level of shareholder returns remained stable even after excluding temporary factors such as fuel prices. Share repurchases were minimal at ¥0.6B, indicating a shareholder return policy centered on dividends. OCF of 3,344B yen substantially covered annual dividend payments of 491B yen. However, Free Cash Flow was negative due to the investment burden, and the balance of capital allocation during this investment phase warrants ongoing monitoring.

Risk Factors

1. Dependence on JERA-related earnings: Equity-method investment income of 947B yen accounted for 32.5% of Ordinary Income of 2,911B yen. Changes in JERA’s business environment, including fuel prices, wholesale electricity prices, and foreign exchange rates, have a significant impact on consolidated Ordinary Income.

2. Concentration of Revenue in the retail business (Miraiz): Miraiz accounts for 79.4% of Revenue from external customers, meaning that the competitive environment in the retail market and the timing of tariff pass-through have a concentrated impact on consolidated results. Government support for electricity and gas prices declined to 69.6B yen in the current period from 93.3B yen in the previous year, and the impact of changes to the program requires close monitoring.

3. Financial leverage and investment burden: Long-term borrowings increased 8.3% year on year to 1 trillion 9,714B yen, while interest expense increased 30.4% to 31.1B yen. Against Investing Cash Flow of 3,508B yen, Free Cash Flow was negative at 163B yen, indicating a high degree of reliance on the financing structure amid continued large-scale investments.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

The Company’s profitability indicators are substantially below the industry median, potentially reflecting differences in its capital-intensive transmission, distribution, and power generation asset structure and its fuel cost pass-through mechanism.

Growth and Capital Efficiency

The Revenue growth rate is also below the industry median. Including the effects of tariff system fluctuations and reduced subsidies, the stagnation in top-line growth is relatively pronounced within the industry.

※Source: Compiled by the Company

Key Points in the Financial Results

1. While Operating Income declined 5.0%, Ordinary Income increased 5.3% and Net Income increased 12.7%, primarily due to a 54.9% increase in equity-method investment income. The fact that JERA’s earnings recovery, rather than improved profitability in the core business, drove consolidated earnings growth is an important point when evaluating the quality of the earnings structure.

2. Capital expenditures reached 1.82 times depreciation expense, indicating a phase of growth investment exceeding replacement investment. Free Cash Flow was negative at 163B yen, with investment funding covered by external financing such as long-term borrowings. Asset expansion and debt growth are therefore progressing in parallel.

3. The annual dividend was ¥70, an increase from ¥30 in the previous year, and the Payout Ratio remained conservative at 23.2%, securing sufficient earnings-based capacity for shareholder returns. Meanwhile, the Equity Ratio improved to 42.0%, indicating progress toward balancing the strengthening of the capital base with shareholder returns.

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This report is an earnings analysis document automatically generated by AI based on XBRL financial results summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available financial results data. Investment decisions should be made at your own responsibility, after consulting with a professional where necessary.

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