Hokuriku Electric Power Company FY2026 FY Earnings Report

Quick View

Executive Summary

Despite improved profitability in the Power Generation and Retail Business, this was a decline in both revenue and earnings, as impairment losses associated with the retirement of thermal power plants weighed on net income. Revenue was ¥7,865.5B (down -8.4% YoY), Operating Income was ¥874.6B (down -13.4%), Ordinary Income was ¥850.1B (down -6.9%), and Net Income attributable to owners of the parent was ¥544.7B (down -16.4%). While an increase in non-operating income narrowed the decline in Ordinary Income, extraordinary losses, including an ¥87.4B impairment loss associated with the decision to retire Unit 1 of the Mikuni Thermal Power Station in Fukui, placed further pressure on net income.

Factors Affecting Earnings Performance

【Revenue】Revenue declined 8.4% YoY to ¥7,865.5B. Revenue from the core Power Generation and Retail Business decreased to ¥6,563.0B (down -8.4%), while lower electricity-lighting and electricity charges, as well as lower electricity sales charges between regions and to other companies, weighed on revenue. In addition, subsidy income related to support for electricity and gas charges declined to ¥180.1B from ¥227.7B in the previous year, also depressing revenue. Revenue from the Transmission and Distribution Business increased to ¥583.2B (up +10.4%), but this was insufficient to offset the overall decline.

【Profit and Loss】Segment profit from the Power Generation and Retail Business improved to ¥663.6B (up +8.0%) on improved profitability. However, segment profit from the Transmission and Distribution Business declined to ¥196.3B (down -10.5%), while profit from Other Businesses fell substantially to ¥39.0B (down -69.7%), leaving consolidated Operating Income at ¥874.6B (down -13.4%). Ordinary Income was ¥850.1B (down -6.9%), with non-operating income of ¥150.4B, including a ¥32.8B foreign exchange gain, narrowing the decline relative to Operating Income. Profit before income taxes was ¥783.3B (down -18.6%), mainly because extraordinary losses of ¥87.4B, including an ¥87.4B impairment loss associated with the retirement of the thermal power plant, exceeded extraordinary income of ¥22.3B. Overall, the results reflected declines in both revenue and earnings, with one-time costs associated with the retirement of facilities placing additional pressure on final profit.

Segment Analysis

The Power Generation and Retail Business recorded revenue of ¥6,563.0B (83.4% of total, down -8.4% YoY) and segment profit of ¥663.6B (up +8.0%, profit margin of 10.1%), indicating improved profitability despite lower revenue. The Transmission and Distribution Business generated revenue of ¥583.2B (up +10.4%) and segment profit of ¥196.3B (down -10.5%, profit margin of 33.7%); although it maintained a high profit margin, profitability declined somewhat. Other Businesses recorded revenue of ¥719.3B (down -19.2%) and segment profit of ¥39.0B (down -69.7%), representing a substantial decline and a drag on consolidated earnings. It should be noted that segment profit is calculated on an Ordinary Income basis and therefore differs in definition from consolidated Operating Income.

Key Financial Indicators

【Profitability】The Operating Income margin declined to 11.1% from 11.8% in the previous year, while the Net Income margin also declined to 6.9% from 7.8%. ROE was 12.1%, supported by the high degree of financial leverage. 【Cash Flow Quality】Operating Cash Flow (OCF) was ¥1,174.6B, equivalent to 2.16 times Net Income of ¥544.7B, indicating strong cash conversion. Stable internal cash generation continued, supported by depreciation and amortization expense of ¥634.4B. 【Investment Efficiency】Capital expenditures (acquisitions of property, plant and equipment of ¥900.1B) were 1.42 times depreciation and amortization expense, indicating a capital allocation policy prioritizing maintenance and growth investment. Equity-method investment income was ¥36.6B, equivalent to only 4.3% of Ordinary Income, indicating that earnings were generated primarily by the Company’s own businesses. 【Financial Soundness】The Equity Ratio improved to 24.5% from 20.5% in the previous year, but the Company carried fixed liabilities of ¥11,014.5B, including ¥5,297.0B in bonds and ¥4,512.6B in long-term borrowings, indicating a high level of reliance on debt. Current assets of ¥3,679.2B exceeded current liabilities of ¥2,869.2B, providing sufficient short-term liquidity.

Cash Flow Analysis

Operating Cash Flow (OCF) declined 22.9% YoY to ¥1,174.6B, but was equivalent to 2.16 times Net Income of ¥544.7B, indicating strong cash-generation capacity relative to earnings. Investing Cash Flow was an outflow of ¥485.7B. Acquisitions of property, plant and equipment of ¥900.1B exceeded depreciation and amortization expense of ¥634.4B, indicating continued investment in facility renewals and the power grid. Free Cash Flow, calculated as Operating Cash Flow less Investing Cash Flow, was positive at ¥688.9B and sufficient to cover dividend payments. Financing Cash Flow was an outflow of ¥579.1B. Bond redemptions of ¥916.0B and repayments of long-term borrowings of ¥466.7B were partially offset by bond issuance of ¥280.0B and proceeds from long-term borrowings of ¥588.3B, resulting in a trend toward reducing net debt. Consequently, cash and cash equivalents declined from the end of the previous year, reaching ¥929.8B at period-end.

Earnings Quality

Against Ordinary Income of ¥850.1B, non-operating income of ¥150.4B included items with a high degree of non-recurring characteristics, such as a ¥32.8B foreign exchange gain and ¥9.6B in dividend income. These items narrowed the decline in Operating Income at the Ordinary Income stage. Extraordinary losses of ¥87.4B consisted of an impairment loss associated with the decision to retire Unit 1 of the Mikuni Thermal Power Station in Fukui, representing a one-time cost of restructuring the facility portfolio that placed additional pressure on net income. Operating Cash Flow reached 2.16 times Net Income, and, together with the recognition of the non-cash impairment loss, confirmed cash generation exceeding accounting profit. The decrease in accounts receivable, representing a ¥113.2B cash inflow, and the decrease in accounts payable, representing a ¥119.4B cash outflow, largely offset each other, with no evidence of discretionary earnings enhancement through changes in working capital.

Earnings Forecast and Guidance

The full-year forecast was revenue of ¥7,600.0B, Operating Income of ¥400.0B, Ordinary Income of ¥350.0B, EPS of ¥119.67, and a dividend of ¥25.00; actual results finished substantially above these levels. Actual Revenue represented 103.5% of the forecast, Operating Income 218.6%, and Ordinary Income 242.9%, suggesting that the full-year forecast was based on conservative assumptions or may have incorporated normalization of earnings in the following fiscal year. The forecast Operating Income margin was 5.3%, substantially below the current-period actual result of 11.1%, indicating that fluctuations in fuel prices, wholesale electricity prices, foreign exchange rates, and power-generation facility operating conditions will influence performance in the following fiscal year.

Shareholder Returns

The annual dividend was ¥25.00 per share (an interim dividend of ¥10.00 and a year-end dividend of ¥15.00), with total dividends of approximately ¥52.2B and a Payout Ratio of 9.6%. Share repurchases were minimal at ¥0.1B, and the difference between the Total Return Ratio and the Payout Ratio was effectively small. Dividend coverage relative to Free Cash Flow of ¥688.9B exceeded 13 times, indicating that the current-period dividend payments were fully covered by internal funds.

Risk Factors

1. Concentration of earnings in the Power Generation and Retail Business: The Power Generation and Retail Business accounted for 83.4% of total revenue, which declined 8.4% YoY. The consolidated results are structurally highly sensitive to fluctuations in electricity demand, selling prices, fuel costs, and wholesale electricity prices.

2. Risk of retirement and impairment of power-generation facilities: The Company recorded an impairment loss of ¥87.4B in connection with the decision to retire Unit 1 of the Mikuni Thermal Power Station in Fukui. Additional facility losses may arise in the future in connection with the renewal or retirement of aging thermal power plants and the transition to alternative energy sources.

3. High financial leverage: The Company carried fixed liabilities of ¥11,014.5B, including long-term borrowings of ¥4,512.6B and bonds of ¥5,297.0B, while the Equity Ratio remained at 24.5%. Although the Equity Ratio has improved from the previous year, sensitivity to financial burdens during periods of rising interest rates or earnings volatility remains relatively high.

Industry Benchmark (Reference; Compiled by the Company)

Profitability and Returns

The Company’s profitability indicators were substantially below the industry median, placing it in the lower tier of the industry in terms of profitability.

Growth and Capital Efficiency

Revenue growth also fell below the industry median, placing the Company among those with relatively large revenue declines within the industry for the current period.

※Source: Compiled by the Company

Key Takeaways from the Financial Results

1. Segment profit from the Power Generation and Retail Business improved by +8.0% YoY despite lower revenue, indicating from the financial results that the primary drivers of the consolidated earnings decline were the sharp decline in profit from Other Businesses (down -69.7%) and the one-time impairment loss.

2. Operating Cash Flow of ¥1,174.6B, equivalent to 2.16 times Net Income, was secured, while Free Cash Flow was also positive at ¥688.9B. Together with the Payout Ratio of 9.6%, this indicates that shareholder returns for the current period were sufficiently covered by internal funds.

3. The Equity Ratio improved to 24.5% from the previous year, but the capital structure remained dependent on fixed liabilities. The fact that the full-year forecast was set substantially below the current-period actual results is an indication that earnings normalization from the following fiscal year onward should be closely monitored.

Theoretical Share Price (Reference Value)

Sensitivity: ¥1,913–¥2,027 at ±1% for the cost of equity, and ¥1,962–¥1,973 at ±0.1 for ω.

Notes:

• Amortization of goodwill of ¥3.8 per share has been added back to earnings (to account for a non-cash expense and comparability with IFRS companies).
• Because forecast ROE is below the cost of equity, the theoretical value is below book value per share.

(Calculation model: Residual income model (Ohlson-type model with an explicit 5-year fade) / Interest rate reference month: 2026-07 / Mechanically calculated solely from publicly available data; this is not a forecast of the market share price or a recommendation of any specific investment action, nor does it predict or guarantee future share prices.)

---

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

---End of Report---