Investors Meeting for FY 2005 Interim Financial Results

Transcription

1 Investors Meeting for FY 2005 Interim Financial Results The Chugoku Electric Power Co., Inc. November In this presentation, the term Fiscal Year 2005 describes the period which ended March 2005.

2 The Direction Chugoku Electric Power Group Aiming For 2

3 1.The Direction of Management for Chugoku Electric Power Group The Direction to enhance corporate value Development of total solution business Efficient use of group management resources Efforts in progress For the achievement of group management goals Numeric Goals Ordinary Profit Return on assets after taxes Equity Ratio Free Cash Flow FY Average Over 72 billion yen Approx. 3 Approx. 26 (End of the FY2006) Over 95 billion yen <Development of Group Management Foundation> Reconstruction of group governance network Introduction of group midterm planning system Improvement of management control for each business segment Optimal allocation of management resources <Business Accounting Response to Globalization> Introduction of consolidated tax payments System Use Early application of assetimpairment accounting Improvement Disclosure of segment of Disclosure information 3

4 2.Past Efforts for Strengthening of Group Management Management Policy/Management Control With the introduction of the Business Headquarters System in Oct , budget control for each business division was also introduced, and a improvement of the Management Control System was promoted. In Oct. 2002, The Basic Concept of Chugoku Electric Power Group Management was established, in Chugoku Electric Group s s aim for steady development. On May 2003, Group Management Goals for consolidated bases were established. On Sept. 2003, operations were begun for the Management Control System. Governance/Structure On Oct. 2001, the 3 business divisions Energy Making and Services Div., Power Generation Div. and Power System Div. were established. The content for each group company was revised from the viewpoint t of the entire group, and by promoting selection & concentration, strategic reorganization/integration were gradually executed. Business Domain Since liberalization of electric power was begun in March 2000, the 4 business domains of Total energy supply businesses, information and telecommunications, environmental harmony and revitalization and business and lifestyle support were ranked as strategic business domains, and start-up businesses were developed. 4

5 2. Past Efforts for Strengthening of Group Management FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 As of financial settlement in FY 2000, financial settlements & consolidated financial settlements have been simultaneously reported The fundamental concept s for group management was established Management Policy Management Control Governance Structure Business Domain Establishment of Group Management Goals LNG supply business was started Optical fiber core leasing was started Improvement of management control system Establishment of Chugoku Electric Power s management goals Group enterprise management strategic council Introduction of business headquarters system Foundation of Mizushima LNG Establishment of Energia Business Development Dept. Concentration of group indirect business Establishment of 4 strategic business domains [Total energy supply, information and telecommunications, environmental harmony and revitalization, business & lifestyle support] Chugoku Information System Service (CIS) Enterprise body for telecommunications was transferred to CIS 5 Consolidated group management goals were established performance appraisal system was tested Group companies were reorganized/integrated Merger between CIS & CTNnet Energia Communications was founded,inc. Foundation of Energia Solution & Service ESS Foundation of Mizushima LNG Sales The control & support section structure was reorganized ESS became a wholly owned subsidiary PHS voice service abolished

6 3.Future Improvement of the Group Management Foundation Purpose O Optimal allocation of group management resources based on business profitability assessments, etc. O Strong and systematic promotion of group-wide cost reductions and attainment of profit Reconstruction of Group Governance Network From the standpoint of group optimization, authority and responsibility for all parties are being organized, with Chugoku Electric Power role in strategy, and group companies roles in execution, having been clarified Promotion of Group Midterm Planning In order to achieve group management goals, the PDCA cycle will be properly put to practice and controlled. (to be introduced as of FY 2006, to be initiated on a full-scale as of FY 2007) 6

7 3.Future Improvement of the Group Management Foundation Reconstruction of Group Governance Network Strengthening of Consolidated Management through Group-Wide Strategic Decision-Making Clarification of our mission in aiming for achievement of group management goals The penetration of management strategy and the rationalization of resource allocation, in aiming for group optimization Formulation of Responsible Organization Aiming for Strengthening of Competitiveness in each Enterprise opromotion of group internal efficiency through the strengthening of relationships between companies Enhancing of market response ability, through an external sales shift for management resources Strengthening of the Group-Wide Monitoring System Establishment of an effective & efficient group internal auditing system/process 7

8 Future Improvement of the Group Management Foundation Promotion of the Group Midterm Planning System Setting up segments by function in total energy business domains Evaluating the profitability of each segment & each company s business section Promoting policies for inter-business relationships for each segment (supply chain management activities, group external sales expansion policies, etc.) A diagram : management / disclosure segments Management segments Total energy Energy marketing & services Power generation Power system Information and telecommunications Business / lifestyle support Electricity Total energy supply Disclosure Segments Information and telecommunications Others Environment (Business / lifestyle support) 8

9 4.Introduction of Consolidated Tax Payments [The Aims of Introduction] Expanded flexibility through group management strategy Alleviation of the risk of worsening profitability which accompanies expansion of the scope of businesses Optimization of capital efficiency Results of Introduction In terms of midterm net income, a positive effect of 1.8 billion yen came into being. Net Interim Income before taxes Income taxes Current Income taxes Deferred Net Interim Income Influences on midterm net income Interim Result 9 [Unit : hundred million yen] [Ignored less than hundred million yen] In case of Non- Consolidated Tax Payments Influences

10 5.Disclosure of Segment Information Purpose of Disclosure Enhancing management transparency Enhancing the morals of managers and company employees The Situation in Business Expansion In order to respond to the diversifying customer needs, 4 strategic business domains were established, and total solution enterprises aiming for a synergistic effect with electric utilities were developed Data Chart of business domains Total Energy Supply Business / lifestyle support Customers Electricity Total Solution Services Environmental harmony and revitalization Flow of services Information and Telecommunications Customers Electricity Support Companies Customers 10

11 5.Disclosure of Segment Information Disclosure Segments 2 extremely important business domains were newly disclosed, which had high ratio of external sales [ Electricity ] [ Information and telecommunications ] [ Total energy supply ] DATA Interim Segment Information of business domains Electricity Information and Telecommunications Total Energy Supply Others Total Unit Hundred million yen Elimination corporate Consolidated Sales to outside customers 4, ,979 4,979 Inter-segment sales / transfers Total Sales 4, , ,979 Operating Expenditure 4, , ,293 Operating Profit Loss

12 6.Early Application of Asset-Impairment Accounting Purpose By applying the introduction of an accounting system Management improvement is conducted, which includes studies of continuation of businesses (including cases where net sales value is greater than the use value) Financial standing is restored through removal of potential loss Asset Groups Construction works in progress Other enterprises Idle assets Use/Classifications Planned construction sites for power station Ozuki Steel Industries Co., Ltd. (cast steel section), etc. Idle land, etc. (195 points) Amount of Impairment Loss 2.3 billion yen 0.3 billion yen 1.7 billion yen Appropriation amount of extraordinary loss (consolidated) 4.3 billion yen 12

13 6.Early Application of Asset-Impairment Accounting Segments, etc. Unit of Judgment Recognition of Asset- Impairment Measurement of Asset- Impairment Amounts (Recoverable Amounts) Appropriation Amounts Electricity Information & Telecommunic ations Total Energy Supply 1 Business (Chugoku Electric Power) 1 Business (1 company) 12 Businesses (3 companies, including Chugoku Electric Power) None None None Concepts of discount rate used in measurement of impairment loss Established in each segment classification Capital cost Electricityreturns, etc.market performance Risk free rate past results of long-term government bonds Risk premium stock price index for TOPIX, etc. Liability costsaverage values for past liability at Chugoku Electric Power - Other Enterprises 63 Businesses, 27 Points (20 companies) 6 Businesses 7 Points (6 companies) 4 Businesses: use value ( 5.5% discount rate) Other: net sales value 5 Businesses 5 Points 0.3 billion yen 1 Project 607 points Idle Assets, etc. (Chugoku Electric Power) Construction works in progress All net sales values (Electric Power) 1 Project Idle: 195 points 13 Construction Works in Progress 2.3 billion yen Idle Assets 1.7 billion yen

14 FY 2005 Interim Financial Results Summary 14

15 Interim Financial Result Non Consolidated Comparison with same term previous year Increased Revenue and Profit [Unit : hundred million yen] [Ignored less than hundred million yen] FY2004 Difference Comparison Interim Revenue Operating Profit Ordinary Profit Net Income 15

16 Total sales that have not increased for 2 years increased to 106.2% compared with same term previous year. Living-Related Demand(Lighting,etc.) is above last year s result due to increased demand for air-conditioning because of the hot summer. Large industrial demand increased steadily due to the high level production. Other Than Specifiedscale Electric Power (Comparison with the previous year) Lighting (Comparison with the previous year) Industrial and Commercial (Comparison with the previous year) Subtotal (Comparison with the previous year) Specified-scale Electric Power (Comparison with the previous year) Total Electricity Sales (Comparison with the previous year) [Details] Large-Scale 100 Million kwh 100 Million kwh 100 Million kwh 100 Million kwh 100 Million kwh 100 Million kwh Interim FY2004 Interim B 16 Difference

17 2. Financial Results Major Factors [Power Generation] Own Facilities Hydroelectric decreased due to less water flow compared with last year. Nuclear generation increased due to decrease in the days of the regular inspection,etc. Purchased Power Increase due to decrease in the days of the regular inspection of J-Power Takehara No.3 power station. Interchanged Power Decrease due to decrease in sales from Misumi power station. Supply Capacity Fuel Own Facilities Water Flow Rate Hydroelectric Thermal Capacity Factor Nuclear Purchased Power Interchanged Power Pumping Use Total Exchange Rate(Inter bank) CIF Crude Oil Price CIF Foreign Coal Price 100 Million kwh 100 Million kwh 100 Million kwh 100 Million kwh 100 Million kwh 100 Million kwh 100 Million kwh Interim FY2004 Interim B Difference 17

18 3. Interim Financial Result Non Consolidated Comparison with same term previous year Revenue [Unit : hundred million yen] [Ignored less than hundred million yen] FY2004 Difference Comparison Interim B % Breakdown Ordinary RevenueOperating Revenue Electricity sales Lighting Industrial and Commercial Subtotal Sales to Other Companies etc. Decrease in Electricity Demand 263 Fuel cost adjustment Different composition of lightning and electric power,etc. 43 Decrease in sales from Misumi power station 53 Increase in sales to Kansai,etc. 32,etc. Total Other Revenues Increase in gains on sales of securities 4,etc. Total 18

19 Ordinary Expense Operating Expense Material Maintenance Depreciation Other Expenses Subtotal Interests Other Expenses Total 3. Interim Financial Result Non Consolidated Comparison with same term previous year E xpense Personnel Fuel Purchased Power Subtotal FY2004 Difference Comparison Interim B % Increase in provision for decommission of nuclear power plant Consignment 31,etc Nuclear Power 75 Thermal Power 51,etc. [Unit : hundred million yen] [Ignored less than hundred million yen] Breakdown Severance benefit 117,etc. High CIF coal price High CIF crude oil price 108 Increase in electricity sales demand 70 Decrease in water flow 24 Increase in nuclear use 79 Strong yen rate 52,etc. Decrease due to progress in the fixed-rate depreciation Decrease in loss on debt-assumption Lowering of interest rate 6 Losses on revaluation of the prior investment for Misumi No.2 28,etc. 19

20 3. Interim Financial Result Non Consolidated Comparison with same term previous year Profits etc. [Unit : hundred million yen] [Ignored less than hundred million yen] FY2004 FY2003 Interim A Interim B Difference Comparison Breakdown AB Operating Profit Ordinary Profit Reserves for Fluctuation in water level Extraordinary Loss Asset-impairment 40 Construction works in progress Fukuyama Point 23 Property out of business Idol Assets 17 Income taxes Current Income taxes Deferred Net Interim Income Increase in income before taxes 20

21 4. Interim Financial Results Consolidated Comparison with the previous year Increased Revenue and Profit [Revenue Operating Revenueand Ordinary Revenue] Increased in revenue and profit as well as the Chugoku Electric Power Company itself [Net Interim Income] The increase in ordinary profit produced an increase in net interim income,despite the loss (7.5 billion yen)resulting from early application of assetimpairment accounting or the abolishment of PHS voice telephone service. Net income increased 27.7 billion yen (Increased 10.8 billion yen compared with the same term previous year) Sales Amount [Unit : hundred million yen] [Ignored less than hundred million yen] FY2004 Difference Comparison Interim Interim B Operating Profit Ordinary Profit Net Interim Income 21

22 Property 5. Interim Balance Sheet Non Consolidated [Assets] [Assets] Decrease 40.7 billion yen due to decrease 43.3 billion yen in depreciation of existing utility Plant and Equipment Plant and Equipment Plant of subsidiary b u s i n e s s Plant out of business Construction in p r o g r e s s Nuclear Fuel Other assets Net Property Net Current Property Total Assets Assets End of End of Difference Breakdown Interim FY2004 Plant and Equipment Breakdown [Unit : hundred million yen] [Ignored less than hundred million yen] 22

23 Treasury Stock 5. Interim Balance Sheet Non Consolidated [Liabilities and Stockholders Equity] [Liabilities] Decrease 61.5 billion yen due to decrease in interest-bearing loan debt(53.4 billion yen),etc. [Stockholders Equity] Increase 20.7 billion yen due to appropriate net income [Unit : hundred million yen] [Ignored less than hundred million yen] Liabilities Stockholders Equity Long-term Liabilities Current Liabilities Reserves for Fluctuation in water level Total Liabilities Common Stock Capital Surplus Retained Earnings Net unrealized holding gains on securities Total Stockholders Equity Total Liabilities and Stockholders Equity End of Interim (A) End of FY2004 (B) 23 Difference (A-B) Breakdown Decrease in Interest-bearing Loan Debt Decrease in retiring allowance reserves Stockholders Equity Ratio End of Interim End of FY2004 Bonds/Borrowing Ratio End of Interim End of FY2004

24 6. Interim Financial Results Summary Non Consolidated Comparison with Previous Plan [Sales Amount(Operating Revenue)] Increase due to increased electricity sales resulting from increased demand for air-conditioning because of the hot summer and increased large industrial demand. [Operating Profit] Despite a rise in material cost resulting from high CIF crude oil price, operating profit increased in the sales amount resulted in increases in the ordinary profit. [Ordinary Profit] Increase due to increase in the operating profit [Net Interim Income] Increase due to increase in the ordinary profit, despite asset-impairment (4 billion yen). Sales Amount Operating Profit Ordinary Profit Net Interim Income Interim Previous Plan Result 24 [Unit : hundred million yen] [Ignored less than hundred million yen] Difference Comparison

25 6. Interim Financial Results Summary Consolidated Comparison with Previous Plan [Sales Amount(Operating Revenue)] Increase due to increase in the Chugoku Electric Power Company itself [Operating Profit] Increase due to recovered business performance of Energia Communications Co., Inc. in addition to the increase in the Chugoku Electric Power Company itself [Ordinary Profit] Increase due to increase in the operating profit [Net Interim Income] Increase due to increase in the ordinary profit,despite asset-impairment (4 billion yen) Sales Amount Operating Profit Ordinary Profit Net Interim Income Interim Previous Plan Difference Comparison Result 25 [Unit : hundred million yen] [Ignored less than hundred million yen]

26 . Financial Results Estimate 26

27 1. Financial Results EstimateNon Consolidated Major Factors [Electricity Sales] Estimate FY2004 Result (Compared with the previous year) Electricity Sales 100 Million kwh [Major Factors] Exchange Rate Estimate FY2004 Result CIF Crude Oil Price CIF Coal Price Water Flow Ratio Nuclear Capacity Factor 27

28 2. Financial Results Estimate Non Consolidated Comparison with the previous year [Sales Amount(Operating Revenue)] Increase due to increase in electricity sales,etc. [Operating Profit] Despite an increase in fuel expenses due to a sharp rise in the price of crude oil and overseas coal, operating profit shall increase thanks to overall management efficiency improvement coupled with a reduction in personnel costs achieved through disposal of past service liabilities via a restructuring of the severance benefit and pension system. [Ordinary Profit] Increase due to decrease in interests,etc. in addition to increase in operating profit [Net Income] Increase due to increase in ordinary profit,etc.,despite asset-impairment (4 billion yen) Sales Amount Operating Profit Ordinary Profit Net Income Estimate(A) FY2004 Result(B) 28 [Unit : hundred million yen] [Ignored less than hundred million yen] Difference Comparison

29 3. Financial Results Estimate Consolidated Comparison with the previous year [Sales Amount(Operating Revenue)] A revenue increase shall be achieved by Chugoku Electric Power Company itself, and there shall be a revenue increase due to increased sales by consolidated subsidiaries to customers outside the Group. [Operating Profit] A increase shall be achieved mainly by Chugoku Electric Power Company itself [Ordinary Profit] A increase shall be achieved mainly by Chugoku Electric Power Company itself. [Net Income] The increase in ordinary profit shall produce an increase in the net income, despite the loss resulting from asset-impairment (4.3 billion yen) and the abolishment of the Energia Communications PHS voice telephone service (3.7 billion yen). [Unit : hundred million yen] [Ignored less than hundred million yen] FY2004 Difference Comparison Estimate Sales Amount Operating Profit Ordinary Profit N e t I n c o m e 29

30 4.FY 2005 financial Results Estimates Non Consolidated Consolidated Comparison with previous plan [Unit : hundred million yen] [Ignored less than hundred million yen] Difference Comparison Previous Estimate Plan S a l e s A m o u n t Operating P r o f i t Ordinary P r o f i t Net Income Non Consolidated Consolidated Non Consolidated Consolidated Non Consolidated Consolidated Non Consolidated Consolidated 30

31 Financial Results Estimate Variable factors Variation in demand Raising of the long-term contract ratios of the liberalized sections via strengthening of the sales system based on competition trends, etc., and expansion of sales via total solution proposal activities Variation in fuel prices Stable and economical procurement that responds to variation in demand and supply Variation in interest rates Reduction in procurement interest through utilization of short-term interest rates together with a high proportion of long-term fixed-interest financing Other (Decreased sales due to cool summers or warm winters, further sharp rises in fuel prices,etc.) Promotion of enhanced efficiency in the implementation phase, so as to accommodate future changes in circumstances 31

32 6.Achievement of Management Goals [Non-Consolidated] Management goals that aim for improvements in business results and financial strength Numeric Goals FY Average FY 2003 Result FY 2004 Result FY 2005 Estimate Equity Ratio Approx. 23 (End of the ) % ROE (Return On Equity) Approx % ROA (Return On Assets After Taxes) Approx % Ordinary Profit Over 70 Billion Yen 66.7 Billion Yen 61.1 Billion Yen 78.0 Billion Yen Free Cash Flow Over 110 Billion Yen Billion Yen Billion Yen Billion Yen 32

33 33.Segment Information

34 Interim Financial Results Electricity Information & Telecommunication UnitHundred Million Yen Total Energy Supply Others Total Sales Amount Interim FY2004 Interim Difference Operating Expense Interim FY2004 Interim Difference Operating Profit Loss Interim FY2004 Interim Comparison Difference 34

35 35 Financial Results Estimate Total Others Total Energy Supply Information & Telecommunication Electricity Difference FY2004 Result Estimate Operating Expense Difference FY2004 Result Estimate Sales Amount Comparison Difference FY2004 Result Estimate Operating Profit Loss UnitHundred Million Yen

36 3.Energia Communications,Inc. Efforts to improve the business results Selection and Concentration of Business Domains PHS voice service abolished Strengthening of Sales Strategy Reinforcing of sales organization & shortening of the initial FTTH period Further efficiency Refinement of personnel & complete reductions in expenses, etc. Goal: Achievement of Zero Ordinary Losses in FY

37 3.Energia Communications,Inc. Financial results Sales Amount Hundred million yen Information Telecommunication Interim Result Previous Plan Estimate Ordinary Profit Net Income Ordinary Profit Net Income Interim Result Ignored less than 100 million yen. Previous Plan 37 Hundred million yen Estimate

38 4.Energia Solution & Service Co., Inc. Capital Stock Issues/Becoming a wholly owned Subsidiary 1. Purpose Strengthening of competitiveness in the comprehensive energy market Concentration of on-site enterprises for ESS & reinforcement of financial foundation Flexible response to management issues 2. Measures Allocation of new shares to a third party, with Chugoku Electric Power as guarantor = In-kind contribution such as entrusted facilities for heat supply and heat reserve, which are conducted as incidental business Purchasing of all stocks possessed by ESS stockholders other than Chugoku Electric Power Reference Outline of ESS Foundation: October 2001, Capital Stock: 4.6 billion yen (1 billion yen prior to capital stock issues) Conditions of business plan Co-generation business plan Strengthen competitiveness by rounding out utility services into packages that include heat storage equipment and boilers as well as cogeneration 10.0 Accumulated power Interim Previous Plan Estimate 38 LNG sales business plan Expand sales through alliances with city gas companies Develop sales by targeting industrial customers for conversion to LNG Raise added value through effective use of LNG cryogenic power Sales amount Interim Previous Plan Estimate

39 4.Energia Solution & Service Co., Inc. Financial results Sales Amount Hundred million yen Interim Result Ordinary Profit Ordinary Profit Interim Result Ignored less than 100 million yen. Previous Plan Estimate Previous Plan Estimate Coal LNG Hundred million yen Co-generation,etc. 39

40 40 DATA

41 1. Electricity Sales 1. Electricity Sales interim electricity sales result Other than Specifiedscale Electric Power Demand Type Industrial and Commercial Lighting Commercial Low Voltage High Voltage A High Voltage B Others Subtotal Specified-scale Electric Power Total Electricity Sales electricity sales estimate Demand Type Estimate Other than Specified-scale Electric Power Lighting Industrial and Commercial Total Lighting Industrial and Commercial Specified-scale Electric Power Total Electricity Sales Unitmillion kwh [ ] Comparison with the previous year 41 Interim Result Previous Plan Comparison with Previous plan FY2004 Result

42 2.Revenue and Expenditure 2. Revenue and Expense Sales Amount Electric utility operating revenue DetailsElectricity sales DetailsSales to other companies etc. Other Revenues Total Revenue Personnel Fuel Purchased Power Maintenance Depreciation Interests Other Expenses Total Expense Ordinary Profit Operating Profit 42 Estimate Unit : hundred million yen Previous Plan FY2004 Result

43 3.Variables 4. Interest-bearing Loan Debt 3. Variables Exchange Rate CIF Crude Oil Price Water Flow Ratio Nuclear Capacity Factor Interest Rate /$ $/b 5. Interest Rate Unit : hundred million yen Estimate FY2004 Result 4. Interest-bearing Loan Debt Non-Consolidated Consolidated 5. Interest Rate Average End-of-FY Estimate 43 Unit : hundred million yen Interim Result Interim Result

44 6.Capital Expenditure Unit : hundred million yen Interim Result Estimate Previous Plan FY2004 Result Hydroelectric Thermal Equipments Nuclear Transmission Transformation Distribution Dispatching Others Subtotal Improvements Nuclear Fuel Subtotal Subsidiary Business and Others Total 44

45 7.Completely Electrical Housing Electric water heater Unit Interim Result Plan FY2004 Result Completely Electrical Housing Number of Housing 14,531 29,700 27,973 Details Newly constructed Number of Housing 6,669 15,100 14,438 Remodeled Number of Housing 7,862 14,600 13,535 Market share of newly constructed completely electrical housing Electric water heater Number of Heater 18,558 39,100 36,997 DetailsEcocute Number of Heater 4,330 7,200 Market share of electric water heater

46 None of the information on this document is intended to solicit or induce purchase or selling of the Company s stocks. Moreover Chugoku Electric makes no guarantees whatever regarding the contents of this website. Persons considering investment in the Company should without fail read in advance the stock and bond reports and other financial literature issued by the Company, and make decisions on their own judgment. Though great care is exercised in the preparation of such literature, Chugoku Electric and the other information providers shall not be liable in any manner for any loss whatever incurred as a result of erroneous information contained therein or in this document. Items in Chugoku Electric's current plans and strategies, etc., published on this document which are not yet historical fact are projections concerning future performance and as such involve factors of risk and uncertainty, which means that actual performance in the future may differ to a large extent from projections published here. Therefore Chugoku Electric does not guarantee the reliability of such projections. 46

47 For Questions or Comments, Please Contact the Corporate Planning Manager at the Address Below: Hiroshima-Shi, Naka-ku, Komachi 4-33 The Chugoku Electric Power Co., Inc. Corporate Planning Department FAX