Hepco Group Report 2025 (Integrated Report)

HEPCO Group Report 2025

https://www.hepco.co.jp/english/

‌Editorial Policy

The HEPCO Group Report is an integrated report structured to systematically present shareholders, investors, and other stakeholders with news about HEPCO Groupʼs business activities as well as both financial and non-financial information and data, including from ESG perspectives.

With the aim of providing an understandable and easy-to-read report, we will continue to strive to improve our reporting so that we may sustainably enhance corporate value and provide our stakeholders with the information they need.

Tool Map

Notes on Forward-Looking Statements

Future plans, forecasts and other outlooks published in this report are based on currently available information and involve potential risks and uncertainties. They do not constitute any guarantee of future performance.

Accordingly, changes in a variety of factors may lead to variations in actual performance, business conditions, and other expectations that differ from those anticipated in this report.

Period Covered

FY2025 (April 1, 2024~March 31, 2025)

Information is included about activities and other operations from April 2025.

Report

Financial Information Non-Financial Information

• Financial Statements

  • Integrated Report

    HEPCO Group Repor t 2025

    https://www.hepco.co.jp/english/

• Corporate Governance Report

Online

• To Our Shareholders and Investors https://www.hepco.co.jp/ english/ir/index.html

  • Data Downloads (Factbook) https://www.hepco.co.jp/ english/ir/datadownloads.html

• Environmental, Social & Governance (ESG Information) https://www.hepco.co.jp/ english/ir/esg.html

Organization

HEPCO Group's 14 companies https://www.hepco.co.jp/corporate/company/group/group.html

Integrated Report Inquiries

2, Higashi 1-chome, Odori, Chuo-ku, Sapporo, Hokkaido 060-8677, Japan Investor Relations Group, Corporate Planning Department, Hokkaido Electric Power Co., Inc. Tel: 011-251-1111

Online Inquiries

Rainbow Post https://www.hepco.co.jp/mailpost/mailpost.html

HEPCO Group 01Integrated Report

‌CONTENTS

INTRODUCTION

1. Editorial Policy

2. Contents

3. Business Foundation 05HEPCO at a Glance 07President's Message

VALUE CREATION STORY

13 Value Creation Process

15 Management Philosophy & Vision

17 Society in 2050

21 Society in 2035

23 HEPCO Group Management Agenda Toward 2035

SUSTAINABLY ENHANCING CORPORATE VALUE

25 HEPCO Group Management Targets

33 HEPCO Group Management Model

39 Power Generation

41 Nuclear Power

45 Thermal Power

49 Hydroelectric & Pumped-Storage

51 Renewable Energy Development

53 Power Transmission & Distribution Business

57 Retail Electricity Business

59 Value Creation through Business Co-creation

61 Energy Decarbonization

ROBUST BUSINESS FOUNDATION FOR SUSTAINABLE GROWTH

63 Kaizen & Digital Transformation Driving Business Transformation

64 Thorough Efficiency Enhancement

65 Promotion of Human Capital Management

69 Thorough Compliance & Risk Management

73 Enhance Corporate Governance

Tripartite Discussion on HEPCO Governance

1. Message from HEPCOʼs Newly Appointed Outside Director

2. Corporate Governance Structure

1. Constructive Dialogue with Our Shareholders & Investors

2. Appropriate Disclosure for Our Stakeholders

   FINANCIAL & NON-FINANCIAL DATA

3. TCFD & TNFD-Based Disclosures

1. Financial Information

2. Stock Information

HEPCO Group 02Integrated Report

‌Hub for Supplying Carbon-Free Energy

Business Foundation Hokkaido's Potential

Renewable energy share of total power generation (2024)

Provisional calculation based on OCCTOʼs “Aggregation of Electricity Supply Plans for FY 2025”

Hokkaido

%

Japan 24%

Hokkaido's share of Japan's renewable energy potential

Provisional calculation by HEPCO based on data from the Ministry of the Environment's Renewable Energy Potential System (REPOS)

*1 Japan Meteorological Agencyʼs simple average of location-specific monthly values (1991~2020)

*2 HEPCO provisional calculation based on IMF statistics for Japanʼs 2021 GDP

Onshore wind power

Solar 25％

Small/medium-scale hydroelectric power

Hub for Digital Industries

• Construction is moving forward to build next generation semiconductor plants and affiliated industries are also expected to cluster in the region.

• The Hokkaido government is promoting data center development throughout the

Ishikari City

Cluster of 100% renewable energy-powered data centers

Development of Data Centers Throughout Hokkaido

Nuclear power station restarts

Tomari Unit 3 (912MW) : As soon as possible in 2027 Tomari Units 1 & 2 (1,158MW): Early 2030s

Food Supply Hub

Food self-sufficiency rate

“2021 Food Self-Sufficiency Rate Trends by Prefecture (Calorie Basis),” Ministry of Agriculture, Forestry and Fisheries

region. A strategy has been rolled out designating the belt connecting Ishikari City and Tomakomai City as a priority zone for data center investment. *3

Sapporo City

Cluster of IX and

other telecommunications network hubs and digital-related enterprises

Priority Area

Chitose City

Hokkaido 223％

Japan

38％

Economic effect of establishing Hokkaido as a hub for semiconductor manufacturing*4

Development of semiconductor industry

Tomakomai City

Premier Tourist Destination

Prefecture attractiveness ranking

Primary plant

production & investment・・

¥10.1trillion

Connections to international submarine cables and large-scale data center development

“Prefecture Attractiveness Ranking 2025,” Brand Research Institute

Primary & secondary

plant production & investment・ ¥18.8 trillion

(14-year cumulative total from FY2024)

Ranked #

1

Inbound tourism ranking by prefecture

“2024 Annual Overnight Travel Statistics Survey Results,” Japan Tourism Agency

*3 “Research Group on Localized Power Demand Growth and Power Transmission and Distribution Networks” Electricity and Gas Market Surveillance Commission

*4 “Simulation of the ripple effect on the Hokkaido economy due to the location of Rapidus Co., Ltd.” ANIC

Ranked # 4

9.65 million overnight stays

Electricity Demand Growth and Initiatives for Ensuring Supply Capacity in the Hokkaido Area

Reference

Estimated electricity demand from operation of a 100MW hyperscale data center

Approx. 0.9TWh =100MW×8,760h

(365 days × 24h)

Average Electricity Demand Growth Rate

(TWh) 45

HEPCO Group Management Vision 2035

40 (Announced March 26, 2025)

35

Approx. 34

(2031)

Approx. 38

(2036)

30 27.8

(2025 Actual)

31

(2031)

31.2

(2035)

*OCCTO projections prepared based on the “Electricity Demand Forecast for Nationwide and Each Regional Service Area (FY2026) Table 3.” HEPCO projection period: 2024-2035;

OCCTO projection period: 2024-2034

25 OCCTO Demand Forecast

Prepared based on the “Electricity Demand Forecast for Nationwide and Each Regional Service Area, January 22, 2025 (Detailed Table)”

20

2014

2016

2021

2026

2031

2036

030

To be restarted in early 2030s

19

Nuclear Power LNG-Fired Station Power Station

(FY)

Tomari Units 1 & 2

To be restarted in early 2030s

Tomari Unit 3

To be restarted as early as possible in 2027

9

commence in FY2031

Construction to start in May 2027 Operation scheduled to

Ishikariwan Shinko Unit 2

Ishikariwan Shinko Unit 3

Construction to start in May 2 30

Operation scheduled to commence in FY2034

‌INTRODUCTION

VALUE CREATION STORY

SUSTAINABLY ENHANCING CORPORATE VALUE

ROBUST BUSINESS FOUNDATION FOR SUSTAINABLE GROWTH

FINANCIAL & NON-FINANCIAL DATA

ＲＯＡ

ＲＯＩＣ

Shareholdersʼ equity

¥1,424.8

Interest-bearing debt

billion

Dividend payout ratio

DOE

Hokkaido Electric Power Co., Inc. (HD)

Power generation & retail electricity businesses

Hokkaido Electric Power Network Co., Inc. (NW)

General transmission & distribution and remote island power generation businesses

Other

Diverse businesses spanning electrical & telecommunications construction, real estate, and comprehensive construction consulting, etc.

ＲＯＥ

FY2025

Shareholders' equity ratio

Debt-to-EBITDA ratio

End of FY2025

JCR Long-Term Issuer Rating

-

Published on July 29, 2025

AA

[Stable outlook]

FY2025

*Including intersegment eliminations

Employees

2,302

Segment assets

¥2,054.1billion

Operating Revenue

¥788.0 billion

Segment income

¥53.6 billion

Employees

2,703

Segment assets

¥804.6 billion

Operating Revenue

¥321.1 billion

Segment income

¥1.1 billion

Employees

4,160

Segment assets

¥181.0 billion

Operating Revenue

¥153.9 billion

Segment income

¥12.1 billion

FY2025 Performance

HEPCO Group 05Integrated Report

Published on August 6, 2025

R&I Issuer Rating

[Stable outlook]

A+

Published on April 24, 2025

S&P Long-Term Issuer Rating

[Stable outlook]

BBB+

INTRODUCTION

VALUE CREATION STORY

SUSTAINABLY ENHANCING CORPORATE VALUE

ROBUST BUSINESS FOUNDATION FOR SUSTAINABLE GROWTH

FINANCIAL & NON-FINANCIAL DATA

Major Supply Facilities (As of March 31, 2025 and FY2025)

Power Generation Facilities (Hokkaido Electric Power Co., Inc. and Hokkaido Electric Power Network Co., Inc.)

Maximum Output (kW) Power Generated

Ishikariwan Shinko Unit 2 Construction to start May 2027 Operation to commence FY2031

Uryu

Percentage in Hokkaido*

(GWh)

Ishikariwan Shinko Unit 3

Hydroelectric 53 plants 1,639,935 80％ 2,992

Thermal 12 plants 4,634,600 72％ 16,167

Kyogoku Unit 3

Construction to start May 2030 Operation to commence FY2034

Tomura

Nuclear power 1 plant 2,070,000 100％ -

Construction started September 2001 Operation to commence 2035 or later

Ishikariwan Shinko 569 MW

Sunagawa Naie

Nokanan

Takisato

Tokachi

New energies, etc.

3 plants 58,000 3％117

Tomari 2070 MW

*Prepared by HEPCO based on the Agency for Natural Resources and Energy Statistical Table 1-(1) Number of Power Plants and Output of Electric Power Operators and 1-(2) Number of Power Plants and Output by Prefecture

Transmission & Distribution Facilities (Hokkaido Electric Power Network Co., Inc.)

Length

Kyogoku

Date

Hoheikyo

Tomakomai Tomato-Atsuma

1650 MW

Okuniikappu Niikappu

Takami

Minami-Chitose Subterranean Line (new construction of Lines 1 & 2) Construction started January 2025 Use to start October 2027

lines

Transmission 8,417km

Minami-Chitose Substation (new construction) Construction started May 2025

Minami-Hayakita Substation (reinforcement)

Shizunai

Minami-Chitose Subterranean Line (addition of Line 3) Construction started September 2025

Distribution lines

68,430km

Hokkaido-Honshu HVDC Link (Shinshin-Kitahon) 300 MW reinforcement Construction started September 2023

Use to start October 2027

Construction to start April 2027 Use to start April 2030

Use to start October 2028

Operation to commence March 2028

Major Supply Facilities (As of April 1, 2025)

Sales Performance

Shiriuchi

Hokkaido-Honshu HVDC Link

Power Generation Facilities Distribution System

Hokkaido Electric Power Company Hokkaido Electric Power Network Hokkaido Electric Power Network

(Hokkaido Electric Power Co., Inc.)

Electricity sales Hokkaidoʼs share

Hokkaido-Honshu HVDC Link (Shin-Kitahon)

300 MW

600 MW

Hydroelectric Thermal Nuclear power

Hydroelectric Thermal

Other HEPCO Group

Substation Switching station

Converter station

Low-voltage customers

High-voltage & extra high-voltage customers

9,569GWh 79.0％

13,160GWh 84.0％

Geothermal Solar

Hydroelectric Thermal Solar

Transmission line (275,000V) Transmission line (187,000V) Transmission line (100,000~110,000V) Transmission line (DC)

Other companyʼs transmission line Other companyʼs converter station

HEPCO Group 06Integrated Report

‌INTRODUCTION

VALUE CREATION STORY

SUSTAINABLY ENHANCING CORPORATE VALUE

ROBUST BUSINESS FOUNDATION FOR SUSTAINABLE GROWTH

FINANCIAL & NON-FINANCIAL DATA

HEPCO Presidentʼs Conversation with Energy Sector Analyst

Daiwa Securities Co. Ltd.

Senior Analyst (Energy & Utilities)

Syusaku Nishikawa

In 2008, joined Daiwa Securities Group as a Japanese equity analyst. In 2013, began covering the energy sector. Currently tracks more than 30 Japanese companies.

Representative Director & Chief Executive Officer

Susumu Saito

Carbon Neutrality and Growing Demand to Pave the Future for Hokkaido and HEPCO

Vision 2035: Aggressive Approach Pursuing Both Shareholder Return & Growth

Syusaku Nishikawa (“Nishikawa”): Many investors in utilities focus heavily on shareholder returns, particularly dividends. In the HEPCO Group Management Vision 2035 announced this past March, you set a DOE [Dividend on Equity] target of 2%. What was your intention or thinking behind this objective?

President Susumu Saito (“Saito”): Vision 2035 was developed to lay out a clear growth trajectory, so the question of how to approach shareholder returns, particularly dividends, was something that we grappled with to a significant extent. In the near term, we must prioritize growth

investments and retained earnings, but even as we maintain that course, we’ll be making dividend

payouts more predictable. Our aim is to expand through continued growth investment while, at the same time, achieving profit targets and building equity. This will ultimately enable us to increase dividends based on DOE as well. We want to grow our company and dividends, which will meet the expectations of both investors focused on capital appreciation as well as those seeking stable dividends.

Nishikawa:The DOE target comes with the stipulation that “Until Tomari NPS Unit 3 is restarted, we will aim for a 2% DOE and make

a comprehensive determination while being mindful to rebuild our financial foundation.” Yet, right after HEPCO announced Vision 2035, the April earnings release projected FY2026 dividends to be near the target level. So, that seems to have been the thinking behind the forecast.

The electricity business has an extremely long investment-to-return cycle—seeds are planted that won't bear fruit for 10 or 15 years. This makes it difficult to evaluate power companies on growth potential alone. In my opinion, it's crucial to balance both dividends and growth.

Saito: Indeed, although we find ourselves in an era of uncertainty, what matters most is maintaining trust with shareholders, customers, and other stakeholders, while firmly staying the course. We must also respond quickly to changes in the business environment.

Taking into account the Japanese government's GX2040 Vision and other factors, we're systematically augmenting our power infrastructure in anticipation of rising demand and renewable energy expansion, while also advancing energy decarbonization. This will naturally require substantial capital investment.

Nishikawa: One thing that surprised me about your investment plan was the scale compared to previous levels.

Saito: Hokkaido has been presented with a once-in-a-generation opportunity. To capitalize on this moment and drive HEPCO Group businesses toward growth, the challenge that we will take up is to ‘realize GX for the development of Hokkaido’ and ‘create new value,’ as outlined in Vision 2035. Our

aim is to first make the necessary investments in safety measures and other enhancements at Tomari Nuclear Power Station to enable units to be restarted and boost profits. As we do that, we will establish hubs supplying carbon-free energy, thereby expanding the business opportunities available. What’s more, as we position ourselves for the coming energy decarbonization, we will plant the seeds for future growth with investments in next-generation energy technologies not yet deployed commercially.

Nishikawa: So, your greatest opportunity lies in the anticipated increase in electricity demand across Hokkaido?

Saito: Exactly. Data centers consume enormous amounts of electricity for cooling and operations. Hokkaido's cool climate reduces that energy consumption. The restart of Tomari Nuclear Power Station and anticipated expansion of offshore wind power and other renewables will increase available

carbon-free power in the Hokkaido area, the ideal location for data centers and semiconductor factories. Still, additional power generation capacity sourced from Ishikariwan Shinko Unit 2 and other power plants is essential in addition to network development and reinforcement in order to attract these companies and facilities.

From a cash flow perspective, as operating cash flow grows on profits in the near term, investment cash flow will expand even more thanks to the significant rise in capital investment. This means we'll likely need financing at levels we have never sought previously.

Nishikawa: Electricity demand in the Hokkaido area will increase, but not all retail operators will benefit equally from that growth. In that respect, the level of growth in HEPCO’s retail electricity sales toward target is forecast to be the same rate as growth in future Hokkaido area demand, meaning

you’re anticipating that HEPCO is set to capture all future retail demand increases. That's an extremely aggressive stance. What do you think your prospects are for success?

Saito: Some might call our target quite ambitious in that we're setting out to acquire all large-scale demand growth. The business environment is relentlessly competitive, that is for sure. However, we're confident only Hokkaido Electric Power can balance both stable supply and carbon neutrality over the

long term for data centers, semiconductor manufacturers, and other clientele. We're strengthening our retail operations and capabilities, methodically laying the groundwork to ensure we are able to provide optimal energy solutions without delay as customers' businesses grow and their needs evolve.

Restarting Nuclear Plants

Stabilizes Energy Supply and Facilitates Carbon Neutrality

Nishikawa: Restarting Tomari is a major facet of Vision 2035. The 7th Strategic Energy Plan approved by the Cabinet in February 2025 takes a pragmatic approach. To balance a stable energy supply with carbon neutrality, Japan will make use of

all available technologies, including nuclear power. Against that backdrop, your proclaimed target of restarting Unit 3 as early as possible in 2027 and Units 1 and 2 in the early 2030s is very significant.

Saito: Thank you. We had extensive internal deliberations about publicly committing to a restart timeline. Nuclear power, a stable carbon-free energy source, is indispensable for ensuring Hokkaido's long-term energy security and achieving 2050 carbon

neutrality. It's challenging to predict when the reactors will be restarted as the Nuclear Regulation Authority reviews the power station to ensure compliance with the new safety requirements. Yet, we recognize that announcing a concrete timeline is crucial for giving companies confidence to invest in Hokkaido.

Nishikawa: How have local residents reacted to the explicit restart timeline? Saito: We're hearing a range of opinions. Of course, some residents are cautious when it comes to nuclear safety and necessity, while there's also considerable anticipation

that the restart will bring electricity rates down. For the reactors to restart, it's vital that Hokkaido residents understand not only the safety measures at Tomari Nuclear Power Station but also why the reactors need to be restarted. We're committed to

providing thorough explanations in briefing sessions and through other channels.

To continue making substantial investments in nuclear power, our cash flow will remain constrained for the time being. However, the restart will significantly boost operating cash flow and improve free cash flow, creating a virtuous cycle eventually where we will be able to simultaneously deliver shareholder returns and fund growth investments.

Growth Strategy Identifies Investment Areas and Focuses on Strengths

Saito: With Vision 2035, we constructed a business portfolio designed to navigate the dramatically shifting management environment where electricity demand is surging, carbon neutrality initiatives advancing, and other changes taking place. Incorporating Product

Portfolio Management (PPM) analysis principles, we've categorized our businesses into four investment tiers: Top Priority Investments, Priority Investments, Carefully-Selected Investments, and Minimum Investments. While taking into account our position in the respective markets, we will allocate resources from the perspectives of maximizing company-wide ROIC through selection and concentration, as well as reducing company-wide WACC through diversified investment. Each individual investment decision must deliver returns, but we're also determining when we should make these investments and whether they are sustainable.

This business portfolio ranks nuclear power as a top priority investment, while renewable energy development—despite its market attractiveness—is set low as a carefully-selected investment due to our current competitive positioning. This is our current stance, which we will review going forward. What is your impression, Mr. Nishikawa?

Nishikawa: I think situating nuclear power in the upper-right quadrant as a top priority investment should resonate strongly in equity markets. Leveraging nuclear power can only be done by a select group of energy players with the proven track record and experience. This is an area

where HEPCO clearly can leverage its strengths. I believe the Japanese government's nuclear commitment in the 7th Strategic Energy Plan will provide a tailwind, reinforcing your stance.

On the other hand, to put it bluntly, precisely because this is a period of high-demand when substantial investment is needed that I think you could have pushed ‘selection and concentration’ more emphatically as concerns your business domains and capital allocation. In areas that are not very attractive where you lack a competitive advantage, I think you not only have to limit investment to the minimum, but also take steps to reduce your involvement in such areas. Even in attractive sectors where you are able to exploit your strengths, it is my sense that there will be more demands on HEPCO to take advantage of capital markets whether that be for self-funding projects, working with partners including financial institutions to provide funding, or leveraging debt.

Saito: As you point out, we didn't go far enough in some areas. We’ll take stock of what drives earnings and where our true competitive advantages lie even throughout the HEPCO Group, an aspect which Vision 2035 does not fully illuminate.

Nishikawa: I'm looking forward to that. Identifying core strengths is very important. The business portfolio mentions “combine to increase value.” I think the proper path for a listed company is to proactively pursue opportunities where your current

strengths apply rather than passively waiting for synergies to emerge.

On the positive side, it is my impression that categorizing renewable energy development as a Carefully-Selected Investment aligns with market demands. The attractiveness of renewable energy development in the Hokkaido area is and will remain high, I believe. Nevertheless, you have shown your desire to think flexibly when it comes to where that investment funding is procured.

Saito: We have set a goal of developing renewable energy to produce at least 3 million kW by FY2036. We'll maximize our strategic alliances to achieve this goal as we resolve challenges to secure suitable sites and overcome other hurdles.

The path to carbon neutrality encompasses diverse renewable energy technologies, such as solar, offshore wind, hydrogen, ammonia, and CCS with many of these still in the transition phase. We're preparing multiple scenarios, discerning which technologies will dominate while also harnessing government programs and other systems.

In terms of procuring financing as well, we're actively pursuing green bonds, transition bonds, and other ESG instruments to meet the needs of investors seeking solutions to environmental and climate change issues.

Nishikawa: Since Trump's second term began, the direction of policies addressing CO₂ reduction and carbon neutrality has shifted. Equity markets are also reflecting that sentiment. Nevertheless, the trajectory toward addressing global warming and the

environment has not come to a halt, the pace has only slowed. That’s all.

My sense is that Vision 2035's business portfolios convey HEPCO’s determination to clearly communicate the company’s strategic direction to stakeholders and, with their understanding and support, accomplish goals set out.

Saito: That resonance may be due to the extensive and broad-ranging process of dialoguing with employees, outside directors, institutional investors, analysts, and others over the course of seeking diverse inputs. The result has been increased calls for collaboration and

co-creation. My dream is for Hokkaido to drive Japan's global competitiveness, and this ambition would be satisfied if HEPCO Group played a central role in that transformation. We're pursuing this approach in communication with a range of people as we begin with smaller-scale projects.

Personally, I wanted to show more commitment, but some internally cautioned that “if we show too much of our hand, we'll be completely exposed.”

Nishikawa: As the energy industry becomes less and less regulated, your business model will eventually be copied should others be able to imitate it once it is revealed. HEPCO Group would do best to pursue what's inimitable, in other words what only the HEPCO Group

has the capability to deliver. HEPCO Group is already an indispensable part of Hokkaido. So, given your share of regional GDP, you should be more profitable. Contributing to the economic growth of Hokkaido and earning an appropriate return are two sides of the same coin. I hope you continue forging ahead as an essential partner for Hokkaido.

Saito: I appreciate your insight. Our strength comes from having our business foundation in Hokkaido. We hope to remain a trusted partner that people will call when they need help. On the other hand, our management environment is experiencing considerable change

unfolding dramatically. Simply continuing to do and think as we have always done will make it more difficult for us to keep doing what we thought was the natural way of conducting business. We must continuously adapt our thinking and actions to changes in the business environment. To instill this mindset in each and every employee, we’re emphasizing ‘transformation’ in our management philosophy, a revision made in conjunction with the development of Vision 2035.

I'm convinced that we will never relent in our drive to continuously transform so that we may always fulfill our responsibility as an energy provider, thereby delivering new value to our customers and communities, and, with Hokkaido as our foundation, we will be able to support its further development and realize a sustainable society.

Photo taken at HEPCO Group’s HOTnet Co-Creation Space Akallabo

https://www.hotnet.co.jp/

‌INTRODUCTION

VALUE CREATION STORY

SUSTAINABLY ENHANCING CORPORATE VALUE

ROBUST BUSINESS FOUNDATION FOR SUSTAINABLE GROWTH

FINANCIAL & NON-FINANCIAL DATA

HEPCO Group

Value Creation Process

Management Philosophy I N P U T S (Management Resources)

To Sustainably Enhance Corporate Value

To drive business growth and realize a sustainable society, HEPCO Group will pursue management that maintains our foundation of Hokkaido and leverage the power of transformation to create the future of energy and new value.

HEPCO Group's New Management Philosophy

Purpose

Our ambition

Light up your future

Mission

Our role

Create the future of energy and new

Manufacturing Capital

Human Capital

Intellectual Capital

Social & Relational Capital

Power generation facilities: Total output 8,690 MW

Transmission line length: 8,417 km; distribution line length: 68,430 km

Employees: 9,165

Engineering personnel: Approx. 70% (HD & NW)

Patents, etc. held: 227 Technology and experience relating to power generation development, maintenance, and operation, as well as power supply Know-how relating to ZEB, ESP, and other energy solutions suited to cold snowy regions

Emergency partnership agreements entered into: 179 comprising all municipalities in Hokkaido (HD & NW) Registered business partners (material procurement): Approx. 2,500 companies (HD & NW)

value by transformation

Financial Capital

Capital ¥114.2 billion｜Cash ¥156.3 billion｜Interest-bearing debt ¥1,424.8 billion

Values

Our shared values

Challenge Co-creation Trust

Natural Capital

Fuel consumption (FY2025)

• Coal: 4,116,000 tons

• Heavy oil: 262,000 kl

• Light oil: 15,000 kl

• LNG: 433,000 tons

• Nuclear fuel material consumed: 0 kg

  Rich nature with high renewable energy potential

• Wind: Good conditions and long coastline

  Potential: 1,680.3TWh (approx. 60 times Hokkaido demand of 28.2TWh)

• Solar: Vast land area blessed with abundant sunlight Potential: 437.7TWh (approx. 16 times Hokkaido demand of 28.2TWh)

  *Prepared by HEPCO using data provided by the Ministry of the Environment's Renewable Energy Potential System

  *Quantitative data not specifically dated is as of the end of FY2025

  *HD: Hokkaido Electric Power NW: Hokkaido Electric Power Network

  HEPCO Group

  13

  Integrated Report

  HEPCO Group 13Integrated Report

  INTRODUCTION

  VALUE CREATION STORY

  SUSTAINABLY ENHANCING CORPORATE VALUE

  ROBUST BUSINESS FOUNDATION FOR SUSTAINABLE GROWTH

  FINANCIAL & NON-FINANCIAL DATA

  Business Operations

  OUTPUT (Performance) OUTCOMES (Value Creation)

  Vision

  Implemented (Core Energy, etc.)

  Prior to Full Implementation

  (Next-Generation Energy)

  Products Services

  Electric power demand in Hokkaido

  27.8TWh

  Electricity sales

  Communities & Customers

  • Supporting the livelihoods of our customers and the economy and building a sustainable society

  • Serving as a responsible energy provider to ensure a stable electricity supply

  • Engaging in co-creation of new value with our stakeholders to contribute to sustainable growth and find solutions to regional challenges

    Light up your future.

    HEPCO will fulfill our core responsibility of

    Decarbonization

    Business Model Transformation Energy

    Power generation

Retail

Energy

Next-Generation Energy

Retail sales: 22.8TWh Wholesale sales: 10.7TWh

Financial Performance

Operating revenue

¥902 billion

Ordinary income

Shareholders & Investors

• ROE ■ROIC ■DOE

  18.1％ 3.1％ 1.3％

• Dividends

  Per share of common stock

  ¥20 annually Total dividend payments ¥4.1 billion

• Interest expenses (amount paid to creditors)

  supplying energy and support the sustainable development of Hokkaido.

  Management Vision

  2035

  (Announced March 2025)

  P15～38

  Combine

  ¥64 billion

  ¥10.3 billion Carbon

  Non-Energy

  Business Area Expansion

  Other

  Beyond seeking to increase profits through individual businesses, we will also systematically implement initiatives where combining businesses is anticipated to create additional value.

  Reinforcement of corporate governance upholding transparent, fair, prompt and decisive decision-making

  Free cash flow

  ¥34.8 billion

  Social & Environmental Effects

  Greenhouse Gas (GHG) Emissions

  22.16 million t-CO₂

  Industrial waste

  703,000 t

  Employees

• Safe and motivating work environment (Work-related injury frequency 0.56)

• Health Management “White 500” Organization (6th consecutive year) (HD & NW)

• Promoting work-style reforms (Rate of annual paid leave taken: 85.5%) (HD & NW)

  Environment

• Reduction in CO₂ 2.66 million tons (compared to FY2014 level)

  *Total for Scopes 1+2+3

• Industrial waste recycling rate 89.1%

Neutral

2050

P18～20

*Quantitative data not specifically dated is as of the end of FY2025

*HD: Hokkaido Electric Power NW: Hokkaido Electric Power Network (if not indicated, numbers are consolidated figures)

HEPCO Group

14

Integrated Report

HEPCO Group 4Integrated Report

‌Management Philosophy & Vision

VALUE CREATION STORY

HEPCO Group's New Management Philosophy

In March 2025, we set out a new management philosophy in conjunction with the announcement of HEPCO Group Management Vision 2035.

HEPCO Group has historically upheld a management philosophy mandating three principles̶respect for humanity, contributions to local communities, and

efficient management̶and maintained the foundation of our business operations in Hokkaido.

Since our previous vision was developed, the business landscape has continually evolved. GX industries are establishing operations in Hokkaido, driving expectations of growth in demand for electricity over the medium- to long-term. Amid this transformation, we remain committed to advancing our Hokkaido-centric business model while continuing to innovate in a manner that propels further HEPCO Group business growth and contributes to a sustainable society.

Purpose

Our ambition

Mission

Our role

Light up your future

Together with local communities, HEPCO Group will continue to ensure Hokkaido stays an attractive region that people are proud to share with the world and enrich the lives of people who call Hokkaido home.

Create the future of energy and new value by transformation

We will never relent in our drive to continuously transform so that we always fulfill our responsibility as an energy provider. We will deliver new value to our customers and communities, and, with Hokkaido as our foundation, we will support its further development and realize a sustainable society.

Values

Our shared values

Challenge

We will aim to grow further and surpass everyone's expectations as we continue to enthusiastically take up challenges.

Co-creation

With our roots in Hokkaido, we will collaborate with communities, companies, local governments, and everyone in the region to harness ingenuity and create our future together.

Trust

We will live up to the trust placed in us by always acting with integrity and fairness and taking even better care of our stakeholders while respecting the diversity of values.

Toward a Management Philosophy & Vision that Each and Every Employee Can Own

We conducted multiple dialogues with employees and HEPCO Group companies to formulate a management philosophy and vision that incorporates their opinions and values.

Date held Approach Employees/HEPCO Group Companies Topic

Dialogues Conducted with Employees and HEPCO Group Companies

REF Results of Employee Survey (Sample)

The management philosophy and vision will only be meaningful once embedded in the organizational culture. To imbue these, we are implementing the following initiatives to engage employees.

Direct messages from the President to employees

The President personally communicates the ideas underscoring our new management philosophy and vision.

Briefing sessions for field offices

To promote a better understanding of our direction by all employees, we are holding briefing sessions at all 24 Hokkaido Electric Power and Hokkaido Electric Power Network offices.

Distribution of guidance material for employees

Guidance materials will supplement the new management philosophy and vision, explain how they were developed, and provide other commentary.

‌Society in 2050

VALUE CREATION STORY

Although it is difficult to accurately predict the future, climate change measures compatible with economic growth along with the application of AI, robots and other digital technologies will most likely drive changes in society so that by around the year 2050 there will be an embrace of diversity that includes not just national, generational, and gender differences, but also coexistence with AI and other technologies, in addition to achieving carbon neutrality (CN). We foresee such a sustainable and prosperous society realized not just through actions taken by national and local governments, corporations, but even each one of us as individuals. HEPCO Group will contribute to our society in a variety of sectors, of which energy is just one.

‌To achieve carbon neutrality by 2050 (Future Energy Demand)

To be carbon neutral by 2050, not only do we need to meticulously conserve

Final Energy Consumption in Hokkaido (Provisional figures for FY2023, heat value basis)

energy, but also shift from CO2-emitting fossil fuels to decarbonized electric power and other carbon-free fuels such as hydrogen and ammonia. For Hokkaido, with its vast and cold snowy climate, decarbonizing the energy used for heating and transportation is a major challenge, and one of the key options for achieving this is electrification sourced from decarbonized power. HEPCO Group has not only implemented supply-side initiatives that make use of carbon-free fuels and decarbonized power sources, but also furthered demand-side initiatives with the promotion of electrification and energy savings, including zero energy buildings (ZEB)*. These efforts help us to maximize our commitment to having all energy in Hokkaido be carbon neutral by 2050.

*ZEB: Net Zero Energy Building, which is a structure designed to keep annual primary energy that the building consumes to zero, while maintaining a comfortable indoor environment.

Heat 0.8%

Electricity 23.4%

rgy

5.3

%

Renewable ene gy 5.3

%

Gas 9.2

rom gas-fired water eating to electric and other measures

Switching f om gas-fired water and space heating to electric heat pumps

al, etc. 17.0%

Co

Conversi

arc furna

onvers on from blast to electric rc furn ces and other measures

O

Promotion of Electrification

il, etc. 44.3%

Ad

EV

Adoption and growth of Vs and other measures

Source:

Source Prefectural Energy Consumption Statistics

Reduction in CO2 from Converting to Smart Electrified Residences How Heat Pumps Work

Further

Reduction of roughly 13%

Heat pump systems used in EcoCute, air conditioners, and other products consume [1] unit of electrical energy to extract more heat energy from the air than [1] unit, generating [2] or more units of heat energy.

[1] unit of electrical energy

Electricity

Heat energy

Heat energy

Heat pump

[2] or more units of heat energy

Kerosene + LP gas residences Smart electrified residences

(heat pumps)

Aiming to be Carbon Neutral by 2050(Partially revised in March 2025 in conjunction with drafting of HEPCO Group Management Vision 2035)

HEPCO Group expanded the scope of greenhouse gases subject to reduction from ‘power generation division CO₂ emissions’ to ‘supply chain emissions (Scope 1

+ 2 + 3),’ with the aim of being carbon neutral by 2050.

We will contribute to society-wide emissions reductions by promoting electrification with heat pumps harnessing air thermal energy, a renewable energy source, as well as energy-saving proposals, customer support for decarbonization, and our renewable energy development business.

Hokkaido's future energy demand is projected to grow over the medium- to longterm, driven by digital industry facilities, including next-generation semiconductor fabs and data centers, locating in the region.

To achieve carbon neutrality by 2050, we are promoting the transition from CO₂-emitting fossil fuels to carbon-free electricity (electrification) and carbon-free fuels such as hydrogen and ammonia, alongside rigorous energy conservation.

HEPCO Groupʼs Reduction in Greenhouse Gas Emissions and Contribution to Achieving Carbon Neutrality(Illustration)

Future Energy Demand in Hokkaido(Illustration)

Thorough energy conservation, etc.

Fossil fuels

(oil, etc.)

Hydrogen, ammonia, etc. produced using renewables in Hokkaido

Demand increase from established data centers, etc. and expanded electrification

Further progress from expanded DX, GX, electrification, etc.

ElectricityDecarbonization

Reduction in GHG Emissions

Toward carbon neutrality

60,000 tons

FY2025 performance

Amount of reduction contribution

2050

Contribution to achieving carbon neutrality

Scopes 1+2+3

22.16

million tons

Present 20352050

*CCUS stands for Carbon dioxide Capture, Utilization and Storage, a new technology that captures emitted CO₂ and either stores it deep underground or effectively utilizes it.

Roadmap to Carbon Neutrality by 2050

As we follow our Roadmap to Carbon Neutrality by 2050, we will mobilize all available means, including the use of innovative technologies and implementation of initiatives with local communities in addition to expanding renewable energy installations as well as utilizing Tomari NPS and other efforts.

2030 2035 2050

6 community

Implement

initiatives

Increase by 1 GW or more *Based on development scale Increase by 3 GW or more *Based on development scale

Develop onshore & offshore wind, geothermal, solar, biomass, and hydroelectric power Further increase

Expand operation and maintenance businesses throughout HEPCO Group

Restart Unit 3 (As early as possible in 2027) Restart Units 1 & 2 (early 2030s) Stable operation

Resolve procurement, transport, and storage challenges

When transitioning, utilize LNG-fired thermal power plants emitting little CO₂ (Ishikariwan Shinko Power Station)

Start operation of Unit 2 (FY2031)

Start operation of Unit 3 (FY2034)

100% LNG

combustion

100% LNG

combustion

20%~50%

hydrogen co-firing

20%~50%

hydrogen co-firing

100%

hydrogen combustion

Conduct studies and demonstrations to realize CO₂ capture, utilization, and storage (CCUS business)

Tomato-Atsuma Power Station Unit 4 Launch CCS business (FY2031)

Decommission Naie & Sunagawa power stations (FY2027) Review while giving consideration to stable supply, etc.

Demonstrate hydrogen productionfacility technology in cold climates

Effectively utilize renewable energy-derived power and other sources to produce hydrogen

Produce on a large-scale and ship outside Hokkaido

Utilize renewable energy-derived electricity across a wide area

Contribute to promotion of new industries, including next-generation semiconductor plants and data centersPromote decarbonization projects that leverage regional resources (joint reviews with local communities and formulation of proposals)

Blue lettering indicates concrete steps since HEPCO Group Report 2024.

‌Society in 2035

VALUE CREATION STORY

So that a sustainable and prosperous society and lifestyle may be realized by around the year 2050, continuous progress is needed over the next 10 years to address the increasing importance of climate change measures and economic security.

In addition, over the next decade, the impact of Japanʼs declining population and aging society will take on increasing prominence, potentially disrupting daily life.

We believe solutions can be found to these social challenges by stably supplying energy, the foundation for a digital society, as well as making progress in decarbonization and applying AI, robots, and other digital technologies more extensively throughout society.

HEPCO Group will contribute to realizing the vision of society in the year 2035 as we leverage Hokkaido's potential to solve such challenges.

Progress in decarbonization premised

on a secure and stable supply

Hokkaido's value rises

(as hub for supplying food and carbon-free energy)

Clustering of digital industries in Hokkaido increases demand for

energy and revitalizes the region

Progress made in efforts to resolve

challenges local communities face, such as labor shortages

• Economic security taking on greater importance

• Global population growth and other factors make it even more important to raise self-sufficiency rates for food, water, energy, etc.

Hokkaido's Development Potential

P22

HEPCO Group's contribution

P59,60

• Although progress is being made on initiatives to reduce greenhouse gas emissions in countries around the world, these are still insufficient on the whole.

Anticipated Social Issues & Changes to the Social Structure Society in 2035 (Challenges Resolved)

• Society is aging and there are fewer children

• Depopulation decreasing regional vitality

• Labor shortages and other factors pose a challenge for maintaining electricity, communications, water, healthcare, and other public services and social infrastructure

*1 On June 5, 2024, the World Meteorological Organization (WMO) indicated an 80% probability that the global annual average temperature will temporarily exceed 1.5°C over pre-industrial levels in at least one of the next five years.

*2 Cited from the “World Population Prospects: The 2024 Revision,” Statistics Bureau, Ministry of Internal Affairs and Communications

*3 Cited from “Population Projections for Japan by Region: 2023 Estimates,” National Institute of Population and Social Security Research

‌Hokkaido's Development Potential

Japan's GX policy*1 defines a course of action aimed at achieving a stable energy supply, decarbonizing power sources, as well as utilizing decarbonization-related technologies along with AI and other digital technologies to bolster economic growth and strengthen Japan's global industrial competitiveness. The policy also emphasizes the importance of local production and consumption of clean energy on a large-scale.

Hokkaido anticipates digital industries will cluster in the region as carbon-free power expands in line with the principle of watt-bit integration*2. Powerful tailwinds are furthering development of the region.

With its abundant nature and vast land, Hokkaido has the potential to be a hub supplying not only food, but also carbon-free energy throughout Japan, a country which relies mostly on resource imports. This will make a significant contribution to enhancing Japan's sustainability. Hokkaido's sustainability may also serve as a tourism resource, making the region even more attractive globally.

Hub for Digital Industries

Hub for Supplying Carbon-Free Energy

Food Supply Hub Premier Tourist Destination

• Construction of next generation semiconductor plants is currently underway, and affiliated industries are expected to gather in the area.

• Hokkaido is promoting the establishment of data centers across the region in anticipation of AI application and DX advances. Strategic initiatives are being promoted to attract companies to the priority area for data centers, which is the belt extending from Ishikari City on the Japan Sea side to Tomakomai City on the Pacific side*4.

*1 GX2040 Vision, etc. *2 Approach integrating power grids and communication infrastructure

• Renewable energy accounts for over 40%*3 of the electric power generated in the Hokkaido area.

• The restart of Tomari Nuclear Power Station and buildout of offshore wind power and other renewable energies are expected to expand carbon-free electric power.

  • With its abundant agriculture, forestry and fishery resources, Hokkaido has contributed to improving Japan's food self-sufficiency rate. As smart agriculture and other digital technologies are adopted and applied, the sustainability of these industries will be enhanced, enabling Hokkaido to continue to fulfill its important role.

  • The region's magnificent nature, powder snow, hot springs, and other tourism resources are very popular among tourists from both Japan and around the world.

*3 Ratio of power (kWh) generated in FY2024 *4 Documents from the “Study Group on Locational Electricity Demand Increase and Transmission & Distributions Networks”

‌HEPCO Group Management Agenda Toward 2035

VALUE CREATION STORY

To contribute to realizing the vision of society in the year 2035, HEPCO Group will spur efforts to take up the ʻChallenge of Realizing GX to Drive Hokkaido's Developmentʼ and ʻChallenge of Creating New Valueʼ as well as strive to ʻReinforce HEPCOʼs Business Foundation for Sustainable Growth,ʼ which establishes the foundation for addressing these challenges and transforming our businesses.

We have made these three points our management themes as we move toward 2035 on the recognition that HEPCO Group has the capability to contribute to Hokkaido's development. HEPCO Group will continue to actively transform our business and take up these challenges to both grow our group businesses and develop Hokkaido.

HEPCO Group's Business Growth and Hokkaido's Development

Material Issues for HEPCO Group (Materiality)

HEPCO Group has identified the three management themes outlined in HEPCO Group Management Vision 2035 as our material issues we must address, and advance initiatives to further develop Hokkaido and build a sustainable society.

Task Subtask (Key Work) Concrete Initiatives

Challenge of Realizing GX to Drive Hokkaido's Development

Stable electricity supply in anticipation of demand

growth and expanded renewable energy installation

Energy Decarbonization

• Restart Tomari NPS as soon as possible

• Construct Ishikariwan Shinko Power Station Units 2 & 3

• Construct next-generation electric power network

• Decarbonize power sources and expand installation of renewables

• Effectively utilize hydrogen, ammonia, and other carbon-free fuels

Challenge of Creating New Value

Value expansion and creation for customers

Value creation through business co-creation

• Provide CN solutions and other services that help customers resolve issues

• Engage in agriculture, forestry, fisheries, and other Hokkaido core industries

Reinforce HEPCO's Business Foundation for Sustainable Growth

Kaizen & DX application to transform businesses

Promote human capital management

Thorough compliance and risk management

Enhancement of corporate governance

Process for Identifying

Materialities

STEP1

Along with looking back to examine previous management initiatives, identify points necessary for promoting management with the aim of achieving sustainable growth.

STEP2

Consolidate HEPCO Group priorities (materialities) based upon the points identified.

STEP3

The Executive Committee, which is comprised of executive officers, deliberates management policies, including priorities (materialities), and

STEP4

The Board of Directors sets management policy, including priorities (materialities).

exchanges views with outside directors.

‌MANAGEM経EN営TビVジISョIンO2N0235035

SUSTAINABLY ENHANCING CORPORATE VALUE

HEPCO Group Management Targets

*1 Preliminary figure *2 Profit targets reflect the impact of planned rate cut following the restart of Tomari NPS

MANAGEM経EN営TビVジISョIンO2N0235035

HEPCO Group Electricity Sales (Retail)

HEPCO Group aims to increase retail electricity sales by making sure that we take advantage of business opportunities presented as next-generation semiconductor plants and large data centers establish operations in Hokkaido. Our aim is to capture all of this large-scale demand as companies establish themselves in Hokkaido.

(TWh)

40

(TWh)

34 TWh

Hokkaido area demand

38 TWh

30

27.8 TWh

20

FY2031 Target

29

TWh +

FY2036 Target

33

TWh +

FY2025 Performance

22.7 TWh

0

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036 (FY)

※The above figures are current estimates provided by HEPCO

MANAGEM経EN営TビVジISョIンO2N0235035

HEPCO Group Environmental Targets

Reduction in Greenhouse Gas Emissions

To combat climate change, HEPCO tracks and manages all emissions from our business activities toward the set aim of reducing emissions across our entire supply chain.

We will rise to the challenge of achieving a 46% reduction compared to FY2014 levels in supply chain emissions (Scopes 1+2+3) throughout the HEPCO Group by FY2031 and 60% by FY2036.

Contribution to Achieving Carbon Neutrality

We will contribute to a 1.5 million-ton reduction in emissions by FY2031 and a

2.5 million-ton reduction by FY2036 by promoting electrification with heat pumps utilizing air heat which is a renewable energy source, energy-saving proposals, customer support for decarbonization, and our renewable energy development business.

Scopes 1+2+3

－46%

－60%

0.001

million tons

(Scope 2)

To achieve carbon neutrality

11.97

million tons

(Scope 1)

10.19

million tons

(Scope 3)

－11%

22.16 million tons

24.82 million tons

Examples of Emission Reductions

FY2014

(Actual)

FY2025

(Performance)

FY2031

[Intermediate target]

FY2036

Target

2050

FY2025

Contributed to

60,000-ton reduction

FY2031

[Intermediate target]

Contributed to

1.5 million-ton reduction

FY2036

Target

Contributed to

2.5 million-ton reduction

*1: Scope 1: Direct emissions from HEPCO Group business sites (mainly thermal power plants).

Scope 2: Indirect emissions associated with use of electricity, heat, etc. that HEPCO Group receives as a user.

Scope 3: Other indirect emissions (mainly indirect emissions associated with electricity purchased from other companies)

MANAGEM経EN営TビVジISョIンO2N0235035

Path to Achieving Environmental Targets (Illustration)

We will pursue a systematic transition shifting to decarbonization to achieve our environmental targets. The chart below illustrates currently quantifiable initiatives.

Demand growth

HEPCO is committed to pursuing carbon neutrality by 2050 utilizing every available means to reduce emissions.

+3.5 million tons

Restart of Tomari NPS Unit 3 (2027)

Improve Tomari NPS capacity factor

Renewable energy development

-1 million tons

-3 million tons

Begin ammonia co-firing at Tomato-Atsuma Power Station Unit 4 (FY2031)

-0.4~0.8 million tons

Start operation of Ishikariwan Shinko Power Station Units 2 & 3 (FY2031 & FY2034)

-0.5 million tons

(only Unit 3)

Restart Tomari NPS Units 1 & 2 (early 2030s) -3 million tons

Launch CCS business

Externally procure non-fossil fuel electricity Etc.

Improve Tomari NPS capacity factors (all units)

Launch CCS business

Externally procure non-fossil fuel electricity Etc.

2025

(Performance)

2031

2036 (FY)

MANAGEM経EN営TビVジISョIンO2N0235035

Ordinary Income ROIC (WACC)・ROE

In addition to improving revenue following the restart of all Tomari Nuclear Power Station units, HEPCO Group will steadily increase profits as business opportunities expand thanks to the establishment of hubs supplying carbon-free energy, expanding our products and services, and increasing retail electricity sales as we make sure to build on environmental changes such as carbon neutrality advances and the increase in demand for electric power in the Hokkaido area.

We will manage our business portfolio to bolster investment in high-profit businesses, and improve ROIC to 3.5% or higher by further increasing the profitability of our businesses. This will enable us to continue assuring appropriate equity capital and maintain an ROE of 8% or higher.

Change in Ordinary Income

(Billion yen) 100

Key increase drivers

• Restart Tomari NPS Units 1 & 2

• Further increase in retail electricity sales

• Develop hubs supplying carbon-free energy*2 to expand business opportunities

  ROIC (% and higher)

  Maximize ROIC

  3.5

  3.0

  Widen the spread

  （2.4）

  （2.2）

  WACC

  decrease

  4

  WACC (%)

  Key increase drivers

  • Restart Tomari NPS Unit 3

  • Increase retail electricity sales

70*1

90*1

3

Increase in WACC as interest rates rise and

financial position improves

2

50

40

0 FY2031

FY2036

0 ROE

Prior to restart

FY2031

FY2036

FY2031

FY2036

*1 Profit targets reflect the planned rate cut following the restart of Tomari NPS

*2 Business model for actively investing to leverage Hokkaidoʼs carbon-free energy so that it may be supplied not just in Hokkaido, but also throughout Japan