9532.T

Corporate Purpose & Mid-Term Focus

• The group's core mission under Mid-Term Management Plan 2026 is to protect current customer security while building future daily infrastructure, committing to delivering safe, stable energy supply even amid geopolitical instability (such as current Middle East tensions) while addressing long-term social challenges including carbon neutrality.

Key Mid-Term Strategic Priorities

1. Co-creation of Future Value (Carbon Neutrality Initiatives)

• Thermal energy: Advancing development of e-methane to hit the 2030 target of 1%+ e-methane adoption. Ongoing activities include full operation of Sabatier methanation demonstration testing in Nagaoka (launched February 2025), bench-scale testing of SOEC methanation, and joint basic design development for an e-methane production project in Nebraska, U.S.
• Electric energy: All 8 biomass power plants are now operational, bringing 2025 renewable energy contribution to an expected 4.61 million kilowatts, on track to hit the 2030 target of 5 million kilowatts. Expanding energy storage business alongside renewable energy growth.

2. Improving Employee Engagement & Capabilities

• Expanding new graduate and experienced hire recruitment, targeting 360 total new hires in FY2026 across the group including base operating company Osaka Gas Network.

3. Evolving Management Foundations (DX-driven Business Transformation)

• Rolling out AI to partial contact center operations with plans for gradual expansion. Building an optimization model for the entire LNG and power value chain to improve operational efficiency. Fostering a DX-focused organizational culture and expanding the core DX talent pool.

Domestic Energy Operational Updates

• Retail & wholesale sales: Leveraging a strong sales base and broad product portfolio to advance cross-selling and national expansion.
• Domestic power generation: Unit 1 of Himeji Power Station entered operation in January 2026, with Unit 2 starting operation in May 2026. This adds 1.2 million kilowatts of domestic thermal generation capacity, bringing total group capacity to 3.2 million kilowatts to meet growing power demand from data centers and AI. Construction has started on Unit 3, targeted for operation in 2030. Expanding renewable energy business by leveraging the full value chain, including offering virtual PPA to customers.
• Energy storage business: Operating across grid-scale storage, renewables-co-located storage, and on-site customer storage. Subsidiary KRI (the group's contracted research firm) has accumulated advanced storage technology expertise, and recently acquired shares of Enax to enable end-to-end development from R&D to large-scale prototyping. The group targets becoming a comprehensive storage operator, with a target of 1 million kilowatts of operational capacity (decision-based) by 2030.
• Supply chain resilience: Maintains a core strategy of long-term contracts and diversified procurement from multiple regions to ensure stable LNG supply. Launched ship-to-ship offshore LNG bunkering in April 2026 to capture growing demand for LNG as a marine fuel, targeting 70,000 tons of annual supply by 2030.
• Gas supply safety & security: Advancing construction of the high-pressure Amagasaki-Kumiyama pipeline, targeted for opening in 2028. Started utilizing communication functions of smart meters in 2025, with full installation across all customers targeted for completion in 2033 to improve security responsiveness and operational efficiency.

Overseas Energy Operational Updates

• U.S. upstream shale gas business: Operator Sabine adjusts production volumes based on price levels, expanding output when gas prices rise to capture upside. Thermal power generation provides timely supply to meet growing demand from AI and data centers with competitive assets.
• India (Asia business): Advancing city gas infrastructure expansion, utilizing domestic operational expertise to grow the business, with plans to also acquire renewable energy assets alongside local partners.

Life & Business Solutions (LBS) Operational Updates

• Core urban development business: Core rental and for-sale condominium businesses are performing well, with expansion into new areas including Tokyo metropolitan area office and logistics properties. Targets increasing the share of flow-based business over the medium term to improve both asset efficiency and profit scale.
• R&D and new business: The new Daigas Innovation Center R&D hub was completed in 2025. Focusing on expanding carbon credit business, starting from the GreenChecker generative AI quality evaluation system, to scale business across the full carbon credit supply chain.

• The group confirms it will achieve its mid-term target of 8% ROE in FY2026, the final year of Mid-Term Management Plan 2026, when excluding time-lag impacts from energy price changes. Targets for FY2026 (excluding time-lag impacts) are maintained at: ordinary profit of 183 billion yen, EBITDA of 330 billion yen, ROIC of 5.2%, ROE of 8.0%.
• Cumulative operating cash flow over the 3-year mid-term plan period is now projected to be 65 billion yen above the original mid-plan target; the excess will be allocated in a balanced way between growth investment and shareholder returns. A 10 yen per share increase in annual dividend is announced, bringing the FY2025 full year dividend forecast to 130 yen per share, aligned with the existing 3.5% DOE target. The group will continue to consider additional flexible shareholder return measures going forward.
• For domestic energy storage business, the group maintains a target of 1 million kilowatts of operational capacity (decision-based) by 2030.
• For India city gas business, the target of 3.5 billion cubic meters of annual sales by 2030 and 10 billion yen of annual profit contribution by the early 2030s is maintained.
• For LNG marine bunkering business, the target of 70,000 tons of annual supply by 2030 is maintained.
• For smart meter full installation, the 2033 completion target is maintained.

For FY2026 (the final year of Mid-Term Management Plan 2026):

1. Domestic Energy Segment: Expected to deliver a year-over-year decrease in profit. The core drivers are shrinking time-lag spread under the baseline assumption of $65 per barrel crude oil, and increased fixed costs (including depreciation) related to the newly operational Himeji Power Station. The segment-wide planned ROIC is 3.3%, which is below the mid-term target. Gas retail and manufacturing operations achieve ROIC above the segment average, while power operations (due to higher fixed costs from Himeji Power Station) and network operations (due to difficulty in timely passing through inflation impacts to pricing) fall below the segment average. ROIC is expected to improve gradually over time as Himeji Power Station fixed costs reduce.
2. Overseas Energy Segment: Expected to deliver a year-over-year increase in profit. Growth is driven by the reversal of 2025 U.S. renewable energy impairment charges, and increased shale gas production in the U.S. upstream business. India's city gas business targets 820 million cubic meters of sales in FY2026, with a long-term target of 3.5 billion cubic meters by 2030, and is targeting 10 billion yen of annual profit contribution by the early 2030s.
3. Life & Business Solutions (LBS) Segment: Expected to see increased profit from higher capital gains on property sales, driven by favorable real estate market conditions. Most growth investment in the segment is directed toward real estate, with investment volumes increasing on strong market conditions.

Aggregate group targets (excluding time-lag impacts) for FY2026: Ordinary profit of 183 billion yen, EBITDA of 330 billion yen, ROIC of 5.2%, ROE of 8.0% (the targeted mid-term goal).

• Ongoing Middle East geopolitical instability: Daigas has no LNG procurement from countries passing through the Strait of Hormuz, maintains diversified long-term procurement contracts, and has sufficient in-house power generation capacity, so no immediate impact to procurement or supply is expected. However, the situation remains unpredictable; if instability drags on long-term, there is risk of global energy procurement difficulties. The group is currently identifying all potential risks across business units, assessing impact severity, and will implement countermeasures rapidly if needed.
• Crude oil price volatility: The FY2026 baseline assumes a crude price of $65 per barrel. If a $30 per barrel price increase (to $95 per barrel) persists for one full year, ordinary profit would decline by 36 billion yen including time-lag impacts, and by 6 billion yen excluding time-lag impacts. This sensitivity analysis only covers crude price changes; additional impacts from JKM and coal price fluctuations are not included. If broader global economic activity stagnates due to extended instability, the baseline assumptions may no longer hold.
• Domestic energy storage business profitability: Currently, only 2 storage sites are operational, so profit contribution is limited. Profitability depends on power market conditions, and the business is still in a trial-and-development phase for future expansion, though it is viewed as having high long-term potential.

Q: Is the 8% ROE target for FY2026 achieved excluding time-lag impacts, and will you use equity capital management to hit the target if profit falls short of plan due to higher-than-expected equity growth?

A: We expect to achieve the 8% ROE target based on profit excluding time-lag impacts. We are pursuing ROE achievement through both profit growth and equity capital management, and equity control remains one of our core tools to hit the target.

Q: How is the equity denominator for ROE calculation calculated?

A: There has been no change from the forecast shared in the third quarter earnings report. We have recently completed a 70 billion yen share repurchase, but no additional repurchases for FY2026 have been finalized, so none have been included in the ROE forecast calculation.

Q: What are the drivers of profit changes by segment for FY2026?

A: Domestic Energy is planned for a year-over-year profit decline: under the baseline crude price assumption of $65/bbl, time-lag spreads shrink, and the Domestic Energy segment sees higher fixed costs including depreciation for the new Himeji Power Station. Overseas Energy is planned for a year-over-year profit increase, driven by the reversal of 2025 U.S. renewable energy impairment charges and higher shale gas production in the U.S. upstream business. LBS is expected to see higher profit from increased capital gains on property sales amid favorable real estate market conditions.

Q: What impact would an increase in JKM or coal prices have on Daigas?

A: For JKM: Daigas primarily procures LNG via long-term contracts, so our share of spot procurement is lower than peers. Retail gas prices are linked to JLC, so if JKM rises and pushes up JLC and retail prices, Daigas' profit will expand. For coal: Daigas sells power primarily in the Kansai region, and retail power prices fluctuate in line with Kansai Electric Power's fuel cost adjustment system (which includes coal-fired power). Daigas has a relatively low weighting of coal-fired power, so if retail power prices rise with coal prices, this is a net positive for profit. That said, impacts can vary case by case if only LNG or only coal procurement prices rise.

Q: What is the ROIC level by business within the Domestic Energy segment?

A: As a baseline, the FY2026 planned ROIC for the entire Domestic Energy segment is 3.3%. Gas retail and manufacturing achieve ROIC above this baseline, while power (due to higher fixed costs from Himeji Power Station operation) and network (due to difficulty in timely passing through inflation impacts) fall below the baseline. Overall segment ROIC of 3.3% is below the mid-term target. The FY2026 plan was finalized before the recent deterioration in Middle East tensions, and already factored in lower JKM prices relative to original mid-plan assumptions, which reduced the competitiveness of Daigas' long-term contracted LNG versus JLC-linked pricing. ROIC is expected to improve gradually going forward as Himeji Power Station fixed costs decline over time.

Q: What is the Henry Hub price assumption and hedge status for the U.S. upstream business in FY2026?

A: We do not disclose the Henry Hub price assumption, but it does not diverge meaningfully from current market conditions. Approximately 80% of production is hedged.

Q: Excluding time-lag impacts, crude sensitivity is minus 200 million yen for every $1/bbl price increase; what makes up this sensitivity?

A: Crude price increases have a positive impact on our Australian upstream business, but a negative impact on our domestic power business; the net difference is a negative 200 million yen per $1/bbl.

Q: Excluding time-lag impacts, which part of the Domestic Energy segment expects profit growth from FY2025 to FY2026?

A: We expect improved profitability from LNG sales due to sales portfolio rebalancing and other adjustments.

Q: What are your plans for LNG procurement from Oman and Russia going forward, after 2025 procurement from these countries?

A: The long-term procurement contract for Oman ended in FY2025, and there will be no procurement from Oman starting in FY2026. Procurement from Russia will continue, but its share of total procurement remains limited.

Q: How do long-term LNG procurement contracts work? Can procurement volumes be adjusted flexibly during periods of low demand?

A: Standard long-term contracts require taking delivery of a fixed annual volume in exchange for guaranteed supply security. If domestic demand falls and creates excess LNG, we resell the excess to other regions via trading operations to capture profit.

Q: The 2025 full-year forecast has not changed from the third quarter update; do you still expect to hit the full-year plan at this point?

A: There has been no major change to the business environment, so we maintain the existing forecast. The current Middle East situation will not impact 2025 results because March LNG prices were already fixed before the latest tension escalation.

Q: Does volatility in spot power prices impact Daigas' earnings?

A: We view the impact of spot power price volatility on overall earnings as limited. We both buy and sell a fixed volume of power on JEPX, and we optimize generation output based on market conditions, so earnings do not move one-for-one with spot market price changes.

Q: What is the breakdown of quality improvement and growth investment for FY2026?

A: Quality improvement investment is largely unchanged from previous years; the largest share goes to pipeline-related construction, with the remainder going to manufacturing equipment maintenance and commercial facilities. Investment is lower than FY2025 because FY2025 included the new research center construction. For growth investment: Most growth investment in Domestic Energy is power-related; Unit 1 is already operational, and Unit 2 construction will finish in May 2026, so total investment in FY2026 is lower than FY2025. Overseas Energy sees higher investment in the U.S. upstream business. Most LBS growth investment is in real estate, and investment is higher due to favorable market conditions.

Q: For domestic solutions, will future growth come from higher gas sales volume, or from value-added services that do not rely on gas volume growth?

A: We plan to grow profit via value-added services. For example, our residential Smairoof service installs and owns solar panels on customers' roofs, with customers paying a monthly fee equivalent to their typical electricity cost, eliminating the need for upfront customer investment. We offer similar services for commercial and industrial customers, and while profits are low initially as we recover investment over several years, we expect steady cumulative profit from this recurring model over time.

Q: What is the current profitability of the domestic storage business, is it still in the trial phase?

A: Currently, only 2 storage sites are operational, so profit contribution is limited. Profitability depends on power market conditions, so we cannot confirm large profits at this stage, and the business still has a trial-and-development element for future expansion, but we recognize it as a high-potential business. Recent slowdown in global EV growth has pushed down battery prices relative to historical levels, so this is a good opportunity to acquire equipment at lower cost. Over the medium to long term, combining solar power and storage has the potential to deliver low-cost, stable decarbonized power, so we have set a target of 1 million kilowatts of operational capacity (decision-based) by 2030 as a future growth driver.

Q: What are your priorities for the India business in FY2026?

A: We will continue growing gas sales volume via expanding CNG station construction and pipeline extension, just as we have done to date. We are advancing steadily toward our 2030 target of 3.5 billion cubic meters of sales, which equals half of Daigas' domestic city gas sales volume.

Q: Will the solutions business see structural changes from new initiatives including AI, compared to past businesses like ESCO?

A: There is no major structural shift from new transformative technology, but we are now targeting the entire national market, which is very large (for example, there are roughly 10,000 energy management designated factories in Japan). We offer customized solutions for individual customer needs including solar, HVAC, water treatment, and demand response. As fewer factories have in-house energy engineering design capacity, we are pushing our solutions as an energy-focused factory automation and carbon neutrality service for this market.