Kyu_07(E)_AR_4C_second+D

Kyushu Electric Power Company Annual Report 2007 >>>
POWERING THE MOVE TO A SUSTAINABLE FUTURE
Kyushu Electric Power Company Incorporated was established in May 1951 as one of the electric power companies created through the postwar
restructuring of Japan’s electric power industry. As an integrated electric power company, we generate, transmit and distribute electric power in our
service area, which covers the island of Kyushu.
Postwar reconstruction and the subsequent high-growth era brought growing demand for electric power. The oil crises triggered more major
changes, and today the environment is being transformed again by the deregulation of the electric power industry. Throughout these changing times,
Kyushu Electric Power and its employees have been motivated by the challenge of maintaining reliable supplies of electric power to support regional
development and the livelihoods and lifestyles of its customers.
Kyushu Electric Power supplies electricity for power and lighting to 8.42 million users. We operate 194 generation facilities with a total capacity of
19.42 million kilowatts. Our sales have risen consistently in the 20 years since 1987, and in fiscal 2006 electricity sales reached a new record of 84.4
billion kilowatt hours. Nuclear facilities account for 41% of the electricity that we produce and buy, and our CO2 emissions per unit of electricity used
are the lowest among Japan’s electric power companies at 0.375kg-CO2/kWh.
As a result of electric power industry deregulation and the associated changes to the Electricity Enterprises Law, we are now able to engage in
business activities other than electric power. We are using the management resources that we have accumulated through our electric power business
to drive new growth through the dynamic diversification of our business activities. In addition to our core total energy business, we are also involved
in IT and telecommunications, environment and recycling, and lifestyle-oriented services.
Electricity
business
Environment and
recycling business
Lifestyle-oriented
services business
IT and
telecommunications
business
Total energy business
Gas business
New energy
electricity
generation
business
Air conditioning
business and
other business
solutions
Overseas
business
(IPP, consulting, etc.)
GROWING WITH OUR REGION INTO THE FUTURE
Corporate Profile >>>
Our Business Domain
The core business segment for the Kyushu
Electric Power is the total energy business.
Under our "total solution" marketing
strategy, we use the total resources of the
Kyushu Electric Power Group to offer
solutions to the specific needs of each
customer. We always put the customer
first. We are dynamically developing our
business activities and expanding and
strengthening our income structure
through involvement in other business
segments, including the environment and
IT and telecommunications.12
KYUSHU ELECTRIC POWER’S MISSION
Our wide-ranging business activities are guided by our awareness that our fundamental mission and our most important social
responsibility is to supply our customers reliably and efficiently with electric power while making safety our first priority.
Through our activities over many years, we have earned the confidence of our customers and a public reputation for
dependability. These are important assets.
The future is expected to bring increasing competition in energy markets, and increasingly serious global environmental
problems and resource and energy problems. There will also be major social changes, including lifestyle diversification.
However, our social responsibilities will remain unchanged, and we will continue to place a high value on our public reputation.
We recently formulated the Mission of Kyushu Electric Power as a framework for our efforts to strengthen the trust that our customers
place in us. It expresses our continuing commitment to the reliable supply of electric power and energy, and determination to
contribute every day to a comfortable, convenient and environment-friendly life for our customers.
01. Steady and reliable, Earth-friendly energy.
In order for our customers to lead harmonious lives we will provide steady and reliable, Earth-friendly energy, while anticipating global trends and
making full use of our advanced technology and abundant experience with energy and the environment.
02. Services that truly satisfy.
We will offer services that place the gaining of trust from the customer as top priority. We would like to listen to the various voices of our customers in
order to respond to their needs with services that truly satisfy.
03. In company with Kyushu. And to Asia and the world.
In company with the people of Kyushu, we will work together to take action while thinking of our children’s future and of the prosperity of the region.
And from there, we will look to Asia and the world.
04. Discovering solutions, and putting them into practice.
We will discover solutions that lead to a better tomorrow through honest, sincere and active discussions, believing in people’s potential and mutually
respecting personalities, and we will put these solutions into practice.
CONTENTS01CORPORATE PROFILE02KYUSHU ELECTRIC
POWER’S MISSION03OUR TERRITORY
— KYUSHU05FINANCIAL HIGHLIGHTS07MANAGEMENT
MESSAGE09AN INTERVIEW WITH
THE PRESIDENT17FEATURE PAGE 0119FEATURE PAGE 0221FEATURE PAGE 0323FEATURE PAGE 0430FINANCIAL SECTION62CORPORATE DATA
BUILDING TRUST AND LEADING BY EXAMPLE
Kyushu Electric Power’s Mission >>>
"Enlighten Our Future"
Towards a comfortable and environment-friendly lifestyle
today and for generations to come.
We will continue to fulfill our Mission by working to achieve the following four goals.
Disclaimer Regarding Forward-Looking Statements:
Statements made in this annual report regarding Kyushu Electric Power Group’s strategies and forecasts and other statements that are not historical facts are forward-looking statements based on management’s
assumptions and beliefs in light of information currently available, and should not be interpreted as promises or guarantees. Owing to various uncertainties, actual results may differ materially from these
statements. Investors are hereby cautioned against making investment decisions solely on the basis of forward-looking statements contained herein.3okyoTokyTodkaNakhodka
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POSITIONED FOR HIGH GROWTH IN THE AGE OF GLOBALIZATION
FukuokaSagaOita
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Transportation Infrastructure Map
Kyushu is at the center of an extremely attractive market. A
1,000 km radius circle with Kyushu at its center
encompasses not only Japan’s major cities, including Tokyo
and Osaka, but also the rapidly growing Yellow Sea Rim,
which has a population similar to that of the EU. Since
ancient times, Kyushu has functioned as a gateway for trade
between Japan and mainland Asia. In recent years, the
development of airports and sea ports in the region has
accelerated. Major cities within a two-hour flight from Kyushu
include Tokyo, Osaka, Nagoya, Seoul, Shanghai and Taipei.
Access has been further improved with the completion of
New Kitakyushu Airport, Kyushu’s first airport capable of 24-
hour operation. Kyushu is expected to remain one of Japan’s
most important logistical crossroads.
Kyushu has an extensive expressway network linking its
seven prefectures. Traffic between the region’s cities is
expected to expand still further with the completion of the
Kyushu Shinkansen (Bullet Train) network in March 2011.
Our Territory Kyushu >>>
Features of Kyushu
Kyushu, the main service area of Kyushu Electric Power, is
the southernmost of Japan’s four main islands. The region’s
total area, including the more than 1,400 islands scattered
around its coast, is approximately 4.2 million km . Kyushu
consists of the prefectures of Fukuoka, Saga, Nagasaki,
Kumamoto, Oita, Miyazaki and Kagoshima. In 2006, these
seven prefectures have a combined population of 13.41
million, or 10.5% of Japan’s total population. The region’s
GDP of 407ドル.0 billion is equivalent to 8.7% of the national
total. As the region of Japan that is closest to continental Asia,
Kyushu has flourished since ancient times as a conduit for
culture and technology between the mainland and Japan.
Today this geographical advantage is helping to drive the
development of a wide variety of industries.2INTERNATIONAL COMPARISONS
Kyushu, our main service area, is comparable in size with many countries. Its area of 42,000 square
kilometers is similar to that of Denmark, Switzerland and the Netherlands and about one-half that of that
South Korea. With a population of 13.41 million, Kyushu has about 3 million more people than either
Portugal or Belgium, and its biggest city, Fukuoka, ranks alongside Barcelona, Spain with a population of
1.35 million.
With a GDP of 407ドル.0 billion, the Kyushu economy is bigger than the economies of Switzerland, Belgium
and Sweden and similar in size to the Australian, Russian and Belgian economies. In terms of area,
population and GDP, Kyushu is bigger than Switzerland and Belgium, and comparable to the Netherlands.
SILICON ISLAND
Since the second half of the 1960s, major semiconductor manufacturers have been attracted to Kyushu by
its labor resources, clean water and efficient transportation infrastructure. As more and more factories were
built in Kyushu, the region became known as the "Silicon Island." With a cluster of around 650
semiconductor manufacturers and supporting companies, including component manufacturers, Kyushu
today accounts for about 25% of integrated circuit production in Japan. Kyushu is not simply a
manufacturing base. Industry-academia-government collaboration on the development of large-scale
integration (LSI) technology and other advanced technologies is helping to establish a role for the region as
a research and development center.
CAR ISLAND
Several manufacturers, including Toyota Motor Kyushu, Nissan Motor, and Daihatsu Motor Kyushu, have
established advanced production facilities in northern Kyushu, earning the region a reputation as Japan’s
"Car Island." Automobile production in the region exceeded one million units in 2006. Kyushu’s
importance as a base of Japanese automobile production is expected to grow as parts production becomes
more integrated and new assembly plants are built by the automobile manufacturers. There is also
extensive industry-academia-government collaboration on the creation of centers for research and
development and human resource development, especially the training of highly qualified personnel
capable of keeping pace with the fusion of automotive and semiconductor technologies.201612480NetherlandsCameroonEcuadorKyushuMaliGreecePortugal
16.31
16.06
13.41
13.21
11.95
10.64
10.52
Population Comparison of Kyushu
and World Nations
(Millions of People)7001002003004005006000BrazilRussiaKyushuNetherlandsSwitzerlandBelgiumSweden604.0
581.4
579.0
407.0
357.4
352.6
346.4
GDP Comparison Kyushu
and World Nations2002Automotive-related
Semiconductor-related
2003 2004 2005 200650102030400
(Fiscal Year)
Number of Factory Locations in Kyushu
Semiconductor- and Automotive-related4(Billions of U.S.dollars)5Financial Highlights
■しかく Consolidated Financial Summary (Years Ended March 31)
■しかく Segment Information (before eliminating internal transactions)
For the year (Billions of Yen)
Operating Revenues
Operating Income
Net Income
Electricity Sales Volume (Millions of kWh)
General Demand (Millions of kWh)
Large Industrial (Millions of kWh)
At year-end (Billions of Yen)
Total Assets
Shareholders’ Equity (*1)
Interest-bearing Debt
Per share of common stock
Net Income (yen and U.S.dollars)
Cash Dividends (yen and U.S.dollars)
Financial ratios (%)
ROA (*2)
ROE (*3)
Equity Ratio
Electric Power
Other2006\ 1,401.7
171.276.882,956
60,765
22,191
4,102.3
1,052.7
2,104.9
161.67
60.002.77.625.72005
\ 1,408.7
213.789.280,199
58,982
21,217
4,049.7
979.2
2,139.4
187.91
60.003.39.424.22004
\ 1,391.6
198.972.777,268
56,684
20,584
4,114.3
910.8
2,336.2
153.05
50.003.18.322.12003
\ 1,421.3
180.064.376,636
56,318
20,318
4,204.5
840.2
2,503.7
135.13
50.002.77.720.02007
$ 11,925
1,31455834,201
9,159
17,2051.180.51
(Millions of U.S. Dollars)2%85%8%5%
Energy-related
Business
IT and
Telecommunications
Operating
Revenues (2007)
1,540円.8
billion2007\ 1,408.3
155.165.984,399
60,706
23,693
4,038.8
1,081.6
2,031.7
139.37
60.002.46.226.8 Electric Power 1,314円.3 billion
Energy-related Business 123円.8 billion
IT and Telecommunications 73円.7 billion
Other 20円.1 billion
1,532円.1

billion2006Other 25円.9 billion
IT and Telecommunications 76円.4 billion
Energy-related Business 128円.3 billion
Electric Power 1,310円.1 billion
1,540円.8
billion2007Operating Revenue Revenue Share by Segment
(*1) Shareholders’ Equity = Equity - Minority Interests (*2) ROA = After-Tax Operating Income/Average Total Assets at beginning and ending of the Fiscal Year
(*3) ROE = Net Income/Average Equity at beginning and ending of the Fiscal Year
(U.S. dollar amounts have been translated from yen, for convenience, at the rate of 118円.09=U.S.1,ドル the approximate rate of exchange at March 31, 2007.)61,500
(Billions of Yen)
1,2009006003000
1,408.3
1,401.7
1,408.7
1,391.6
1,421.320072003200420052006
Operating Revenues
(Billions of Yen)10080604020020072003200420052006
Net Income65.976.889.272.764.3(Billions of Yen)25020015010050020072003200420052006
Operating Income
155.1
171.2
213.7
198.9
180.0
(Yen)200150100500139.37
161.67
187.91
153.05
135.1320072003200420052006
Earnings per Share (EPS)543(%)2102.72.73.13.13.33.32.72.72.42.420072003200420052006Return on Assets (ROA)
(Billions of Yen)
3,000
2,000
1,500
2,500
1,000500020072003200420052006
Interest-bearing Debt
2,031.7
2,104.9
2,139.4
2,336.2
2,503.7
(Billions of Yen)
■しかく Shareholders’ Equity (Left) ●くろまる Equity Ratio (Right)
1,20080040005040302010020072003200420052006Shareholders' Equity/
Equity Ratio
1,081.6
1,052.7
979.2
910.8
840.222.022.022.022.022.122.122.122.124.224.224.224.2 25.725.725.7
25.7 26.826.826.826.8(%)(%)300250200150100500
187.84
187.84
199.94
199.94
218.48
218.48
256.49
256.49
297.98
297.9820072003200420052006
Debt/Equity Ratio7TOWARD SUSTAINABLE AND RELIABLE MANAGEMENT
CORPORATE POLICIES UNDER THE
NEW MANAGEMENT STRUCTURE
Our goals under the medium-term management policy for the period from fiscal
2005 to fiscal 2009 are the reinforcement of our group business structure,
especially our total energy business, and the achievement of renewed growth. As
we work toward these goals, we have taken on a variety of challenges, including
the achievement of the best efficiency standards in the electric power industry.
Though we have a new management team, our fundamental policy goals
remain unchanged. These include the maintenance of long-term reliability in our
electricity supply activities, the alleviation of environmental problems, the
reinforcement of our business base, and maximization of our growth potential. We
will continue to focus on the needs of our customers as we strive to expand our
business activities, enhance our competitiveness and strengthen our public
reputation for dependability. Specifically, we will continue to develop efficient
electricity supply infrastructure and ensure that all facilities are operated soundly.
We will also work to secure reliable long-term access to fuel resources in
anticipation of a further tightening of supply and demand. Another focus will be
the alleviation of the increasingly serious problems affecting the global
environment. At the same time, we will work to improve our services to customers.
We have identified what needs to be done, and with the cooperation of all of our
employees, we will turn these goals into realities through efforts spanning the next
20 or 30 years.
OPERATING RESULTS IN FISCAL 2006 AND
OUTLOOK FOR FISCAL 2007
Fiscal 2006 was our second year under the medium-term management policy
that we adopted in fiscal 2005. We saw the year as an opportunity to develop
momentum toward the achievement of our targeted results while tackling various
challenges.
One of our key management targets under the medium-term management
policy was to increase new electric power demand by 2.5 billion kilowatt hours
over the fiscal 2003 level by fiscal 2009. I am pleased to announce that we
achieved this target ahead of schedule at the end of November 2006, and that
the number of all-electric households exceeded 300,000. This strong volume
growth in electricity sales was reflected in revenue growth, and our consolidated
net sales for fiscal 2006 were 0.5% higher year on year at 1,408円.3 billion.
Operating revenues were also 0.5% higher at 1,417円.0 billion. However, reduced
operation of our nuclear facilities resulted in increased fuel costs, and there was
also an increase in nuclear back-end costs, including the cost of reprocessing
used fuel. Operating expenses increased by 1.1% year on year to 1,298円.4 billion,
and ordinary income was consequently 5.3% lower at 118円.5 billion.
Looking ahead to fiscal 2007, we anticipate 1.3% volume growth in electricity
sales, reflecting further increases in the number of all-electric households, the
establishment of new commercial facilities, buoyant production trends, and
strong demand from major users. Operating revenues are expected to decline
because of amendments to the taxation regime, which will result in changes to
our depreciation system. However, we expect ordinary income and net income to
be higher, in part because of reduced interest payments.
(Left) Chairperson: Shingo Matsuo
(Right) President: Toshio Manabe
Management Message >>>
I would like to begin by thanking our
shareholders and investors for your ongoing
support.
In June 2007, a new management team,
including a new President and Chairperson,
took the helm of Kyushu Electric Power. We will
maintain our unchanging commitment to the
maximization of corporate value through the
improvement of our management quality, and
through relentless effort to provide increased
satisfaction for our shareholders and investors,
for our customers in regional communities and
for our employees. As always, the core focus of
our business activities will be our customers.8NEW INVESTMENTS
New investments are channeled primarily into projects that offer income and
growth opportunities through the use of Kyushu Electric Power’s management
and business expertise. In the past we have invested in overseas IPP projects,
including the Tuxpan No. 2 and No. 5 projects in Mexico, the joint acquisition of
an LNG carrier, and condominiums with care services for senior citizens. We will
continue to invest actively, especially in areas relevant to our total energy
business, without limiting ourselves to specific business and investment formats,
and always taking into account the potential for investment returns.
ACHIEVING SUSTAINABLE GROWTH—CORPORATE
SOCIAL RESPONSIBILITY INITIATIVES
Economic growth alone is not enough. We want to create sustainable corporate
value and contribute to the advancement of society. Corporate social
responsibility (CSR) is identified as a key priority in our medium-term
management policy, and we are actively implementing initiatives in various areas,
including compliance management, environmentally responsible management,
and harmonious coexistence with communities and society.
Environmental problems are a particular focus. We recognize the importance of
environmental protection in all of our business activities, and the entire Kyushu
Electric Power Group is determined to contribute to environmental improvement
through environmentally responsible management. We also aim to contribute by
promoting increased use of new energy resources. In addition to our own wind-
power operations, we also buy electric power generated using wind, solar and
biomass technologies. In April 2006, commercial production started at the
Hatchobaru Power Station, a 2,000 kilowatt binary-cycle geothermal facility. The
Nagashima Power Station, a 50,400 kilowatt wind-power facility, is currently under
construction and will become operational in October 2008.
MAXIMIZING SHAREHOLDER VALUE
I will conclude with some comments about shareholder returns. Deregulation is
changing our business environment, but we intend to maintain our policy of
providing a reliable dividend of 60円 per annum, while also making steady
progress toward the achievement of a shareholders’ equity ratio of 30%, which is
one of the targets in our medium-term management policy. We believe that we
can best meet the expectations of our shareholders by maximizing long-term
shareholder value.
The entire Kyushu Electric Power Group is united in our determination to
achieve sustainable improvement in our corporate value. We look forward to the
continuing cooperation and understanding of our shareholders and investors.
September 2007
DEVELOPING OUR CORPORATE BRAND
We recently adopted a new corporate philosophy, which we call "Kyushu Electric
Power’s Mission." In developing this mission, we conducted a variety of research,
including customer interviews and questionnaire surveys, to identify the factors
that would allow us to build a linkage between our aspirations and those of our
customers over the long-term future. We also established a working group made
up of employees drawn from various organizational units and representing a
wide range of age groups. Workshops were held over a period of more than six
months to provide opportunities for debate. This process resulted in the
formulation of the Mission, which reflects changes in our environment and
identifies goals toward which all employees should work so that Kyushu Electric
Power can continue to contribute to society as the preferred electric power
supplier for its customers.
ENSURING RELIABILITY OF SUPPLY
We will keep pace with future growth in electric power demand through a
balanced approach to power supply development, with particular emphasis on
nuclear power. Our strategy will be based on a comprehensive range of
considerations, including energy security, economic performance and the
environment. In addition to its reliability and economic performance, nuclear
power also offers many environmental advantages, including the fact that no
carbon dioxide is emitted during the generation process. We will continue to
develop nuclear generation capacity, always with safety as our first priority. We
will continue our efforts to gain the support and cooperation of our customers
and regional communities in preparation for the development of next-generation
nuclear power facilities, starting in the second half of the next decade.
Environmental surveys are currently being carried out for this purpose at the
Sendai Nuclear Power Station.
PLUTHERMAL PROJECT
Japan has very limited energy resources. We believe that pluthermal technology,
which involves the reprocessing of used fuel to produce MOX fuel, is essential to
ensure a reliable supply of energy to meet future needs. We are steadily
implementing a pluthermal project for Unit 3 at the Genkai Nuclear Power
Station. The understanding and support of local communities is vital for this
project, and we will continue to disclose information actively.
MAINTAINING CUSTOMER SUPPORT
We aim to maintain our position as the preferred electricity supplier for our
customers by implementing a "total solution" marketing strategy. The aim of this
approach is to provide comprehensive solutions to a variety of needs and
problems, always from the customer’s perspective. We also aim to expand and
strengthen our income structure by exploiting the full potential of our group-level
management resources, and by aggressively developing business activities in the
IT and telecommunications, environment and recycling, and lifestyle-oriented
services segments, with our total energy business as our core segment.
Chairperson Shingo Matsuo President Toshio Manabe9BUILDING STRONG BONDS WITH CUSTOMERS
QUESTION 1
HOW WOULD YOU ASSESS PROGRESS
UNDER THE CURRENT MEDIUM-TERM POLICY?
The theme for our medium-term management policy is consolidation, followed
by growth. The entire Kyushu Electric Power Group has been working to meet a
variety of challenges under this policy.
Fiscal 2007 will be the third year and half-way point of our medium-term policy,
which covers the period from fiscal 2005 to fiscal 2009. We will continue our efforts to
meet management targets, improve efficiency, fulfill our corporate social
responsibility, and create new demand. At the same time, we need to adjust to
current conditions and anticipated changes. Reflecting shifts in the energy situation
and the global environment, our priorities include the maintenance of reliable
supplies of energy to meet the needs of our customers and society, the reinforcement
of customer confidence in Kyushu Electric Power, the development of group
management systems and the establishment of the Kyushu Electric Power brand.
The management indicators that we are using for our income and financial
stability targets are free cash flow (FCF), ordinary income, ROA and the
shareholders’ equity ratio. Our target for FCF is an average of 120円 billion at the
consolidated level and 100円 billion at the non-consolidated between fiscal 2005
and fiscal 2009. The actual averages for fiscal 2005 and fiscal 2006 were 86円.2
billion consolidated and 73円.9 billion non-consolidated. Our ordinary income
target is an average of 110円 billion at the consolidated level and 100円 billion at
the non-consolidated over the same period. The corresponding results for the
two-year period through fiscal 2006 were 121円.9 billion and 109円.9 billion. The
target for ROA is an average of 3% at both the consolidated and non-
consolidated levels. The two-year average was 2.6% and 2.5% through fiscal
2006. We aim to achieve a consolidated and non-consolidated shareholders’
equity ratio of 30%. The actual figures as of March 31, 2006 were 26.8%
consolidated and 26.9% non-consolidated.
Previously our target for the creation of new demand was an increase of 2.5
billion kilowatt hours from the fiscal 2003 level. This was achieved at the end of
November 2006, and we have now adopted a new target of 3.7 billion kilowatt
hours. We will continue our efforts to expand our electricity sales by promoting
all-electric housing to residential consumers, and by dynamically offering
corporate customers new products, including electrical kitchen and air-
conditioning systems.
Our capital investment target was an average of 190円 billion per annum over a
five-year period starting in fiscal 2005. This investment has been channeled into
efficiency improvements. In the previous fiscal year investment increased by
10円.8 billion year on year to 181円.4 billion. In addition to improvements in
efficiency, including reductions in design and construction costs, we have also
invested in measures to expand demand. Capital investment is expected to
increase because of expenditure in such areas as demand expansion and the
maintenance of supply reliability. However, we aim to optimize the efficiency
through measures that will include reviews of design standards and specifications.
To reflect these policies, we have changed average yearly capital investment
target for fiscal 2005--2009 from 190円 billion to 200 billion. We also aim to
improve labor productivity (units of electricity sold per employee) by at least 10%
in the period to fiscal 2009. We will achieve this through further improvements in
operating efficiency, including the use of IT to reform operational processes.
Our target for FCF is an average of 100円 billion (non-consolidated) in the five
years between fiscal 2005 and fiscal 2009. Sources of FCF include efficiency
improvements and cost reductions. We use FCF to strengthen our
competitiveness by cutting electricity charges, to improve our financial position by
reducing interest-bearing liabilities, and to strengthen our earning power by
investing in new business activities. By using FCF to fund reliable dividend
payments, we are also working to raise our corporate value.
An Interview with the President >>>
In June 2007, I was appointed President of
Kyushu Electric Power. I am determined to
maintain and enhance our reputation as a
company that contributes to society and is a
dependable partner for its customers. I also
want to ensure that our employees have
opportunities to communicate directly with
stakeholders, and that they can enhance their
professional skills in working environments that
also support free and open communication.
These qualities are vital to the realization of our
vision of Kyushu Electric Power as a vibrant and
dynamic company.
TOSHIO MANABE
Toshio Manabe joined Kyushu Electric Power in 1968. He was appointed
President in June 2007. Previous posts include executive officer and
director, and he has headed the Power System Operation Department,
the Corporate Planning Office, the Kumamoto Branch and the
Transmission and System Operation Division.10QUESTION 2
YOU INTRODUCED A NEW MANAGEMENT STRUCTURE IN JUNE 2007.
WHAT ARE YOUR VIEWS ON THE BUSINESS ENVIRONMENT?
In creating the new structure, we further enhanced our corporate governance
systems and reviewed the roles of our directors and Executive Officers.
Specifically, we reduced the number of directors from a maximum of 25 to a
maximum of 17 and abolished the position of Managing Director. We also
shortened the term of office of directors from two years to one. Another change
was the creation of the position of Managing Executive Officer, which is
positioned mid-way between the Senior Managing Executive Officer and
Executive Officer levels. These latest reforms follow previous changes designed to
speed up decision-making and strengthen the supervisory functions of the Board
of Directors, including the introduction of the Executive Officer system and the
appointment of an outside director in 2001.
We made the recent changes to our management structure with the aim of
further clarifying supervisory and executive roles. As members of the Board of
Directors, directors discuss and make decisions about corporate management
policies and other important matters. Executive Officers are responsible for the
performance of business operations within the area of responsibility delegated to
them by the Company, under the coordination of the President.
QUESTION 3
WHAT DO YOU SEE AS THE KEY EVENTS OF FISCAL 2006?
First, we set two new records for electricity production. In August 2006, our
maximum daily output reached a new high for the first time in two years at
336.576 million kilowatt hours, while our maximum hourly output set a new
record of 17.541 million kilowatts for the first time in five years. Reasons for this
high output include increased air-conditioning demand because of unusually high
temperatures after the end of the rainy season. Another factor was the economic
recovery, which was manifested in increased capital investment and production.
In addition, rising crude oil prices caused customers to switch from on-site
generation to electricity supplied by Kyushu Electric Power.
General demand, including domestic lighting and commercial demand
increased. Among the factors contributing to the rise in domestic lighting demand
was growth in the number of all-electric homes. Positive factors for commercial
demand included the opening of new commercial facilities. However, demand for
cooling and heating was lower compared with the growth recorded in the previous
accounting period as a result of extremely high summer temperatures and a harsh
winter in that year. These and other factors were reflected in a 0.1% year on year
decline in the volume of electric power sales. Demand from major industrial users
increased by 6.8% year on year. Reasons for this growth included strong
production trends in several industries, notably digital electrical appliances and
iron and steel. In addition, higher crude oil prices caused users to switch from in-
house generation to electricity supplied by Kyushu Electric Power. Total electric
power sales increased by 1.7% year on year to 8,439 million kilowatt hours.
Another important event was the start of commercial operation of the first unit
at the Omarugawa Power Station in July 2007, following the completion of
voluntary pre-use checks. The first unit has a rated output of 300,000 kilowatts.
We started construction of this pure pumped storage station in February 1999.
Pumped storage power stations are extremely useful for adjusting output
according to demand. They can be started up or shut down quickly, and play an
important role as peak or emergency capacity. Our priority now is to operate the
first unit safely while bringing the other units into commercial operation. We will
continue to emphasize safety and environmental protection throughout the
construction project. When the power station is completed in 2011, it will have a
capacity of 1.2 million kilowatts.
2004 2005 2006 2009
Target
(Fiscal Year)
100,000
80,000
60,000
40,000
20,000080,199
80,199
82,956
82,956
86,700
86,700
84,399
84,399
Electricity Sales Volume
Demand by customers other than
large-scale industrial decreased by
0.1%. Growth mainly in all-electric
housing and new openings of
commercial facilities was offset
by demand decreases in air-
conditioning, etc.
Demand by large-scale industrial
customers increased by 6.8%.
Robust economic activities in
digital electronics and steel
industries, etc. led to demand
increase. In response to a rise in
oil price, industrial users switched
from on-site generation to power
purchase.
(Millions of kWh)11QUESTION 4
WHAT ARE YOUR PRIORITIES, ESPECIALLY WITH REGARD TO
FUEL PROCUREMENT AND THE OPERATION OF NUCLEAR FACILITIES?
World energy demand is expected to expand dramatically, especially in the
BRIC economies. This means that reliable long-term access to fuel resources,
including coal, LNG, crude oil and nuclear fuel is an important issue. We will
continue to rely primarily on long-term contracts, and to diversify our sources
and contract methods. The reinforcement of our procurement capabilities will
remain a priority. Strategies include direct, integrated participation in the fuel
supply chain at all stages from procurement and transportation to acceptance
and sale. In this way, we aim to secure reliable, long-term access to fuel, and
improve the flexibility and economic performance in terms of both
procurement and utilization.
We will continue to comply with all laws, regulations and other requirements
concerning the operation of our nuclear power stations, including cooperation in
government safety inspections, approval of construction plans, and pre-use and
periodic inspections. We also manage and operate our facilities under
appropriate maintenance, security and management systems to ensure that that
safety standards remain consistently high.
As part of our ongoing efforts to strengthen safety management systems in
nuclear power stations, we are raising employee awareness of the important roles
and responsibilities of nuclear power stations. We are also enhancing and
expanding our education and training programs, and ensuring facilities are
operated safely and in accordance with all inspection, maintenance and quality
management procedures.
Regular reviews also play an important part in the ongoing improvement of
safety and reliability in our nuclear facilities. These reviews allow us to monitor
the effectiveness of safety activities and the extent to which those activities are
based on the latest technical knowledge. We have expanded our mechanical
and structural maintenance programs to include aging countermeasures. As
facilities approach the 30th year of their operating lives, we conduct technical
evaluations of their aging characteristics. The results are reflected in long-term
maintenance programs.
We regularly monitor the environmental radiation in the areas around our
nuclear power stations to assess the effect on the general public. The results of this
monitoring show that the radiation levels are less than one-thousandth of the level
mandated by law, indicating that the environments around our facilities are safe.
Our extensive measures to ensure safety at our nuclear power stations not with
standing, the total operating rate for our six nuclear units was 82.1% in fiscal
2006. This is substantially higher than the national average of 69.9% and
indicative of excellent operating performance.
Japan is not richly endowed with energy resources. We believe that pluthermal
projects are essential, and that the early establishment of a nuclear fuel cycle
based on the use of plutonium produced through reprocessing is the only way to
ensure reliable supplies of electric power over the long-term future. The
development of pluthermal and reprocessing technology are important steps
toward the creation of this nuclear fuel cycle. We are aware that the
establishment of nuclear fuel cycle technology will require a long period of time,
and we therefore believe that steady progress toward this goal should begin now.
By fiscal 2010, we aim to implement a pluthermal system in the No. 3 Unit at
our Genkai Nuclear Power Station. In September 2005, following stringent safety
inspections, we received government permission to modify a nuclear installation.
In March 2006 we obtained the preliminary agreement of Saga Prefecture and
the municipal government of Genkai-cho. In September 2006 we signed an
agreement with Mitsubishi Heavy Industries, Ltd. concerning the supply of mixed
oxide (MOX) fuel, which is a mixture of uranium and plutonium oxides.
Currently we are preparing for the production of MOX fuel. Prior to the start of
Maintaining
a High Nuclear Power
Utilization Rate
We have worked to maintain a
high utilization rate of nuclear
power facilities based on the
major premise of ensuring safety.
In FY2006, the nuclear power
utilization rate was 82.1% mainly
due to the continuous safe and
stable operation of nuclear power
stations and the implementation
of the constant cycling at rated
thermal output at all the nuclear
power plants.2009Target
(Fiscal Year)
2004 2005 2006
National Average
Kyushu Electric Power10080604020086.886.871.971.982.182.169.969.983.583.586.286.268.968.9(%)12
production, Kyushu Electric Power staff were sent to Mitsubishi Heavy Industries,
Mitsubishi Nuclear Fuel Co., Ltd., which will manufacture parts, and the French
company MELOX, which will produce the MOX fuel, in April 2007 to audit quality
assurance systems.
The next step will be the completion of formalities relating to the processing
and transportation of MOX fuel. Kyushu Electric Power will implement a full range
of safety measures, and we will ensure compliance with all related laws and
regulations and implement appropriate safety assurance activities at each stage.
QUESTION 5
THERE WERE NUMEROUS PROBLEMS WITH POWER STATIONS
AFTER FISCAL 2006. HOW DO YOU VIEW THESE ISSUES?
The Ministry of Economy, Trade and Industry and the Ministry of Land,
Infrastructure and Transport directed us to carry out inspections of our generation
facilities. These inspections identified 599 instances of four types of unsatisfactory
situations in hydroelectric facilities, and six instances of one type in thermal
facilities. Overall, there were 605 instances of five types of unsatisfactory
situations. While none of these problems posted a threat to safety or the
environment, they nevertheless represent a totally unacceptable failure to live up
to the trust placed in us by society. For this we apologize unreservedly. One of
the underlying reasons for these problems were decisions based on inadequate
knowledge of the laws and regulations that govern our operations. Other factors
appear to have included complacent reliance on long-standing operational
practices, and an inadequate awareness of compliance requirements.
We recognize the seriousness of these issues, and we are absolutely
determined to prevent recurrences by steadily implementing measures at all of
our generation facilities and throughout our organization, including steps to raise
awareness of compliance issues. We are also working to restore public
confidence in our operations by ensuring that our operations are highly
transparent and guided by high standards of fairness and business ethics.
Following the Niigata Chuetsu Offshore Earthquake on July 16, 2007, the
Nuclear and Industrial Safety Agency (NISA) directed electric power companies to
conduct inspections of firefighting capabilities at nuclear power stations, and of
their reporting systems for radioactive leaks and other incidents. Inspections
conducted by Kyushu Electric Power in accordance with this directive confirmed
that appropriate systems were in place at our facilities. However, we are now
complying with a subsequent directive from the Minister of Economy, Trade and
Industry by formulating plans for the reinforcement of in-house fire-fighting
teams and the improvement of systems to ensure timely, accurate reporting of
accidents. The improvements will include stationing of full-time fire-fighting
personnel and personnel capable of measuring radioactivity at our facilities on a
24-hour basis, and the provision of chemical firefighting vehicles and water tanks.
We aim to complete these measures by the end of fiscal 2007.
In September 2006, the Regulatory Guide for Reviewing Seismic Design of
Nuclear Power Reactor Facilities was amended to reflect the latest knowledge.
Kyushu Electric Power was carrying out assessments based on the amended
Regulatory Guide when the Minister of Economy, Trade and Industry directed that
evaluation plans should be revised, and we now plan to issue an interim
assessment report in March 2008. This report will include the results of a seismic
safety evaluation of representative facilities with essential functions at two
representative plants: Unit 3 at the Genkai Nuclear Power Station and Unit 1 at
the Sendai Nuclear Power Station.
We are constantly working to ensure the seismic safety of our nuclear power
stations according to the latest knowledge. If new knowledge is discovered as a
result of the recent Niigata Chuetsu Offshore Earthquake, we will apply this to our
current review process as required, so that we can provide additional confidence
for residents near our nuclear facilities, and for our shareholders and investors.
(Fiscal Year)
05〜09
Average Target70.870.8
120.0
120.0
101.6
101.6
2004 2005 2006
Equity Ratio
(Right)FCF(Left)
250 40302010020015010050025.725.726.826.8303024.224.224.2
212.9
212.9
(Fiscal Year)
05〜09
Average Target
125.2
125.2
110.0
110.0
118.5
118.5
2004 2005 2006ROA(Right)
Ordinary Income
(Left)
200 864201501005002.72.72.42.43.03.03.33.3
159.9
159.9
Kyushu Electric Power is striving to
improve management efficiency
and have set financial target
in our midterm management
policy for FY2005-2009.
Both ordinary income and
shareholders’ equity ratio show
steady improvement while FCF
and ROA are still below the target
level due to the increased external
funding in accordance with the
accounting regulation regarding
the reserve for nuclear back-end
expenses issued in October 2005.
Financial Indexes (Consolidated)
(Billions of Yen) (%) (Billions of Yen) (%)13QUESTION 6
HOW WOULD YOU SUM UP TRENDS BY BUSINESS AREA?
Our core segment is the total energy business, which is based on our management
and business knowledge in the field of electric power. We are aggressively
developing our business activities in this area. We are also using our tangible and
intangible management resources to respond to the needs of customers in our
region by developing activities in the areas of IT and telecommunications, the
environment and recycling, and the lifestyle-oriented services.
In our total energy business activities we have focused primarily on areas
that provide the best opportunities for synergies with our electric power
business, such as gas and LNG sales and overseas IPP projects. At 128円.3
billion, net sales were 3.6% higher year on year in fiscal 2006. Reasons for this
increase include volume growth in gas sales. Operating income increased by
49.8% to 6円.8 billion. In addition to sales growth, this also resulted from
cancellation of unprofitable contracts in the distributed power business,
starting in the previous fiscal year.
In the IT and telecommunications segment, we are dynamically using our IT
expertise and infrastructure, including our fiber-optic network and data centers,
to develop business activities centering on broadband services, which are
marketed under the "BBIQ" brand. In fiscal 2006 net sales increased by 3.6%
year on year to 76円.4 billion, mainly because of growth in the number of
broadband service subscribers. Operating income declined by 600円 million to
a loss of 1円.3 billion, in part because of facility-related costs relating to the
expansion of broadband services.
Another area in which we are actively using our management resources to
develop business activities that reflect the needs of regional customers is the
environment and recycling. Income potential is key to the selection of
activities, which include the recycling of used fluorescent tubes and
confidential documents.
In our last segment, lifestyle-oriented services, we are involved in a wide range
of activities that help to enhance the quality of life for our customers, including
the operation of condominiums with care services for senior citizens and housing
evaluation services. In June 2006, we established our newest condominium
subsidany, Kyuden Goodlife K.K., which controls and supports condominium
business for senior citizens. In November 2006, we opened its third
condominium complex, Grand Garden Kagoshima after condominiums in East
Fukuoka and Kumamoto.
QUESTION 7
WHAT ARE YOUR PRIORITY POLICIES IN THESE AREA?
One of our core policy goals is the dynamic development of overseas business
activities that allow us to translate our technology and knowledge into high
returns. Our first of these new overseas activities is the discovery of new IPP
projects in which we can use our technology and other management resources.
We are looking for these projects in Asia, including China, and in North America,
including Mexico. We are especially interested in the use of natural energy
resources, such as wind and geothermal energy, to generate electricity in China
and Indonesia. In addition, we are contributing to the achievement of targets
under the Kyoto Protocol by providing energy conservation consulting services in
China and elsewhere.
The second priority policy regards is our broadband business. The advent of the
ubiquitously connected society is reflected in growing demand for high-speed,
large-capacity, two -way communication technology, including Internet access, IP
telephony, digital broadcasting and home networking. In our IT and
telecommunications segment, we are achieving sustained growth in the number
of subscribers for our broadband services.
and lifestyle services business
segment. In year ended March
2007, ordinary income from the
total energy business segment
increased by 57.7% to 8円.2 billion,
but there was a 14.8% decline to a
loss of 2円.7 billion in the IT and
telecommunications business
segment. Ordinary income from the
environmental, recycling and lifestyle
services business segment was
35.5% higher at 3円.4 billion.
Trends in
Segment Ordinary Income
We are actively developing a range
of business activities to meet the
needs of our customers, and to
expand and strengthen our income
base. Under our medium-term
management policy for the period
from fiscal 2005 to fiscal 2009, we
aim to achieve average ordinary
income of 4円 billion from the total
energy business segment, 4円 billion
from the IT and telecommunications
business segment, and 2円 billion
from the environmental, recycling
(Fiscal Year)
05〜09
Average Target8.28.23.43.4-2.7-2.74.04.02.02.04.04.08.08.02.02.0-3.0-3.0
Total energy services
(not including electricity business)
Environment and Recycling business/
Lifestyle‐oriented service
IT and Telecommunications
2005 2006 2007
Target201510505.05.02.52.5-2.3-2.3(Billions of Yen)14As the number of broadband connections increases, we need to invest in
capacity expansion. There has also been forward investment in the reinforcement
of our marketing systems in this area. As a result, the expenditure and income
balance is likely to remain tight for while longer. However, we see opportunities
for growth and income in the future, and we will continue to focus our group
resources on the development of this business.
Finally, there is the gas business. We import approximately 2.7 million tons of
LNG annually from Indonesia and Australia for use as a generator fuel. The gas is
imported by two group companies, Oita Liquefied Natural Gas and Kitakyushu
Liquefied Natural Gas, which gasify the LNG and deliver it to our facilities. We
developed the gas business to create a reliable income stream by exploiting our
advantages in area of fuel procurement, including merits of scale and access to
LNG terminals and other infrastructure. We supply gas to gas companies and
major users. In fiscal 2006, higher demand was reflected in year on year growth
in both sales and income. In fiscal 2007, demand is expected to remain strong,
and we anticipate further growth in sales volumes.
QUESTION 8
TO CONCLUDE, DO YOU HAVE A MESSAGE FOR SHAREHOLDERS?
Our fundamental policy on dividends is to maintain stability. When setting the
dividend, we take into account a wide range of factors, including the medium-
and long-term outlook for income and expenditure, and our progress toward the
achievement of management targets.
For the time being, we plan to maintain our dividend at 60円 per annum while
striving to raise our shareholders’ equity ratio to 30%. Looking further ahead, we
will continue to work toward this shareholders’ equity target set down in our
medium-term management policy, but we will also review the situation based on
a comprehensive analysis of business conditions, including income and
expenditure trends, the competitive environment, and capital market trends.
The entire Kyushu Electric Power Group will remain focused on the
improvement of our corporate value through continuing efforts to provide
enhanced satisfaction for all stakeholders, including our shareholders.1501
Kyushu Electric Power—Timeline
"Enlighten Our Future"
Towards a comfortable and environment-friendly lifestyle
today and for generations to come.
Kyushu Electric Power’s Four Challenges >>>
Steady and reliable,
Earth-friendly energy.
1951: Kyushu Electric Power is established.
1953: Japan receives its first postwar loan
(approximately 3円.8 billion) from the
International Bank for Reconstruction and
Development (the World Bank).
1955: The Kami-Shiiba Power Station, the first in Japan
with an arch dam, becomes operational.
1955: The No.1 Unit at the Kanda Thermal Power Station,
an advanced, high-capacity system (75,000 kW)
becomes operational.
1957: Kyushu Electric Power completes its Central Line
(220,000 V), its first super-high-voltage
transmission line.
Thermal generation capacity exceeds
hydroelectric capacity.
1960: Frequency unification is completed.
1967: The Otake Power Station, Japan’s first
commercial geothermal generation facility,
becomes operational with a capacity of 11,000 kW.
The No.1 Unit at the Karatsu Power Station
(156,000 kW) becomes operational as
Kyushu Electric Power’s first generation facility
with a control computer.
1969: The No.1 Unit at the Oita Power Station
(250,000 kW), Kyushu Electric Power’s first facility
designed to run exclusively on heavy fuel oil,
becomes operational.
Supporting Japan’s
Postwar Reconstruction
1950~
Supporting Growth by Making
Electricity Available Everywhere
1960~
1970: The provision of electric lighting to
all homes is completed.
1975: The No. 1 Unit at the Genkai Power Station
(559,000 kW), Kyushu Electric Power’s
first nuclear facility, becomes operational.
The Ohira Power Station, then Japan’s biggest
pumpedstorage facility (500,000 kW)
becomes operational.
1977: The No.1 Unit at the Hatchobaru
Geothermal Power Station becomes operational.
initially with a capacity of 23,000 kW,
it is one of the biggest in Japan .
Overcoming the Oil Crises
1970~
Kyushu
Electric Power’s
Mission1602 03 04
1980: Kyushu Electric Power builds the Central and
West Kyushu Substations (500,000 V) and
raises the voltage on its Saga Line to 500,000 V.
The 500,000 V Trans-Kanmon Line
becomes operational.
1982: The Kyushu Energy Pavilion is opened.
The No. 1 Unit at the Sendai Nuclear Power Station
(890,000 kW) becomes operational.
1984: The No. 1 Unit at the Tenzan Power Station
(300,000 kW), a large-capacity pumped
storage facility, becomes operational.
1986: Kyushu Electric Power begins to use automatic
control systems on its distribution lines.
1989: Kyushu Electric Power achieves a zero outage record
for work on high- and low-voltage facilities for the
first time in Japan.
The establishment of Iris outlets begins.
Improving the Quality of Electricity
1980~
1990: The No.1 System at the Shin-Oita Power Station
(690,000 kW) becomes operational. Designed to
use LNG, this combined-cycle unit provides
excellent thermal efficiency.
1992: Kyushu Electric Power begins to purchase surplus
electric power from distributed generation facilities,
including solar and wind power systems.
1998: Kyushu Electric Power begins to operate a
superconducting storage system as an electric power
facility. It is the first of its type in Japan and one of the
largest in the world.
Improving the Quality of Electricity
1990~
2000: The Genkai Energy Park is opened.
2001: A loan agreement is signed for the Tuxpan IPP project
in Mexico.
The Kyushu Homeland Forestation Program is launched.
2002: Dedicated account managers are assigned to
corporate customers.
2004: The Call Center is extended to the entire
corporate organization.
Kyushu Electric Power achieves the
best CO2 emission level per unit of electric power
(0.331kg-CO2/kWh) in the
Japanese electric power industry.
2005: The Goto Archipelago Link, Japan’s longest
sea-bed cable, becomes operational.
2006: Electricity charges are reduced, bringing the
cumulative reductionsince January 1996 to
approximately 30%.
Kyushu Electric Power becomes the first
electric power company to win top prize
in the 9th Green Reporting Awards.
2007: The "Kyushu Electric Power’s Mission" is adopted.
Enhancing Competitiveness through
Electric Power Liberalization
2000~
Services that
truly satisfy.
In company with
Kyushu. And to Asia
and the world.
Discovering solutions,
and putting them
into practice.
The Mission is our unchanging pledge to supply electric power and energy reliably in a changing world, and help our customers to enjoy
brighter, more secure lives and social environments.
To provide comfort and convenience while being kind to the environment, we need to create a virtuous circle in which comfort brings
enhanced enjoyment of day-to-day life, and that enjoyment in turn helps to create a better global environment, which then further
enhances the lives of people. Our determination to realize this vision has led us to accept the four challenges.
Generation Capacity Development Plan Ensuring Long-term Reliability
Kyushu Electric Power employs a balanced approach to generation capacity development. Our strategy of
building a generation mix centering on nuclear power takes into account a comprehensive range of factors,
including energy security, economic performance and environmental compatibility.
[Nuclear Power Generation] Nuclear power provides major advantages in terms of economic and environmental
performance and reliability, and we will continue to develop nuclear power facilities as our core base load capacity,
always with safety as our first priority. We will continue our efforts to gain the support and cooperation of our
customers and regional communities in preparation for the development of next-generation nuclear power facilities,
starting in the second half of the next decade. Environmental surveys are currently being carried out for this purpose
at the Sendai Nuclear Power Station.
[Pumped-storage Hydroelectric Power Generation] Pumped-storage hydroelectric facilities play a key role in
adjusting output to reflect demand, since they can be started up and shut down quickly. We will continue to develop
these facilities to provide the capacity needed to meet peak and emergency demand. The first unit at the
Omarugawa Power Station in Miyazaki Prefecture went on line in July 2007.
[Thermal Power Generation] Fuel diversification is one of our priorities, and we plan to develop various types of
thermal generation capacity, including coal-fired facilities. We will also continue our efforts to improve efficiency,
both from a global environmental perspective, and also to ensure that optimal utilization of energy resources.
[Conventional Hydroelectric Power Generation and Geothermal Energy] Hydroelectricity and geothermal energy are
both purely domestic renewable energy resources. Our development activities are guided by systematic research, which
takes into account not only economic performance but also site-related factors and environmental considerations.
Our priorities are environmental protection and the reliable supply of electric power. We will continue our efforts to
reconcile these two goals by improving our energy efficiency, promoting the use of new forms of energy, maintaining
reliability, and developing new technology. The main focus of these efforts will be nuclear power, which offers key
advantages in terms of environmental and economic performance and reliable access to resources.1701
Kyushu
Electric Power's
Mission
STEADY AND RELIABLE, EARTH-FRIENDLY ENERGY020406080100(%)2004200520062016Target■しかくNuclear ■しかくHydro ■しかくGeothermal ■しかくCoal
■しかくLNG ■しかくOil, etc ■しかくNew energy
(Fiscal Year)
Target Ratio of Power Sources
(Optimum mixture electrical power source)18SENDAI NUCLEAR POWER STATION
(Fiscal year)
PLASMA WIRE COATING
LARGE LITHIUM-ION BATTERY
ENVIRONMENTAL MANAGEMENT We are implementing environmental management policies throughout the Kyushu Electric Power
Group. This stance reflects our awareness of the need to protect the environment and contribute to environmental improvement in
all of our business activities. Each year we formulate an Environmental Action Plan with five core components: the implementation
of environmental management, initiatives in response to global environmental problems, support for the creation of a recycling-
based society, harmonious coexistence with local environments, and harmony and cooperation with society. This plan forms the
framework for environmental activities in that year.
SAFE OPERATION OF NUCLEAR POWER FACILITIES, MAINTENANCE AND IMPROVEMENT OF EFFICIENCY IN THERMAL FACILITIES Nuclear power
accounts for about 40% of our generation capacity. Nuclear power generation produces no carbon dioxide, and this technology is
playing an important role as a solution to both energy security issues and global environmental problems. Safety is our first priority. We
also aim to maintain high operating rates by implementing thorough preventive maintenance programs, and by running our facilities
under a constant rated thermal power operation policy. Another priority is the reduction of emissions, including CO2, SOx and NOx,
from our thermal power stations. We are achieving this goal by reducing fuel consumption through improvements in thermal efficiency.
PROMOTING NEW ENERGY USE In addition to our the development of our wind-power facilities, we buy electric power produced
using wind-power, solar, biomass and other technologies. We are also working to promote the use of new energy through our
support for Kyushu Green Power Fund. In fiscal 2006, initiatives such as these allowed us to reach the 500 million kWh new energy
utilization target stipulated in the Special Measures Law Concerning the Use of New Energy by Electric Utilities (also known as the
Renewables Portfolio Standard, or RPS, Law).
REDUCING GREENHOUSE GAS EMISSIONS In relation to global warming, we were previously working toward a CO2 emission reduction
target for fiscal 2010. However, the start of the first commitment period under the Kyoto Protocol (2008—2012) is now imminent,
and we have therefore switched from this single-year target to one based on the average for 2008—2012. We aim to reduce this
average by about 20% compared with the level in fiscal 1990. Our main strategy for the achievement of this target is to establish an
optimal generation mix centering on nuclear power. We are also implementing demand-side measures, including increased efforts
to promote the use of energy-saving equipment, such as heat-pump water heaters. We will continue to take all possible steps to
minimize greenhouse gas emissions.
Research and Development
PLASMA WIRE COATING This technology, the first such introduction in Japan, was strengthens our earning capacity by extending
facility lifespans. A plasma spray gun is used to apply an aluminum-magnesium alloy coating to surfaces. This system is expected to
prevent corrosion for at least 100 years. It is especially effective in environments with high concentrations of sea salt and has the
potential to provide dramatic reductions in life-cycle costs. The method is also environmentally responsible. The materials used,
aluminum and magnesium, are already present in high concentrations in the soil, and emissions of volatile organic compounds
(VOCs) are low. This technique has been used on a variety of facilities, including urban expressway overpasses, bridges, wind-
turbine towers, power transmission pylons, fuel tank bases and small-bore pipes.
LARGE LITHIUM-ION BATTERY FOR ELECTRIC CARS Kyushu Electric Power is collaborating with Mitsubishi Heavy Industries, Ltd. on the
development of a large lithium-ion battery for use in electric vehicles and plug-in hybrid vehicles (PHEVs). The battery that is being
developed will be lighter and more compact than conventional batteries used in electric vehicles and will support enhanced vehicle
performance. Samples have been provided to vehicle manufacturers, and tests are now being conducted to verify the performance
characteristics of the battery. Studies are also being carried out with a view to reducing production costs.
Patent Applications
As competition intensifies in the electric power market, there is a growing need for measures to counter problems relating to intellectual
property, such as patent violations and leaks. Kyushu Electric Power is developing intellectual property infrastructure, including a
specialist unit established in July 2004 to deal with patent-related matters. Key goals in this area include the effective protection of rights
over the results of our technology development projects, and employee education concerning the importance of intellectual property
rights. As of March 31, 2007, Kyushu Electric Power held 273 Japanese patents, 18 overseas patents and six Japanese utility models.2004200520062008~2012Target(Kg-CO2/kWn) (10 thousand t-CO2)
CO2 emission intensity (Left)
CO2 emissions (Right)012340.00.10.20.30.40.5CO2 Emission Intensity
Our core mission is to meet our customers’ needs and help people to enjoy enhanced amenity by providing services
centering on electricity and other forms of energy to both living environments, including homes, schools, and
communities, and work environments, including offices, factories and commercial buildings.1902
Kyushu
Electric Power's
Mission
Total Solution Marketing
For residential customers, we offer a wide choice of charging options to match various usage patterns. We
also provide technical services, information about energy-saving methods, and ideas about all-electric
lifestyles, which offer advantages in terms of safety, comfort, economic performance and environmental
responsibility. For corporate customers, we dynamically use the total resources of Kyushu Electric Power
and its group companies to respond to needs and requests relating not only to electric power, but to all
aspects of energy.
Stimulating New Demand
The new demand target under our medium-term management policy was 2.5 billion kilowatt hours by
fiscal 2009. This was achieved in fiscal 2006, and we have since adopted a new target of 3.7 billion
kilowatt hours by fiscal 2009.
One of our priorities is the expansion of electricity sales to residential customers. Our target for this
market segment is the creation of a cumulative total of 600,000 all-electric households by fiscal 2009. We
made excellent progress in fiscal 2006. Almost 50% of all new residences built were all-electric, and a total
of 79,000 all-electric households were added, bringing the cumulative total to 350,000. The target for our
expansion efforts in fiscal 2007 is 88,000, which will raise the cumulative total to 430,000 households. In
the corporate market, we are aggressively proposing a variety of solutions, including electric kitchens and
air conditioning systems, to our customers.
SERVICES THAT TRULY SATISFY.202004200520062009Target(10 thousands) (10 thousands)g yComplex housing Existing single unit house New-built single unit house (Left)
Accumulated Number of All Electric Housing (Right)0123456780102030405060
(Fiscal Year)2004200520062007TargetTa050100150200250
(thousands)
Single year Accumulated total
(Fiscal Year)YeTransition to
All-electric Housing
Our enhanced total-solution service accurately
spots customer needs and provides optimal
energy services, while striving to create new
electricity demand through promotion of all-
electric housing. Since the original target demand
of 2.5 billion kWh was achieved in late November
2006, we have set a new and higher target of
newly created electricity demand, 3.7 billion kWh
to achieve by FY2009. Concerning residential
customers, we will increase the amount of
electric power sold, with our sights set on the
acquisition of 600,000 all-electric houses
(cumulative) by FY2009.
BBIQ Broadband Contracts
The IT and Telecommunications business is a
fast-growing area that we continue to proactively
develop by utilizing our extensive infrastructure
and facilities, including optical fiber networks and
data centers.
BBIQ broadband service grew by 60,000
subscribers in fiscal 2006. As a result, total
connections rose to 155,000, toward our aim of
240,000 connections by fiscal 2009.
Customer Satisfaction Initiatives
Kyushu Electric Power is constantly focused on customer needs and customer satisfaction. We canvas customer opinions
and wishes not only through day-to-day operations, but by visiting customers and hosting a variety of social events. This
valuable feedback is actively reflected in our business operations. The scope of our customer satisfaction activities is
continually expanding. In addition to our basic commitment to the reliable supply of electricity, other initiatives include
innovative payment methods and low-interest loans to fund the installation of all-electric systems.
INITIATIVES TO PROMOTE THE SHIFT TO ALL-ELECTRIC ENERGY In October 2005 we created the Kireilife.net website to promote the shift
to all-electric housing. Through this site, customers can view their electricity charges and usage. Other services include estimates of
lighting and heating costs, and the distribution of an e-mail magazine. Home advisors in our service centers can offer solutions and
follow-up services. Other promotional initiatives are based on our eight Iris Kireilife Plazas serving all Kyushu prefectures. These
provide opportunities for a first-hand experience of the all-electric lifestyle.
PROMOTING ALL-ELECTRIC KITCHENS FOR COMMERCIAL USERS All-electric kitchens are highly efficient. Because there is minimal waste
heat, the air-conditioning load is also lower. Because no combustion is involved, soiling is reduced. Another advantage is the ease
with which cooking temperatures can be controlled. Kyushu Electric Power is promoting all-electric commercial kitchens to its
customers as systems that help to raise operating efficiency, create better kitchen environments, and improve hygiene
management.
Credit Card Payments/ Previously customers could pay their electricity charges by means of bank transfers, payments through
financial institutions and convenience stores, or over-the-counter payments at Kyushu Electric Power offices. In January 2007 we
further diversified the payment options available by introducing a credit card payment service, and since June 2007 it has also been
possible to make payments through mobile telephones.
Alliances with Leasing Companies and Financial Institutions/ In August 2006, we introduced a leasing option for Ecocute
products, IH cooking appliances and other electrical equipment to minimize the initial investment required for the conversion of
apartment buildings to all-electric systems. This service is provided in partnership with leasing companies and manufacturers.
Since February 2005, Kyushu Electric Power has offered low-interest finance for rebuilding, renovation and remodeling of all-
electric residences. The number of financial institutions participating in this scheme has since increased to 28. There has also been
an increase in the number of insurance companies offering discounted fire insurance for all-electric housing.
Developments in IT and Telecommunications, Lifestyle-Oriented Services
Kyushu Electric Power offers a wide range of services to support a comfortable lifestyle. Evidence of Japan’s evolution as a
ubiquitously networked society includes the continuing expansion of Internet use, the growing use of IT in the business
sector, and the emergence of electronic government at the regional level. We see the telecommunications business as a
segment with major growth potential. The Kyushu Electric Power Group has important management assets in this field,
including high-speed, large-capacity data communications infrastructure based on its fiber-optic network. We are using this
infrastructure to develop broadband and data services and other business activities.
BROADBAND BUSINESS The number of subscribers to our BBIQ broadband service has grown steadily since the service was
launched in 2002. In February 2007 the cumulative number of connections exceeded 150,000. The IP telephony service, marketed
as BBIQ Hikari Denwa, has also been very successful. The number of subscribers has continued to grow steadily since the launch of
the service, and the cumulative total exceeded 100,000 two years after the launch. In some areas, we are now offering a triple
package combining Internet access and IP telephony with video and broadcasting services. Another added-value service is power
line communication (PLC), which allows electric power lines inside a building to be used as a data transmission medium.
HOME SECURITY BUSINESS In November 2005, Kyushu Electric Power introduced a home security service in some areas of Fukuoka
Prefecture. The service uses the Kyushu Electric Power Group’s telecommunications technology to link homes to a security
company. This is another example of how Kyushu Electric Power uses its management resources to contribute to safety, security
and amenity in regional communities.
A Growing Regional Economy
Kyushu is taking a role in overseas exchange. Various economic and cultural exchanges are carried out,
especially with Asia. The number of visitors from Asia has increased steadily since the Asian Financial
Crisis of 1998.
Major industrial facilities in Kyushu are becoming increasingly productive and technologically
advanced, allowing them to function as "mother plants for Asia’s growing industrial clusters, especially in
the automobile and semiconductor industries. Thanks to its geographical proximity to mainland Asia, the
region is expected to enjoy continuing growth in step with the economic development of Asia.
New Manufacturing Facilities In 2006, 196 new manufacturing facilities were opened in Kyushu. The number
has increased in each of the past four years, and the 2006 figure was 1.0% higher than the previous year’s total.
The area of land used for these facilities has increased in five consecutive years. The 2006 total of 323.3 ha
represents a year on year increase of 19.0%. The number of semiconductor and LCD facilities established was
similar to the previous year’s total at 27, but the number of new automobile-related facilities was dramatically
higher at 45, compared with 27 in the previous year.
Trade In 2006, exports from Kyushu increased by 16.0% year on year to 5,059円.5 billion, and imports by
27.0% to 5,429円.4 billion. Both figures are new records. Exports have been expanding continuously for five years
and imports for seven years. In 2006, Kyushu became a net importer for the first time since 1991, with imports
exceeding exports by 369円.9 billion.
Kyushu Electric Power will continue to contribute actively to its region through its business and social contribution
activities. Our aim is to support sustainable progress toward the development of amenable, prosperous communities.
Kyushu Electric Power is also actively involved in activities that provide opportunities for the effective use of its
management resources, including overseas IPP projects and consulting services.2103
Kyushu
Electric Power's
Mission
IN COMPANY WITH KYUSHU. AND TO ASIA AND THE WORLD.
Phu My 3 IPP projec
Vietnam : Ba Ria Vung Tau Province
Ilijan IPP project
Philippines : Batangas City
Tuxpan Unit No. 2 and 5 IPP
Mexico : State of Veracruz
Taiwan : Consultation for Taiwan Power’s substation construction
China : Consultation for energy conservation
promotion verification project
Consulting and Environment related business
IPP business
Harmonious Coexistence with Regional Communities
We aim to support sustainable development of prosperous, pleasant communities in our region. One of the ways in which
we contribute is through support and cooperation in such areas as culture, the arts, sports, regional development and social
welfare. We are also actively involved in international exchange, including information sharing and technical cooperation
with overseas electric power companies. In the area of international cooperation, we assist developing countries by
accepting trainees and sending experts.
Kyushu Homeland Forestation Program The Kyushu Homeland Forestation Program was launched to commemorate our 50th
anniversary. Under this program, we are working with local residents in various parts of Kyushu to plant 1 million trees over a 10-
year period starting in fiscal 2001. In fiscal 2006, we planted 120,000 trees in 42 locations, bringing the total for the past six years to
approximately 670,000 trees.
Promoting Sports Sport plays an important role in the development of healthy, pleasant regional communities. We are working
to improve and revitalize sporting activities in our region in various ways, including support for regional sports tournaments, and
participation in various events. Our commitment to sport is symbolized by the success of the our corporate rugby team, which has
been promoted to the top league this year. We are actively building community support for the team through various initiatives,
including rugby training programs for children.
Attracting Projects and Investment to Our Region
Kyushu Electric Power is helping to revitalize Kyushu’s regional economy by promoting investment in the region. In July 2005,
we established a specialist investment promotion unit. We are actively working to attract investment to our region by
gathering and distributing information and participating in regional projects. In March 2007, we created regional promotion
pages in Japanese and English on our website to encourage Japanese and overseas businesses to invest in Kyushu. As a
company that operates key infrastructure in Kyushu and aims to achieve growth in partnership with the region, we will
continue to contribute to the revitalization of Kyushu.
Overseas Activities
Kyushu Electric Power sees the discovery of overseas business opportunities as an important pathway to new growth and
development. Overseas activities include participation in IPP projects in Asia, North America and other parts of the world, as
well as energy conservation consulting in China and elsewhere.
IPP PROJECTS One of the IPP projects in which Kyushu Electric Power has participated is the Tuxpan No. 5 Project in Mexico. A
power station built as part of this project commenced commercial operations on September 1, 2006. This is the first overseas IPP
project in which a Japanese electric power company has entered a successful bid covering participation from the initial concept
stage. Kyushu Electric Power partnered with Mitsubishi Corporation for this project. Together with the neighboring No. 2 Project, this
scheme will have capacity for approximately 1 million kilowatts. Until 2031, the electricity will be supplied wholesale under a 25-year
contract with Mexico’s Comision Federal de Electricidad.
CONSULTATION AND ENVIRONMENT-RELATED ACTIVITIES Through its electric power business in Japan, Kyushu Electric Power has
accumulated extensive experience and knowledge, as well as expert personnel with advanced technical skills. We have used these
resources to build a consulting business relating to power supply development and the construction of power transmission and
distribution facilities in other countries, especially Asian countries. Our services include surveys, design work, construction
management, and technical inspections. Through these activities, we are making an important contribution to the reliable supply of
electric power and the training of electric power technicians in many countries.
OTHER ACTIVITIES, INCLUDING COOPERATION AGREEMENTS Kyushu Electric Power works actively with overseas organizations. In February
2007, we signed an exchange and cooperation agreement with India’s National Thermal Power Corporation (NTPC). Activities
covered by the agreement include the sharing of information in such areas as power generation and the environment. In April, we
signed a joint project development agreement with Medco, a major Indonesian energy company, concerning an IPP Projects and
upstream fuel interests in Indonesia and overseas. We also concluded a cooperation agreement with China Datang Corporation and
Sumitomo Corporation concerning renewable energy development in China and overseas and the sharing of technology and
knowledge. Also in April 2007, we signed a joint venture agreement China Datang Corporation and Sumitomo Corporation covering
wind-power development projects to be implemented in China’s Inner Mongolia Autonomous Region using a CDM scheme.22KYUSHU HOMELAND FORESTATION
RUGBY CLASS FOR CHILDREN
THE TUXPAN NO. 5 PROJECT
Project Data : the Tuxpan No. 5 Project
Construction site: Tuxpan, State of
Veracruz, Mexico
Generation method: Combined-cycle
Output: 495,000 kilowatts
Construction cost: Approximately
US300ドル million
Fuel: Natural gas
Start of construction: July 2004
Start of operation: September 2006
Overseas Business Developments
(Year ended March 31, 2007)23Motivating and Upskilling Employees,
Enhancing Group-level Technology Resources
Our human resource policies are based on respect for fundamental human rights
and compliance with related laws and regulations. We also recognize that the
people are the real source of improvement in corporate value. This is reflected in
our human resource development programs, which are designed to foster
awareness of personal roles and responsibilities, encourage imagination and
creativity, and provide opportunities to acquire management skills and specialist
abilities. We want our employees to be independent people with the ability to act
for themselves. Employee views are reflected in our human resource policies,
which also emphasize the development of motivational working environments in
which there is free and open communication.
■しかく Respect for Human Rights
Kyushu Electric Power respects human rights in Japan and overseas. Contribution to
the development of amenable and enriched social environments is a fundamental part
of the philosophy on which our group-level business policies are based. We implement
various initiatives to ensure that all of our employees have a proper understanding
about human rights issues and are aware of the importance of ethical behavior.
Communicating with Stakeholders
Dialog with stakeholders is an important way to inform the public about
our business activities and obtain opinions and suggestions. We are working
to expand and enhance communication activities by creating a variety of
opportunities for dialog with stakeholders, and we aim to respond promptly
and in good faith to this feedback.
Kyushu Electric Power Advisors
Kyushu Electric Power Advisors are outside experts who provide opinions and
suggestions about all aspects of our business activities. The advisors, of whom
there are currently 12, meet directly with senior management officials, including
the President and Executive Vice Presidents, and their views are reflected in
management activities.
Stakeholder Satisfaction Surveys
Every year Kyushu Electric Power conducts questionnaire surveys of its
customers, employees, shareholders and investors. The results are used to
improve management quality.
We value feedback about our activities, and we are expanding our communication activities so that we can reflect
stakeholder views and suggestions quickly and effectively in our business operations. We also recognize that people are
the real source of corporate value, and we are continually striving to provide amenable and motivational working
environments.
DISCOVERING SOLUTIONS, AND PUTTING THEM INTO PRACTICE.04Kyushu
Electric Power's
Mission
■しかく Measures to Prevent Sexual Harassment
The Kyushu Electric Power Group has implemented a range of measures to prevent
sexual harassment. We have distributed pamphlets to all employees, held seminars,
and established internal and external contact points, including a hotline system, for
advice on sexual harassment issues. In fiscal 2006, the hotline system, which operates
outside of the corporate organization, was extended to include companies in the
Kyushu Electric Power Group.
■しかく Employment Opportunities for the Aged and Disabled
There have been many changes in the environment for aged people, including
increases in the starting age for welfare pension payments, and amendments to the
Law concerning Stabilization of Employment of Older Persons. Kyushu Electric Power
has expanded and enhanced its employment systems for older workers. Our core
system in this area is the Senior Employee System, which provides for the
reemployment of people who have reached retirement age. The purpose of this
system is to provide opportunities for retirees to make further use of knowledge and
skills accumulated over many years, and to meet the varying needs of individual
workers. We have also expanded social participation opportunities for people with
disabilities by systematically recruiting people in cooperation with schools, and also
through employment security offices under the "Hello Work" scheme. In July 2004, we
established a special subsidiary, Kyushu Captioning Co-Production Center Inc., as a
venture by and for people with disabilities.
■しかく Equal Opportunity Initiatives
In order to achieve a goal to raise corporate value and activate in the entire company,
we promote the employment of talented workers based on neither sex nor age to
follow the Equal Employment Opportunity Law and to promote gender equality in
employment management.
Specifically, we enforce the employment of all people regardless of academic
background, gender or work experience.
Moreover, we deploy a fair promotion selection based on proper evaluation of
placing the right person for the position according to capability and motivation, in
addition to education and training programs regardless of gender.
■しかく Advancement Opportunities for Women
Business conditions are changing rapidly, and customer values are becoming
increasingly diverse. The ability to employ a wide range of human resources without
reference to age, gender or other characteristics is a key driving force for the creation
of new corporate value in this environment. From a corporate social responsibility
perspective, companies have an important role to play in the development of
workplace environments that allow people to reconcile their work and home
obligations so that they can remain in employment.
One of the goals in the Kyushu Electric Power’s Mission, which we adopted in April
2007, is Discovering of solutions and putting them into practice. These words express
our belief in the potential of human beings, our respect for individuality, and our
determination to discover solutions for the future through free and dynamic dialog.
Kyushu Electric Power already implements gender-neutral employment
management policies and helps its employees to reconcile work and home
responsibilities. We plan to turn the Mission into reality through comprehensive
initiatives, including career development support for female employees and work-life
balance support, backed by measures to modify attitudes and develop the necessary
cultural environment. In July 2007, we established a special group in our Human
Resources Department to promote advancement opportunities for women.
The aim of initiatives such as these is to create a vibrant corporate culture and
motivational workplace environments in each individual employee can achieve his or
her full potential, regardless of gender, age or other characteristics.24Management and Governance
Continual reinforcement of our management and governance systems is essential
to the achievement of sustained improvement of our corporate value, through
successful adaptation to changing business conditions, and through sound
management of our business operations.
Strengthening Corporate Governance
The core governance structures for Kyushu Electric Power are the Board of
Directors and the Board of Corporate Auditors, which work to strengthen the
supervisory functions of the Board of Directors and ensure that all management
decisions are in compliance with laws and regulations. They also formulate basic
policies concerning the development of internal control systems as the basis for
sound business management and continual improvement. In June 2006 we
reviewed the roles of directors and executive officers and made further
enhancements to our structures.
Board of Directors The Board of Directors normally meets once each month to
make decisions on important aspects of corporate management, and to supervise
the performance of business operations. We have taken steps to revitalize the
Board of Directors and strengthen its supervisory functions, including a reduction
in the number of directors and the appointment of outside corporate directors.
If a decision to be taken by the Board of Directors is important for the
performance of executive duties and requires prior consultation, it is first
discussed by the Corporate Management Committee members of which include
the President and the executive officers. Executive officers are assigned to various
organizational units, such as divisions and branches, to implement business
operations. This structure allows timely decision-making and efficient
performance of operations.25Board of Corporate Auditors The Corporate Auditors attend important
meetings, including meetings of the Board of Directors. They also interview the
executive officers of each division, executives of consolidated subsidiaries and
other affiliated companies and inspect business premises as part of their overall
supervision of the performance of directors’ duties.
The Board of Corporate Auditors normally meets once a month to receive
reports, consult and make decisions on important audit-related matters as
stipulated in laws and regulations and the Articles of Incorporation. The corporate
auditors are assisted by a specialist organizational unit, the Corporate Audit Office.
Internal Auditing To ensure that business operations are conducted
appropriately and with optimal efficiency, audits are also conducted from an
independent perspective by special personnel assigned to the Management
Administration Office. Aspects monitored include regulatory compliance and the
status of business operations.
Special staff are also assigned to major supply facilities, such as nuclear and
thermal power stations. Their task is to audit quality assurance systems for safety
activities at these facilities.
Risk Management Organization
Kyushu Electric Power has established systems to identify serious risks affecting its
corporate or divisional operations. Risk factors with the potential to have a
significant impact on the Company’s business activities are periodically sampled,
classified and assessed by coordinating management units. Individual divisions
and business sites prepare for risks identified through this process, and for risks
relating to individual projects, by including countermeasures in their advance
planning. These systems ensure appropriate management of risk.
Audit
Report
Internal Audit
Submission
Report
Report concerning
compliance
Collaboration
Policies/Plan
Policies/Plan
Proposal/Report
Report
Report
Assign
Control/Assign
Audit regarding accounts
Attaching discussion report of important matter
Report
Election/Dismissal
Election/Dismissal Election/Dismissal
Election/Dismissal
Consent of election and dismissal
Judgment of audit validity
Information Exchange/Liaison and Coordination
Comments
General Meeting of Stockholders
Accounting Auditor
Environment
Committee
Internal Audit System.
(Management Administration Office)yd i i i f
Kyushu Electric Power
Environmental
Adviser Meeting
Executive Vice President,
Senior Managing
Executive Officer,
Managing Executive Officer
Responsible for the Business
Lead Department •
Each Business Department
Group Management Conference
(Group CSR Promotion Committee/Group environmental management promotion committee)p gC i /G i l
Compliance Committee
CSR Promotion Committee
Board of Corporate
Auditors
Corporate
Audit Office
Board of Directors
President
Corporate Management Committee26Compliance
Committee
Board of
Directors
Environment
Committee
PresidentCSRPromotion
Committee
Corporte Management
Committee
Group Management
Conference
Matters relating to group management, etc.
Group Business Promotion Committee
Group business promotion, etc.
Group CSR Promotion Committee
Compliance, etc.
Group Human Resources Committee
Group joint training programs, etc.
Group Environmental Management Promotion Committee
Planning, etc., of group environmental activities.
Group Overseas Business Promotion Committee
Examination, etc., of overseas business projects
Group Technology Development Promotion Committee
Technology development activities, etc.
Crisis Management
If an emergency arises, such as a situation that could have a major impact on
business operations or cause serious damage to the Company’s reputation, an
emergency response task force will be established under the leadership of the
President, as crisis management coordination officer. In accordance with the crisis
management regulations, this task force will work with the relevant organizational
units to establish a structure capable of responding quickly and effectively to the
situation. Crisis management preparations include drills based on various
emergency scenarios. Group companies have also established systems to ensure
a timely and effective response to emergency situations in cooperation with
Kyushu Electric Power.
CSR Management Cycle
The corporate social responsibility (CSR) activities of the Kyushu Electric Power Group
are based on a CSR management cycle. Stakeholders are informed about the Group’s
activities in various ways, including the publication of CSR reports, and input from
stakeholders is reflected in management policies and operational management.
■しかく CSR Promotion Committee and Group CSR Promotion Committee
The CSR Promotion Committee deliberates on CSR activities in general, including
policies, planning and reporting. It consists of senior management executives and is
chaired by the President. In August 2006 the Group CSR Promotion committee was
established to promote CSR activities by the Kyushu Electric Power Group. In fiscal
2007 this group is working to create a PDCA cycle based on the Kyushu Electric Power
Group’s CSR Action Plan.
In 2007, Kyushu Electric Power’s CSR Report for 2006 was
commended in the 10th Green Reporting and Sustainability
Reporting Awards. This event is co-sponsored by Toyo Keizai Inc.
and the Green Reporting Forum.
Please refer the links below for the electronic version of the report.
Japanese http://www1.kyuden.co.jp/csr_backnumber_csr2006
English http://www1.kyuden.co.jp/en_csr_backnumber_csrreport200627Compliance Management
■しかく Compliance Improvement Initiatives
Kyushu Electric Power has implemented a number of specific measures relating
to compliance. In October 2002, we established the Compliance Committee.
Chaired by the President, the Committee includes outside experts. It reports to
the Board of Directors. At the same time, department and branch managers were
given responsibility for compliance. We have also created contact points within
and outside of the corporate organization to provide advice on compliance
issues. The aim of initiatives such as this is to prevent behavior that would
contravene regulatory requirements or business ethics, and to ensure the early
detection of problem behavior.
We have also adopted the Kyushu Electric Power Group Action Charter as a
framework for compliance management activities across the entire Group.
Examples of Compliance Violations and
Measures to Prevent Recurrences
■しかく Generation Facility Inspection Results
Under a directive from the Nuclear and Industrial Safety Agency (NISA) of the
Ministry of Economy, Trade and Industry dated November 30, 2006, we
conducted a stringent and thorough inspection of our hydroelectric, thermal and
nuclear generation facilities. These inspections identified 599 instances of four
problems in 138 hydroelectric facilities, and six instances of one problem in four
thermal facilities. No problems were identified in nuclear facilities. It was
confirmed that none of the problems found in hydroelectric and thermal facilities
had safety implications. These findings were published on March 30, 2007.
The common factor in these problems appears to have been a lack of
awareness about compliance issues. This was manifested in inadequate
knowledge of regulatory requirements, and complacent reliance on existing
operational practices.
As reported on April 6, 2007, we implemented measures to prevent
recurrences of these problems. On May 21, 2007 we reported the adoption of a
specific action program for this purpose, and we have since taken steps to raise
awareness of compliance and create mechanisms to prevent recurrences of
compliance issues. We are also working dynamically to prevent recurrences
through changes to our organizational culture, by intensifying our efforts to
inform and educate all employees, and by creating a working environment in
which people are able to discuss and say anything.
Disclosure and Communications
■しかく Strengthened Emergency and Disaster Information Systems
Kyushu Electric Power uses its emergency and disaster information system and
customer outage information system to monitor outages caused by major
emergencies and disasters, such as typhoons and earthquakes. Precise
information obtained through these systems is used to respond to customer
inquiries, and to inform the public through media organizations and our website.
In fiscal 2006, we further improved customer services by extending mobile
telephone access to emergency and disaster outage information to our entire
corporate organization. In July 2007, we enhanced our ability to provide timely
information about estimated service restoration times at the municipality level.
Report
Consultation Consultation Consultation Consultation
Report
Chairman: President.
Members: Directors.Labor Union Chair person.External professionals.
Observer: Senior Corporate Auditor
Responsible person for
General Managers Compliance:
Managing directors
Responsible person for compliance:
• Head of each department at head office
• Head of each branch office, etc.
Board of Directors
Each Group Company
Each Group Company
Chairman: chief of general affairs Dept.
Vice chairman: Chief Management Administration Office
Members: Responsible person for compliance
Members: In-house members
Submission
Monitoring
Group CSR Promotion Committee Compliance Subcommittee
Each Group Company Operational Units
(each department at head office,branch office, etc.)
Compliance Committee
CollaborationratiborllabC n
Compliance
Consultation Desks
Responsible Person for
Promotion of Compliance
President
Consultation Desks
Consultation Desks
Compliance
Consultation Desks
(internal • external)
President
Employees
Directors
Employees
Directors
Business
Partners28■しかく FAQ
Q Can your nuclear power stations withstand a major earthquake?
A When building a nuclear power station, we design the facilities to have sufficient strength to withstand extremely powerful earthquakes. We also
take extreme care to prevent radioactive substances from contaminating the environment.
• We carry out thorough geological surveys of candidate sites to ensure that there are no active faults that could trigger earthquakes.
• Buildings housing key facilities are built directly onto solid bedrock to minimize shaking during earthquakes.
At a given distance from the epicenter of an earthquake, a building constructed on a weak geological structure will be shaken two or three times more
violently than one that is built directly on bedrock.
• Our nuclear reactors are shut down automatically if a major earthquake is detected.
Our systems are designed to shut down and cool each reactor safely and isolate radioactive material, even in the biggest possible earthquake.
Seismic Design Guidelines Amended
In September 2006, the Regulatory Guide for Reviewing Seismic Design of Nuclear Power Reactor
Facilities was amended to reflect recent advances in knowledge, including new results from
research in the fields of seismology and seismic engineering. The purpose of the changes is to
improve the reliability of seismic safety measures in nuclear power stations.
The government has directed that the seismic safety of power stations should be assessed
under the amended Regulatory Guide. Kyushu Electric Power was carrying out these assessments
when the Niigata Chuetsu Offshore Earthquake occurred in July 2007. We have since amended our
implementation plans to reflect new directives from the Minister of Economy, Trade and Industry.
We now plan to file an interim assessment report in March 2008. This report will include the results
of a seismic safety evaluation of representative facilities with essential functions at two
representative plants: Unit 3 at the Genkai Nuclear Power Station and Unit 1 at the Sendai Nuclear Power Station.
Kyushu Electric Power has consistently used the latest available knowledge to confirm and ensure the seismic safety of its facilities. If new
knowledge is discovered as a result of the recent earthquake in Niigata, it will be appropriately reflected in seismic safety evaluations of our facilities.
Q What is your policy on electricity charges?
A Improved price competitiveness is essential to the maintenance of our status as preferred electricity supplier for our customers. In April 2006 we
reduced our charges by an average of 3.71%, and we believe that we have achieved a reasonable level of competitiveness. When setting future
charging policies, we will need to take a range of factors into account, including income and expenditure trends, competition from other electric
power companies and the PPS sector, and also from other forms of energy, such as gas.
Q Is your pluthermal project safe?
A In 1995, Japan’s Nuclear Safety Commission published a report on a safety study of MOX fuel. This report stated that there was no significant
difference between the properties of MOX fuel and uranium fuel in a nuclear reactor, provided that the proportion of MOX fuel used did not exceed
one-third, and that MOX fuel could be used according to existing criteria and according to safety design and evaluation procedures that took into
account the properties of MOX fuel.
When a pluthermal project is implemented, the government conducts a priority safety inspection of each nuclear reactor involved. The safety of
the Genkai Nuclear Power Station was confirmed as a result of inspections that were completed on September 7, 2005.
Intensity of earthquake
General buildings
Subsurface ground
Bedrock
Epicenter
Nuclear power station29■しかく Board of Directors and Auditors (As at June 28, 2007)
Chairperson
Shingo Matsuo
President
Toshio Manabe
Executive Vice President
Mitsuaki Sato
Yukio Tanaka
Hachirou Kurano
Shuuzou Katayama
Director
Nobuyoshi Yokoe
Yasumichi Hinago
Hajime Sankoda
Mamoru Dangami
Masayoshi Nuki
Seizaburou Ikematsu
Kazutami Oyama
Keiji Mizuguchi (Outside Director)
Senior Corporate Auditor
Tooru Soufukuwaki
Tokihisa Ichinose
Corporate Auditor
Kenji Hokamura
Zengo Ishimura (Outside Corporate Auditor)
Michiyo Koike (Outside Corporate Auditor)
Kyousuke Takaishi (Outside Corporate Auditor)
Chairperson
Shingo Matsuo
President
Toshio Manabe
Executive Vice President
Mitsuaki Sato
Executive Vice President
Yukio Tanaka
Executive Vice President
Hachirou Kurano
Executive Vice President
Shuuzou Katayama
Consolidated Five-Year Financial Summary . . . . . . 31
Management Discussion and Analysis . . . . . . . . . . 32
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . 37
Consolidated Statements of Income . . . . . . . . . . . 39
Consolidated Statements of Changes in Equity . . 40
Consolidated Statements of Cash Flows . . . . . . . . 41
Notes to Consolidated Financial Statements . . . . . 42
Independent Anditors' Report . . . . . . . . . . . . . . . . 54
Non-consolidated Balance Sheets . . . . . . . . . . . . . 55
Non-consolidated Statements of Income . . . . . . . 57
Non-Consolidated Five-Year Financial Summary . . 58
Overview of Power Generation Facilities . . . . . . . . 59
Major Subsidiaries and Affiliated Companies . . . . 60
Corporate Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
financial information
Contents3031
■しかく Consolidated Five-Year Financial Summary
Kyushu Electric Power Company, Incorporated and Consolidated Subsidiaries
Years Ended March 31,
Thousands of
U.S. Dollars
(except for per share data)
Millions of Yen
(except for per share data)
FOR THE YEAR:
Operating revenues
Electric
Other
Operating expenses
Electric
Other
Interest charges
Income before income taxes and
minority interests
Income taxes
Net income
Per share of common stock
(yen and U.S. dollars):
Basic net income
Cash dividends applicable
to the year
AT YEAR-END:
Total assets
Net property
Long-term debt, less current portion
Equity
$ 11,925,887
11,074,071
851,816
10,611,864
9,784,182
827,682
324,786
955,940
390,168
558,625
$ 1.180.51$ 34,201,363
26,591,582
14,303,557
9,252,27420071,421,310円
1,350,675
70,635
1,241,296
1,170,655
70,641
77,897
102,363
38,417
64,319
\ 135.13
50.00
4,204,566円
3,523,273
1,984,702
840,24520031,391,684円
1,308,843
82,841
1,192,718
1,108,104
84,614
77,121
112,451
39,086
72,792
\ 153.05
50.00
4,114,378円
3,394,855
1,858,512
910,83820041,408,728円
1,320,581
88,147
1,194,993
1,107,744
87,249
49,522
146,797
57,858
89,288
\ 187.91
60.00
4,049,713円
3,300,740
1,739,660
979,25220051,401,752円
1,311,996
89,756
1,230,467
1,140,797
89,670
41,130
120,790
43,038
76,850
\ 161.67
60.00
4,102,319円
3,217,982
1,724,179
1,052,78520061,408,328円
1,307,737
100,591
1,253,155
1,155,414
97,741
38,354
112,887
46,075
65,968
\ 139.37
60.00
4,038,839円
3,140,200
1,689,107
1,092,6012007(U.S. dollar amounts have been translated from yen, for convenience, at the rate of 118円.09=U.S.1,ドル the approximate rate of exchange at March 31, 2007.)32Operating Results
In the year ended March 31, 2007, power sales increased in volume terms, but both
power and lighting revenues were marginally lower because of reductions in power
charges from April 2006. However, revenues from segments other than electric power
were higher, with the result that operating revenues increased by 0.5% year on year to
1,408円.3 billion.
On the expenditure side, there was a reduction in personnel expenses in the electric
power segment, in part because of good returns on pension assets over the past few
years. However, fuel costs increased because of reduced operation of nuclear
generating facilities. There were also increases in nuclear power back-end costs,
including reprocessing costs of irradiated unclear fuel. Overall, operating expenses
increased by 1.8% year on year to 1,253円.1 billion. As a result, operating income was
9.4% lower at 155円.1 billion.
Despite reduced investment income from equity method subsidiaries, non-
operating income increased by 13.7% year on year to 8円.7 billion. Reasons for this
increase included higher interest income and proceeds from sales of fixed assets.
Non-ordinary expenses were 15.6% below the previous year’s level at 45円.3 billion.
This reflects a reduction in interest paid because of efforts to reduce interest-bearing
liabilities, and the inclusion of impairment losses, which were shown as non-ordinary
expenses in the previous year, in extraordinary losses in the current year’s accounts.
Ordinary income were 0.5% higher year on year at 1,417円.0 billion, while ordinary
expenses were 1.1% higher at 1,298円.4 billion. As a result, ordinary income was lower
for the second consecutive year with a year on year decline of 5.3% to 118円.5 billion.
Net income also declined for the second consecutive year with a 14.2% reduction
to 65円.9 billion. Reasons for this decline included an impairment loss of 5円.6 billion2007200720032004200520060300600900
1,200
1,500020406080100
1,408.3
1,401.7
1,401.7
1,408.7
1,408.7
1,391.6
1,391.6
1,421.3
1,421.364.364.372.772.789.289.276.876.865.965.9
Operating Revenues (Left) Net Income (Right)
(Billions of Yen)
■しかく Management Discussion and Analysis200720072003200420052006050100150200250
155.1
171.2
171.2
213.7
213.7
198.9
198.9
180.0
180.088.188.1
114.4
114.4
159.9
159.9
125.2
125.2
118.5
118.5
Operating Income Ordinary Income
(Billions of Yen)20072007200319981999200020012002200420052006030,000
20,000
10,000
40,000
50,000
60,000
70,000
12,000
13,000
14,000
15,000
16,000
17,000
General Demand (Left) Large-scale Industrial (Left)
Peak Load (Right)
49,982
49,982
19,914
19,914
14,779
52,733
52,733
19,292
19,292
15,697
53,310
53,310
19,754
19,754
14,417
54,632
54,632
20,619
20,619
15,365
55,334
55,334
19,993
19,993
16,362
56,318
56,318
20,318
20,318
15,346
56,684
56,684
20,584
20,584
15,560
58,982
58,982
21,217
21,217
16,094
60,765
60,765
22,191
22,191
15,890
60,706
60,706
23,693
23,693
16,807
(Millions of kWh) (Thausands of kW)
Electricity Sales Volume (Millions of kWh) and Peak Load (Thousands of kW)
Summary
• Higher Revenues and Lower Income for the First Time Since the year ended March 31, 1995.
— In the electricity segment, there was a volume increase in electric power sales, but lighting revenues were slightly lower
because of reductions in electricity charges implemented in April 2006. However, revenue was higher for the first time in two
years because of increased contributions from segments other than electricity.
— Personnel expenses were lower in the electricity segment, but fuel costs increased, causing income to decline for the second
consecutive year.33resulting from the conversion of assets to real estate for leasing, and the application of
impairment accounting to unused assets for which there are no specific future
utilization plans. This item is shown in the accounts as an extraordinary loss. Net
income per share was 22円.3 lower at 139円.37.
Segment Information (before eliminating internal transactions)
(1) Electric Power
General demand, including domestic lighting and commercial demand, increased.
Among the factors contributing to the rise in domestic lighting demand was growth in
the number of all-electric homes. Positive factors for commercial demand included the
opening of new commercial facilities. However, demand for cooling and heating was
lower compared with the growth recorded in the previous accounting period as a
result of extremely high summer temperatures and a harsh winter in that year. These
and other factors were reflected in a 0.1% year on year decline in the volume of
electric power sales. Demand from major industrial users increased by 6.8% year on
year. Reasons for this growth included strong production trends in several industries,
notably digital electrical appliances and iron and steel. In addition, higher crude oil
prices caused users to switch from in-house generation to electricity supplied by
Kyushu Electric Power. Total electric power sales increased by 1.7% year on year to
843.9 billion kilowatt hours.
On the supply side, our nuclear facilities and other general facilities continued to
operate steadily, allowing us to maintain reliable supplies of electric power. An analysis
of our energy mix, including electric power generated and purchased wholesale from
other companies, shows that nuclear power accounted for 41%, thermal power for
52%, hydroelectric power for 6%, and new energy for 1%.
Despite growth in the volume of electric power sales, the value of sales was 0.3%
lower year on year at 1,310円.1 billion. This reflects the impact of lower electric power
charges introduced in April 2006. In addition to this reduction in revenues, operating
income was also affected by higher fuel costs and other factors, resulting in an 11.4%
year on year decline to 144円.2 billion.
(2) Energy-related Business
Sales increased by 3.6% year on year to 128円.3 billion because of higher gas sales
and other factors. Operating income was 49.8% higher at 6円.8 billion. Reasons for this
increase included the cancellation of unprofitable contracts in the distributed power
business, starting in the previous year.200720072006-20020406080-20246876.473.773.7-1.3-1.3-0.6-0.6Sales (Left) Operating Loss (Right)
IT and Telecommunications (Billions of Yen)2006200703060901201500246810
123.8
123.8
128.34.64.66.86.8
Sales (Left) Operating Income (Right)
Energy-Related Business (Billions of Yen)200720072003199819992000200120022004200520060900600300
1,200
1,50002040608010034.51,409.4
1,409.442.31,387.8
1,387.836.41,392.1
1,392.138.31,410.0
1,410.076.61,381.4
1,381.470.61,350.6
1,350.682.81,308.8
1,308.888.11,320.5
1,320.589.71,311.9
1,311.9
100.5
1,307.7
1,307.7
Electric Power (Left) Other (Right)
(Billions of Yen) (Billions of Yen)
Trends of Operating Revenues by Segments (after eliminating internal transactions) (Billions of Yen)2007200720060300600900
1,200
1,5000501001502001,310.1
1,314.3
1,314.3
162.9
162.9
144.2
144.2
Sales (Left) Operating Income (Right)
Electric Power (Billions of Yen)34(3) IT and Telecommunications
Sales increased by 3.6% year on year to 76円.4 billion. Reasons for the growth
included an increase in the number of broadband service lines used. Operating loss
was 0円.6 billion larger at 1円.3 billion, mainly because of higher facility-related expenses
resulting from the expansion of broadband services.
(4) Other Activities
Sales were 28.5% higher year on year at 25円.9 billion. The main reason for this
growth was the addition of a company that was treated as an equity method
subsidiary in the previous year to the consolidation. Operating income increased by
39.2% to 4円.2 billion.
Financial Position
(1) Cash Flows
Net cash provided by operating activities increased by 12.4% year on year to 304円.5
billion. Reasons for the increase included higher revenues from segments other than
electric power, and reduced tax payments.
Net cash used in investing activities was 2.9% higher year on year at 202円.8 billion
because of increases in capital expenditures, payments for investments and advances,
and other areas.
Net cash used in financing activities rose by 54.3% to 102円.7 billion.
Cash remaining after the payment of dividends was used to improve our financial
structure by reducing interest-bearing debt.
After taking into account these and other factors, including 0円.1 billion resulting from
the addition of another company to the consolidation, cash and cash equivalents as of
March 31, 2007 amounted to 50円.6 billion, a year on year reduction of 1円.0 billion.
(2) Assets, Liabilities and Net Assets
Assets amounted to 4,038円.8 billion as of March 31, 2007, a year on year reduction
of 1.5%. Reasons for the lower figure include the reduction of fixed assets in the
electric power segment as a result of depreciation.
Liabilities reduced by 3.1% year on year to 2,946円.2 billion. Reasons for the
lower figure include the reduction of interest-bearing liabilities by 73円.2 billion to
2,031円.7 billion.
Net assets reduced because of dividend payments. However, the year-end total of
1,092円.6 billion was 3.8% higher above the level at the end of the previous fiscal
year, reflecting net income and other items. The equity ratio reached 26.8%.20072007200320042005200602468106.27.67.69.49.48.38.37.77.7ROE (%)2007200720031998199920002001200220042005200603,000
2,000
1,000
4,000
5,0000102030
659.9
659.9
Interest-bearing Debt (Left) Shareholders’ Equity (Left)
Total Assets (Left)
4,165.1
15.9 16.017.519.4 19.2 20.022.124.2
25.7 26.8
2,831.9
2,831.9
659.5
659.5
4,123.6
2,692.5
2,692.5
725.5
725.5
4,141.7
2,603.9
2,603.9
810.0
810.0
4,166.4
2,699.6
2,699.6
824.9
824.9
4,290.1
2,503.7
2,503.7
840.2
840.2
4,204.5
2,336.2
2,336.2
910.8
910.8
4,114.3
2,139.4
2,139.4
979.2
979.2
4,049.7
2,104.9
2,104.9
1,052.7
1,052.7
4,102.3
2,031.7
2,031.7
1,081.6
1,081.6
4,038.8
Equity Ratio (Right)
Note : Interest-bearing debt is calculated from the year ended March 31, 1999.
(Billions of Yen) (%)
Consolidated Interest-bearing Debt and Equity Ratio (Billions of Yen, %)20072007200320042005200601.02.03.04.02.42.72.73.33.33.13.12.72.7
ROA (%)2007200720060102030024625.920.120.13.03.04.24.2Sales (Left) Operating Income (Right)
Other Activities (Billions of Yen)351 Risks Related to System Reforms of the Electricity Industries
2 Risks Related to Businesses Other than Electricity
The Kyushu Electric Power Group is enhancing its revenue basis by utilizing the group’s management resources and proactively
developing new business area beyond electricity business. In the business operation, we put emphasis on the profitability and
work to improve efficiency while pursuing the growth. In case securing the planned profits can not be achieved due to the
worsening business conditions, the Kyushu Electric Power Group’s performance may be affected.
3 Risks Related to Economic Conditions and Weather Conditions
The sales volume in the electric power business reflects economic conditions and seasonal changes in temperatures. These
factors may have a material impact on the results and financial condition of the Kyushu Electric Power Group.
Business Risk Factors
The following is a list of some significant risk factors that may have an effect on the operating results, financial
position, and other aspects of the Group (consolidated). The statements made in this report regarding our future
operations are forward-looking statements made in light of information available as of June 28, 2007.
In electricity business, approximately 60% of our electricity sales are to the customers under liberalization. Issues including the
ways toward full-scale of liberalization of the electricity market are under active consideration at the Electricity Industry
Committee in the Advisory Committee for Natural Resources and Energy.
As per the Framework for Nuclear Energy Policy approved by the Cabinet in 2005, it was agreed to reprocess irradiated
nuclear fuel and utilize collected plutonium and uranium as the basic policies on nuclear power back-end business. After this
approval, an external fund has been established to reserve every year since FY2006 aiming to reduce risks. Kyushu Electric
Power is subject to the possibility of being responsible for additional expenses associated with nuclear power generation due to
the changes in the international circumstances and possible revision of safety regulation regarding nuclear power based on the
latest scientific knowledge.
The system reforms of the electricity industries and the competition with other companies have the potential to affect the
Kyushu Electric Power Group's operating results.364 Risks Related to the Fluctuation of Fuel Prices
Fuel expenses in electricity business fluctuate as a result of trends in CIF prices and in the foreign exchange markets because
we procure sources of fuel for thermal power generation including liquefied natural gas (LNG) and coal from overseas.
However, changes in fuel prices and in the foreign exchange markets are reflected in electric rates through a fuel cost
adjustment system designed to limit the impact of these factors.
5 Risks Related to Interest Rates
The Kyushu Electric Power Group’s balance of interest-bearing debt as of the end of March 2007 is 2,031.7 billion yen, which
accounts for 50% of total assets of the group. Future changes in interest rates have potential to affect the Kyushu Electric Power
Group’s financial condition.
However, 93% of outstanding interest-bearing debt comprises long-term debt, and most of these bear interest at fixed rates.
In addition, the group has worked aggressively to reduce interest-bearing debt to improve its financial position. The impact of
fluctuating interest rates on Kyushu Electric Power Group is therefore viewed as limited.
6 Risks Related to the Leaking of Personal Information
The Kyushu Electric Power Group has established strict internal frameworks to manage personal information and to secure
information security. Additionally, we have implemented thorough protection of personal information by establishing internal
policies and guidelines on handling information as well as familiarizing employees with the handling procedures. However, in
case of the leaking of personal information, the Kyushu Electric Power Group’s operation may be affected.
7 Risks Related to Natural Disasters
To ensure a stable supply of electricity to our customers, the Kyushu Electric Power Group implements inspection and
maintenance of the facilities systematically to prevent any trouble from occurring. However, large-scaled natural disasters such
as typhoons, torrential rains and earthquakes as well as unexpected accidents and illicit acts have the potential to affect the
Kyushu Electric Power Group’s operations.37■しかく Consolidated Balance Sheets
Kyushu Electric Power Company, Incorporated and Consolidated Subsidiaries
March 31, 2007 and 2006
Thousands of
U.S. Dollars (Note 1)
Millions of Yen
ASSETS
PROPERTY (Notes 3 and 13):
Plant and equipment
Construction in progress
Total
Less—
Contributions in aid of construction
Accumulated depreciation
Total
Net property
NUCLEAR FUEL
INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 4)
Investments in and advances to non-consolidated subsidiaries and affiliated companies
Reserve funds for reprocessing of irradiated nuclear fuel (Note 8)
Deferred tax assets (Note 10)
Other assets
Total investments and other assets
CURRENT ASSETS:
Cash and cash equivalents
Receivables
Allowance for doubtful accounts
Inventories, principally fuel, at average cost
Deferred tax assets (Note 10)
Prepaid expenses and other
Total current assets
TOTAL
$ 73,865,128
2,674,748
76,539,876
1,167,127
48,781,167
49,948,294
26,591,582
2,037,963
1,239,800
524,278
593,463
888,263
217,258
3,463,062
429,096
991,574
(9,899)
422,712
133,906
141,367
2,108,756
34,201,363ドル20078,722,733円
315,861
9,038,594
137,826
5,760,568
5,898,394
3,140,200
240,663
146,408
61,912
70,082
104,895
25,656
408,953
50,672
117,095
(1,169)
49,918
15,813
16,694
249,023
4,038,839円
\ 8,682,387
303,045
8,985,432
132,713
5,634,737
5,767,450
3,217,982
234,358
160,311
58,863
60,135
103,387
24,926
407,622
51,676
109,553
(1,462)
48,746
21,443
12,401
242,357
\ 4,102,319
2007 2006
See notes to consolidated financial statements.38Thousands of
U.S. Dollars (Note 1)
Millions of Yen
LIABILITIES AND EQUITY
LONG-TERM LIABILITIES:
Long-term debt, less current portion (Note 6)
Liability for employees’ retirement benefits (Note 7)
Reserve for reprocessing of irradiated nuclear fuel (Note 8)
Reserve for decommissioning of nuclear power units
Other
Total long-term liabilities
CURRENT LIABILITIES:
Current portion of long-term debt (Note 6)
Short-term borrowings (Note 9)
Commercial paper
Notes and accounts payable (Note 14)
Accrued income taxes
Accrued expenses
Reserve for loss on business restructuring (Note 2.m.)
Other
Total current liabilities
RESERVE FOR FLUCTUATIONS IN WATER LEVEL
MINORITY INTERESTS
COMMITMENTS AND CONTINGENCIES (Note 17)
EQUITY (Note 11):
Common stock, authorized, 1,000,000,000 shares;
issued, 474,183,951 shares in 2007 and 2006
Capital surplus
Retained earnings
Unrealized gain on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Foreign currency translation adjustments
Treasury stock-at cost
999,075 shares in 2007 and 777,738 shares in 2006
Total
Minority interests
Total equity
TOTAL
$ 14,303,557
1,500,398
3,148,573
1,068,439
208,908
20,229,875
1,690,329
1,152,087
59,277
702,549
102,159
629,359
382,683
4,718,4437712,009,527
263,308
6,405,335
465,679
32,729
(1,558)
(15,616)
9,159,404
92,870
9,252,274
34,201,363ドル20071,689,107円
177,182
371,815
126,172
24,670
2,388,946
199,611
136,050
7,000
82,964
12,064
74,321
45,191
557,20191237,305
31,094
756,406
54,992
3,865
(184)
(1,844)
1,081,634
10,967
1,092,601
4,038,839円
\ 1,724,179
204,289
353,390
119,627
24,569
2,426,054
196,203
184,605
83,425
21,048
86,076
1,958
40,040
613,355
10,125
237,305
31,094
720,036
65,831
(306)
(1,175)
1,052,785
1,052,785
\ 4,102,319
2007 200639■しかく Consolidated Statements of Income
Kyushu Electric Power Company, Incorporated and Consolidated Subsidiaries
Years Ended March 31, 2007 and 2006
Thousands of
U.S. Dollars (Note 1)
Millions of Yen
OPERATING REVENUES (Note 15):
Electric
Other
Total operating revenues
OPERATING EXPENSES (Notes 12 and 15):
Electric
Other
Total operating expenses
OPERATING INCOME
OTHER EXPENSES (INCOME):
Interest charges
Loss on business restructuring
Loss on impairment of fixed assets (Note 13)
Other-net
Total other expenses-net
INCOME BEFORE INCOME TAXES AND PROVISION FOR (REVERSAL OF) RESERVE
FOR FLUCTUATIONS IN WATER LEVEL AND MINORITY INTERESTS
PROVISION FOR (REVERSAL OF) RESERVE FOR FLUCTUATIONS IN WATER LEVEL
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS
INCOME TAXES (Note 10):
Current
Deferred
Total income taxes
INCOME BEFORE MINORITY INTERESTS IN NET INCOME OF CONSOLIDATED SUBSIDIARIES
MINORITY INTERESTS IN NET INCOME OF CONSOLIDATED SUBSIDIARIES
NET INCOME
PER SHARE OF COMMON STOCK (Note 2.r.):
Basic net income
Cash dividends applicable to the year
$ 11,074,071
851,816
11,925,887
9,784,182
827,682
10,611,864
1,314,023
324,786
47,438
(14,912)
357,312
956,711771955,940
324,041
66,127
390,168
565,772
(7,147)
$ 558,625
$ 1.180.512007
\ 1,311,996
89,756
1,401,752
1,140,797
89,670
1,230,467
171,285
41,130
9,172
2,089
2,786
55,177
116,108
(4,682)
120,790
53,687
(10,649)
43,038
77,752
(902)
\ 76,850
\ 161.67
60.00
2007 2006
See notes to consolidated financial statements.
U.S. DollarsYen1,307,737円
100,591
1,408,328
1,155,414
97,741
1,253,155
155,173
38,354
5,602
(1,761)
42,195
112,97891112,887
38,266
7,809
46,075
66,812
(844)
\ 65,968
\ 139.37
\ 60.0040See notes to consolidated financial statements.
■しかく Consolidated Statements of Changes in Equity
Kyushu Electric Power Company, Incorporated and Consolidated Subsidiaries
Years Ended March 31, 2007 and 2006
Thousands of Shares / Millions of Yen
Capital
Surplus
Retained
Earnings
Unrealized
Gain on
Available-for-
sale Securities
Deferred Gain
on Derivatives
under Hedge
Accounting
Foreign
Currency
Translation
Adjustments
Treasury Stock
Shares Amount Total
Minority
Interests
Total
Equity
BALANCE AT APRIL 1, 2005
Adjustment of retained earnings
for inclusion of a company
accounted by the equity method
Net income
Cash dividends, 65円 per share
Bonuses to directors and
corporate auditors
Increase in treasury stock
Net change in the year
BALANCE AT MARCH 31, 2006
Reclassified balance as
of March 31, 2006 (Note 2.p.)
Adjustment of retained earnings
for inclusion of companies
accounted by the equity method
Net income
Cash dividends, 60円 per share
Bonuses to directors and
corporate auditors
Increase in treasury stock
Net change in the year
BALANCE AT MARCH 31, 2007
474,184 237,305円 \ 31,094 \ 675,191 \ 36,914 \ (272) 699 \ (980) \ 979,252 \ 979,252
(904) (904) (904)
76,850 76,850 76,850
(30,796) (30,796) (30,796)
(305) (305) (305)
79 (195) (195) (195)
28,917 (34) 28,883 28,883
474,184 237,305 31,094 720,036 65,831 (306) 778 (1,175) 1,052,785 1,052,785
10,125円 10,125
(870) (870) (870)
65,968 65,968 65,968
(28,422) (28,422) (28,422)
(306) (306) (306)
221 (669) (669) (669)
(10,839) 3,865 122 (6,852) 842 (6,010)
474,184 237,305円 \ 31,094 \ 756,406 \ 54,992 \ 3,865 \ (184) 999 \(1,844) 1,081,634円 10,967円 1,092,601円
Common Stock
Shares Amount
Thousands of U.S. Dollars (Note 1)
Capital
Surplus
Retained
Earnings
Unrealized
Gain on
Available-for-
sale Securities
Deferred Gain
on Derivatives
under Hedge
Accounting
Foreign
Currency
Translation
Adjustments Treasury Stock Total
Minority
Interests
Total
Equity
BALANCE AT MARCH 31, 2006
Reclassified balance as
of March 31, 2006 (Note 2.p.)
Adjustment of retained earnings
for inclusion of companies
accounted by the equity method
Net income
Cash dividends, 0ドル.51 per share
Bonuses to directors and
corporate auditors
Increase in treasury stock
Net change in the year
BALANCE AT MARCH 31, 2007
2,009,527ドル 263,308ドル 6,097,349ドル 557,465ドル $(2,591) $ (9,950) 8,915,108ドル 8,915,108ドル
85,740ドル 85,740
(7,367) (7,367) (7,367)
558,625 558,625 558,625
(240,681) (240,681) (240,681)
(2,591) (2,591) (2,591)
(5,666) (5,666) (5,666)
(91,786) 32,729ドル 1,033 (58,024) 7,130 (50,894)
2,009,527ドル 263,308ドル 6,405,335ドル 465,679ドル 32,729ドル $(1,558) $(15,616) 9,159,404ドル 92,870ドル 9,252,274ドル
Common Stock41■しかく Consolidated Statements of Cash Flows
Kyushu Electric Power Company, Incorporated and Consolidated Subsidiaries
Years Ended March 31, 2007 and 2006
Thousands of
U.S. Dollars (Note 1)
Millions of Yen
CASH FLOWS FROM OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes-paid
Depreciation and amortization
Loss on impairment of fixed assets
Reversal of liability for employees’ retirement benefits
Provision for reserve for reprocessing of irradiated nuclear fuel
Provision for reserve for decommissioning of nuclear power units
Loss on disposal of plant and equipment
Provision for (reversal of) reserve for fluctuations in water level
Loss on business restructuring
Cash contribution for business restructuring
Changes in assets and liabilities, net of effects from newly consolidated subsidiaries
Increase in reserve funds for reprocessing of irradiated nuclear fuel
Increase in trade receivables
Increase in inventories
Increase in trade payables
Other-net
Total adjustments
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures including nuclear fuel
Payments for investments and advances
Proceeds from sales of investment securities and collections of advances
Other-net
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of bonds
Repayments of bonds
Proceeds from long-term bank loans
Repayments of long-term bank loans
Net increase (decrease) in short-term borrowings
Net increase in commercial paper
Cash dividends paid
Other-net
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED
SUBSIDIARIES AT BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF YEAR
$ 955,940
(400,457)
2,034,533
47,438
(229,545)
156,025
55,424
80,032771(26,260)
(84,232)
(69,159)
(9,925)
5,191
62,893
1,622,729
2,578,669
(1,718,291)
(73,554)
11,601
62,816
(1,717,428)
918,697
(630,993)
558,811
(1,117,207)
(412,575)
59,277
(240,596)
(5,860)
(870,446)
(356)
(9,561)
1,059
437,598
$ 429,0962007\ 112,887
(47,290)
240,258
5,602
(27,107)
18,425
6,545
9,45191(3,101)
(9,947)
(8,167)
(1,172)6137,427
191,628
304,515
(202,913)
(8,686)
1,370
7,418
(202,811)
108,489
(74,514)
65,990
(131,931)
(48,721)
7,000
(28,412)
(692)
(102,791)(42)(1,129)12551,676
\ 50,672
\ 120,790
(68,110)
253,440
2,089
(1,146)
2,692
9,121
8,353
(4,682)
9,172
(6,643)
(60,135)
(10,768)
(10,064)
7,157
19,656
150,132
270,922
(200,111)
(7,449)
1,520
8,959
(197,081)
108,824
(74,700)
92,160
(163,239)619(30,779)514(66,601)(10)7,230
1,615
42,831
\ 51,676
2007 2006
See notes to consolidated financial statements.42■しかく Notes to Consolidated Financial Statements
Kyushu Electric Power Company, Incorporated and Consolidated Subsidiaries
Years Ended March 31, 2007 and 2006
The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in the Japanese
Securities and Exchange Law and the Japanese Electric Utility Law and
their related accounting regulations. Especially accounting related to the
nuclear power generation is regulated by the above accounting
regulations which are dependent on a governmental long term nuclear
energy policy. Kyushu Electric Power Company, Incorporated (the
"Company") and its domestic consolidated subsidiaries maintain their
accounts and records in accordance with the provisions set forth in the
Corporate Law (on and after May 1, 2006; see Note 11) and the
Commercial Code of Japan (the "Code") and in conformity with
accounting principles generally accepted in Japan, which are different in
certain respects as to application and disclosure requirements of
International Financial Reporting Standards.
On December 27, 2005, the Accounting Standards Board of Japan
(the "ASBJ") published a new accounting standard for the statement of
changes in equity, which is effective for fiscal years ending on or after
May 1, 2006. The statement of shareholders’ equity, which was
previously voluntarily prepared in line with the international accounting
practices, is now required under generally accepted accounting
principles in Japan and has been renamed "the statement of changes in
equity" in the current fiscal year.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to the
consolidated financial statements issued domestically in order to
present them in a form which is more familiar to readers outside Japan.
In addition, certain reclassifications have been made to the consolidated
financial statements for the year ended March 31, 2006 to conform to
the classifications used in the consolidated financial statements for the
year ended March 31, 2007.
The United States dollar amounts included herein are provided
solely for the convenience of readers and are stated at the rate of
118円.09 = U.S. 1,ドル the approximate exchange rate prevailing on March
31, 2007. The translations should not be construed as representations
that the Japanese yen amounts could be converted into United States
dollars at that or any other rate.
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
a. Consolidation and Application of the Equity Method — The
consolidated financial statements as of March 31, 2007 include the
accounts of the Company and its twenty-nine (twenty-six for 2006)
subsidiaries (together, the "Companies"). All significant intercompany
transactions and balances have been eliminated in consolidation.
Investments in thirteen (twelve for 2006) non-consolidated subsidiaries
and thirteen (twelve for 2006) affiliated companies are accounted for
by the equity method.
The Company adopts the control or influence concept. Under the
control or influence concept, those companies in which the Company,
directly or indirectly, is able to exercise control over operations are treated
as subsidiaries and those companies over which the Companies have the
ability to exercise significant influence are treated as affiliated companies.
The excess of the cost of an acquisition over the fair value of the net
assets of the acquired subsidiary at the date of acquisition is being
amortized over a period of five years.
Consolidation of the remaining subsidiaries and the application of the
equity method to the remaining affiliated companies would not have a
material effect on the accompanying consolidated financial statements.
b. Property and Depreciation — Property is stated at cost.
Contributions in aid of construction including those made by customers
are deducted from the cost of the related assets.
Depreciation is principally computed using the declining-balance
method based on the estimated useful lives of the assets. Depreciation
of easements is computed using the straight-line method based on the
estimated useful lives of the transmission lines.
c. Impairment of Fixed Assets — The Companies review their fixed
assets including leased property for impairment whenever events or
changes in circumstance indicate the carrying amount of an asset or
asset group may not be recoverable. An impairment loss would be
recognized if the carrying amount of an asset or asset group exceeds
the sum of the undiscounted future cash flows expected to result from
the continued use and eventual disposition of the asset or asset group.
The impairment loss would be measured as the amount by which the
carrying amount of the asset exceeds its recoverable amount, which is
the higher of the discounted cash flows from the continued use and
eventual disposition of the asset or the net selling price at disposition.
d. Amortization of Nuclear Fuel — Amortization of nuclear fuel is
computed based on the proportion of current heat produced to the
estimated total potential heat production over the estimated useful life
of the nuclear fuel.
e. Investment Securities — The accounting standard for financial
instruments requires all applicable securities to be classified and
accounted for, depending on management’s intent, as follows:
i) held-to-maturity debt securities are stated at cost with discounts or
premiums amortized throughout the holding periods; ii) available-for-
sale securities, which are not classified as the aforementioned securities
and investment securities in non-consolidated subsidiaries and affiliated
companies, are stated at market value; and securities without market
value are stated at cost.
The Companies record unrealized gains or losses on available-for-
sale securities, net of deferred taxes, in equity presented as "Unrealized
gain on available-for-sale securities."
For other than temporary declines in fair value, investment securities
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES43are written down to net realizable value by a charge to income.
f. Cash Equivalents — Cash equivalents are short-term investments
that are readily convertible into cash and that are exposed to insignificant
risk of changes in value. Cash equivalents include time deposits, which
mature or become due within three months of the date of acquisition.
g. Foreign Currency Transactions — Receivables and payables
denominated in foreign currencies are translated into Japanese yen at
the rates in effect as of the each balance sheet date.
h. Foreign Currency Financial Statements — The balance sheet
accounts of the foreign subsidiary, which is not consolidated but
accounted for by the equity method, are translated into Japanese yen at
the current exchange rate as of the balance sheet date except for equity,
which is translated at the historical rate.
Differences arising from such translation were shown as "Foreign
currency translation adjustments" in a separate component of equity.
i. Derivatives and Hedging Activities — The accounting standard for
derivative financial instruments and the accounting standard for foreign
currency transactions require that: a) all derivatives are recognized as
either assets or liabilities and measured at market value, and gains or
losses on the derivatives are recognized currently in the income
statements and b) for derivatives used for hedging purposes, if
derivatives qualify for hedge accounting because of high correlation and
effectiveness between the hedging instruments and the hedged items,
gains or losses on the derivatives are deferred until maturities of the
hedged transactions.
The long-term debt denominated in foreign currencies for which the
foreign exchange forward contracts are used to hedge the foreign
currency fluctuations are translated at the contracted rate, since such
treatment is also allowed to be incorporated under the standards if the
forward contracts qualify for hedge accounting.
The interest rate swaps which qualify for hedge accounting and meet
specific matching criteria are not remeasured at market value but the
differential paid or received under the swap agreements are recognized
in interest charges, which treatment is also allowed under the standards.
j. Severance Payments and Pension Plans — The Companies have
unfunded retirement plans for all of their employees and the Company
and most of the consolidated subsidiaries also have contributory funded
defined benefit pension plans covering substantially all of their employees.
Under the accounting standard for employees’ retirement benefits,
the amount of the liability for employees’ retirement benefits is
determined based on the projected benefit obligations and plan assets
of the pension fund at the end of the fiscal year.
k. Reserve for Reprocessing of Irradiated Nuclear Fuel — This
reserve is provided for reprocessing costs of irradiated nuclear fuel. The
annual provision is calculated in accordance with the accounting
regulations set by the Japanese Government applicable to electric utility
providers in Japan.
l. Reserve for Decommissioning of Nuclear Power Units —
Provision is made for future disposition costs of nuclear power units
based on a proportion of the current generation of electric power to the
estimated total life-time generation of electric power of each unit.
In December 2005, "Law to Amend the Law on the Regulation of
Nuclear Source Material, Nuclear Fuel Material and Reactors" and the
related regulation were issued. This law and related regulation changed
the criteria of density of radioactive waste. Following the changes,
further cost analysis and estimation on the types and amount of waste
generated in the process of decommissioning have been conducted by
the subcommittee.
The subcommittee reported that the total estimated costs associated
with the decommissioning of all the nuclear power generation facilities
nationwide would increase by 329,000円 million (2,786,011ドル thousand)
based on the calculation with a model plant. However, because the
estimation methods of decommissioning costs for each power
generation unit has not been disclosed and is subject to studies in the
future, the reserve for decommissioning of nuclear power units for the
years ended March 31, 2007 and 2006 is recorded based on estimation
by the former criteria. When a reasonable estimate based on the revised
criteria for each of nuclear power units becomes practical, the amount of
necessary reserve may be changed.
m. Reserve for Loss on Business Restructuring — Provision is made for
losses relating to the restructuring of the distributed generation business
by Nishinippon Environmental Energy Company, Incorporated ("NEECO"),
a consolidated subsidiary of the Company. The amount is based on the
estimated cost of rescinding unprofitable contracts by NEECO.
n. Income Taxes — The provision for income taxes is computed based
on the pretax income included in the consolidated statements of
income. The asset and liability approach is used to recognize deferred
tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases
of assets and liabilities. Deferred taxes are measured by applying
currently enacted tax laws to the temporary differences.
o. Reserve for Fluctuations in Water Level — This reserve is provided
to stabilize the Company’s income level based on the Japanese Electric
Utility Law and related accounting regulations. This reserve is recorded
when the volume of water for generating hydroelectric power is
abundant and available for future power generation, and reversed in
years when there is an insufficient volume of water. Also this reserve
must be shown as a liability under the law and regulations.
p. Presentation of Equity — On December 9, 2005, the ASBJ published
a new accounting standard for presentation of equity. Under this
accounting standard, certain items which were previously presented as
liabilities are now presented as components of equity. Such items include
minority interests and any deferred gain or loss on derivatives accounted
for under hedge accounting. This standard is effective for fiscal years
ending on or after May 1, 2006. The consolidated balance sheet as of
March 31, 2007 is presented in line with this new accounting standard.44q. Treasury Stock — The accounting standard for treasury stock
requires that where an affiliated company holds a parent company’s
stock, a portion which is equivalent to the parent company’s interest in
such stock should be presented as treasury stock as a separate
component of equity and the carrying value of the investment in the
affiliated company should be reduced by the same amount.
r. Net Income and Cash Dividends per Share — Basic earnings per
share ("EPS") is computed by dividing net income available to common
shareholders by the weighted-average number of common shares
outstanding during the year and diluted EPS reflects the potential
dilution that could occur if securities were exercised or converted into
common stock.
Diluted EPS is not disclosed for the years ended March 31, 2007
and 2006, because potentially dilutive securities were not outstanding.
Cash dividends per share represent actual amounts applicable to
earnings of the respective years.
s. Research and Development Costs — Research and development
costs are charged to income as incurred.
t. Leases — All leases are accounted for as operating leases. Under
Japanese accounting standard for leases, finance leases that are
deemed to transfer ownership of the leased property to the lessee are
to be capitalized, while other finance leases are permitted to be
accounted for as operating lease transactions if certain "as if capitalized"
information is disclosed in the notes to the lessee’s financial statements.
u. New Accounting Pronouncements
Measurement of Inventories — Under generally accepted accounting
principles in Japan, inventories are currently measured either by the cost
method, or at the lower of cost or market. On July 5, 2006, the ASBJ
issued ASBJ Statement No.9, "Accounting Standard for Measurement of
Inventories", which is effective for fiscal years beginning on or after April
1, 2008 with early adoption permitted. This standard requires that
inventories held for sale in the ordinary course of business be measured
at the lower of cost or net selling value, which is defined as the selling
price less additional estimated manufacturing costs and estimated direct
selling expenses. The replacement cost may be used in place of the net
selling value, if appropriate. The standard also requires that inventories
held for trading purposes be measured at the market price.
Lease Accounting — On March 30, 2007, the ASBJ issued ASBJ
Statement No.13, "Accounting Standard for Lease Transactions", which
revised the existing accounting standard for lease transactions issued on
June 17, 1993.
Under the existing accounting standard, finance leases that deem to
transfer ownership of the leased property to the lessee are to be
capitalized, however, other finance leases are permitted to be
accounted for as operating lease transactions if certain "as if capitalized"
information is disclosed in the note to the lessee’s financial statements.
The revised accounting standard requires that all finance lease
transactions should be capitalized. The revised accounting standard for
lease transactions is effective for fiscal years beginning on or after April
1, 2008 with early adoption permitted for fiscal years beginning on or
after April 1, 2007.
The breakdown of property as of March 31, 2007 and 2006 was as follows:
Thousands of
Millions of Yen U.S. Dollars
2007 2006 2007
Costs:
Electric power production facilities:
Hydroelectric power
Thermal power
Nuclear power
Internal-combustion engine power
Transmission facilities
Transformation facilities
Distribution facilities
General facilities
Other electricity-related facilities
Other plant and equipment
Construction in progress
Total
Less contributions in aid of construction
Less accumulated depreciation
Carrying amount
3. PROPERTY
$ 4,663,977
13,094,801
12,882,115
1,032,255
31,673,148
13,318,249
7,956,694
10,919,866
3,111,288
546,693
6,339,190
2,674,748
76,539,876
1,167,127
48,781,167
$ 26,591,582
\ 550,769
1,546,365
1,521,249
121,899
3,740,282
1,572,752
939,606
1,289,527
367,412
64,559
748,595
315,861
9,038,594
137,826
5,760,568
3,140,200円
\ 547,133
1,577,196
1,528,454
119,125
3,771,908
1,533,004
927,925
1,287,240
376,251
64,559
721,500
303,045
8,985,432
132,713
5,634,737
\ 3,217,982454. INVESTMENT SECURITIES
The carrying amounts and aggregate fair values of investment securities at March 31, 2007 and 2006 were as follows:
Millions of Yen
Cost Unrealized Unrealized Fair
March 31, 2007 Gains Losses Value
Securities classified as:
Available-for-sale:
Equity securities 13,144円 86,085円 \ 1 99,228円
Other securities 252 22 3 271
Held-to-maturity 4,924 5 179 4,750
March 31, 2006
Securities classified as:
Available-for-sale:
Equity securities 13,126円 102,975円 \ 0 116,101円
Other securities 96 24 4 116
Held-to-maturity 1,842 0 101 1,741
Thousands of U.S. Dollars
Cost Unrealized Unrealized Fair
March 31, 2007 Gains Losses Value
Securities classified as:
Available-for-sale:
Equity securities 111,305ドル 728,978ドル $ 9 840,274ドル
Other securities 2,134 186 25 2,295
Held-to-maturity 41,697 43 1,516 40,224
Available-for-sale securities and held-to-maturity debt securities whose fair value is not readily determinable as of March 31, 2007 and 2006 were
as follows:
Thousands of
Millions of Yen U.S. Dollars
2007 2006 2007
Available-for-sale:
Equity securities
Other securities
Held-to-maturity
Total
$ 322,508
17,292
15,734
$ 355,534
\ 38,085
2,042
1,858
\ 41,985
\ 38,139
1,994
2,119
\ 42,252
All of the Company’s assets are subject to certain statutory preferential
rights established to secure bonds, notes, loans borrowed from The
Development Bank of Japan and bonds transferred to banks under debt
assumption agreements (see Note 17).
Certain assets of the consolidated subsidiaries, amounting to
66,718円 million (564,976ドル thousand), are pledged as collateral for a
portion of their long-term debt at March 31, 2007.
Investments in affiliated companies held by a consolidated subsidiary,
amounting to 8,179円 million (69,261ドル thousand), are pledged as
collateral for bank loans of the affiliated companies at March 31, 2007.
5. PLEDGED ASSETS46Long-term debt consisted of the following at March 31, 2007 and 2006:
Thousands of
Millions of Yen U.S. Dollars
2007 2006 2007
Yen bonds, 0.3% to 3.65%, due serially to 2024
U.S. dollar notes, 7.25%, due 2008
Swiss franc bonds, 2.625% to 4.0%, due 2007 to 2014
Loans from The Development Bank of Japan, 0.69% to 6.7%, due serially to 2027
Loans, principally from banks and insurance companies, 0.25% to 5.775%, due serially to 2025
Collateralized
Unsecured
Total
Less current portion
Long-term debt, less current portion
6. LONG-TERM DEBT
$ 9,295,317
320,603
161,030
2,196,105
169,709
3,851,122
15,993,886
1,690,329
$ 14,303,557
1,097,684円
37,860
19,016
259,338
20,041
454,779
1,888,718
199,611
1,689,107円
\ 1,052,860
37,860
29,513
289,515
18,520
492,114
1,920,382
196,203
\ 1,724,179
Certain long-term loan agreements include, among other things, provisions that allow the lenders the right to approve dividends, if desired. However,
to date, no lender has exercised this right.
The annual maturities of long-term debt outstanding at March 31, 2007 were as follows:
Thousands of
Year ending March 31 Millions of Yen U.S. Dollars20082009201020112012Thereafter
Total
Employees terminating their employment with the Company, either
voluntarily or upon reaching mandatory retirement age, are entitled,
under most circumstances, to severance payments based on credits
earned in each year of service, length of service and certain other
factors. As for the Company, if the termination is made voluntarily at
one of a number of specified ages, the employee is entitled to certain
additional payments.
Additionally, the Company and most of the consolidated subsidiaries
have contributory funded defined benefit pension plans covering
substantially all of their employees. In general, eligible employees
retiring at the mandatory retirement age receive pension payments for
the several fixed terms selected by them. As for the Company, eligible
employees retiring after at least 20 years of service but before the
mandatory retirement age, receive a lump-sum payment upon
retirement and annuities.
7. SEVERANCE PAYMENTS AND PENSION PLANS
The liability for employees’ retirement benefits at March 31, 2007 and 2006 consisted of the following:
Thousands of
Millions of Yen U.S. Dollars
2007 2006 2007
Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial gain
Unrecognized prior service cost (deduction of liability)
Net liability
$ 4,163,231
(3,141,976)
346,956
132,187
$ 1,500,398
\ 491,636
(371,036)
40,972
15,610
\ 177,182
\ 498,084
(351,185)
34,370
23,020
\ 204,289
\ 199,611
171,258
165,978
158,065
210,173
983,633
\ 1,888,718
$ 1,690,329
1,450,233
1,405,521
1,338,513
1,779,770
8,329,520
$ 15,993,88647The components of net periodic benefit costs for the years ended March 31, 2007 and 2006 are as follows:
Thousands of
Millions of Yen U.S. Dollars
2007 2006 2007
Service Cost
Interest Cost
Expected return on plan assets
Recognized actuarial loss (gain)
Amortization of prior service cost
Net periodic benefit costs
Assumptions for actuarial computations for the years ended March 31, 2007 and 2006 are as follows:
2007 2006
Discount rate
Expected rate of return on plan assets
Recognition period of actuarial gain / loss
Amortization period of prior service cost
$ 131,044
83,055
(117,495)
(6,376)
(65,586)
$ 24,642
\ 15,475
9,808
(13,875)
(753)
(7,745)
\ 2,910
\ 14,676
9,656
(3,491)
17,019
(7,942)
\ 29,9182.0%mainly 4.0%
mainly 5 years
mainly 5 years2.0%mainly 1.0%
mainly 5 years
mainly 5 years
The reserve is provided for reprocessing costs of irradiated nuclear fuel.
The annual provision is calculated in accordance with the accounting
regulations set by the Japanese Government applicable to electric utility
providers in Japan.
The reserve is consisted of three portions and each of them is
calculated in different ways. (a) The costs reprocessed in Japan Nuclear
Fuel Limited are calculated based on the expected future cash flows of
discounted at 1.7% and 1.9% at March 31, 2007 and 2006,
respectively, (b) the costs reprocessed in the other reprocessing
companies is calculated based on the quantities to be reprocessed as of
each balance sheet date and contracted reprocessing rate, (c) the costs
of irradiated nuclear fuels which have no authorized definite reprocessing
plan are calculated based on the expected future cash flows of
discounted at 4.0%.
The balance of the reserve as of March 31, 2006 did not include the
portion of (c) because the regulations could not show the calculation
method. The amount of (c), as of March 31, 2007, was 6,976円 million
(59,074ドル thousand).
As of April 1, 2005, unrecognized prior costs of 130,495円 million
which had not been recognized in the past as liability, were incurred
because new accounting regulations to estimate the reprocessing costs
for irradiated nuclear fuel were applicable on or after April 1, 2005.
These costs are amortized on a straight-line basis over 15 years and
annual amortization is presented as operating expenses in the
consolidated statements of income. The balance of unrecognized past
costs as of March 31, 2007 was 113,096円 million (957,710ドル
thousand). The Company is permitted to recover these reprocessing
costs by including them in the admitted cost elements for electric rate.
If any changes are made in the assumptions for the calculations of
the reserve, such as expected future cash flows and the discount rate,
unrecognized difference might be incurred. The balance of
unrecognized difference as of March 31, 2007 is 19,042円 millions
(161,250ドル thousand). In accordance with the accounting regulations,
the difference will be amortized on a straight-line basis beginning the
year following the year the change was made over the period in which
the irradiated nuclear fuel was produced. The annual amortization is
presented as operating expenses.
An independent fund managing body was set up based on a specific
law and the Company is obliged to contribute the same amounts as the
balance of reserve for reprocessing of irradiated nuclear fuel to reserve
funds in 15 years. The reserve funds is presented as "Reserve funds for
reprocessing of irradiated nuclear fuel."
8. RESERVE FOR REPROCESSING OF IRRADIATED NUCLEAR FUEL
Short-term borrowings are generally represented by bank loans, bearing interest at rates ranging from 0.553% to 1.11% and from 0.11091% to
5.03% at March 31, 2007 and 2006, respectively.
9. SHORT-TERM BORROWINGS48The Companies are subject to several income taxes. The aggregate normal statutory tax rates for the Company approximated 36.1% for 2007 and 2006.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at March 31,
2007 and 2006 are as follows:
Thousands of
Millions of Yen U.S. Dollars
2007 2006 2007
Deferred Tax Assets:
Pension and severance costs
Depreciation
Reserve for reprocessing of irradiated nuclear fuel
Reserve for decommissioning of nuclear power units
Tax loss carryforwards
Unrealized profits arising from the elimination of intercompany transactions in consolidation
Accrued bonus to employees
Other
Less valuation allowance
Deferred tax assets
Deferred Tax Liabilities:
Unrealized gain on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Other
Deferred tax liabilities
Net deferred tax assets
A reconciliation between the normal effective statutory tax rate for the year ended March 31, 2007 and the actual effective tax rate reflected in the
accompanying consolidated statement of income is as follows:2007Normal effective statutory tax rate
Increase in valuation allowance
Expenses not deductible for income tax purposes
Tax credit for R&D
Other-net
Actual effective tax rate
Such reconciliation for the year ended March 31, 2006 is not disclosed because the difference between the normal effective statutory tax rate and
the actual effective tax rate is immaterial.
10. INCOME TAXES
$ 544,763
264,070
157,947
86,239
83,021
75,078
59,057
252,807
(209,856)
$ 1,313,126
$ 264,239
18,969
8,163
$ 291,371
1,021,755ドル
\ 64,331
31,184
18,652
10,184
9,804
8,866
6,974
29,854
(24,782)
\ 155,067
\ 31,204
2,240964\ 34,408
\ 120,659
\ 74,122
29,174
10,509
10,184
13,789
9,061
7,572
29,378
(20,864)
\ 162,925
\ 37,301849\ 38,150
\ 124,775
36.1%3.51.6
(0.6)0.240.8%49On and after May 1, 2006, Japanese companies are subject to the
Corporate Law, which reformed and replaced the Code with various
revisions that are, for the most part, applicable to events or transactions
which occur on or after May 1, 2006 and for the fiscal years ending on
or after May 1, 2006. The significant changes in the Corporate Law that
affect financial and accounting matters are summarized below:
(a) Dividends
Under the Corporate Law, companies can pay dividends at any time
during the fiscal year in addition to the year-end dividend upon
resolution at the shareholders meeting. For companies that meet
certain criteria such as; (1) having the Board of Directors, (2) having
independent auditors, (3) having the Board of Corporate Auditors,
and (4) the term of service of the directors is prescribed as one year
rather than two years of normal term by its articles of incorporation,
the Board of Directors may declare dividends (except for dividends
in kind) at any time during the fiscal year if the company has
prescribed so in its articles of incorporation. However, the Company
cannot do so because it does not meet all the above criteria.
The Corporate Law permits companies to distribute dividends-in-
kind (non-cash assets) to shareholders subject to a certain
limitation and additional requirements.
Semiannual interim dividends may also be paid once a year
upon resolution by the Board of Directors if the articles of
incorporation of the company so stipulate. The Corporate Law
provides certain limitations on the amounts available for dividends
or the purchase of treasury stock. The limitation is defined as the
amount available for distribution to the shareholders, but the
amount of net assets after dividends must be maintained at no less
than \ 3 million.
(b) Increases / decreases and transfer of common stock,
reserve and surplus
The Corporate Law requires that an amount equal to 10% of
dividends must be appropriated as a legal reserve (a component of
retained earnings) or as additional paid-in capital (a component of
capital surplus) depending on the equity account charged upon the
payment of such dividends until the total of aggregate amount of
legal reserve and additional paid-in capital equals 25% of the
common stock. Under the Corporate Law, the total amount of
additional paid-in capital and legal reserve may be reversed without
limitation. The Corporate Law also provides that common stock,
legal reserve, additional paid-in capital, other capital surplus and
retained earnings can be transferred among the accounts under
certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Law also provides for companies to purchase
treasury stock and dispose of such treasury stock by resolution of
the Board of Directors. The amount of treasury stock purchased
cannot exceed the amount available for distribution to the
shareholders which is determined by specific formula. Under the
Corporate Law, stock acquisition rights, which were previously
presented as a liability, are now presented as a separate
component of equity. The Corporate Law also provides that
companies can purchase both treasury stock acquisition rights and
treasury stock. Such treasury stock acquisition rights are presented
as a separate component of equity or deducted directly from stock
acquisition rights.
11. EQUITY
Research and development costs charged to income were 9,504円 million (80,481ドル thousand) and 9,788円 million for the years ended March 31,
2007 and 2006, respectively.
12. RESEARCH AND DEVELOPMENT COSTS
Losses on impairment for mainly idle assets which will not be used in
the future due to the changes in business plan were recognized in the
amounts of 5,602円 million (47,438ドル thousand) and 2,089円 million for
the years ended March 31, 2007 and 2006, respectively.
13. LOSS ON IMPAIRMENT OF FIXED ASSETS
The carrying amount of these assets was written down to the
recoverable amount which was mainly measured by the respective net
selling prices which were based on appraisal valuation and assessed
value of fixed assets.50Significant transactions of the Company with an affiliated company for the years ended March 31, 2007 and 2006 were as follows:
Thousands of
Millions of Yen U.S. Dollars
2007 2006 2007
KYUDENKO CORPORATION
Transactions:
Purchase of construction works on distribution facilities and other
Balances at year end:
Payables for construction works
14. RELATED PARTY TRANSACTIONS
$ 387,315
40,715
\ 45,738
4,808
\ 42,685
5,109
a. Lessee
The Companies lease certain computer and other equipment.
The Companies recorded an impairment loss of 1,081円million for the year ended March 31, 2006 on certain leased property held under finance
leases that do not transfer ownership and an allowance for impairment loss on leased property, which is included in long- term liabilities - other.
Pro forma information of leased equipment such as acquisition cost, accumulated depreciation and lease obligations, all of which included
imputed interest expense, under finance leases that do not transfer ownership of the leased equipment to the lessee on an "as if capitalized" basis
at March 31, 2007 and 2006 were as follows:
Millions of Yen Thousands of U.S. Dollars
General General
March 31, 2007 facilities Other Total facilities Other Total
Acquisition cost
Accumulated depreciation
Accumulated impairment loss
Net leased equipment
Millions of Yen
General
March 31, 2006 facilities Other Total
Acquisition cost
Accumulated depreciation
Accumulated impairment loss
Net leased equipment
Obligations under finance leases which included the imputed interest expense at March 31, 2007 and 2006 were as follows:
Thousands of
Millions of Yen U.S. Dollars
2007 2006 2007
Due within one year
Due after one year
Total
The above-mentioned amounts include sublease agreements.
Allowance for impairment loss on leased property of 801円 million (6,783ドル thousand) and 1,073円 million as of March 31, 2007 and 2006 are
not included in the obligations under finance leases.
15. LEASES
$ 376,865
215,099
8,612
$ 153,154
$ 201,160
110,839
8,612
$ 81,709
$ 175,705
104,260
$ 71,445
\ 44,504
25,401
1,017
\ 18,086
\ 23,755
13,089
1,017
\ 9,649
\ 20,749
12,312
\ 8,437
\ 50,263
24,942
1,190
\ 24,131
\ 26,421
12,156
1,190
\ 13,075
\ 23,842
12,786
\ 11,056
$ 57,228
103,853
$ 161,081
\ 6,758
12,264
19,022円
\ 8,612
16,657
\ 25,26951Depreciation expense and other information under finance leases:
Thousands of
Millions of Yen U.S. Dollars
2007 2006 2007
Depreciation expense
Lease payments
Reversal of allowance for impairment loss
Impairment loss
Depreciation expense, which is not reflected in the accompanying statements of income, is computed by the straight-line method.
b. Lessor
The Company leases industrial batteries.
Revenues under finance leases were 84円 million (711ドル thousand) and 84円 million for the years ended March 31, 2007 and 2006, respectively.
Information of leased property such as acquisition cost and accumulated depreciation under finance leases at March 31, 2007 and 2006 were
as follows:
Thousands of
Millions of Yen U.S. Dollars
Other plant Other plant
and equipment and equipment
2007 2006 2007
Acquisition cost
Accumulated depreciation
Net leased equipment
Future lease revenues under finance leases which included the imputed interest revenue at March 31, 2007 and 2006 were as follows:
Thousands of
Millions of Yen U.S. Dollars
2007 2006 2007
Due within one year
Due after one year
Total
The above-mentioned amounts include sublease agreements.
Depreciation expense relating to the leased assets arrangements mentioned above was 129円 million (1,092ドル thousand) and 190円 million for
the years ended March 31, 2007 and 2006, respectively.
$ 61,961
64,265
2,303
7,317円
7,589272\ 7,196
8,0128161,081
$ 7,198
4,835
2,363ドル
\ 850571\ 279
\ 850442\ 408
$ 1,093
8,671
9,764ドル
\ 129
1,024
1,153円
\ 114
1,051
\ 1,165
The Company enters into foreign exchange forward contracts, currency
swaps, interest rate swaps, energy swap agreements and weather
derivatives to manage its exposures to fluctuations in foreign exchanges,
interest rates, fuel price and electric operating revenues, respectively.
Some consolidated subsidiaries of the Company enter into interest
rate swaps to manage exposure to fluctuations in interest rates.
The Companies do not enter into derivatives for trading or
speculative purposes.
Foreign exchange forward contracts, currency swaps, interest rate
swaps and energy swap agreements are subject to market risk which is
16. DERIVATIVES
the exposure created by potential fluctuations in market conditions.
Weather derivatives are subject to electric power business risk
which is the exposure created by potential fluctuations in summer
temperature changes.
The Companies do not anticipate any losses arising from credit risk
which is the possibility that a loss may result from counterparties’ failure
to perform according to the terms and conditions of the contract,
because the counterparties to those derivatives have high credit ratings.
The execution and control of derivatives are controlled by the
executive and administrative section based on internal policies.52At March 31, 2007, the Companies had a number of fuel purchase commitments, most of which specify quantities and dates for fuel deliveries.
However, most of the purchase prices are contingent upon fluctuations in market prices.
Contingent liabilities as of March 31, 2007 were as follows:
Thousands of
Millions of Yen U.S. Dollars
Co-guarantees of loans, mainly in connection with procurement of fuel
Guarantees of employees’ loans
Guarantees under debt assumption agreements
Other
Under the debt assumption agreements, the Company was contingently liable for the redemption of the domestic bonds transferred to banks.
17. COMMITMENTS AND CONTINGENCIES
$ 918,545
615,488
1,016,174
84,605
\ 108,471
72,683
120,000
9,991
Information by business segments for the years ended March 31, 2007 and 2006 is as follows:
Business Segments
Millions of Yen2007Electric Energy-related IT and Other Eliminations/
Power Business Telecommunications Corporate Consolidated
Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income (loss)
Total assets
Depreciation
Impairment loss
Capital expenditures
Thousands of U.S. Dollars2007Electric Energy-related IT and Other Eliminations/
Power Business Telecommunications Corporate Consolidated
Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income (loss)
Total assets
Depreciation
Impairment loss
Capital expenditures
18. SEGMENT INFORMATION
1,307,737円
2,433
1,310,170
1,165,874
\ 144,296
3,681,177円
210,138
2,057
170,244
\ 49,266
79,050
128,316
121,424
\ 6,892
\ 235,891
9,147
8,826
\ 40,236
36,165
76,401
77,708
\ (1,307)
\ 133,580
18,981
21,406
\ 11,089
14,837
25,926
21,681
\ 4,245
\ 138,006
4,950
3,545
4,920
\ (132,485)
(132,485)
(133,532)
\ 1,047
\ (149,815)
(2,958)
(2,809)
1,408,328円
1,408,328
1,253,155
\ 155,173
4,038,839円
240,258
5,602
202,587
$ 11,074,071
20,603
11,094,674
9,872,758
$ 1,221,916
$ 31,172,639
1,779,473
17,419
1,441,646
$ 417,190
669,405
1,086,595
1,028,233
$ 58,362
$ 1,997,553
77,458
74,740
$ 340,723
306,250
646,973
658,041
$ (11,068)
$ 1,131,171
160,733
181,269
$ 93,903
125,641
219,544
183,597
$ 35,947
$ 1,168,651
41,917
30,019
41,663
$ (1,121,899)
(1,121,899)
(1,130,765)
$ 8,866
$ (1,268,651)
(25,048)
(23,787)
$ 11,925,887
11,925,887
10,611,864
$ 1,314,023
$ 34,201,363
2,034,533
47,438
1,715,53153Millions of Yen2006Electric Energy-related IT and Other Eliminations/
Power Business Telecommunications Corporate Consolidated
Sales to customers
Intersegment sales
Total sales
Operating expenses
Operating income (loss)
Total assets
Depreciation
Impairment loss
Capital expenditures
\ 1,311,996
2,398
1,314,394
1,151,486
\ 162,908
\ 3,751,602
223,387694174,229
\ 46,153
77,684
123,837
119,236
\ 4,601
\ 244,459
9,957
1,173
5,756
\ 36,011
37,739
73,750
74,401
\ (651)
\ 131,926
18,059218,420
\ 7,592
12,582
20,174
17,124
\ 3,050
\ 126,744
5,1302202,313
\ (130,403)
(130,403)
(131,780)
\ 1,377
\ (152,412)
(3,093)
(2,759)
\ 1,401,752
1,401,752
1,230,467
\ 171,285
\ 4,102,319
253,440
2,089
197,959
Energy related business consisted of obtaining, storing, gasifying and
supplying LNG, the heat supply business, distributed generation
business, energy consulting and other businesses related to energy.
Operating loss consisted of providing telephone lines and wirelines.
Other consisted of environment and recycling, lifestyle-oriented
services and others.
Geographic segment information is not disclosed because the
Companies’ overseas operations are immaterial.
Information for overseas sales is not disclosed due to overseas sales
being immaterial compared with consolidated net sales.
At the general shareholders meeting held on June 28, 2007, the Company’s shareholders approved the following appropriation of retained earnings
as of March 31, 2007:
Appropriations of Retained Earnings
Thousands of
Millions of Yen U.S. Dollars
Year-end cash dividends, 30円.00 (0ドル.25) per share
19. SUBSEQUENT EVENT
$ 120,290
\ 14,2055455
■しかく Non-consolidated Balance Sheets
Kyushu Electric Power Company, Incorporated
March 31, 2007 and 2006 (Unaudited)
Thousands of
U.S. Dollars
Millions of Yen
ASSETS
PROPERTY:
Plant and equipment
Construction in progress
Total
Less—
Contributions in aid of construction
Accumulated depreciation
Total
Net property
NUCLEAR FUEL
INVESTMENTS AND OTHER ASSETS:
Investment securities
Investments in and advances to subsidiaries and affiliated companies
Reserve funds for reprocessing of irradiated nuclear fuel
Deferred tax assets
Other assets
Total investments and other assets
CURRENT ASSETS:
Cash and cash equivalents
Receivables
Allowance for doubtful accounts
Fuel and supplies, at average cost
Deferred tax assets
Prepaid expenses and other
Total current assets
TOTAL
$ 69,444,932
2,643,535
72,088,467
1,137,294
46,170,734
47,308,028
24,780,439
2,037,963
1,159,599
981,421
593,463
750,411
185,273
3,670,167
287,679
849,767
(8,578)
267,770
109,433
100,474
1,606,545
32,095,114ドル20078,200,752円
312,175
8,512,927
134,303
5,452,302
5,586,605
2,926,322
240,663
136,937
115,896
70,082
88,616
21,879
433,410
33,972
100,349
(1,013)
31,621
12,923
11,865
189,717
3,790,112円
\ 8,174,756
300,424
8,475,180
129,087
5,345,135
5,474,222
3,000,958
234,358
154,116
120,312
60,135
88,646
14,892
438,101
37,088
91,814
(1,335)
31,957
15,762
8,614
183,900
\ 3,857,317
2007 2006
(U.S. dollar amounts have been translated from yen, for convenience, at the rate of 118円.09=U.S.1,ドル the approximate rate of exchange at March 31, 2007.)56Thousands of
U.S. Dollars
Millions of Yen
LIABILITIES AND EQUITY
LONG-TERM LIABILITIES:
Long-term debt, less current portion
Liability for employees’ retirement benefits
Reserve for reprocessing of irradiated nuclear fuel
Reserve for decommissioning of nuclear power units
Other
Total long-term liabilities
CURRENT LIABILITIES:
Current portion of long-term debt
Short-term borrowings
Commercial paper
Accounts payable
Accrued income taxes
Accrued expenses
Reserve for loss on financial support for a subsidiary
Other
Total current liabilities
RESERVE FOR FLUCTUATIONS IN WATER LEVEL
EQUITY :
Common stock, authorized, 1,000,000,000 shares;
issued, 474,183,951 shares in 2007 and 2006
Capital surplus:
Additional paid-in capital
Retained earnings:
Legal reserve
Retained earnings - carryfoward
Unrealized gain on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Treasury stock-at cost
680,316 shares in 2007 and 459,121 shares in 2006
Total equity
TOTAL
$ 13,510,280
1,367,872
3,148,573
1,068,439
77,264
19,172,428
1,514,980
1,109,323
59,277
530,197
80,769
698,112
301,905
4,294,5637712,009,527
263,248
502,379
5,378,652
453,451
33,398
(13,303)
8,627,352
32,095,114ドル20071,595,429円
161,532
371,815
126,172
9,124
2,264,072
178,904
131,000
7,000
62,611
9,538
82,440
35,652
507,14591237,305
31,087
59,326
635,165
53,548
3,944
(1,571)
1,018,804
3,790,112円
\ 1,638,092
187,492
353,390
119,627
13,510
2,312,111
163,071
174,000
64,218
18,322
94,797
3,662
31,474
549,544
237,305
31,087
59,326
604,490
64,356
(902)
995,662
\ 3,857,317
2007 2006
OPERATING REVENUES:
Electric
Other
Total operating revenues
OPERATING EXPENSES:
Electric:
PersonnelFuelPurchased power
Depreciation
Maintenance
Reprocessing costs of irradiated nuclear fuel
Decommissioning costs of nuclear power units
Disposal cost of high-level radioactive waste
Disposition of property
Taxes other than income taxes
Subcontract feeRentOther
Total
Other
Total operating expenses
OPERATING INCOME
OTHER EXPENSES:
Interest charges
Loss on financial support for a subsidiary
Loss on impairment of fixed assets
Other-net
Total other expenses-net
INCOME BEFORE INCOME TAXES AND PROVISION FOR (REVERSAL OF) RESERVE
FOR FLUCTUATIONS IN WATER LEVEL
PROVISION FOR (REVERSAL OF) RESERVE FOR FLUCTUATIONS IN WATER LEVEL
INCOME BEFORE INCOME TAXES
INCOME TAXES:
Current
Deferred
Total income taxes
NET INCOME
PER SHARE OF COMMON STOCK:
Basic net income
Cash dividends applicable to the year57■しかく Non-consolidated Statements of Income
Kyushu Electric Power Company, Incorporated
Years Ended March 31, 2007 and 2006 (Unaudited)
Thousands of
U.S. Dollars (Note 1)
Millions of Yen
$ 11,094,674
193,648
11,288,322
1,226,234
1,789,466
953,536
1,600,508
1,446,261
422,212
55,432
74,706
151,292
738,555
555,991
309,213
549,352
9,872,758
197,849
10,070,607
1,217,715
303,159
47,438
18,816
369,413
848,302771847,531
288,771
57,134
345,905
$ 501,626
$ 1.060.512007
\ 1,314,394
15,041
1,329,435
178,455
179,745
113,252
199,587
157,370
31,080
9,121
8,041
16,407
89,259
64,896
36,316
67,957
1,151,486
18,314
1,169,800
159,635
38,445
10,0648436,150
55,502
104,133
(4,682)
108,815
49,471
(9,793)
39,678
\ 69,137
\ 145.64
60.00
2007 2006
(U.S. dollar amounts have been translated from yen, for convenience, at the rate of 118円.09=U.S.1,ドル the approximate rate of exchange at March 31, 2007.)
U.S. DollarsYen1,310,170円
22,868
1,333,038
144,806
211,318
112,603
189,004
170,789
49,859
6,546
8,822
17,866
87,216
65,657
36,515
64,873
1,165,874
23,364
1,189,238
143,800
35,800
5,602
2,222
43,624
100,17691100,085
34,101
6,747
40,848
\ 59,237
\ 125.07
60.0058Kyushu Electric Power Company, Incorporated
Years Ended March 31, 2007 and 2006 (Unaudited)
■しかく Non-Consolidated Five-Year Financial Summary
Kyushu Electric Power Company, Incorporated
Years Ended March 31,
Thousands of
U.S. Dollars
(except for per share data)
Millions of Yen
(except for per share data)
FOR THE YEAR:
Operating revenues
Electric
Other
Operating expenses
PersonnelFuelPurchased power
Depreciation
Maintenance
Reprocessing costs
of irradiated nuclear fuel
Decommissioning costs
of nuclearpower units
Disposal cost of high-level
radioactive waste
Disposition of property
Taxes other than income taxes
Subcontract feeRentOther
Interest charges
Income before income taxes
Net income
Per share of common stock
(yen and U.S. dollars):
Basic net income
Cash dividends
applicable to the year
At year-end:
Total assets
Net property
Long-term debt, less current portion
Total equity
$ 11,288,322
11,094,674
193,648
10,070,607
1,226,234
1,789,466
953,536
1,600,508
1,446,261
422,212
55,432
74,706
151,292
738,555
555,991
309,213
747,201
303,159
847,531
501,626
$ 1.060.51$ 32,095,114
24,780,439
13,510,280
8,627,35220071,358,608円
1,353,075
5,533
1,185,506
190,908
137,953
104,682
247,876
158,851
49,763
6,656
8,075
13,883
94,226
60,215
36,159
76,259
73,622
98,476
62,546
\ 131.64
50.00
3,929,942円
3,259,307
1,854,130
796,92420031,318,337円
1,311,220
7,117
1,127,669
201,538
126,507
95,935
232,151
153,232
27,038
1,633
8,003
13,933
90,749
60,345
36,183
80,422
73,566
105,913
70,118
\ 147.65
50.00
3,859,049円
3,150,938
1,744,666
861,91020041,333,161円
1,322,996
10,165
1,131,586
185,902
143,221
105,553
210,386
158,704
26,628
5,009
7,727
14,856
91,846
66,779
36,463
78,512
46,521
143,567
89,385
\ 188.33
60.00
3,806,568円
3,076,207
1,635,720
929,35620051,329,435円
1,314,394
15,041
1,169,800
178,455
179,745
113,252
199,587
157,370
31,080
9,121
8,041
16,407
89,259
64,896
36,316
86,271
38,445
108,815
69,137
\ 145.64
60.00
3,857,317円
3,000,958
1,638,092
995,66220061,333,038円
1,310,170
22,868
1,189,238
144,806
211,318
112,603
189,004
170,789
49,859
6,546
8,822
17,866
87,216
65,657
36,515
88,237
35,800
100,085
59,237
\ 125.07
60.00
3,790,112円
2,926,322
1,595,429
1,018,8042007(U.S. dollar amounts have been translated from yen, for convenience, at the rate of 118円.09=U.S.1,ドル the approximate rate of exchange at March 31, 2007.)59■しかく Overview of Power Generation Facilities
(As of March 31, 2007)
Nuclear Power Stations
Operation
Station name Rated output (kW) commencement date System Location
Genkai 3,478,000 Oct. 1975 Pressurized water reactor Genkai-cho, Higashi Matsuura-gun, Saga Prefecture
(×ばつ2 ×ばつ2)
Sendai 1,780,000 July 1984 Pressurized water reactor Gumisaki-cho, Satsumasendai-shi, Kagoshima Prefecture
(×ばつ2)
Rated output total 5,258,000 kW
Thermal Power Stations
Approved maximum Operation
Station name output (kW) commencement date Main fuel Location
Shin Kokura 1,800,000 Oct. 1961 LNG Nishi Minato-cho, Kokura Kita-ku, Kitakyushu-shi, Fukuoka Prefecture
(×ばつ3)
Karita 735,000 April 1972 Heavy oil/crude oil/coal (PFBC) Kanda-machi, Miyako-gun, Fukuoka Prefecture
(×ばつ1 ×ばつ1)
Buzen 1,000,000 Dec. 1977 Heavy oil/crude oil Hachiya, Buzen-shi, Fukuoka Prefecture
(×ばつ2)
Karatsu 875,000 July 1971 Heavy oil/crude oil Futago, Karatsu-shi, Saga Prefecture
(×ばつ1 ×ばつ1)
Matsuura 700,000 June 1989 Coal Shisa-cho, Matsuura-shi, Nagasaki Prefecture
Shin Oita 2,295,000 June 1991 LNG Aozaki, Oita-shi, Oita Prefecture
(×ばつ6 ×ばつ4 ×ばつ3)
Oita 500,000 July 1969 Heavy oil Ichinosu, Oita-shi, Oita Prefecture
(×ばつ2)
Ainoura 875,000 April 1973 Heavy oil/crude oil Hikari-machi, Sasebo-shi, Nagasaki Prefecture
(×ばつ1 ×ばつ1)
Reihoku 1,400,000 Dec. 1995 Coal Reihoku-machi, Amakusa-gun, Kumamoto Prefecture
(×ばつ2)
Sendai 1,000,000 July 1974 Heavy oil/crude oil Minato-cho, Satsumasendai-shi, Kagoshima Prefecture
(×ばつ2)
Approved maximum output total 11,180,000 kW
Hydroelectric Power Stations (Stations with an output of 50,000kW or more are listed.)
Approved maximum Operation
Station name output (kW) commencement date System Location
Tenzan 600,000 Dec. 1986
Dam and conduit system
Kyuragi-machi, Karatsu-shi, Saga Prefecture
(pure pumped storage)
Ohira 500,000 Dec. 1975
Dam and conduit system
Sakamoto-machi, Yatsushiro-shi, Kumamoto Prefecture
(pure pumped storage)
Hitotsuse 180,000 June 1963 Dam and conduit system Katauchi, Saito-shi, Miyazaki Prefecture
Kamishiiba 90,000 May 1955 Dam and conduit system Shiiba-son, Higashi Usuki-gun, Miyazaki Prefecture
Oyodogawa No. 2 71,300 March 1932 Dam and conduit system Takaoka-cho, Miyazaki-shi, Miyazaki Prefecture
Tsukabaru 63,090 Oct. 1938 Dam and conduit system Morotsuka-son, Higashi Usuki-gun, Miyazaki Prefecture
Yanagimata 63,800 June 1973 Dam and conduit system Uchikawano, Hita-shi, Oita Prefecture
Oyodogawa No. 1 55,500 Jan. 1926 Dam system Takazaki-cho, Miyakonojo-shi, Miyazaki Prefecture
Iwayado 51,100 Jan. 1942 Dam and conduit system Shiiba-son, Higashi Usuki-gun, Miyazaki Prefecture
Matsubara 50,600 Aug. 1971 Dam system Oyama-machi, Hita-shi, Oita Prefecture
Morozuka 50,000 Feb. 1961
Dam and conduit system
Morotsuka-son, Higashi Usuki-gun, Miyazaki Prefecture
(river pumped storage)
Approved maximum output total 2,377,716 kW
Geothermal Power Stations
Approved maximum Operation
Station name output (kW) commencement date Location
Takigami 25,000 Nov. 1996 Kokonoe-machi, Kusu-gun, Oita Prefecture
Hatchobaru 110,000 June 1977 Kokonoe-machi, Kusu-gun, Oita Prefecture
(×ばつ2)
Hatchobaru Binary-cycle 2,000 April 2006 Kokonoe-machi, Kusu-gun, Oita Prefecture
Otake 12,500 Aug. 1967 Kokonoe-machi, Kusu-gun, Oita Prefecture
Ogiri 30,000 March 1996 Makizono-cho, Kirishima-shi, Kagoshima Prefecture
Yamagawa 30,000 March 1995 Yamagawa-cho, Ibusuki-shi, Kagoshima Prefecture
Approved maximum output total 209,500 kW60■しかく Major Subsidiaries and Affiliated Companies
(As of March 31, 2007)
Major Consolidated Subsidiaries
Capital Equity
Company Name (Millions of yen) Ownership (%) Business
Total Energy
Kyuden International Corporation 10,600 100.0 Acquiring and owning securities of power companies overseas
Oita Liquefied Natural Gas Co.,Inc. 7,500 90.0 Receipt, storage, vaporization and delivery of LNG
Kitakyushu Liquefied Natural Gas Co.,Inc. 4,000 75.0 Receipt, storage, vaporization and delivery of LNG
Pacific Hope Shipping Limited 1,590 60.0 Purchase of LNG, holding, operating, chartering and renting of LNG carriers
Nishinippon Environment Energy Co.,Inc. 1,010 100.0 Consultation about energy efficiency
Kyushu Rinsan. Co. 490 100.0 Greening construction at power stations and other facilities
Nagashima Windhill Co., Ltd. 490 86.0 Sales of electricity generated by wind power
Fukuoka Energy Service Co.,Inc. 490 80.0 Heat supply business
NISHI NIPPON AIRLINES CO.,LTD. 360 54.7 Air cargo transportation
KYUKI Corporation 305 66.5 Manufacture and sales of electric machinery
Nishi Nippon Plant Engineering and Construction Co.,Inc. 150 82.5 Construction, maintenance and repair of power generation facilities
Kyuden Sangyo Co.,Inc. 117 100.0 Environmental preservation activities in power generation facilities
West Japan Engineering Consultants, Inc. 40 100.0 Consultation and planning of civil engineering and construction
Kyushu Meter & Relay Engineering Corporation 22 98.4 Repair and maintenance of electronic instruments
IT and Telecommunications
Kyushu Telecommunication Network Co., Inc. 22,020 96.8 Fiber-optic cable and broadband services, IP phone services
Kyuden Infocom Company, Inc. 480 100.0 IT-related planning and consultation, and data center business
Nishimu Electronics Industries, Co., Ltd. 300 100.0
Manufacturing, sale, installation and maintenance of
telecommunication devices
Kyuden Business Solutions Co.,Inc. 100 100.0 Development, operation and maintenance of information systems
Lifestyle-oriented Services
Capital Kyuden Corporation 600 91.3 Acquiring and owning of securities, loans to group companies
DENKI BLDG. Co., Ltd. 495 89.9 Leasing and management of real estate
Kyuden Good Life Company, Inc. 200 100.0 Paid elderly nursing home management and nursing services
Shinrintoshi Co., Ltd. 32 98.1 Leasing of company housing and other real estate61Major Non-consolidated Subsidiaries and Affiliated Companies accounted for under Equity Method
Capital Equity
Company Name (Millions of yen) Ownership (%) Business
Total Energy
KYUDEN ILIJAN HOLDING CORPORATION
3,050
100.0 Investment in Ilijan IPP business company
(Thousands of U.S. dollars)
Electricidad Aguila de Tuxpan
642 Million
50.0 Overseas IPP business
(Mexico Pesos)
Tobata Co-operative Thermal Power Co., Inc. 9,000 50.0 Wholesale electricity supply
Kyudenko Corporation 7,901 30.5 Engineering works for power supply facilities
Oita Co-operative Thermal Power Co., Inc. 4,000 50.0 Wholesale electricity supply
Kyushu Kouatsu Concrete Industries Co., Ltd. 240 30.0 Manufacture and sale of concrete poles
Kyuhen Co., Ltd. 225 35.9 Manufacture and sale of electric equipment
Seishin Corporation 200 24.5 Sale of electric equipment
Kyuken Corporation 100 14.1 Construction and repair of electric lines, leasing of real estate for students
Nishigi Kogyo 20 49.0 Maintenance and repair of hydroelectric power generation facilities
Environmental and Recycling
J-Re-Lights Co., Ltd. 275 100.0 Recycling of fluorescent bulbs
Kyushu Environmental Management Corporation 80 98.1 Recycling of confidential documents
Lifestyle-oriented Service
Kyushu Housing Guarantee Corporation 265 90.0 Housing and building assessments
Kyushu Highlands Development Co., Ltd. 150 100.0 Management of hotels and golf courses
Kyuden Home Security Co., Inc. 100 90.0 Home security and monitoring business
Note: There is no specified subsidiary62■しかく Corporate Data
(As of March 31, 2007)
Company Overview
Trade Name Kyushu Electric Power Company, Incorporated
Head Office 1-82, Watanabe-dori 2-chome, Chuo-ku, Fukuoka 810-8720, Japan
Phone +81-92-761-3031
Tokyo Branch Office 7-1, Yurakucho 1-chome, Chiyoda-ku, Tokyo 100-0006, Japan
Phone +81-3-3281-4931
Date of establishment May 1, 1951
Paid-in Capital 237,304,863,699円
Number of Employees 12,670
Stock Information
Total Number of Shares Authorized
Number of Shares Issued and Outstanding
Number of Shareholders
Shareholders’ Meeting
Fiscal Year End
Stock Listings
Transfer Agent and Registrar
Accounting Auditor
Major Shareholders
Number of Shares Held Shareholding Ratio
Name (Thousands of Shares) (%)
The Master Trust Bank of Japan, Ltd. (trust unit) 24,780 5.23
Meiji Yasuda Life Insurance 23,710 5.00
Nippon Life Insurance Company 18,454 3.89
Japan Trustee Services Bank, Ltd. (trust unit) 14,419 3.04
Mizuho Corporate Bank, Ltd. 10,419 2.20
Mizuho Trust and Banking, Retirement Benefit Trust Fukuoka Bank unit 8,637 1.82
Sumitomo Mitsui Banking Corporation 8,474 1.79
Kochi Shinkin Bank 7,047 1.49
Kyushu Electric Power Co., Inc. Employees’ Shareholding Association 6,731 1.42
Shinkin Central Bank 6,680 1.41
Composition of Shareholders
Financial
Institutions
47.2%
Securities Firms1.0%Other Domestic
Companies 6.3%
Foreign Investors
12.4%
Governmental
Organization0.9%Individuals
and Other
32.2%
■しかく By Type of Shareholder
Less than 100
24.2%
100 to 499
33.9%
500 to 999
13.3%
5,000 or more2.6%1,000 to 4,999
26.0%
■しかく By Number of Shares Held
Stock Price Movement05,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
(Thousands of Shares)
(Yen)0500
1,000
1,500
2,000
2,500
3,000
3,500
4,000200242003420044200542006420073
1,000,000,000
474,183,951
183,736JuneMarch 31
Tokyo Stock Exchange, Osaka Securities Exchange,
Fukuoka Stock Exchange
(Code: 9508)
The Chuo Mitsui Trust and Banking Co., Ltd.
33-1, Shiba 3-chome, Minato-ku, Tokyo, Japan
Deloitte Touche Tohmatsu
Printed in Japan