SECOND PARTY OPINIONTOHOKU ELECTRIC POWER CO., INC.
GREEN/TRANSITION FINANCE FRAMEWORK

Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: 20 February 2023
Ref. Nr.: PRJN-496078-2023-AST-JPN-01

Page 1 of 72

Table of Contents
Executive Summary ..........................................................................................................................................................3
I. Introduction .................................................................................................................................................................10
II. Scope and Objectives ..............................................................................................................................................21
III. Responsibilities of Tohoku Electric Power and DNV ....................................................................................24
IV. Basis of DNV’s Opinion ..........................................................................................................................................25
V. Work Undertaken ......................................................................................................................................................28
VI. Findings and DNV's Opinion ................................................................................................................................29
VII. Assessment Conclusion .......................................................................................................................................47
Schedule-1 Green/Transition Finance Nominated Projects List .......................................................................49
Schedule-2 Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs) .........51
Schedule-3 Transition Finance Framework Eligibility Assessment Protocol .................................................52
Schedule-4 Green Finance (or transition finance with specific use of proceeds) Eligibility Assessment
Protocol ...............................................................................................................................................................................58
Schedule-5 Transition-Linked Finance Eligibility Assessment Protocol ..........................................................64

Revision History
Revision
Number0

Date of Issue
20 February 2023

Remarks
InitialDisclaimer
Our assessment relies on the premise that the data and information provided by Fundraiser to us as part of our review procedures have been provided in good faith.
Because of the selected nature (sampling) and other inherent limitations of both procedures and systems of internal control, there remains the unavoidable risk thaterrors or irregularities, possibly significant, may not have been detected. Because of the selected nature (sampling) and other inherent limitations of both procedures andsystems of internal control, there remains the unavoidable risk that errors or irregularities, possibly significant, may not have been detected. DNV expressly disclaims any
liability or co-responsibility for any DNV expressly disclaims any liability or co-responsibility for any decision a person or an entity may make based on this Statement.

Statement of Competence and Independence
DNV applies its own management standards and compliance policies for quality control, in accordance with ISO/IEC 17021:2011 - Conformity Assessment Requirements
for bodies providing audit and certification of management systems, and accordingly maintains a comprehensive system of quality control We have complied with therequirements for quality control, in accordance with ISO/IEC 17021:2011 - Conformity Assessment Requirements for bodies providing audit and certification ofmanagement systems, and accordingly maintains a comprehensive system of quality control. We have complied with the DNV Code of Conduct1 during the assessmentand maintain independence where required by relevant This engagement work was carried out by an independent team of sustainability assurance professionals. DNV
maintains complete impartiality towards stakeholders. DNV maintains complete impartiality towards stakeholders interviewed during the assessment process.

1 DNV Code of Conduct is available from the DNV website (www.DNV.com)

Page 2 of 72

Executive Summary
Tohoku Electric Power Co., Inc. (hereinafter referred to as “Tohoku Electric Power”) was
founded in 1951, a time when Japan was still recovering from the turmoil of the Second World
War. Since then, Tohoku Electric Power have continued difficult challenges in each era,
including power shortages during the post war period of reconstruction, oil crises, numerous
natural disasters, and the deregulation of the electric power market. On each occasion, theGroup (77 group companies) has worked as a team to fulfil its mission of delivering a stable,
high-quality supply of electricity. Moving forward, Tohoku Electric Power will continue to workwith local communities to contribute to the growth and development of the six Tohoku
prefectures and Niigata Prefecture while ceaselessly working to create new corporate value.
In January 2020, Tohoku Electric Power formulated the Tohoku Electric Power Green Bond
Framework and issued the company's first Green Bond (Green Bond with Climate Bond
Certification) in February of the same year. Subsequently, in August 2020, the framework wasrevised to the “Tohoku Electric Power Green Finance Framework” with the addition of green
loans in order to further promote green finance, and the company is working to contribute to
the environment through its business by executing green bonds and green loans multiple
times. In order to further promote its efforts towards carbon neutrality, the Tohoku ElectricPower Group has now revised the Green/Transition Finance and Transition Linked Finance
Framework (hereinafter referred to as the “Framework”) in accordance with the following
principles and guidelines.
The framework is structured as a comprehensive framework that incorporates the elements
necessary to execute the following type of financing:- Green Finance (Green bonds and loans)- Transition Finance (Use of Proceeds/ General Corporate Purpose transition bonds andloans)
DNV Business Assurance Japan K.K. (hereinafter referred to as DNV), as an external reviewer,
evaluated the eligibility of the Framework. Specifically, DNV provided the eligibility assessment
for the Framework by applying the frameworks (such as principles and guidelines) including
the following:- Climate Transition Finance Handbook (CTFH), International Capital Market Association(ICMA), 2020.
- Basic Guidelines on Climate Transition Finance (CTFBG), Financial Services Agency, Ministryof Economy, Trade and Industry, Ministry of the Environment, 2021.
- Green Bond Principles (GBP), International Capital Market Association (ICMA), 2021.
- Green Bond Guidelines (GBGLs), Ministry of the Environment, 2022.
- Green Loan Principles (GLP), Loan Market Association (LMA, et al.), 2021.
- Green Loan Guidelines (GLGLs), Ministry of the Environment, 2022.
- Sustainability Linked Bond Principles (SLBP), International Capital Market Association(ICMA), 2020.
- Sustainability Linked Bond Guidelines (SLBGLs), Ministry of the Environment, 2022.

Page 3 of 72

- Sustainability Linked Loan Principles (SLLP), Loan Market Association (LMA, et al.), 2022.
- Sustainability Linked Loan Guidelines (SLLGLs), Ministry of the Environment, 2022.
The following is a summary of the assessment results for each common element indicated in
the above frameworks.

<CTF Eligibility Assessment Results>
DNV has confirmed the followings based on the documents and information provided by
Tohoku Electric Power. CTF-1 through CTF-4 below are the findings and DNV’s opinions against
the four common elements (disclosure elements) of the CTFH and CTFBG.
CTF-1. Fundraiser’s Climate Transition Strategy and Governance:
The transition strategy of the Fundraiser, Tohoku Electric Power, is aligned with the goals set
forth in “The Sixth Strategic Energy Plan” and the “Transition Roadmap for Power Sector”
formulated by the Agency for Natural Resources and Energy. Tohoku Electric Power plans toreview the planned transition strategy in accordance with changes in social trends and thebusiness environment. In terms of governance and disclosure related to the implementationof the Transition Finance, Tohoku Electric Power has established an internal structure andinformation disclosure process based on TCFD*1. These are disclosed in the Framework andother documents and meet the disclosure element of CTF-1.
*1: Task Force on Climate-related Financial Disclosures

CTF-2. Business Model Environmental Materiality:
Eight key environmental materialities in Tohoku Electric Power's business model have been
identified, based on discussions at the Sustainability Promotion Council and advice fromexternal experts. The materiality that Transition primarily relates to is the “Challenge to
become carbon neutral,” which sets the tasks of closing the gap with the current situation inorder to achieve the “Tohoku Electric Power Group Carbon Neutral Challenge 2050.” In Tohoku
Electric's transition strategy, management strategy and ESG (environment, society andgovernance) initiatives are inseparable, and specific initiatives are set out in the “Tohoku
Electric Group Carbon Neutral Challenge 2050,” which also takes into account contributions to
the SDGs, which will be discussed later. These are disclosed in the Framework and otherdocuments and meet the disclosure element of CTF-2.
CTF-3. Climate Transition Strategy to be ‘Science-based’ including Targets and Pathways:
Tohoku Electric Power’s transition strategy has been formulated based on science-based
goals and pathways. Specifically, the medium- to long-term goals are measured byindicators and quantified while the process of achieving those goals is clarified based on thetargets set forth in “The Sixth Strategic Energy Plan” formulated by the Agency for Natural
Resources and Energy and the targets and pathways set forth in the "Transition Roadmap
for Power Sector" as described in CTF-1. These are disclosed in the Framework and otherdocuments or this Second Party Opinion and meet the disclosure element of CTF-3.

Page 4 of 72

CTF-4. Implementation Transparency
Tohoku Electric Power has presented the basic investment plan including the amount to beinvested to implement the Transition Strategy and outlined the effects and returns from theimplementation. DNV has confirmed that the future overall and individual investments
required to implement the Transition Strategy are planned to be implemented in accordancewith the internal management system and processes, taking into account CTF-1 to CTF-3.
These are disclosed in the Framework and other documents or this Second Party Opinion,
and meet the disclosure element of CTF-4.

<GBP/GLP Eligibility Assessment Results>
DNV confirmed the following based on the materials and information provided by Tohoku
Electric Power. GBP/GLP-1 through GBP/GLP-4 described below are the findings and DNV’sopinions against the four common elements of GBP/GLP (including *GBGLs/GLGLs).
GBP/GLP-1. Use of Proceeds:
DNV defines the eligibility criteria for the use of proceeds as projects that directly or
indirectly contribute to the realisation of transition strategy and goals (“Green/Transition
Projects”). Specifically, the eligibility criteria are identified and classified in Table-1 and areearmarked as new expenditure or refinancing of existing expenditure; DNV has ensured
that these projects are consistent with the elements of CTF-1 to 4. The projects have been
evaluated by Tohoku Electric Power as having clear and positive environmental impacts inline with the transition strategy and are expected to contribute directly and indirectly to
the SDGs. These processes are consistent with GBP/GLP-1.

Table-1: Tohoku Electric Power Green/Transition Finance Eligibility Criteria and Project
Summary
Roadmap

Eligibility
Criteria

Project Overview

Renewable

Development,

Energyconstruction,
operation and

Project Examples✓

Wind Farm Tsugaru (onshore wind
power)✓

renovation of wind,

Tamagawa Hydroelectric Power Station
No. 2 (hydropower)

Maximum Use

geothermal, solar,✓

Miyagi Osato Solar Park (solar)of Renewablehydro and biomass✓

Matsukawa Geothermal Power Station

Energy andpower generation

Nuclear Powerprojects (*)
Nuclear

Further safetyPower

improvements and(geothermal)✓

continued
safe/stable
operation

Page 5 of 72

Onagawa Nuclear Power Station Unit 2
safety works

Power Grid

Upgrading through✓Tohoku-Tokyo interconnection line

grid maintenance✓Northern Tohoku Area Power Supply

and digitalisation,

Recruitment Processstorage of surplus
renewable energy,
P2G, etc.
LNG Thermal

Decarbonisation

Powerusing hydrogen andammonia, and✓Mixed-firing project at Niigata Thermal
Power Station, No. 5.

✓

High efficiency ofDevelopment of Joetsu Thermal Power
Plant 1.

thermal power
Coal Thermal

Decarbonisation

Powerusing biomass andammonia

Decarbonization✓

Mixed burning f black pellets at Noshiro
Thermal Power Station.

✓

Production of the biomass rawof Thermalmaterials on unused land at our powerPowerstations
Fading Out

Discontinuation ofInefficient

Ageing Firepower✓

East Niigata Thermal Power Station PortNo. 1 and Port No. 2 decommissioned.

Power
Sources
CCUS

Studying CCUS✓

Converting the CO2 generated bythermal power sources of methane gas

Home andHeat pump✓

Installation of Electrification Systems.

Business

Electrification and✓More End-User-Friendly Renewable

Sales of Renewable

Electricity.

Energy Menus
through Credit
Purchases
Electrification andTransport✓

Electric Vehicles,

Realization of a
Smart Society

Promotion ofElectrification of Company-Owned
Vehicles (*)

etc.
Industry

Energy Conversion✓

Electrification of Heat Resources (*)

of Production
Processes, etc.
Use ofVPP Projects Using✓

Aozora Charge service (*)

Decentralized

Private Solar and✓

The Renewable Aggregation Business

EnergyStorage Battery(*)

Services, etc.

Projects marked with an asterisk (*) in Table-1 are green eligible projects; thus,
Transition Finance and Green Finance may use them as a source of funds.

Page 6 of 72

GBP/GLP-2. Process for Project Evaluation and Selection:
Tohoku Electric Power confirms that the projects meet the GBP/GLP-1 eligibility criteria
and the standards required for the Green/Transition Projects and have clear environmental
benefits. In addition, Tohoku Electric Power confirms that the potential negativeenvironmental/social impacts are appropriately taken into consideration and that theprocedures such as certification of facilities/equipment, licensing, and environmental
assessment in the regions where the projects are to be implemented are appropriate.
Specifically, the Office Department with jurisdiction over each project selects project
candidates based on the “Tohoku Electric Power Group Carbon Neutral Challenge 2050”
and the eligibility criteria in Table-1, which are then approved through appropriate internal
processes. These processes are consistent with GBP/GLP-2.

GBP/GLP-3. Management of Proceeds:
The appropriation and management of proceeds are carried out by the Accounting and
Finance Department of Tohoku Electric Power. The total amount of eligible projects will be
managed using an accounting system or the proceeds management table to ensure that the
total amount does not fall below the Green/Transition Finance proceeds. The proceeds will
be managed in cash or cash equivalents in an amount equal to the unallocated proceeds
until the proceeds will be fully allocated.

GBP/GLP-4. Reporting:Tohoku Electric Power will report the allocation of the proceeds and the effects ofenvironmental improvements in the annual Tohoku Electric Group Integrated Report or on its
website until the proceeds will be fully allocated. This includes the allocated amount, thebalance of unallocated proceeds, and the approximate amount (or the share) of theproceeds allocated for refinancing. In addition, the outline and the environmental benefits ofthe projects to which the proceeds have been allocated will be disclosed within the scope ofconfidentiality obligations and to the extent reasonably practicable. Any major changes intransition strategy, pathways, allocation plan or performance will be reported even after thecompletion of the appropriation.
<SLBP/SLLP Eligibility Assessment Results>
Based on the documents and information provided by Tohoku Electric Power, DNV has
confirmed the following. SLBP/SLLP-1 through SLBP/SLLP-5 described below are the findings
and DNV’s opinions against the five elements of SLBP/SLLP (*including SLBGLs/SLLGLs).
SLBP/SLLP-1. Selection of Key Performance Indicators (KPIs):
One KPI (reduction of CO2 emissions (domestic power generation business)) related toenvironmental sustainability (transition) set by Tohoku Electric Power shown in Table-2 is an
important indicator in a comprehensive transition strategy for the “Carbon Neutral Challenge
2050” set forth by Tohoku Electric Power as an energy company. The selection of KPIs has

Page 7 of 72

gone through a rational process, and KPIs are considered to be clearly defined, measurable
and verifiable, and have robustness and reliability in accordance with SLBP/SLLP.

SLBP/SLLP-2. Calibration of Sustainability Performance Targets (SPTs):
The SPTs of Tohoku Electric Power shown in Table-2 are meaningful and closely related tothe sustainability (transition) and business strategy required of Tohoku Electric Power as anenergy provider and show significant improvements according to a pre-set timeline. The
Agency for Natural Resources and Energy has set a 2030 CO2 emission reduction target of
46% (compared to 2013), and the SPT is set as an ambitious target to benchmark against
and exceed that level. Through the review, DNV has confirmed that Tohoku Electric Power’s
plan is feasible for the achievement of the SPT in FY2030.

SLBP/SLLP-3. Finance Characteristics:
The financial characteristics of the Transition-Linked Finance based on the Framework will be
impacted by the performance of the KPIs defined by the SPT. This impact is due to the factthat the bond or loan is linked to changes in bond issuance rates, loan interest rates, orother financial incentives (for example, donations to organisations that conduct activities
closely related to the set KPI). DNV has confirmed that these will be stipulated in formal
documents related to the bond or loan at each financing execution by a specific trigger event(SPT achievement status) within a defined period/due date based on the Framework.
SLBP/SLLP-4. Reporting:
The reporting is planned to include the information required in the SLBP/SLLP and the
Framework stipulates that the reporting is to be made publicly available at an appropriate
frequency.
SLBP/SLLP-5. Verification:
Tohoku Electric Power intends to have the data relating to the KPIs independently verified
annually by an external evaluation agency.

Page 8 of 72

Table-2: Tohoku Electric Power Transition-Linked Finance KPIs and SPTs
KPIs
KPI: CO2 emissions (*)

SPTs
SPT: halve by 2030 compared to 2013 (22.82 million t-CO2)(*) Emissions from Retail Electricity
Description of KPIs

Description of SPTs

The KPIs have been set for items closely
related to the “carbon neutrality challenge”,
one of the materialities identified by Tohoku
Electric Power.
It is a core KPI towards the realisation of
Tohoku Electric's 2050 carbon neutrality
target and can be measured quantitatively
and continuously in accordance with the Act
on Promotion of Global WarmingCountermeasures (Anti-Warming Law).

The SPT is an ambitious, meaningful and realistic target set toaccelerate Tohoku Electric's Carbon Neutral Challenge 2050
efforts, surpassing the 2030 target of 46% reduction set by the
Agency for Natural Resources and Energy.
Reference: CO2 emissions in 2013 were 45.63 million t-CO2(Source: Tohoku Electric Power Group Sustainability Report2022)

Based on the assessment of the Framework and other relevant documents and information
provided by Tohoku Electric Power, DNV has confirmed that the Framework established by
Tohoku Electric Power meets the standards required by the relevant frameworks, namely,
CTFH/CTFBG, GBP/GBGLs, GLP/GLGLs, SLBP/SLBGLs, and SLLP/SLLGLs and thus is eligible astransition finance.

Page 9 of 72

I. Introductioni.

About the Fundraiser
The Tohoku Electric Power Group consists of 77 Group companies and its main business is tosupply electricity mainly to the six Tohoku prefectures and Niigata Prefecture. The Group has
also positioned the "Smart Society Realisation Business" as a growth business, which aims tosolve social issues and realise a society in which local residents can live comfortably, safely
and securely, and is boldly taking up the challenge of changing its business model. Since its
founding in 1951, the Tohoku Electric Power Group has been striving to contribute to thedevelopment of the six prefectures of Tohoku and Niigata Prefecture. They have been doing
so through stable, eco-friendly supply of reasonably priced power on the premise of safety,
with their basic principle: “The prosperity of the Tohoku region is essential to our own
growth.”The strong commitment to local communities expressed in this approach is a fundamental
value of Tohoku Electric's management and is clearly expressed in the Tohoku ElectricGroup's management philosophy, "Prospering with Local Communities." Moreover, the twothoughts of "Be more in touch with customers" and "Be close to the community" are wellexpressed in the Tohoku Electric Group’s slogan, “The Strength of Working Alongside”, whichaims to realise the "Smart Society of the New Era from Tohoku" set out in the medium- tolong-term vision "Working Alongside next ~Yori, Sou, Chikara~."ii.

Fundraiser's Initiatives for ESG/SDGs
Under the Tohoku Electric Power Group Sustainability Policy, the Tohoku Electric PowerGroup has identified Sustainability Materialities, which are priority issues to be addressed inorder to place sustainability at the core of management and contribute to medium- to longterm improvements in corporate value and the sustainable development of society as awhole.
The Tohoku Electric Power Group is committed to co-creating social and corporate value
together with stakeholders across future generations and contributing to the achievement of
the SDGs by working to resolve materiality, realising the Tohoku Electric Power Group's
medium- to long-term vision "Working Alongside next ~Yori, Sou, Chikara~" and taking on
the challenge of the "Carbon Neutral Challenge 2050." The Group will also contribute to theachievement of the SDGs.
Tohoku Electric Power Group Sustainability Policy
The Tohoku Electric Power Group is actively promoting sustainability through the realisationof the Tohoku Electric Power Group's medium- to long-term vision "Working Alongside next
~Yori, Sou, Chikara~" and the challenge of the "Carbon Neutral Challenge 2050."
The Tohoku Electric Power Group's concept of sustainability is based on its management
philosophy of "The prosperity of the Tohoku region is essential to our own growth" and theGroup slogan "The Strength to Work Alongside ~Yori, Sou, Chikara~." The Group's vision ofPage 10 of 72

sustainability is to contribute to medium- and long-term improvements in corporate value
and the sustainable development of society as a whole by resolving issues faced by local
communities and society, and by working as a unified corporate group to create a smart
society through the provision of energy-centred services and other means, while being close
to customers and local communities.
In order to realise this, the Tohoku Electric Power Group, under the Tohoku Electric PowerGroup Code of Conduct, will demonstrate its collective strength through concerted efforts
while utilising the characteristics of each Group company, which strongly support the value
chain of its business activities, to conduct honest and fair business activities, meet the
expectations of its stakeholders, and fulfil its corporate as a Group is committed to fulfilling
its social responsibility as a company by meeting the expectations of its stakeholders.

Figure-1 Tohoku Electric Power Group Sustainability Policy

Page 11 of 72

iii. Fundraiser’s Environmental Initiatives
The Tohoku Electric Power Group is promoting environmental management to evolve its
management foundations, with the aim of realizing the Tohoku Electric Power Group's
medium- to long-term vision "Working Alongside next ~Yori, Sou, Chikara~." Based on the
Tohoku Electric Power Group Environmental Policy and the Four Principles of Environmental
Action shown in Figure 2, we are promoting initiatives for the formation of a recyclingoriented society and regional environmental conservation. In addition, based on the Tohoku
Electric Power Group Medium-Term Environmental Plan, which was formulated as an action
plan for the next three years in consideration of the situation surrounding the environment,
we are developing various measures based on the three pillars of tackling climate change
issues based on the “Carbon Neutral Challenge 2050”, thorough environmental conservationand communication with local communities. The Group is developing a range of measures
based on the three pillars.

Figure-2 Tohoku Electric Power Group Environmental Policy

Page 12 of 72

Table-3: Tohoku Electric Power’s Participation in External Initiatives and Efforts
External Initiatives
Task Force on
Climate-related
Financial
Disclosures(TCFD)UN Global
Compact

Challenge Zero

Initiatives of Tohoku Electric PowerThe Tohoku Power Group endorsed the TCFD in April
2019 and considers it important not only to disclose
information but also to reflect mechanism-related risks
and opportunities in its business strategy.

Seeking to build a sound global society through joint
efforts between the United Nations and the private
sector (companies and other organizations), the UN
Global Compact is the world’s largest sustainability
initiative. Signatory organizations are required toconform to and put into practice 10 principles in thefour areas of human rights, labor, the environment,
and anti-corruption.
Challenge Zero is an initiative to communicate acrossthe world and support innovative actions by companies
and other organizations to take on the challenge ofrealizing a carbon-neutral society, a long-term goal
under the Paris Agreement, through joint efforts
between Keidanren and the Japanese government.
The following two challenge cases were registered by
Tohoku Electric Power.
-

Commercialization of VPPs.
Realization of a hydrogen society.

Challenge
initiatives for 30%
of Executives tobe Women by
2030

The Challenge Initiatives for 30% of Executives to be
Women by 2030 program was launched by Keidanren
to accelerate efforts to promote diverse humanresources for inclusion and co-creation based ondiverse values, the key to sustainable capitalism. The
goal is to ensure that 30% of executives will be womenby 2030.

Plastics Smart

Plastics Smart is a campaign launched by the Ministryof the Environment to promote joint efforts andpartnership among a wide range of parties including
individuals, NGOs, corporations, research institutes,
and government agencies, to resolve the issue ofocean plastic wastes

Keidanren
Initiative for
Biodiversity
Conservation

The Keidanren Initiative for Biodiversity Conservation isan initiative launched by Keidanren and the Keidanren
Committee on Nature Conservation. By promoting the
Keidanren Biodiversity Conservation Statement andGuidelines, it strives to promote further mainstream
adoption of efforts to preserve biodiversity.

Page 13 of 72

iv. About the Green/Transition Finance Framework
In pursuing Tohoku Electric Power’s “Carbon Neutral Challenge 2050,” Tohoku ElectricPower has set ambitious targets for CO2 emission reduction in alignment with its
contribution to the greenhouse gas emission reduction targets set forth in “The Sixth
Strategic Energy Plan” and the “Transition Roadmap for Power Sector” formulated by
the Agency for Natural Resources and Energy.
Tohoku Electric Power intends to procure the funds necessary for achieving this ambitious
CO2 emission reduction target and for conducting transition activities through theGreen/Transition Finance and aims to expand the foundation of the Green/Transition
Finance while enhancing the ability to disseminate its strategy by expanding the link withfinance.
In January 2020, Tohoku Electric Power established a Green Bond Framework, which wasrevised to a Green Finance Framework including loans in August 2020. Now, in order toimplement Green/Transition Finance in a way that conforms to the internationally definedframework, the Tohoku Electric Power Green/Transition Finance Framework has been
established.
The criteria to which this Framework specifically referred to are listed in section II, (3)below.

v.
(1)

Fundraiser’s Transition Strategy for Decarbonization
Strategies by Sector (Industry) at the International/National/Regional Level
Figure-3 shows the scenario for decarbonisation in the electric power sector as set forth in
the “Transition Roadmap for Power Sector” formulated by the Agency for Natural
Resources and Energy.
“The Sixth Strategic Energy Plan” formulated in October 2021 and the “Transition
Roadmap for Power Sector” in February 2022 by the Agency for Natural Resources andEnergy consist of initiatives to achieve carbon neutrality by 2050 and efforts to be madeby 2030 in anticipation of the achievement by 2050. In the electric power sector, themain pillar of the plan and the roadmap is the emission reduction utilizing various
technologies, including the following: expansion of non-fossil energy introduction throughelectrification and hydrogenation in light of decarbonisation on the supply side; initiatives
to make renewable energy the main power source; optimal use of nuclear and thermal
power generation; and reinforcement and sophistication of the power transmission anddistribution network.
The plan and the roadmap have set a target by FY2030 to reduce greenhouse gas
emissions by 46% compared to FY2013 as an indicator corresponding to the short- to
medium-term goals based on “The Sixth Strategic Energy Plan” shown in Figure-4. As aneven more ambitious target, they set a target of 50% reduction (compared to FY 2013).
Tohoku Electric Power is taking on the challenge of becoming carbon neutral by 2050
based on the three pillars of “Maximum use of renewable energy and nuclear power”,

Page 14 of 72

“Decarbonization of thermal power” and “Electrification and realization of a smart
society”, in accordance with the policies of the Agency for Natural Resources and Energy.

Figure-3: Transition Roadmap for Decarbonizing Power Sector(Transition Roadmap for Power Sector, Agency for Natural Resources and Energy, February 2022)

Page 15 of 72

Figure-4: The Sixth Strategic Energy Plan, Point (1) of Outlook for Energy Supply and Demand in
FY2030 (Transition Roadmap for Power Sector, Agency for Natural Resources and Energy, February 2022)(2) Fundraiser’s Transition Strategy
Tohoku Electric Power positions the following activities as “transition strategy”: activities
that contribute to the CO2 emission reduction targets that are aligned with “The Sixth
Strategic Energy Plan” formulated by the Agency for Natural Resources and Energy, andto realise the Tohoku Electric Power Group Carbon Neutral Challenge 2050" set by Tohoku
Electric Power.
Table-4 shows the long-term and medium-term targets of Tohoku Electric Power. Tohoku
Electric Power has set a target of achieving carbon neutrality by 2050 and halving CO2
emissions (compared to FY2013) by 2030. This target is confirmed to be higher than thegreenhouse gas emission reduction target of “The Sixth Strategic Energy Plan” formulatedby the Agency for Natural Resources and Energy.

2050
2030

Table-4: Long-term and medium-term goals
Carbon-neutral
CO2 emissions halved (compared to 2013)
Aim for 2 million kW of renewable energy
development as early as 2030 onwards.

Table-5 shows a breakdown of Tohoku Electric Power's GHG emissions by scope, with
Scope 1 accounting for more than 70% of GHG emissions. The maximum use of renewableenergy and nuclear power and the decarbonisation of thermal power, as set out in the
Tohoku Electric Power Group Carbon Neutral Challenge 2050, are initiatives that contribute

Page 16 of 72

to the reduction of Scope 1 emissions, which account for the majority of Tohoku ElectricPower's GHG emissions. In addition, according to the Tohoku Electric Power Group
Integrated Report 2022, approximately 4.31 million tonnes of Scope 3 emissions are
related to fuel extraction and transportation, which will be reduced in tandem with Tohoku
Electric Power's efforts to reduce its consumption of fossil fuels in order to reduce Scope 1
emissions. In other words, reducing Scope 1 emissions is considered to be an important
initiative in lowering Tohoku Electric's overall GHG emissions. In addition, the progress in
the low-decarbonization of power generation across the country in accordance with theGovernment's CO2 emission reduction targets is expected to reduce Tohoku ElectricPower's Scope 3 emissions related to the electricity it receives from other companies.

Table-5: Scope 1, 2, and 3 greenhouse gas emissions
GHG emissions

FY2020 results

FY2021 results

Scope 1.

31,14032,815(Direct GHG emissions by the business)thousand t-CO2

thousand t-CO2

Scope 2.

1

1

thousand t-CO2

thousand t-CO2

Scope 3.

8,491

13,599(Indirect GHG emissions other than Scope 1 and 2)

thousand t-CO2

thousand t-CO2(Indirect GHG emissions from the use of electricity, heatand steam supplied by other companies).

Figure-6 and Table-6 show Tohoku Electric Power's approach towards carbon neutrality in
2050. In order to achieve its 2030 and 2050 targets, Tohoku Electric Power is accelerating
CO2 emission reductions with a focus on three pillars: maximising the use of renewableenergy and nuclear power, decarbonization of thermal power, and electrification andrealization of a smart society, and has set specific strategies for implementing specifictechnologies. In addition, the initiatives in these three pillars are closely interrelated, as
shown in Figure-7.

Page 17 of 72

Figure-6: Approaches towards carbon neutrality

Table-6: Initiatives to become carbon neutral
Enforcement Agenda

Maximum use of renewableenergy and nuclear power

Decarbonization of thermal
powerElectrification andrealization of a smart
society

Contents[Renewable energy] The aim is to develop 2 million kW as early as
possible after 2030. In the power transmission and distribution
business, work on upgrading the electricity network to maintain astable supply and expand the introduction of renewable energy.
[Nuclear power] The government will work to ensure the early restartof nuclear power plants and to improve their operating rates, basedon the premise that safety is ensured and with the understanding of
local communities.
The development of Joetsu Thermal Power Plant No. 1 and the steadypromotion of the decommissioning of ageing thermal power plants,
and the expansion of biomass co-firing in coal-fired power plants, will
be addressed, as well as the low-carbonisation and decarbonisation ofthermal power generation through demonstrations towards
decarbonisation.
The company will also actively work on the efficient use of energy anddistributed energy through the promotion of electrification and smart
society realisation projects, and contribute to the reduction of CO 2 forcustomers and local communities.

Page 18 of 72

Figure-7: Towards carbon neutrality(3) Fundraiser’s Governance (Structure for Environmental Initiatives)
The Board of Directors of Tohoku Electric Power has made a decision to strengthen its
response to climate change and incorporate it into its management strategy throughrecognition of climate change risks and opportunities and consideration of response
measures, as well as monitoring and supervising the progress of targets. The President
and Chief Executive Officer chairs the Carbon Neutral and Environmental Management
Promotion Council, which is responsible for overseeing environmental activities, including
addressing climate change. After consolidating the progress in addressing climate-related
issues in the framework of environmental management, the company reports annually to
the Board of Directors, via the Sustainability Promotion Council, as one of thematerialities.
In addition, the Tohoku Electric Power Group Environmental Committee is used to liaise
with Group companies, and a system has been established to promote sustainability
throughout the Tohoku Electric Power Group. Furthermore, at the practical level, actual
progress is managed at the Carbon Neutral Liaison Meeting, which is attended by deputy
general managers and section managers, and an implementation system has been
established from the management level to the practical level.

Page 19 of 72

Figure-8: Tohoku Electric Power's sustainability promotion system

Name of Fundraiser: Tohoku Electric Power Co., Inc.
Name of Framework: Tohoku Electric Power Green/Transition Finance Framework
Name of External Reviewer: DNV Business Assurance Japan K.K.
Date of Report: 20 February 2023

Page 20 of 72

II. Scope and Objectives
DNV has been commissioned by Tohoku Electric Power to provide an assessment of the
Framework. The objective of the assessment by DNV is to implement an assessment on whether
Tohoku Electric Power’s initiatives meet the criteria established in CTFH/CTFBG, GBP/GBGLs,
GLP/GLGLs, SLBP/SLBGLs, and SLLP/SLLGLs described below and provide a Second Party
Opinion on the eligibility of the Framework.
DNV, as an independent external reviewer, has identified no real or perceived conflicts ofinterest associated with the delivery of this Second Party Opinion for Tohoku Electric Power.
In this report, no assurance is provided regarding the financial performance of, the value of any
investments in, or the long-term environmental benefits of, Tohoku Electric Power’s
Green/Transition Finance.

Green Finance and Use of Proceeds Transition Finance Instruments*Although the following items are based on GBP, they may be replaced with the loan-specific items as
appropriate.

(1) Scope of Review*

The review assessed the following elements and confirmed their alignment with the gist of the four core elementsof GBP.
☒

Use of Proceeds☒

Process for Project Evaluation and Selection☒

Management of Proceeds☒

Reporting*The scope of the review is applied as the evaluation of Use of Proceeds transition finance instruments.
*The four disclosure elements of CTFH and CTFBG are also included in the scope of the review.

(2) Role(s) of Review Provider (Use of Proceeds Transition Finance)☒

Second Party Opinion☐

Certification☐

Verification☐

Rating☐Other (please specify):

Page 21 of 72

General Corporate Purpose Transition Finance Instruments*Although the following items are based on SLBP, they may be replaced with the loan-specific items as
appropriate.

(1) Structure of Bonds at the Time of Finance Execution☒

A step‐up structure☒

A variable redemption structure*Any of the above or other structures set individually based on the fundraiser's internal processes at the timeof financing execution.

(2) Scope of Review*
The review assessed the following elements and confirmed their alignment with the gist of the five core elementsof the SLBP/SLLP.
☒

Assessed all the following elements(complete review)☐

Assessed some elements only (partial review)☒

Selection of KPIs☒

Bond Characteristics☒

Calibration of SPTs☒

Reporting☒

Verification*The scope of the review is applied as the evaluation of General Corporate Purpose transition financeinstruments.
*The four disclosure elements of CTFH and CTFBG are also included in the scope of the review.

(3) Role(s) of the Review Provider☒

Second Party Opinion☐

Certification☐

Verification☐

RatingPage 22 of 72

Standards/Guidelines Applied
No.

Standards/Guidelines

Scheme Owner

1.

Climate Transition Finance Handbook (CTFH)*1

International Capital Market Association(ICMA), 2020.

2.

Basic Guidelines on Climate Transition Finance (CTFBG)*1

Financial Services Agency, Ministry of
Economy, Trade and Industry, Ministry of
the Environment, 2021.

3.

Green Bond Principles (GBP) *2*3

International Capital Market Association(ICMA), 2021.

4.

Green Bond Guidelines (GBGLs) *2*3

Ministry of the Environment, 2022.

5.

Green Loan Principles (GLP) *2*3

Loan Market Association (LMA et al.),
2021.

6.

Green Loan Guidelines (GLGLs) *2*3

Ministry of the Environment, 2022.

7.

Sustainability Linked Bond Principles (SLBP) *4

International Capital Markets Association(ICMA), 2020.

8.

Sustainability Linked Bond Guidelines (SLBGLs) *4

Ministry of the Environment, 2022.

9.

Sustainability Linked Loan Principles (SLLP) *4

Loan Market Association (LMA et al.),
2022.

10.

Sustainability Linked Loan Guidelines (SLLGLs) *4

Ministry of the Environment, 2022.

*1

The concept of climate transition focuses principally on the credibility of an issuer’s climate change-related commitments
and practices. (Quote from CTFH and CTFBG)*2

Applied to confirm that the Transition Finance is consistent with the four core elements (i.e., Use of proceeds, Process for
Project Evaluation and Selection, Management of Proceeds, and Reporting) that should be met when executing Use ofProceeds bonds or loans that meet the four elements of transition. (Edited quote from CTFBG)*3

Green projects were qualified using the Climate Bond Initiative's Climate Bond Criteria and the EU Taxonomy ofReferrable Technical Criteria.

*4

Sustainability-Linked loan: Sustainability-linked loans are any types of loan instruments and/or contingent facilities (suchas bonding lines, guarantee lines or letters of credit) which incentivise the borrower’s achievement of ambitious,
predetermined sustainability performance objectives. (Quoted from SLLP. *The evaluation for SLBP is conducted basedon a similar definition.) The SLBP confirms compliance with the five elements, etc., which must also be met when
implementing transition-linked finance without specifying the use of the funds.

Page 23 of 72

III. Responsibilities of Tohoku Electric Power and DNV
The management of Tohoku Electric Power has provided the information and data used by DNV
during the delivery of this review. DNV’s Second Party Opinion represents an independent
opinion and is intended to inform Tohoku Electric Power’s management and other interested
stakeholders in the Green/Transition Finance whether the established criteria have been met,
based on the information provided to us. In our work, we have relied on the information andthe facts presented to us by Tohoku Electric Power. DNV is not responsible for any aspect of thenominated assets referred to in this opinion and cannot be held liable if estimates, findings,
opinions, or conclusions are incorrect. Thus, DNV shall not be held liable if any of theinformation or data provided by Tohoku Electric Power’s management and used as a basis forthis assessment were not correct or complete.

Page 24 of 72

IV. Basis of DNV’s Opinion
To provide a protocol as flexible as possible for the Fundraiser, DNV has developed theGreen/Transition Finance Eligibility Assessment Protocol (hereinafter referred to as "Protocol")which incorporates the requirements of CTFH/CTFBG, GBP/GBGLs, GLP/GLGLs, SLBP/SLBGLs,
and SLLP/SLLGLs. Please refer to Schedule-3, 4, and 5. The Protocol is applicable togreen/transition finance and transition-linked finance based on CTFH/CTFBG, GBP/GBGLs,
GLP/GLGLGLs, SLBP/SLBGLs, and SLLP/SLLGLs.
DNV provides the Second Party Opinion according to the Protocol as an independent external
reviewer.
Our Protocol includes a set of suitable criteria that can be used to underpin DNV’s opinion. The
overarching principles behind green/transition finance and transition-linked finance which form
the basis for the opinion are as follows:“Enable capital-raising and investment for new or existing projects with environmental
benefits”“Provide the investment opportunities necessary for climate transition finance to be executedwith transparency and credibility."“Through KPIs and SPTs, encourage the achievement of the issuer’s ESG (regarding climatetransition) that are material (for climate transition), quantifiable, predetermined, ambitious,
regularly monitored and externally verifiable.”
According to DNV’s Protocol, the criteria against which this Green/Transition Finance andTransition-Linked Finance has been reviewed are grouped into common elements below, as set
forth in CTFH/CTFBG, GBP/GBGLs, GLP/GLGLs, SLBP/SLBGLs, and SLLP/SLLGLs.

(1) Four Common Elements of CTFH and CTFBG (Disclosure Elements)
Principle One: Fundraiser’s Climate Transition Strategy and Governance
The financing purpose should be for enabling the fundraiser’s climate change strategy.
Principle Two: Business Model Environmental Materiality
The planned climate transition trajectory should be relevant to the environmentallymaterial parts of the fundraiser’s business model.
Principle Three: Climate Transition Strategy to be ‘Science-based’ including Targets
and Pathways

Fundraiser’s climate strategy should reference science-based targets and transition
pathways.
Principle Four: Implementation Transparency
Market communication in connection with the offer of a financing instrument which has
the aim of funding the fundraiser’s climate transition strategy should also provide
transparency of the underlying investment program.

Page 25 of 72

(2)Four Common Elements of GBP/GBGLs and GLP/GLGLs

Principle One: Use of Proceeds
The Use of Proceeds criteria are defined by the requirement that the fundraiser
raising funds through green finance and transition finance in the format of Use ofProceeds instruments should use the proceeds from green/transition finance for
eligible projects. The eligible projects are those that provide clear environmental
benefits.
Principle Two: Process for Project Evaluation and Selection
The Project Evaluation and Selection criteria are defined by the requirements thatthe fundraiser raising funds through green/transition finance should outline (1) theprocess it follows when determining the eligibility of an investment for which theproceeds from green/transition finance will be used and (2) how it takes into
consideration the impact the project will make on its objectives.
Principle Three: Management of Proceeds
The Management of Proceeds criteria are defined by the requirements that thefundraiser should (1) track the green/transition finance, (2) develop separate
portfolios if necessary, and (3) announce how unallocated funds will be managed.
Principle Four: Reporting
The Reporting criteria are defined by the recommendation that the fundraiser
should report to the bond investors or loan lenders at least on how the proceeds
have been allocated and provide a sustainability report using qualitative andappropriate performance indicators and, where feasible, quantitative performancemeasures.

Page 26 of 72

(3) Five Elements of SLBPs/SLBGLs and SLLPs/SLLGLs＊“Sustainability” may be replaced with “transition” as necessary.

Principle One: Selection of Key Performance Indicator (KPIs)
The fundraiser of a sustainability-linked finance should clearly communicate (to lenders) its
overarching sustainability objectives as set forth in its sustainability strategy and how these
relate to its proposed SPTs. The KPI should be reliable, material to the fundraiser’s coresustainability and business strategy, address relevant ESG challenges of the industry
sector, and be under management control.
Principle Two: Calibration of Sustainability Performance Targets (SPTs)
The SPTs should be ambitious, meaningful and realistic. SPTs should be set in good faithand based on sustainability improvements in relation to a predetermined performancetarget benchmark.
Principle Three: Financial Characteristics
The finance should include a financial and/or structural characteristics of selected KPI(s)depending on whether the selected KPIs reach (or not) the predefined SPT(s). The financedocumentation is required to include the definitions of the KPI(s) and SPT(s) and thepotential variation of the SLB’s and SLL’s financial and/or structural characteristics. Any
fallback mechanisms in case the SPTs cannot be calculated or observed in a satisfactorymanner, should be explained.
Principle Four: Reporting
Fundraisers should publish and keep readily available and easily accessible up to date
information on the performance of the selected KPI(s), as well as a verification assurance
report (see Principle 5) outlining the performance against the SPTs and the related impact
and timing of such impact on the loan’s financial and/or structural characteristics. Suchinformation should be disclosed to investors or lenders at least annually during their
participation in financing.
Principle Five: Verification
Fundraisers should seek independent and external verification of their performance level
against each SPT by a qualified external reviewer with relevant expertise at least once ayear. The verification of the performance against the SPTs should be made publicly
available.

Page 27 of 72

V. Work Undertaken
Our work constitutes a comprehensive review of the available information, based on theunderstanding that the information was provided to us by Tohoku Electric Power in good faith.
We have not performed an audit or other tests to check the veracity of the information provided
to us. The work undertaken to form our opinion included:i. Pre-funding Assessment (Green/Transition Finance Framework Assessment)•

Creation of the Tohoku Electric Power-specific assessment protocol for the purpose of
application to Tohoku Electric Power Green/Transition Finance with respect to the above
and Schedule-3 to 5 below, which contribute to this assessment.

•

Assessment of documentary evidence provided by Tohoku Electric Power on theGreen/Transition Finance and supplemental assessment by a comprehensive desktop
research. These checks refer to the latest best practices in assessments as well as
standard methodologies.

•

Discussions with Tohoku Electric Power and review of relevant documentation.

•

Documentation of findings against each element of the criteria.

ii. Post-funding Assessment (*not included in this report)•

Interviews with the management of Tohoku Electric Power and evaluation (orverification) of the relevant document control.

•

On-site visits and inspections (if necessary).

•

Documentation of post-funding assessment results.

Page 28 of 72

VI. Findings and DNV's Opinion
The summary of DNV's findings and opinion are as described in (1), (2) and (3) below:
CTF-1 through 4 under (1) are the findings and DNV’s opinions against the disclosure elementsof CTFH/CTFBG applied to the Green/Transition Finance. See Schedule-3 for details.
GBP/GLP-1 through 4 under (2) are the findings and DNV’s opinions against the four common
elements of GBP/GBGLs and GLP/GLGLs. Please see Schedule-4 details.
SLBP/SLLP-1 through 5 under (3) are the findings and DNV’s opinions against therequirements of SLBP/SLBGLs and SLLP/SLLGLs regarding Sustainability (Transition)-Linked
Finance*1 applied in sustainable finance. Please see Schedule-2 and 5 for details.
*1: Loan with potential variation of financial and/or structural characteristics that is linked to the achievement status of
future transition goals.

(1) Findings and DNV’s Opinions against the Four Common Elements (Disclosure
Elements) of CTFH and CTFBG
CTF-1.

Fundraiser’s Climate Transition Strategy and Governance-

In March 2021, Tohoku Electric Power formulated the Tohoku Electric PowerGroup Carbon Neutral Challenge 2050. In addition, the Tohoku Electric PowerGroup's management strategy and ESG (environment, society and governance)
initiatives are inseparable, and the strategies of the Tohoku Electric PowerGroup's medium- to long-term vision "Working Alongside next ~Yori, Sou,
Chikara~” are linked to ESG, respectively. In addition, transition strategies andpathways/trajectories are shown as medium- and long-term targets up to 2030
and 2050 and approaches towards carbon neutrality.

-

DNV has reviewed and confirmed, based on the scientific evidence quantified by
Tohoku Electric Power, that Tohoku Electric Power’s targets are aligned with thegoals of the Paris Agreement.

-

Tohoku Electric Power’s transition strategy incorporates the results obtained
from the TCFD scenario analysis and the reduction targets and policies necessary
to achieve Japan’s 2050 carbon neutrality and the goals of the Paris Agreement.

-

Tohoku Electric Power has established a system and structure to promote thetransition strategy at the management level.

-

Tohoku Electric Power has made it clear that it will contribute to ESG and SDGs
while minimizing the negative impact (negative external effects) on society
through its business activities.

-

Based on the assessment of the Framework, the “Tohoku Electric Power Group
Carbon Neutral Challenge 2050” and the implementation plan, DNV confirmedthat they are well aligned with Tohoku Electric Power’s transition strategy. DNVPage 29 of 72

confirmed that the implementation plan based on the transition strategy iscredible, ambitious, and achievable.

CTF-2.

Business Model Environmental Materiality (Level of Importance)-

Tohoku Electric Power’s initiatives for transition include not only emission
reductions from its own operations (Scope 1 and 2), but also activities that
contribute to Scope 3 reductions. These are important initiatives in Japan'svarious decarbonisation plans and strategies and contribute to the realisationof carbon neutrality on both the supply and demand sides. In other words,
Tohoku Electric Power’s initiatives for transition will directly support thetransition of the whole society, including Tohoku Electric Power itself, as anenergy company taking on the challenge to achieve carbon neutrality by 2050.

-

Tohoku Electric Power’s approach towards carbon neutrality is well alignedwith “The Sixth Strategic Energy Plan” and the “Transition Roadmap for Power
Sector” formulated by the Agency for Natural Resources and Energy. Their
specific action plans and goals are set and quantified in absolute terms thatthey must enable optimal solutions and further improvements.

-

DNV confirmed that Tohoku Electric Power’s plan to implement its transition
strategy is closely linked to the activities of its core business and to theactivities that contribute to the reduction of CO2 in the whole society, thus
contributing to the overall environment and supporting Tohoku Electric Powerto advance its businesses. Tohoku Electric Power’s planned transition strategy
and transition pathways are associated with the issues that Tohoku ElectricPower has identified as materiality by utilizing GRI standards*1, ISO 26000,
TCFD, etc., and will contribute to a significant environmental benefit (impact)from both qualitative and quantitative perspectives.
*1: An international standard providing ESG-related reporting, management and analysis methods
established by Global Reporting Initiative.

CTF-3.

Climate Transition Strategy to be Science-based including Targets andPathways-

Tohoku Electric Power has set a transition plan for the Tohoku Electric PowerGroup’s CO2 emissions that is consistent with the science-based Paris
Agreement and a transition trajectory that is consistent with the Agency for
Natural Resources and Energy’s targets.

-

DNV confirmed that Tohoku Electric Power’s transition strategy was quantified
as an absolute value or the share based on a consistent measurement method
based on prescribed assumptions.

Page 30 of 72

-

DNV confirmed that J-POWER’s transition strategy was established withmedium-term goals (FY2030) and long-term goals (2050), which exceed thegoals of the Agency for Natural Resources and Energy, as milestones.

Table–4 (re-posted): Long-term and medium-term goals
Carbon-neutral
2050
CO2 emissions halved (compared to 2013)
Aim for 2 million kW of renewable energy
2030
development as early as 2030 and beyond.

CTF-4.

Implementation Transparency-

DNV has confirmed that the investment and deployment plans related to
Tohoku Electric Power’s transition strategy include agreement on future
investment and expenditure. As a specific example, in order to realise the
Tohoku Electric Power Group’s medium- to long-term vision “Working
Alongside next ~Yori, Sou, Chikara~”, the renewable energy business,
including grid reinforcement of the power transmission and distribution
network, and the smart society realisation business are positioned as mediumto long-term growth areas, and around 400 billion yen will be invested byaround 2030. The Group also plans to make the necessary investments tomaximise the use of nuclear power and to reduce and decarbonise thermal
power as set out in the roadmap of the “Tohoku Electric Power Group Carbon
Neutral Challenge 2050”. See Figure-9 for details.

-

DNV also reviewed the Framework and the “Tohoku Electric Group Carbon
Neutral Challenge 2050” to ensure that the implementation was transparent
and that the validity of the implementation was explained and agreed by
Tohoku Electric Power.

Figure-9: Tohoku Electric Power's investment plans

Page 31 of 72

(2) Findings and DNV’s Opinions against the Four Common Elements of GBP/GBGLs
and GLP/GLGLs*The four elements are the criteria for green finance and transition finance in the format of Use ofProceeds instruments and the term Green Bonds in some parts below can be read as transition financeinstruments (bonds and loans).

GBP/GLP-1. Use of Proceeds
Tohoku Electric Power has defined the eligibility criteria for the use of proceeds as
green/transition projects which are consistent with the transition strategy and meet therequirements of the related frameworks (CTFH/CTFBG, GBP/GBGLs and GLP/GLGLs).

Table-1: (re-posted) Tohoku Electric Power Green/Transition Finance Eligibility Criteria andProject Summary
Roadmap

Eligibility

Project Overview

Project Examples

Criteria
Maximum Use

Renewable

Development,of Renewable

Energyconstruction,

Energy andoperation and

Nuclear Powerrenovation of✓Wind Farm Tsugaru (onshore
wind power)✓

Tamagawa Hydroelectric Power
Station No. 2 (hydropower)

wind,

✓

Miyagi Osato Solar Park (solar)

geothermal,✓

Matsukawa Geothermal Powersolar, hydro andStation (geothermal)

biomass power
generation
projects (*)
Nuclear

Further safetyPower

improvements✓

Onagawa Nuclear Power Station
Unit 2 safety works

and continued
safe/stable
operation
Power Grid

Upgrading✓Tohoku‐Tokyo interconnection line

through grid✓Northern Tohoku Area Power

maintenance andSupply Recruitment Process

digitalisation,
storage of
surplusrenewableenergy, P2G, etc.
Decarbonization

LNG Thermal

Decarbonisation

Powerusing hydrogenof Thermal

and ammonia,

Power

and

✓

Mixed‐firing project at Niigata
Thermal Power Station, No. 5.

✓

Development of Joetsu Thermal
Power Plant 1.

Page 32 of 72

High efficiency ofthermal power
Coal Thermal

Decarbonisation

Powerusing biomass
and ammonia✓

Mixed burning f black pellets at
Noshiro Thermal Power Station.

✓

Production of the biomass raw
materials on unused land at ourpower stations

Fading Out

Discontinuation

Inefficientof Ageing

Station Port No. 1 and Port No. 2

Power

Firepower

decommissioned.

✓

East Niigata Thermal Power

Sources
CCUS

Studying CCUS✓

Converting the CO2 generated bythermal power sources ofmethane gas

Electrification andHome andHeat pump

the Realization ofBusiness

Electrificationa Smart Society

and✓Installation of Electrification
Systems.

✓

Sales ofMore End‐User‐Friendly
Renewable Electricity.

Renewable
Energy Menus
through Credit
Purchases
Transport

Promotion of✓Electric Vehicles,

Electrification of Company‐Owned
Vehicles (*)

etc.
Industry

Energy✓Conversion ofElectrification of Heat Resources(*)

Production
Processes, etc.
Use ofVPP Projects✓

Aozora Charge service (*)

Decentralised

Using Private✓

The Renewable Aggregation

EnergySolar andBusiness (*)

Storage Battery
Services, etc.

Projects marked with an asterisk (*) in Table-1 are green eligible projects; thus,
Transition Finance and Green Finance may use them as a source of funds.

DNV has confirmed that Tohoku Electric Power plans to allocate all the net proceeds fromthe Green/Transition Finance to finance new expenditures or refinancing existing
expenditures such as capital expenditures, operating and administrative expenses, equity
investments, R&D related expenses, demolition expenses or other related expenditures of
eligible green/transition projects which are consistent with Tohoku Electric Power's
investment plan for implementation of its transition strategy. For refinancing, projects that

Page 33 of 72

have been disbursed within 36 months retroactively from the date of the financing are
eligible for the refinancing.
These are projects that directly or indirectly support projects that would result in significant
greenhouse gas reductions as exemplified by CTFH/CTFBG, GBP/GBGLs, and GLP/GLGLs,
projects that aims to achieve carbon neutrality that contribute to business transformation,and projects that align with the “Transition Roadmap for Power Sector” by the Agency for
Natural Resources and Energy and contribute to achieving its goals. These projects are
expected to contribute to the SDGs because they have been evaluated as meeting thecriteria required for green/transition projects and as having a clear environmental benefit
that contributes to the transition strategy. These processes are consistent with GBP/GLP-1.

Use of proceeds categories as per GBP/GLP☒

Renewable Energy☒

Energy efficiency (energy savings)☐

Pollution prevention and control☐

Sustainable management of living natural

Terrestrial and aquatic biodiversity☒

Clean Transportation

resources☐

conservation☐

Sustainable water management☐

Climate change adaptation☐

Eco-efficient products, production☐

Green buildings with regional, national or

technologies and processes

internationally recognized standards andcertifications☐

Other (please specify).

☐

It is undecided at the time of bond issuance, but is expected to be line with the GBP/GLP
classification or other eligible areas not listed in the GBP/GLP at this time.

Page 34 of 72

GBP/GLP-2. Process for Project Evaluation and Selection
In selecting Green/Transition projects, the office department with jurisdiction over eachproject selects project candidates based on the “Tohoku Electric Power Group Carbon
Neutral Challenge 2050” and the eligibility criteria in Table-1, which are then approved
through an appropriate internal decision-making process. In addition, the following
processes for reducing environmental and social risks, which have been defined inadvance in the framework, will be implemented.
These have been established as internal processes at Tohoku Electric Power and the DNV
confirmed that they will be implemented in accordance with the appropriate processes.
DNV also confirmed that the Green/Transition projects implemented by Tohoku ElectricPower are consistent with Tohoku Electric Power's management and environmental
policies and that they are aligned with the transition strategy, targets, and pathways.
<Processes for reducing environmental and social risks>
Tohoku Electric Power will accurately monitor legal amendments and policy trends andensure compliance with environmental laws and regulations for all its operations. In
addition, through the Tohoku Electric Power Group Environmental Management
System (T-EMS) and other programmes, Tohoku Electric Power will continuously
improve the level of environmental management at each company in the corporategroup and strive to further reduce environmental risks.

Evaluation and Selection☒

The project is consistent with the☒

The project is evaluated and selected based on

Fundraiser’s achievement ofa documented process showing that the projectenvironmental contribution goals.
☒

fit into the defined eligibility categories.

The project is eligible for use of proceeds☒

The project is evaluated and selected basedby green finance and the transparency

on a documented process showing thatis ensured.

potential ESG risks associated with project
implementation are identified and managed.

☒

The project is evaluated and selected☐

Other (please specify):

based on the gist of published standard
summary (green projects for whichreferenceable criteria exist).

Information on Responsibilities and Accountability☒

Evaluation/selection criteria based on☒

external advice or verification☐

Other (please specify):

Page 35 of 72

Internal assessmentGBP/GLP-3. Management of Proceeds
DNV confirmed how Tohoku Electric Power will track and manage proceeds during theperiod from bond issuance to redemption/repayment of Green/Transition Finance. With
respect to the proceeds from the Green/Transition Finance, based on Tohoku ElectricPower’s internal control procedures, the Finance and Accounting Department will manage
the expenditure for eligible projects and track the allocated and unallocated amounts ofthe proceeds by using the fund management code assigned to each project using theinternal system and forms such as the proceeds management table. The total amount ofeligible projects will be managed so that it does not fall below the proceeds from theGreen/Transition Finance. Unallocated proceeds, if any, will be managed in cash or cash
equivalents.
Tracking and Management of Proceeds:☒

Some or all the proceeds from green finance that are planned to be allocated aresystematically distinguished or tracked by the Fundraiser.

☐

The type and schedule of temporary investment of unallocated proceeds are disclosed.

☒

Other (please specify): Unallocated proceeds are managed in cash or cash equivalents.

Additional Disclosure Information:☐

Allocation to new investments only☒

Allocation to both existing and newinvestments☒

Allocation to individual (project)☐

Allocation to a portfolio of disbursements☒

Other (please specify): includes allocations

disbursements☐

Disclosure of portfolio balance of
unallocated proceeds

through affiliates/subsidiaries.

Page 36 of 72

GBP/GLP-4. Reporting
DNV has confirmed that the following information will be disclosed in the Tohoku ElectricPower Group Integrated Report or on the Tohoku Electric Power website as part of thereporting on the allocation of proceeds and impact reporting until Tohoku Electric Power
has allocated the full amount of proceeds raised through the green/transition finance.
Even after the completion of the allocation, any significant changes in the progress of the
projects subject to allocation or in the effects of environmental benefits will be disclosed.

<Reporting on Allocation Status>
 Balance of unallocated proceeds (the share in the case of loans) Amount of allocated proceeds (the share in the case of loans) Approximate amount (or the share) of the proceeds allocated to refinancing<Impact Reporting>
As for impact reporting, all or part of the information illustrated in Table-7 will be disclosed,
within the limits of confidentiality and as far as is reasonably practicable. Please note thatthe impact reporting indicators are illustrative and are subject to change in the future.
Table-7: An example of impact reporting
Eligibility

Project

Criteria

Overview

Renewable
EnergyNuclear PowerPower Grid

Project Examples

Example of Impact
Reporting Items

Development,
construction,
operation andrenovation ofwind, geothermal,
solar, hydro andbiomass power
generation
projects (*)✓

Further safety
improvements
and continued
safe/stable
operation
Upgradingthrough grid
maintenance anddigitalisation,
storage of surplus
renewableenergy, P2G, etc.

✓

Wind Farm Tsugaru✓(onshore wind power)✓

Tamagawa HydroelectricPower Station No. 2✓(hydropower)✓✓

Annual CO2 emission
reductions by renewableenergy type (t-CO2/y)
Installed capacity byrenewable energy type(MW)

Miyagi Osato Solar Park
(solar)Matsukawa Geothermal
Power Station (geothermal)
Onagawa Nuclear Power
Station Unit 2 safety works

✓
✓
✓

✓

Tohoku-Tokyo✓

interconnection line
Northern Tohoku Area
Power Supply Recruitment
Process

Page 37 of 72✓✓

Installed capacity (MW)Annual CO2 emission
reductions (t-CO2/y)Annual electricity
production (MWh)Outline of capital
investment, etc.
Reduction in renewableenergy output
suppression (estimated)LNG Thermal
Power

Coal Thermal
Power

Decarbonisation
using hydrogenand ammonia,
andHigh efficiency ofthermal power
Decarbonisation
using biomass
and ammonia✓

Niigata Thermal Power✓

Station, No. 5.
Development of Joetsu
Thermal Power Plant 1.

✓

Mixed burning f blackpellets at Noshiro✓

Fading Out
InefficientPower Sources

Discontinuation of
Ageing Firepower

Mixed-firing project at✓

Thermal Power Station.
Production of the biomass
raw materials on unused
land at our power stations
East Niigata Thermal Power
Station Port No. 1 and PortNo. 2 decommissioned.

✓
✓
✓

✓
✓
✓

✓
✓
✓

CCUS

Studying CCUS✓

Home andBusiness

Heat pump
Electrification andSales ofrenewable Energy
Menus throughCredit Purchases
Promotion ofElectric Vehicles,
etc.
EnergyConversion of
Production
Processes, etc.
VPP Projects
Using Private
Solar and Storage
Battery Services,
etc.

✓

Transport

Industry

Use ofDecentralised
EnergyProject overview.
Annual CO2 emission
reductions (t-CO2/y)Annual electricity
production (MWh)Project overview.
Annual CO2 emission
reductions (t-CO2/y)Annual electricity
production (MWh)Project overview.
Annual CO2 emission
reductions (t-CO2/y)Annual electricity
production (MWh)Project overview.

Converting the CO2
generated by thermal
power sources of methanegas
Installation of Electrification
Systems.
More End-User-Friendly
Renewable Electricity.

✓✓✓

Electrification
introduction results
Electricity sold (MWh)Credit purchases✓

Electrification of CompanyOwned Vehicles (*)✓

EV introduction results✓

Electrification of Heat
Resources (*)✓

Electrification
introduction results✓✓

Aozora Charge service (*)
The Renewable Aggregation
Business (*)✓

Service introduction
results
Annual CO2 emission
reductions (t-CO2/y)✓Page 38 of 72✓✓

Reporting on Allocation Status:☒

On a project-by-project basis☒

On a project portfolio basis☐

On an individual related bond basis☐

Other (please specify):☐

Share of total investment amount allocated byInformation reported:☒☐

Amount of allocated proceeds

proceeds from Green Finance
Other (please specify):

Frequency:☒

Annual☐Other (please specify):☐

Semi-annual

Impact Reporting (Environmental Benefits):☒

On a project-by-project basis☒

On a project portfolio basis☐

On an individual related bond basis☐

Other (please specify):

Frequency:☒

Annual☐Other (please specify):☐

Semi-annual

Information Reported (Expected/Post-funding Impact):☒

GHG emissions/reduction☒

Other ESG evaluation items (please

Installed capacity (MW), annual electricity production

specify):(MWh), etc.

☐

Energy reduction

Means of Disclosure:☒

Included in the financial report (integrated☐

Included in the sustainability report☒

Other (please specify): disclosed on website

report)☐Included in the extraordinary report☐

Included in the reviewed report (please specify the report items subject to external review).

Page 39 of 72

(3)Findings and DNV’s Opinion against the Five Requirements of SLBP/SLLP
SLBP/SLLP-1

Selection of Key Performance Indicators (KPIs）-

DNV reviewed Tohoku Electric Power's KPIs related to sustainability andconfirmed that the selected KPIs are important to Tohoku Electric Power andrelevant to its core transition strategy and sustainability management.

-

DNV confirmed that Tohoku Electric Power's Transition Link Finance KPIs and
SPTs, shown in Table-2, are closely related to the “carbon neutrality challenge”
among the materialities identified by Tohoku Electric Power. In addition, it was
confirmed through interviews that the KPI CO2 emissions from retail electricity
account for a large proportion of the CO2 emissions in the Tohoku ElectricPower Group and are an important indicator in the Tohoku Electric PowerGroup's carbon neutrality efforts.

-

DNV confirmed that the KPIs selected by Tohoku Electric Power are consistent
with “The Sixth Strategic Energy Plan” and the “Transition Roadmap for Power
Sector” formulated by the Agency for Natural Resources and Energy, and areappropriately set as comparable indicators.

-

DNV believes that Tohoku Electric Power's KPI initiatives are closely related to
the goals set out in the Tohoku Electric Power Group Carbon Neutral Challenge
2050 and will contribute to the realisation of Tohoku Electricity Power Group's
medium- to long-term vision "Working Alongside next ~Yori, Sou, Chikara~",as well as being an important driver for profit growth. The KPIs are also
considered to contribute to both the goals related to Tohoku Electric Power's
sustainability management and Tohoku Electric Power's business strategy.

-

DNV concludes that CO2 emissions as a KPI are measurable according to aconsistent methodology (Act on Promotion of Global WarmingCountermeasures), are externally verifiable and can be benchmarked against
external references. DNV concludes that CO2 emissions are a robust andreliable indicator.

-

DNV has confirmed that the KPIs selected by Tohoku Electric Power provide aclear assessment scope and calculation methodology. For more information,see Schedule-5.

Page 40 of 72

Selected KPIs
✓ KPI: CO2 emissions (*)(*) Emissions from retail electricity

Definition, Scope and Parameters☒

Clear definition of each selected KPIs☐

Other (please specify):☒

Clear calculation methodology

Relevance, Robustness and Reliability of the Selected KPIs☒

Demonstrated that the selected KPIs are☐

relevant, core and material to the

Evidence that the KPIs are externallyverifiable

fundraiser’s sustainability and businessstrategy☒

Demonstrated that KPIs are measurable☒

Evidence that the KPIs can be benchmarked☐

Other (please specify):or quantifiable on a consistentmethodological basis

Page 41 of 72

SLBP/SLLP-2

Calibration of Sustainability Performance Targets (SPTs):-

DNV confirmed that it can be estimated that the substantive contribution of
Tohoku Electric Power to the reduction of CO2 emissions exceeds the target
more than in “The Sixth Strategic Energy Plan”, based on the perspective that
the SPTs shown in Table-2 support the reduction of CO2 emissions set in“Tohoku Electric Power Group Carbon Neutral Challenge 2050.“ DNV also
confirmed SPTs shown in Table-2 is ambitious, realistic, and meaningful.

-Based on the “Tohoku Electric Power Group Carbon Neutral Challenge 2050” andthe information provided by Tohoku Electric Power, DNV concluded that Tohoku
Electric Power has an inherent concrete plan to achieve the SPT, that the SPT isrealistic, that the plan is feasible and that it is likely to be achieved.

-

The SPT set by Tohoku Electric Power of halving emissions by 2030 compared to2013 (22.82 million t-CO2) is more ambitious than the target set in “The Sixth
Strategic Energy Plan” formulated by the Agency for Natural Resources andEnergy of reducing CO2 emissions by 46% by 2030 (compared to 2013), whichgoes beyond “Business as Usual.”-

DNV has confirmed that the SPTs set by Tohoku Electric Power are tied to theimprovement of the KPIs. Tohoku Electric Power's KPI/SPT efforts are expected
to be a driving force in the implementation of Tohoku Electric's Transition(Sustainability) strategy.

-

DNV has ensured that the process of setting SPT targets is based on the rightcombination of benchmarking approaches.

-•

DNV confirmed that the selected KPI CO2 emissions have beenmeasured for at least 10 years and are disclosed in the Tohoku ElectricPower Group Sustainability Report 2022, which provides guidelines forsetting targets up to 2030.

•

DNV confirmed that the set SPT of half the 2030 reduction (compared
to 2013) is at a level that exceeds the 2030 target of 46% set by the
Agency for Natural Resources and Energy.

•

DNV concludes that the SPTs set are appropriately related to the CO2
emission reduction targets set by the Agency for Natural Resources
and Energy. The Agency's targets have been developed with a view toaligning them with those of the Paris Agreement and can be judged to
be based on scientific evidence.

DNV confirmed that SPT target setting has been adequately disclosed as follows.
•

The timeline for achieving the SPT is 2030. Milestone SPTs may be
defined for redemption periods, etc.

•

CO2 The base year for the SPT on emission reductions is 2013. This isconsistent with the base year (2013) set by the Agency for Natural
Resources and Energy.

Page 42 of 72

•It details how CO2 emission reductions can be achieved through theapproach towards carbon neutrality described in the “Tohoku ElectricPower Group Carbon Neutral Challenge 2050”.

Selected SPTs
✓ SPT: halve by 2030 compared to 2013 (22.82 million t-CO2)(SPTs’) Rationale and level of ambition☒

Evidence that the SPTs represent a☒material improvement☒

Demonstrated relevance and reliability of
selected benchmarks and standards

Evidence that SPTs are consistent with☒

the Fundraiser’s sustainability and

Demonstrated SPTs have been set in apredefined timeline

business strategy☐

Other (please specify):

Benchmarking approach☒

Fundraiser’s own performance☐Fundraiser’s industry peers☒

Reference to scientific evidence☐

Other (please specify):☒

Explanation of the fundraiser’s strategy for

Additional disclosure☒

Explanation of possible recalculations or
adjustments☒

Identification of key factors that may

achievement☐

affect the achievement of SPTs

Page 43 of 72

Other (please specify):

SLBP/SLLP-3

Bond/Loan Characteristics

DNV has confirmed that the financial and structural characteristics of the TransitionLinked Finance (bond or loan) executed under the Framework vary depending on thetiming of the observation of certain SPTs and trigger events with performancerequirements. The details, including terms and conditions, will be determined after
discussions at Tohoku Electric Power’s internal meetings and will be disclosed in the legal
disclosure documents for the bond or the loan agreement, as the case may be, eachtime the financing is executed.
-

DNV confirmed that Tohoku Electric Power has considered appropriate fallback
mechanisms (fallback alternatives) and as a result has decided not to set up
another SPT or calculation method at this time as the risk of not being able tocalculate or observe is very small.

-

DNV confirmed that there is a possibility that changes may be made to the KPIs
and SPTs after discussions at internal meetings, etc., if there are reasonablereasons, such as changes in the business environment / business structure /KPIs at Tohoku Electric Power, whether such events are due to external factors
or as a result of management decisions by Tohoku Electric Power. The company
has confirmed that the KPIs and SPTs may be changed for reasonable reasons.

-

DNV confirmed that if Tohoku Electric Power changes its KPIs and SPTs, it
intends to disclose this in the statutory disclosure documents for the bonds or in
the loan agreement documents.

Financial impact☒

Variation in interest rates☒

Other (please specify): other financial incentives (determined on the basis of the fundraiser's
internal criteria)

Structural characteristics☒

Other (please specify): The conditions for trigger event determination (determination date andSPTs) will be set according to the term of each bond or loan and will be specified in legal
disclosure documents (or other methods of public disclosure) or contract documents.

Page 44 of 72

SLBP/SLLP-4-

Reporting

DNV confirmed that the necessary information will be disclosed to the public in atimely manner for the following details required by the SLBP/SLLP.
•KPI performance for SPT: will be verified by an external agency at least
once a year until the completion of redemption or repayment after the
execution of Transition‐Linked Finance, and disclosed to the lender in the
Integrated Report or on the website (in the case of loan only).

•

SPT achievement status: will be verified annually by an independent third
party and used for determination of the financial characteristics. Whentargets set by the Agency for Natural Resources and Energy werechanged: an evaluation by an external evaluation body may be obtained
after consultation with the relevant parties, including setting evaluation
criteria for the SPT with a level of ambition equal to or higher than theconventional evaluation criteria.

Information reported☒

Performance of the selected KPIs☒

Verification assurance report☒

Level of ambition of the SPTs☒

Other (please specify): Information on thefinancial impact when implementing trigger
event determination. Validity of theadjustment and recalculation result of KPIs
and SPTs, if necessary.

Frequency☒

Annual☐Other (please specify):☐

Semi-annual

Means of disclosure☐

Information published in financial report☐

Information published in sustainability report☐

Information published in ad hoc☒

Other (please specify): disclosed on thefundraiser’s website or to the lender (incase of loan only)☐

Reasonable assurance☐

Other (please specify):

documents☐

Reporting externally reviewed

Level of assurance on reporting☒

Limited assurance

Page 45 of 72

SLBP/SLLP-5

Verification

DNV confirmed that Tohoku Electric Power planned to undergo independent verification of
KPI and SPT-related performance at least once a year by qualified external assessment
agency.
Information reported☒

Limited assurance☐

Reasonable assurance☐

Other (please specify):☐

Semi-annual☐

KPI methodology

Frequency☒

Annual☐Other (please specify):

Material changes☒

Perimeter☐

SPTs calibration

Page 46 of 72

VII. Assessment Conclusion
On the basis of the information provided by Tohoku Electric Power and the work
undertaken, it is DNV’s opinion that the Tohoku Electric Power’s Green/Transition Finance
Framework meets the criteria established in the Protocol, and that they are aligned withthe following stated definition or purpose of Green/Transition Finance and Transition‐Linked
Finance for bonds and loans that specified use of Proceeds or for the general purposes,
within the CTFH/CTFBG, GBP/GLP, GBGLs/GLGLs, SLBP/SLBGLs, and SLLP/SLLGLs.
-“Enable capital‐raising and investment for new and existing projects withenvironmental benefits"“Provide an investment opportunity with transparent sustainability credentials””Climate Transition Finance is important (as climate transitions) through KPIs and
SPTs, quantitative, pre‐determined, ambitious, and regularly monitored and externallyvalidated and encourage the achievement of ESG (in terms of climate transitions) offundraisers”

DNV Business Assurance Japan K.K.
20 February 2023

Mark Robinson

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV Business Assurance, Australia

DNV Business Assurance Japan K.K.

Masato Kanedome

Jun Chokai

Project Leader

Assessor

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

Page 47 of 72

About DNVDriven by our purpose of safeguarding life, property and the environment, DNV enables organisations to advance thesafety and sustainability of their business. Combining leading technical and operational expertise, risk methodology andin-depth industry knowledge, we empower our customers We continuously invest in research and collaborative innovation
to provide customers and society with operational and technological foresight.
With our origins stretching back to 1864, our reach today is global. operating in more than 100 countries, our 16,000
professionals are dedicated to helping customers make the world safer, smarter and greener.

Disclaimer
Responsibilities of the Management of the Fundraiser and the Second-Party Opinion Providers, DNV : The management of
the Fundraiser has provided the Our statement represents an independent opinion and is intended to inform theFundraiser management and other interested stakeholders in the Bond as to whether the established criteria are met. Our
statement represents an independent opinion and is intended to inform the Fundraiser management and other interested
stakeholders in the Bond as to whether the established criteria have been met, based on the information In our work wehave relied on the information and the facts presented to us by the Fundraiser. Thus, DNV shall be liable for any aspect of
the nominated assets referred to in this opinion and cannot be held liable if estimates, findings, opinions, or conclusions
are incorrect. Thus, DNV shall be held liable if any of the information or data provided by the Fundraiser's management
and used as a basis for this assessment were not correct or complete

Page 48 of 72

Schedule-1 Green/Transition Finance Nominated Projects List
The projects listed in the table are the nominated projects that have been evaluated for eligibility at the time of pre‐issue eligibility assessment (asof January 2023). In future Green/Transition Finance issued under the Tohoku Electric Power’s Green/Transition Finance Framework, one or moreof the Eligible Criteria (nominated eligible projects) described in Schedule‐1 as per its labelling and the use of proceed are reported in the pre‐financing or post‐financing reports. If additional green/transition projects are included, project eligibility will be evaluated in advance by Tohoku
Electric Power in accordance with the process based on Tohoku Electric Power Finance Framework and, if necessary, DNV will evaluate them in atimely manner.

Roadmap

Eligibility Criteria
Renewable Energy

Project Overview
Development, construction,

Project Examples✓

operation and renovation of wind,geothermal, solar, hydro andpower)✓

biomass power generation
projects (*)

Maximum Use ofRenewable Energy andNuclear PowerWind Farm Tsugaru (onshore wind
Tamagawa Hydroelectric Power Station
No. 2 (hydropower)✓

Miyagi Osato Solar Park (solar)✓

Matsukawa Geothermal Power Station(geothermal)

Nuclear Power

Further safety improvements and✓continued safe/stable operation
Power Grid

Onagawa Nuclear Power Station Unit 2
safety works

Upgrading through grid✓

Tohoku-Tokyo interconnection line

maintenance and digitalisation,✓

Northern Tohoku Area Power Supply

storage of surplus renewable

Recruitment Processenergy, P2G, etc.
LNG Thermal Power
Decarbonization of
Thermal Power

Decarbonisation using hydrogen✓and ammonia, andHigh efficiency of thermal power

Mixed-firing project at Niigata Thermal
Power Station, No. 5.

✓

Development of Joetsu Thermal Power
Plant 1.

Page 49 of 72

Coal Thermal Power

Decarbonisation using biomass✓

and ammonia

Mixed burning f black pellets at Noshiro
Thermal Power Station.

✓

Production of the biomass raw
materials on unused land at our power
stations

Fading Out Inefficient Power Sources

Discontinuation of Ageing✓

Firepower

East Niigata Thermal Power Station
Port No. 1 and Port No. 2
decommissioned.

CCUS

Studying CCUS✓

Converting the CO2 generated bythermal power sources of methane gas

Home and Business

Heat pump Electrification and✓Installation of Electrification Systems.

Sales of Renewable Energy Menus✓

More End-User-Friendly Renewablethrough Credit Purchases
Electrification and theRealization of a Smart
SocietyTransport

Promotion of Electric Vehicles, etc.

Electricity.
✓

Electrification of Company-Owned
Vehicles (*)

Industry

Energy Conversion of Production✓

Electrification of Heat Resources (*)

VPP Projects Using Private Solar

✓

Aozora Charge service (*)

and Storage Battery Services, etc.

✓

The Renewable Aggregation Business

Processes, etc.
Use of Decentralised Energy(*)

Projects marked with an asterisk (*) in Table-1 are green eligible projects; thus, Transition Finance and Green Finance may use them as a sourceof funds.
*1 Projects that have been identified as eligible as green projects can be incorporated as green projects when implementing green finance in the future. Green projects are also
allowed in the CTFBG to be incorporated as part of transition finance implementation.
*2 Some of the projects currently classified as transition projects may become green projects by the application of technological innovations in the future (e.g. application of green
fuel/manufacturing process and achievement of CO2 emission standards that meets the criteria for green projects). The eligibility criteria for both green and transition areclassified as either or both depending on the individual project.

Page 50 of 72

Schedule-2 Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs)
KPIs Key performance indicators
KPIs

Description
The KPIs have been set for items closely related to the “carbon neutrality challenge” within Tohoku
Electric Power's materiality.

CO2 Emissions (*)(*) Emissions from retail electricity

It is a core KPI towards the realization of Tohoku Electric Power's 2050 carbon neutrality target and canbe measured quantitatively and continuously in accordance with the Act on Promotion of Global WarmingCountermeasures

SPTs Sustainability Performance Targets
SPT

Halve by 2030 compared to 2013(22.82 million t-CO2)

Description
The SPT is an ambitious, meaningful and realistic target set to accelerate Tohoku Electric Power's Carbon
Neutral Challenge 2050 efforts, surpassing the 2030 target of 46% reduction set by the Agency for
Natural Resources and Energy.
Reference: CO2 emissions in FY2013 were 45.63 million t-CO2 (Source: Tohoku Electric Power Group
Sustainability Report 2022)

Page 51 of 72

Schedule-3 Transition Finance Framework Eligibility Assessment Protocol
The following checklists (1-4) are DNV evaluation procedures created for Tohoku Electric Power Transition Finance (specific use of proceeds and general purposes)
from Tohoku Electric Power’s Green/Transition Finance Framework, based on the disclosure requirements of the CTFH and CTFBG.
The "confirmed documents" in the Work Undertaken include public or private documents (internal documents of the issuer or the fundraiser), etc., and are provided
by Tohoku Electric Power as evidence of eligibility judgment for DNV.
*"Issuer" and "investor" may be read as "financier" and "lender" respectively in the disclosure requirements below and elsewhere as appropriate.

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1

Issuer’s Climate
Transition
Strategy andGovernance

The financing purpose should be forenabling an issuer’s climate change
strategy. A ‘transition’ label applied to a
debt financing instrument should serve tocommunicate the implementation of anissuer’s corporate strategy to transform thebusiness model in a way which effectively
addresses climate‐related risks andcontributes to alignment with the goals of
the Paris Agreement.

Confirmed Documents:- Framework- The Sixth Strategic
Energy Plan.
- Transition Roadmap
for the power sector- Tohoku Electric PowerGroup Integrated
Report 2022
- Tohoku Electric PowerGroup Sustainability
Report 2022
- Tohoku Electric PowerGroup Medium- andLong-Term Vision- Tohoku Electric PowerGroup Carbon Neutral
Challenge 2050
- project list

Tohoku Electric Power has established a framework and has
also introduced various plans and initiatives to manage andenhance the organisation's environmental sustainability andrelated performance against Tohoku Electric Power's
broader environmental strategy.

•••<Suggested information andindicators>Long-term goal consistent
with the Paris Agreement target (tokeep global average temperature
increase well below at least 2°C above
pre-industrial levels, ideally limited to
1.5°C).
Reasonable medium-term objectives on
a trajectory towards long-term goals.
Disclosure by issuers on their measures
to decarbonise and their strategic plans
towards long-term goals that are

Interviews with relevant
stakeholders.

Page 52 of 72

DNV has reviewed and confirmed that Tohoku ElectricPower's targets are equivalent to achieving the Paris
Agreement targets, in that they are based on an approachto achieving carbon neutrality in 2050, a science-based
long-term goal quantified by Tohoku Electric Power. Basedon the identification of risks and opportunities and scenario
analysis using the TCFD guidance, Tohoku Electric Power
has set a corporate strategy in environmental aspects thatare important for its business model.
In March 2021, Tohoku Electric Power formulated the
Tohoku Electric Power Group Carbon Neutral Challenge
2050, in which it outlines its approach towards carbon
neutrality. It sets a long-term goal of carbon neutrality in
2050, which is consistent with the goals of the Paris
Agreement, and sets medium-term targets to realise that
goal. Tohoku Electric Power's approach discloses a strategicplan to realise a transition to carbon neutrality (Transition).

Ref.

Criteria

Requirements••

Work Undertakenaligned with the goals of the Paris
Agreement.
Clear oversight and governance oftransition strategies
Evidence of a broader sustainability
strategy to contribute to the UN
Sustainable Development Goals (SDGs)
as well as mitigate associated negativeenvironmental and social external
effects.

DNV Findings
Specifically, Tohoku Electric Power's Transition Strategy
incorporates the reduction targets and policies necessary torealise Japan's 2050 carbon neutrality and Paris Agreementtargets. Furthermore, when the need arises to review
initiatives to achieve sustained emission reductions in the
future, it is planned to do so based on the progress in thedevelopment of each technology and in accordance with thetimeline as appropriate.
Tohoku Electric Power regards climate change response,
including the implementation of the Transition Strategy, as
one of its most important management issues, and has
established a system and mechanism to promote theinitiatives set out in Tohoku Electric Power Group Carbon
Neutral Challenge 2050 and Tohoku Electric Power's
approach towards carbon neutrality at the managementlevel. The company has established a system andmechanism to promote the initiatives set out in the "Tohoku Electric Power Group Carbon Neutral Challenge
2050" and Tohoku Electric Power's approach to carbon
neutrality at management level.
Based on the Framework, the “Tohoku Electric Power Group
Carbon Neutral Challenge 2050” and the implementation
plan provided by Tohoku Electric Power, DNV confirmed thatthey are well aligned with Tohoku Electric Power's Transition
Strategy. Through the evaluation, DNV confirmed that theimplementation plans based on the Transition Strategy arecredible, ambitious and achievable.

2

Business model
environmental
materiality

The planned climate transition trajectoryshould be relevant to the environmental
material parts of the issuer’s business model,
taking into account potential future scenarios

Confirmed Documents:- Framework- The Sixth Strategic
Energy Plan.

Page 53 of 72

DNV assessed whether the key activities related to Tohoku
Electric Power's operations corresponded to Tohoku ElectricRef.

Criteria

Requirements

Work Undertaken

which may impact on current determinations
concerning materiality.

-

-

-

-

Transition Roadmap forthe power sector
Tohoku Electric PowerGroup Integrated
Report 2022
Tohoku Electric PowerGroup Sustainability
Report 2022
Tohoku Electric PowerGroup Medium- andLong-Term Vision
Tohoku Electric PowerGroup Carbon Neutral
Challenge 2050

DNV Findings
Power's Transition Strategy, which was assessed ascontributing to the environment.
The greenhouse gas emissions of the Tohoku Electric PowerGroup (FY2020 and FY2021 results) are as follows:

Interviews with relevant
stakeholders.

Tohoku Electric Power's approach towards carbon neutrality
is well aligned with the Transition Roadmap for Power Sector
formulated by the Agency for Natural Resources and Energy,
and their specific implementation plans and targets havebeen set and quantified in the absolute sense that they mustallow for optimal solutions and further improvements The
following are set and quantified in absolute terms.
DNV confirmed that Tohoku Electric Power’s plan toimplement its transition strategy is closely related to theactivities of Tohoku Electric Power's core business and toactivities that contribute to the reduction of CO2 in society as
a whole, contributing to the environmental aspects of society

Page 54 of 72

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
as a whole and supporting the promotion of Tohoku ElectricPower's business. Tohoku Electric Power's planned transition
strategies and transition pathways are linked to thematerialities identified by Tohoku Electric Power using GRI
standards*1, ISO 26000, SASB*2, TCFD, etc., and contributeto significant environmental improvement effects (impacts)from qualitative and quantitative perspectives. The following
are some examples.
*1: Global Reporting Initiative (international standard
providing ESG-related reporting, management and analyticalmethods).
*2: Disclosure standards developed by the Sustainable
Accounting Standards Board on ESG factors that are
expected to have a high future financial impact.

3

Climatetransition
strategy to bescience‐based
includingtargets andpathways

Issuer’s climate strategy should reference
science‐based targets and transition
pathways. The planned transition trajectoryshould:• be quantitatively measurable (based on ameasurement methodology which isconsistent over time);• be aligned with, benchmarked orotherwise referenced to recognized, science‐
based trajectories where such trajectories
exist;• be publicly disclosed (ideally inmainstream financing filings), include

Confirmed Documents:- Framework- The Sixth Strategic
Energy Plan.
- Transition roadmap
for the power sector- Tohoku Electric PowerGroup Integrated
Report 2022
- Tohoku Electric PowerGroup Sustainability
Report 2022
- Tohoku Electric PowerGroup Medium- andLong-Term Vision

Page 55 of 72

Tohoku Electric Power has a transition plan that is
consistent with the science-based Paris Agreement and atransition trajectory that is consistent with the targets
formulated by the Agency for Natural Resources andEnergy.
The plan provides a realistic achievement and pathway forCO2 emission reductions in absolute terms and a plan toreduce CO2 emissions in absolute (gross) terms in order tomaintain defined levels in the future.
DNV confirmed that the transition strategies of Tohoku
Electric Power have been quantified as absolute values or
ratios based on a consistent measurement methodology
based on prescribed assumptions. Transition targets are set
voluntarily based on initiatives such as the TCFD forsustainable CO2 emission reductions, and they areRef.

Criteria

Requirementsinterim milestones, and;• be supported by independent assurance orverification

Work Undertaken-

Tohoku Electric PowerGroup Carbon Neutral
Challenge 2050

Interviews with relevant
stakeholders.

<Suggested information and indicators>

DNV Findings
consistent with the policies of the Agency for Natural
Resources and Energy, which serves as a benchmark.
Specifically, Tohoku Electric Power has defined the following
goals for transitions:
2050

Carbon-neutral
CO2 emissions halved (compared to 2013)• Short, medium, and long‐term greenhouse2030

gas reduction targets aligned with Paris

Aim for 2 million kW of renewable energy
development as early as 2030 and beyond.

Agreement;

Tohoku Electric Power's CO2 reductions focus not only on
reducing emissions from its own operations (Scope 1 and2), but also on Scope 3 and activities that contribute to the
reduction of other companies. This contributes to therealisation of supply-side and demand-side carbon neutrality
as an important initiative presented in the various plans andstrategies for decarbonisation in Japan. In other words,
Tohoku Electric's transition efforts directly support thetransition of society as a whole, including its own company,as an energy company challenging to achieve carbon
neutrality in 2050.

• Baseline• Scenario utilized, and methodology applied(e.g. ACT, SBTi, etc.);• Greenhouse gas objectives covering all
scopes (Scope 1, 2 and 311); and,• Targets formulated both in intensity andabsolute terms

Transition initiatives and respective scope emissions aredisclosed in the Integrated Report and the Sustainability
Report.
4

Implementationtransparency

Market communication in connection withthe offer of a financing instrument which
has the aim of funding the issuer’s climatetransition strategy should also provide
transparency to the extent practicable, ofthe underlying investment program
including capital and operational

Confirmed Documents:- Framework- The Sixth Strategic
Energy Plan.
- Transition Roadmap
for the power sector

Page 56 of 72

DNV confirmed that the investment plan related to Tohoku
Electric Power’s transition strategy includes agreement on
future investment and expenditure. Specifically, therenewable energy business, including grid reinforcement of
the power transmission and distribution network, and thesmart society realisation business are positioned as
medium- to long-term growth areas for the realisation ofRef.

Criteria

Requirements

Work Undertaken

expenditure. This may include R&D related
expenditure where relevant, and details of
where any such operating expenditure isdeemed ‘non‐Business as Usual’, as well asother relevant information indicating how
this program supports implementation of
the transition strategy, including details ofany divestments, governance and processchanges.

-<Suggested information and indicators>-• Disclosure on the percentage ofassets/revenues/expenditures/divestmentsaligned to the various levers outlined in
Element 1 above;• Capex roll‐out plans consistent with theoverall strategy and climate science

-

-

-

Tohoku Electric PowerGroup Integrated
Report 2022
Tohoku Electric PowerGroup Sustainability
Report 2022
Tohoku Electric PowerGroup Medium- andLong-Term Vision
Tohoku Electric PowerGroup Carbon Neutral
Challenge 2050
project list

Interviews with relevant
stakeholders.

DNV Findings
the “Working Alongside, next ~Yori Sou, Chikara~”
strategy, and around 400 billion yen will be invested byaround 2030, while the “Tohoku Electric Power Group
Carbon Neutral Challenge”. The company also plans tomake the necessary investments to maximise the use of
nuclear power and to reduce and decarbonise thermal
power, as set out in the roadmap of the “Tohoku ElectricPower Group Carbon Neutral Challenge 2050”. This
encompasses projects implemented throughgreen/transition finance.
As an overall investment plan (investment amount) for the
future, DNV has identified a plan whereby the investments
required to implement the transition strategy will be carriedout according to the appropriate timelines in accordancewith internal management systems and processes, taking
into account CTF-1 to CTF-3.
DNV confirmed that Tohoku Electric Power plans to use thefunds for expenditure on the development, construction,
operation and refurbishment of the potential Transition
Eligible Projects set out in Schedule-1, as well as forresearch and development-related expenditure.

Page 57 of 72

Schedule-4 Green Finance (or transition finance with specific use of proceeds) Eligibility
Assessment Protocol
The checklist below (GBP/GLP‐1 to GBP/GLP‐4) is a DNV evaluation procedure created for Tohoku Electric Power‘s Green/Transition Finance Eligibility Assessment(Green Finance and Transition Finance with specific use of proceeds) based on the requirements of GBP/GBGLs and GLP/GLGLs. “Confirmed documents” in the “Work
Undertaken” includes documents inside the issuer and is provided by Tohoku Electric Power as evidence of eligibility judgment for DNV.
In Schedule‐4, it is referred to as GBP or GLP according to the practice, but this is the standard to be referred to in the case of financing that specifies the use ofproceeds such as transition projects in Transition Finance that specifies the use of proceeds based on CTFH and CTFBG, so please read as the meaning of theGreen/Transition as appropriate.

GBP/GLP-1 Use of Proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1aType of funds

The types of green/transition finance areclassified into one of the following types
defined by GBP.

Confirmed Documents:- Framework

DNV has identified the following categories ofGreen/Transition Finance through its assessment work:・ (Standard) Green/transition Bond/Loan

Interviews with relevant
stakeholders.

(Standard) Green/transition Finance・ Green/transition Revenue Bond/Loan・ Green/transition Project Bond/Loan・ Other
1b

Green/transition
Project
Classification

The key to a green/transition bond is thatthe proceeds will be used for a green
project, which should be properly statedin the legal documents relating to thesecurity.

Confirmed Documents:- Framework

Interviews with relevant
stakeholders

Page 58 of 72

DNV has confirmed that the Green/Transition Finance isintended to fund a wide range of green/transition projects
focused on Tohoku Electric Power's environmental objectives
and transition strategy as set out in the Framework and
Schedule-1. If green/transition projects have been preselected prior to the execution of the finance, this will be
disclosed in legal documents.

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
Through the assessment, DNV concludes that the nominatedgreen/transition-eligible projects provide tangible andgenuinely environmental benefits.

1c

1dEnvironmental
benefits

Refinancing rate

All green projects to which the funds areused should have clear environmental
benefits, the effects of which should beassessed by the issuer and, where
possible, quantitatively demonstrated.

Confirmed Documents:- Framework- Project List

If all or part of the proceeds are used or
may be used for refinancing, the issuer
will indicate the estimated ratio of theinitial investment to the refinancing and,if necessary. Therefore, it isrecommended to clarify whichinvestment or project portfolio is subject
to refinancing.

Confirmed Documents:- Framework

The Green/Transition project was found to have clear
environmental benefits, including reduced CO2 emissions, andits environmental improvement benefits will be reported on anannual basis.

Interviews with relevant
stakeholders.

Interviews with relevant
stakeholders

Page 59 of 72

DNV confirmed that DNV and Tohoku Electric Power areplanning to clarify "the approximate amount (or percentage)of the portion of the procured funds allocated to refinancing"through reporting on the status of the fund appropriation.

GBP/GLP-2 Process for Project Evaluation and Selection
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2a.

Project
selection
process

Green/Transition bond issuers should provide an
overview of the process of qualifying projects forwhich green/transition bond funding will be
used. This includes (but is not limited to):Confirmed Documents:- Framework

DNV confirmed that Tohoku Electric Power has aprocess for determining the eligibility of projects to
use Green/Transition Finance proceeds, which isoutlined in the Framework.

2b

Issuer's
Environment
al and Social
Governance
Framework

・ The process by which the issuer determinesthat the project in question is included in thebusiness category of a qualified green/transition
project.
・ Creation of criteria for eligibility of projects forwhich green/transition bond funding will be used
・ ・ Environmental sustainability goals
In addition to criteria and certifications, theinformation published by issuers regarding thegreen/transition bond process also considers thequality of performance of the issuer's frameworkand environmental sustainability.

Interviews with relevant
stakeholders

Confirmed Documents:- Framework
Interviews with relevant
stakeholders.

Page 60 of 72

DNV confirmed that when selecting projects, Tohoku
Electric Power followed a process of environmental
and social risk reduction through the Tohoku ElectricPower Group Environmental Management System (TEMS), among others.

GBP/GLP-3 Management of Proceeds
Ref.

Criteria

3a

Tracking
procedure‐1

3b

Tracking
procedure‐23c

Temporaryholding

Requirements

Work Undertaken

DNV Findings

The net proceeds from of Green/Transition bonds
should be managed in sub‐accounts, included in
sub‐portfolio, or otherwise tracked. It should also
be certified by the issuer in a formal internal
process related to the issuer's investment andfinancing operations for the Green/Transition
Project.

Confirmed Documents:- Framework

Confirmation that the proceeds relating to funds raised
through Green/Transition Finance are traceable byattaching an asset management code to the funds
raised and are evidenced in the verification process inaccordance with internal regulations.

During the green/transition bond redemption
period, the balance of funds raised that is being
tracked should be adjusted at regular intervals tomatch the amount allocated to eligible projects
undertaken during that period.

Confirmed Documents:- Framework

If no investment or payment has been made in aqualified green project, the issuer should also
inform the investor of the possible temporary
investment method for the balance of unallocatedproceeds.

Confirmed Documents:- Framework

Interviews with relevant
stakeholders.

Interviews with relevant
stakeholders.

Interviews with relevant
stakeholders.

Page 61 of 72

DNV confirmed that, from Green/Transition Financeexecution to redemption, Tohoku Electric Power plans
to manage the total amount of eligible projects to be noless than the Green/Transition Finance execution
amount at regular intervals.

DNV confirmed that Tohoku Electric Power intends tomanage the proceeds in cash or cash equivalents until
the appropriation of the funds is determined. It also
confirmed that it intends to clarify the balance of
unallocated funds through reporting on the status of theappropriation of funds.

GBP/GLP-4 Reporting
Ref.

Criteria

4a.

Periodical
reporting.

Requirements

Work Undertaken

DNV Findings

In addition to reporting on the use ofproceeds and the temporary investment of
unallocated proceeds, the issuer willconsider each project at least once a year
for projects to which the Green/Transitionbond proceeds have been allocated, taking
into account the following: A list of eachproject should be provided.

Confirmed Documents:- Framework

DNV has confirmed that Tohoku Electric Power intends to include
the following as disclosure information. Impact Reporting intends
to disclose any or all of the following items, as far as is reasonably
practicable and within the limits of confidentiality obligations. The
Government also confirmed that it intends to disclose any
significant changes in the progress of the projects covered by theappropriation or in the effectiveness of environmental
improvements, even after the appropriation has been completed.

‐ Confidentiality and competitive
considerations‐ Outline of each project, expectedsustainable environmental and social
effects[Funding appropriation reporting].
 Balance of unappropriated funds (as a percentage of theamount raised in the case of loans) Amount allocated (as a percentage of the amount raised in thecase of loans) Estimated amount (or proportion) of the portion of the funds
raised allocated to refinancing[Impact reporting].
eligibility

Example of impact reporting items

criteria
Renewable
Energy✓✓Nuclear Power

Page 62 of 72✓✓

Annual CO2 emission reductions
by renewable energy type (t-CO/y)2Installed capacity by renewableenergy type (MW)Installed capacity (MW)Annual CO2 emission reductions(t-CO /y)2

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings✓
Power Grid✓✓

LNG Thermal
Power

✓
✓
✓

Coal Thermal
Power

✓
✓
✓

Fading Out
InefficientPower Sources

✓
✓
✓

CCUS
Home andBusiness
Transport
Industry
Use ofDecentralised
EnergyPage 63 of 72

✓
✓
✓
✓
✓
✓
✓
✓

Annual electricity production(MWh)Outline of capital investment, etc.
Reduction in renewable energy
output suppression (estimated)
Project overview.
Annual CO2 emission reductions(t-CO2 /y)Annual electricity production(MWh)Project overview.
Annual CO2 emission reductions(t-CO /y)2
Annual electricity production(MWh)Project overview.
Annual CO2 emission reductions(t-CO /y)2
Annual electricity production(MWh)Project overview.
Electrification introduction results
Electricity sold (MWh)Credit purchase results
EV introduction results
Electrification introduction results
Service introduction results
Annual CO2 emission reductions(t-CO /y)2

Schedule-5 Transition-Linked Finance Eligibility Assessment Protocol
The transition financing of Tohoku Electric Power may be executed as a General Corporate Purposes (GCP) transition bond or loan, and the five factors of SLBP and
SLLP required for the eligibility assessment of a bond or loan without a specific use of proceeds as stipulated in the CTFH and CTFBG are applied to the assessment.
The five SLBP and SLLP factors required for the eligibility assessment of bonds or loans that do not specify the use of the proceeds, as specified in the CTFH andCTFBG, are applied in the assessment.
The following checklists (SLBP/SLLP 1-5) are DNV evaluation procedures developed for the eligibility assessment of transition bonds or loans for general purposes,
based on the SLBP and SLLP requirements.
The ’confirmed documents' in the evaluation work include public or non-public documents (internal issuer’s documents), which are provided by Tohoku ElectricPower to the DNV as evidence for the eligibility decision.

SLBP/SLLP-1 Selection of KPIs (Key Performance Indicators)
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1a

KPI – material
to coresustainability
and businessstrategy

The fundraiser’s sustainability performance ismeasured using sustainability KPIs that can be
external or internal. The KPIs should bematerial to the fundraiser’s core sustainability
and business strategy and address relevant
environmental, social and/or governancechallenges of the industry sector and be undermanagement’s control. The KPI should be ofhigh strategic significance to the fundraiser’s
current and/or future operations;

Confirmed Documents:- Framework- Tohoku Electric PowerGroup Integrated
Report 2022
- Tohoku Electric PowerGroup Sustainability
Report 2022
- Tohoku Electric PowerGroup Carbon Neutral
Challenge 2050

DNV reviewed Tohoku Electric Power's KPIs related tosustainability and confirmed that the selected KPIs areimportant and relevant to Tohoku Electric Power's coretransition strategy and sustainability management.

It is recommended that fundraiser
communicate clearly to investors the rationale
and process according to which the KPI(s)have been selected and how the KPI(s) fit into
their sustainability strategy.

Interviews with Tohoku
Electric Power officials.

Page 64 of 72

Tohoku Electric Power has identified eight key
sustainability issues (materialities), with reference toadvice from the Sustainability Promotion Council andexternal experts, and the KPIs are closely linked to the'carbon neutrality challenge'.
Tohoku Electric Power's response to climate changerelated issues is reported to the Board of Directors via the
Sustainability Promotion Council, and the KPIs are under
the control of the management team.
In the Tohoku Electric Power Group Carbon Neutral
Challenge 2050, the Group aims to be carbon neutral in
2050 and to halve its CO2 emissions in 2030 from the2013 results. Its CO2 emissions are set as a KPI andRef.

Criteria

Requirements

Work Undertaken

DNV Findings
clearly communicated to investors/lenders through theframework.

1b

KPI Measurability

KPIs should be measurable or quantifiable ona consistent methodological basis; externallyverifiable; and able to be benchmarked, i.e. asmuch as possible using an external referenceor definitions to facilitate the assessment of
the SPT’s level of ambition.
Fundraiser are encouraged, when possible, toselect KPI(s) that they have already includedin their previous annual reports, sustainability
reports or other non‐financial reporting
disclosures to allow investors to evaluate
historical performance of the KPIs selected. In
situations where the KPIs have not beenpreviously disclosed, fundraiser should, to theextent possible, provide historical externallyverified KPI values covering at least theprevious 3 years.

1c

KPI – Clear
definition

A clear definition of the KPI(s) should be
provided and include the applicable scope or
perimeter as well as the calculation
methodology

Confirmed Documents:- Framework- The Sixth Strategic
Energy Plan.
- Transition Roadmap
for the power sector- Tohoku Electric PowerGroup Integrated
Report 2022
- Tohoku Electric PowerGroup Carbon Neutral
Challenge 2050
Interviews with Tohoku
Electric Power officials.

Confirmed Documents:- Framework- The Sixth Strategic
Energy Plan.
Interviews with Tohoku
Electric Power officials.

DNV concludes that CO2 emissions as a KPI aremeasurable based on a consistent methodology (Act on
Promotion of Global Warming Countermeasures), areexternally verifiable and can be benchmarked against
external references.
It was also confirmed that the KPIs selected by Tohoku
Electric Power are consistent with “The Sixth Strategic
Energy Plan” and the Transition Roadmap for Power
Sector developed by the Agency for Natural Resources
and Energy, and are appropriately set as comparable
indicators.
Tohoku Electric Power has selected CO2 emissions as a
KPI, for which historical data has already been disclosed
in the Tohoku Electric Power Group Sustainability Report
2022 and on its website, allowing investors/lenders toassess past performance.

DNV confirmed that the KPIs selected by Tohoku ElectricPower provide a clear evaluation scope and calculation
methodology.
CO2 emissions were confirmed to be the values reported
as a retail electricity supplier and calculated in accordancewith the Law on the Promotion of the Measures to Copewith Global Warming.
KPIs are also indicators used in “the Sixth Strategic
Energy Plan” formulated by the Agency for Natural
Resources and Energy.

Page 65 of 72

SLBP/SLLP-2 Calibration of SPTs (Sustainability Performance Targets)
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2a.

Target Setting‐ Meaningful

The SPTs should be ambitious, realistic andmeaningful to the fundraiser’s business andbe consistent with the issuers’ overall
strategic sustainability/ESG strategy

Confirmed Documents:- Framework- The Sixth Strategic
Energy Plan.
- Transition Roadmap
for the power sector- Tohoku Electric PowerGroup Integrated
Report 2022
- Tohoku Electric PowerGroup Sustainability
Report 2022
- Tohoku Electric PowerGroup Carbon Neutral
Challenge 2050

DNV confirmed that the SPT is ambitious, realistic andmeaningful from the perspective that it supports the CO2
emission reduction targets set out in the Tohoku ElectricPower Group Carbon Neutral Challenge 2050 and because
it exceeds the targets set by the Agency for Natural
Resources and Energy. It was also confirmed that theachievement of the SPT is consistent with Tohoku ElectricPower's efforts to become carbon neutral.

Interviews with Tohoku
Electric Power officials.

2bTarget Setting‐ Meaningful

SPTs should represent a material
improvement in the respective KPIs and be
beyond a “Business as Usual” trajectory;
where possible be compared to a benchmark
or an external reference and be determinedon a predefined timeline, set before (orconcurrently with) the issuance of the loan.

Confirmed Documents:- Framework- The Sixth Strategic
Energy Plan.
- Tohoku Electric PowerGroup Carbon Neutral
Challenge 2050

Page 66 of 72

Based on the 'Tohoku Electric Power Group Carbon Neutral
Challenge 2050', the DNV concluded that the SPT isrealistic, the plan is feasible and the SPT targets outlined in
the Framework are likely to be achieved. The halving of
CO2 emissions in 2030, based on FY 2013, set by Tohoku
Electric Power, has been confirmed to exceed the targets
outlined in the Sixth Strategic Energy Plan developed by
the Agency for Natural Resources and Energy.
This is expected to provide impetus for efforts toimplement Tohoku Electric's Transition (Sustainability)
strategy.
DNV has confirmed that the selected SPT is tied to theimprovement of the KPI: the SPT is to halve (22.82 million
t-CO2) by 2030 compared to 2013. This halving of CO2
emissions is more ambitious than the 46% reduction targetof the Sixth Strategic Energy Plan formulated by the
Agency for Natural Resources and Energy, and goesbeyond "Business as Usual".

Ref.

Criteria

Requirements

Work Undertaken

DNV FindingsInterviews with Tohoku
Electric Power officials.
2cTarget Setting– benchmarks

The target setting exercise should be basedon a combination of benchmarking
approaches:
1. The fundraiser’s own performance overtime for which a minimum of 3 years, where
feasible, of measurement track record on theselected KPI(s) is recommended and whenpossible forward‐looking guidance on the KPI
2. The SPTs relative positioning versus thefundraiser’s peers where comparable oravailable, or versus industry or sector
standards
3. Systematic reference to science‐based
scenarios, or absolute levels (e.g. carbon
budgets) or official
country/regional/international targets or torecognized Best‐Available‐Technologies orother proxies

2dTarget setting– disclosures

Disclosures on target setting should makeclear reference to:
1. The timelines of target achievement, thetrigger event(s), and the frequency of SPTs
2. Where relevant, the verified baseline orreference point selected for improvement of
KPIs as well as the rationale for that baseline
or reference point to be used

Confirmed Documents:- Framework- The Sixth Strategic
Energy Plan.
- Transition Roadmap
for the power sector- Tohoku Electric PowerGroup Integrated
Report 2022
- Tohoku Electric PowerGroup Sustainability
Report 2022
- Tohoku Electric PowerGroup Carbon Neutral
Challenge 2050

The DNV confirmed that the process of setting SPT targets
is based on an appropriate combination of benchmarking
approaches.
・

DNV confirmed that the selected KPI CO2 emissions
have been measured for at least 10 years and aredisclosed in the Tohoku Electric Power Group
Sustainability Report 2022, which provides guidelines
for setting targets up to 2030.

・

DNV confirmed that the set SPT of halving theemissions by 2030 compared to 2013 (22.82 million tCO2) is a level that exceeds the 2030 target of 46%
set by the Agency for Natural Resources and Energy.

・

DNV concludes that the SPTs set are appropriately
related to the CO2 emission reduction targets
developed by the Agency for Natural Resources andEnergy. The Agency for Natural Resources andEnergy's targets have been developed with a view toaligning them with the targets of the Paris Agreement
and can be judged to be based on scientific evidence.

Interviews with Tohoku
Electric Power officials.

Confirmed Documents:- Framework- The Sixth Energy
Plan.
- Transition Roadmap
for the power sector- Tohoku Electric PowerGroup Integrated
Report 2022

Page 67 of 72

The DNV confirmed that SPT target setting was properly
disclosed.
・The timeline for achieving the SPT is set at 2030.
Milestone SPTs may be defined for redemption
periods, etc.

・CO2 The base year for the SPT on emission reductions
is 2013. This is consistent with the base year (2013)
set by the Agency for Natural Resources and Energy.

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

3. Where relevant, in what situations
recalculations or pro‐forma adjustments ofbaselines will take place

Tohoku Electric PowerGroup Sustainability
Report 2022
- Tohoku Electric PowerGroup Carbon Neutral
Challenge 2050
Interviews with Tohoku
Electric Power officials.

・

4. Where possible and taking into accountcompetition and confidentiality considerations,
how the borrowers intend to reach such SPTs-

Page 68 of 72

It details how CO2 emission reductions can beachieved through the approach towards carbon
neutrality described in the 'Tohoku Electric PowerGroup Carbon Neutral Challenge 2050'.

Based on the 'Tohoku Electric Power Group Carbon Neutral
Challenge 2050', the DNV concludes that the SPT isrealistic, the plan is feasible and the SPT is likely to beachieved.

SLBP/SLLP-3 Finance Characteristics
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

3aFinance
Characteristics– SPT
Financial/structural impact

The SLL/SLB will need to include a financial and/or
structural impact involving trigger event(s) based onwhether the KPI(s) reach the predefined SPT(s).

Confirmed
Documents:- Framework

DNV confirmed that the framework includes trigger
events and complies with the requirements describedin the SLBP/SLLP.

Finance
Characteristics– Fallback
mechanism

Any fallback mechanisms in case the SPTs cannot becalculated or observed in a satisfactory manner should
be explained.

3bInterviews with
Tohoku ElectricPower officials.

Fundraisers may also consider including, where
needed, language in the bond or loan documentation
to take into consideration potential exceptional events.

Confirmed
Documents:- Framework
Interviews with
Tohoku ElectricPower officials.

Page 69 of 72

DNV has confirmed that the financial and structuralcharacteristics of the transition-linked finance (bond orloan) executed under the Framework will varydepending on the timing of the observation of certain
SPTs and trigger events with performancerequirements. The details, including terms andconditions, will be determined after discussions at
Tohoku Electric Power’s internal meetings and will be
disclosed in the statutory disclosure documents for thebond or the contractual documents for the loan, as
the case may be, each time the financing is executed.
The DNV confirmed that Tohoku Electric Power has
considered appropriate fallback mechanisms (fallback
alternatives) and as a result has decided not to set up
another SPT or calculation method at this time as therisk of not being able to calculate or observe it is verysmall.
It was confirmed that changes to KPIs and SPTs may
be brought about by discussions at internal meetings,
etc., when there are reasonable reasons, such as
when changes in the businessenvironment/restructuring of the businessstructure/changes to KPIs occur at Tohoku ElectricPower, regardless of whether such events are causedby external factors or the result of management
decisions made by Tohoku Electric Power.

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
Tohoku Electric Power confirmed that it intends todisclose any changes to the KPIs and SPTs in thestatutory disclosure documents for the bonds or in theloan agreement documents.

Page 70 of 72

SLBP/SLLP-4 Reporting
Ref.

Criteria

Requireents

Work Undertaken

DNV Findings

4a.

ReportingFundraisers of SLLs should publish, and keep readily
available and easily accessible:

Confirmed
Documents:- Framework

The DNV concludes that the SLBP/SLLP requires thefollowing to ensure that the necessary information isand remains publicly available in a timely manner

1. Up‐to‐date information on the performance of theselected KPI(s), including baselines where relevant.
2. A verification assurance report relative to the SPT
outlining the performance against the SPTs and therelated impact, and timing of such impact, on the loan’s
financial and/or structural characteristics.

Interviews with
Tohoku ElectricPower officials.

3. Any information enabling investors to monitor the levelof ambition of the SPTs.
This reporting should be published regularly, at least
annually, and in any case for any date/period relevant forassessing the SPT performance leading to a potential
adjustment of the SLL’s financial and/or structuralcharacteristics.

Page 71 of 72

 Performance of KPIs: after the implementation oftransition-linked finance, at least once a year before
the redemption or repayment is completed, the KPIs
are verified by an external organisation, etc. anddisclosed in a consolidated report or on the website,or disclosed to the lender (only in the case of loans).
 Achievement of SPTs: subject to annual verification
by an independent third party and used todetermine financial and structural characteristics.
 If the targets formulated by the Agency for Natural
Resources and Energy are changed: an evaluation
by an external evaluation body may be obtained
after consultation with the relevant parties, including
setting evaluation criteria for the SPT with a level ofambition equal to or higher than the conventional
evaluation criteria.

SLBP/SLLP-5 Verification
Ref.

criterion

requirement

Work Undertaken

DNV Findings

5aExternal
Verification

Fundraisers should have its performance against
each SPT for each KPI independently verified by aqualified external reviewer with relevant expertise,at least once a year and for each SPT trigger
event.

Confirmed
Documents:- Framework

DNV has confirmed that Tohoku Electric Power plans to havean independent verification of its performance against the
SPTs of its KPIs by an external evaluation body withexpertise at least once a year.

Interviews with
Tohoku ElectricPower officials.

Page 72 of 72