Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

SECOND PARTY OPINION
KYUSHU ELECTRIC POWER CO., INC.
SUSTAINABLE FINANCE FRAMEWORK(GREEN FINANCE, TRANSITION FINANCE AND TRANSITION LINK FINANCE)

Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: April 27, 2022
Ref. Nr.: PRJN‐360859‐2022‐ASTJPN‐01

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Contents
Executive Summary

3

Ⅰ. Introduction

10

Ⅱ.

Scope and Objectives

21

Ⅲ.

Responsibilities of Kyushu Electric Power and DNV

24

Ⅳ. Basis of DNV’s opinion

24

Ⅴ. Work Undertaken

27

Ⅵ. Findings and DNV's opinion

28

Ⅶ.

48

Assessment Conclusion

Schedule‐1

Green/Transition Finance Nominated Projects List

50

Schedule‐2 Key Performance Indicators (KPIs) and Sustainability Performance Targets (SPTs)

52

Schedule‐3

54

Transition Finance Framework Eligibility Assessment Protocol

Schedule‐4 green finance (or Transition Finance with specific use of proceeds) Eligibility Assessment
Protocol62

Schedule‐5 Transition‐Linked Finance (Transition Finance with general corporate purpose) Eligibility
Assessment Protocol

71

Rivision History
Rev. No.

Date of Issue

0

April 27, 2022

Remarks
InitialDisclaimer
Our assessment relies on the premise that the data and information provided by Issuer to us as part of our review procedures have been provided in good faith. Becauseof the selected nature (sampling) and other inherent limitation of both procedures and systems of internal control, there remains the unavoidable risk that errors or
irregularities, possibly significant, may not have been detected. Limited depth of evidence gathering including inquiry and analytical procedures and limited sampling at
lower levels in the organization were applied as per scope of work. 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, including documented policies
and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We have complied with the
DNV Code of Conduct1 during the assessment and maintain independence where required by relevant ethical requirements. This engagement work was carried out by anindependent team of sustainability assurance professionals. DNV was not involved in the preparation of statements or data included in the Framework except for thisStatement. DNV maintains complete impartiality toward stakeholders interviewed during the assessment process.

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

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Executive Summary
Kyushu Electric Group consists of Kyushu Electric Power Co., Inc. (hereinafter, “Kyushu ElectricPower”), 67 subsidiaries and 46 affiliates as of March, 2022, and is engaged in “Power andRetail business”, “Transmission and Distribution business”, “Other energy services businesses”,“ICT services business” and “Other businesses”. Kyushu Electric Power formulated the Green
Bond Framework in April 2021, and issued its Green Bonds for the first time in June 2021.
Kyushu Electric Power will revise the Green Bond Framework to the Sustainability Finance
Framework due to the progress of the various systems and policies related to the carbon
neutrality strategy and the sustainable finance in the Kyushu Electric Power Group. Moreover,
Kyushu Electric Power enhances the power to send a message of Kyushu Electric Power’s
strategy by interlocking and expanding with the finance and aims to expand the foundation of
the sustainable finance.
To promote these initiatives, Kyushu Electric Power has set the ambitious targets for its
activities that far exceed the greenhouse gas (GHG) reduction targets set forth in the Basic
Energy Plan formulated by the Agency for Natural Resources and Energy. Kyushu ElectricPower has set this ambitious goal as its mid‐ to long‐term management targets (environmental
target), and as the industry's top runner in low‐carbon and decarbonization, has set the "Kyuden Group Carbon Neutral Vision 2050" to realize carbon neutrality. Kyushu Electric Powerwill allocate the funds raised through the Sustainable Finance to the initiatives for therealization of carbon neutrality in order to realize the carbon neutrality and become a corporategroup that leads decarbonization in Japan from Kyushu.
Kyushu Electric Power has established the Kyushu Electric Power Sustainable Finance
Framework in order to implement the sustainable finance in a manner that conforms to theframework internationally defined.
The Kyushu Electric Power Sustainable Finance Framework (hereinafter, "Framework") is
structured as a comprehensive framework that includes the following elements required for the
execution of financing.
‐ Green Finance (Green Bond and Loan)‐ Transition Finance (Transition bond and Loan with specific use of proceeds / general
corporate purpose)
DNV Business Assurance Japan K.K. (hereinafter, "DNV"), as an external reviewer, has evaluatedthe eligibility of the framework.
Specifically, DNV provided an eligibility assessment for the Framework by applying the
Frameworks centered on 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, 2020

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion‐ Green Loan Principles (GLP) Loan Market Association (LMA) and others, 2021
‐ Green Loan Guidelines (GLGLs)

Ministry of the Environment, 2020

‐ Sustainability Linked Loan Principles (SLLP) Loan Market Association (LMA) and others,
2021‐ Sustainability Linked Bond Principles (SLBP) International Capital Market Association(ICMA), 2020
‐ Sustainability Linked Loan Guidelines (SLLGLs) Ministry of the Environment, 2020
The following is a summary of the assessment results for each common element indicated in
the above framework.

< CTF Eligibility Assessment Results >DNV confirmed the following through the materials and information provided by Kyushu ElectricPower. Followings (CTF‐1 ~ CTF‐4) are findings and opinions of DNV against the four common
elements of the CTFH and CTFBG (disclosure elements):
CTF-1. Issuer’s Climate Transition Strategy and Governance:
The Transition Strategy of the Kyushu Electric Power, as a fundraiser, is consistent with orexceeds the goals set forth by “the sixth Strategic Energy Plan” and “Electric Power Sector
Transition Roadmap”. The planned transition strategies will be reviewed in accordance withsocial trends and changes in the business environment, and the internal system has been
established and the information disclosure process based on the TCFD*1 has been createdas governance and disclosure related to implementation. These are disclosed in the
Framework and other documents and meet the disclosure elements of CTF‐1.
*1: Task Force on Climate‐related Financial Disclosures

CTF-2. Business model environmental materiality:
For the environmental materiality, Kyushu Electric Power's business model makes the efforts
to close the gap between "Kyuden Group Management Vision 2030" and the current
situation toward the achievement of the “Kyuden Group Carbon Neutral Vision 2050” and to
take an initiative on the climate change. In Kyushu Electric Power's transition strategy, theKyuden Group's management strategy and the efforts for the ESG (Environmental, Social,and Governance) are inseparable, and the “Kyuden Group Carbon Neutral Vision 2050” and“Action Plan” (Kyuden Group Action Plan to Achieve Carbon Neutrality) show specificinitiatives, while the contribution to the SDGs, described below, is also considered. These aredisclosed in the Framework and other documents, and meet the disclosure elements of CTF‐2.
CTF-3. Climate transition strategy to be ‘science-based’ including targets and pathways:
Kyushu Electric Power’s transition strategy is defined by science‐based targets andpathways. Specifically, the medium‐ to long‐term targets are indexed and quantified and theachievement process toward the goals is clarified, based on the goals set in “the sixth
Strategic Energy Plan” formulated by Agency for Natural Resources and Energy, described inPage 4 of 82

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CTF‐1, and the targets and the pathways defined by “Electric Power Sector Transition
Roadmap”. These are disclosed in the framework or through a second party opinion, andmeet the disclosure elements of CTF‐3.
CTF-4. Implementation transparency:
Kyushu Electric Power has shown a basic investment plan, including investment amounts, forthe execution of the transition strategy and an overview of the results and impact of theexecution. For the future overall and individual investment plans, it was confirmed that theinvestment required for implementation of the transition strategy would be executed inaccordance with the internal management system and the process, considering CTF‐1～CTF‐
3. These are disclosed in the Framework or through this Second Party Opinion and meet thedisclosure elements of CTF‐4.

<GBP/GLP Eligibility assessment results >DNV confirmed the following through the documents and the information provided by Kyushu
Electric Power. GBP/GLP‐1～GBP/GLP‐4 shown below are DNV’s findings and opinion for fourcommon elements (including *GBLGs、GLGLs) of GBP and GLP. (GBLGs is included.)
GBP/GLP-1. Use of Proceeds:
Kyushu Electric Power defines the Eligible Criteria for the use of proceeds as projects(green/transition projects) that directly or indirectly contribute to the realization oftransition strategies and goals. Specifically, the Eligible Criteria are presented in the
Eligible Project Categories identified and categorized in Table‐1, and the proceeds will beallocated to the research and development, the business development, the construction,
the operation, the renovation or the other one or more of projects as financing to new
expenditures or refinancing to existing expenditures. DNV confirmed that these projects
were consistent with the elements of CTF‐1 through CTF‐4. The projects have been
evaluated by Kyushu Electric Power as providing clear environmental benefits to thetransition strategy and are expected to make direct and indirect contributions to the SDGs.
These processes are consistent with GBP‐1.

Table‐1

Kyushu Electric Power Green/Transition Finance Eligible Criteria and Project outline(See text for details)
Eligible Criteria

Low‐carbonization Renewable
Energyand
Decarbonization

Project*1*2
Project Overview
Investment for development, construction,
operation, and renovation of geothermal,hydroelectric, solar, wind and biomass facilities
Investment for the development of batteries andpumped storage hydro power, and theestablishment of integrated control technology

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GreenTransition

〇

〇

〇

〇

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinionof power
sources
Nuclear Power
Generation *3

Thermal Power
GenerationPowertransmission
anddistribution
network

Promotion ofElectrification

Increasing
electrification
rate in Kyushu

Promotion ofcarbonneutrality in theregionfor distributed energy resources, and thedevelopment of aggregation business
Investments to ensure continued safe and stable
operation of existing nuclear power plants
Investments for decommissioning and shut
down of inefficient thermal power plants
Investment for the construction of new high‐efficiency thermal power plants
Investment for R&D and installation of facilities
for co‐firing of hydrogen, ammonia, biomass,
etc. and CO2 capture, utilization and storage
technologies (CCUS)
Investment for building a supply chain for
carbon‐free fuels (hydrogen and ammonia)
Investment for the development andenhancement of interconnection lines andbackbone systems that contribute to the
expansion of renewable energy, etc.
Investment for advanced supply‐demand
operation and grid stabilization technologies toimprove network utilization
Investments and expenditures for sales
promotion of products and services that
contribute to increasing the electrification rate,
such as all‐electrification and heat pumps, aswell as investments for the introduction of EV(company‐owned vehicles) and EV‐related
businesses
Investments for various initiatives to promote
carbon neutrality in the region, including thecost of maintaining company‐owned forests andpurchasing carbon credits (J‐credits)

(〇)

〇
〇
〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

SDGs related
items*1 Projects that have been qualified the eligibility as green projects can be incorporated as green projects when
executing the green finance in the future. In addition, Green projects are permitted in CTFBG to be included
as a part of those when implementing the transition finance.
*2 Some projects that are currently classified as transition projects may become green projects due to theapplication of future technological innovations. (e.g., application of green fuel/manufacturing processes,
achieving performance that meets CO2 emission standards as a green project, etc.) Eligible Criteria with themark "〇" listed for both Green and Transition are classified as either or both depending on the individual
project.
*3 Regarding nuclear power generation, eligibility criteria are being considered in various standards androadmaps. Domestic and international trends, etc. will be closely monitored, and consider including this as a
future use of proceeds.

GBP/GLP-2. Process for Project Evaluation and Selection:
Kyushu Electric Power will confirm that the projects are consistent with the eligible criteriaof GBP/GLP‐1 and meet the required standards as Green or Transition projects, andinclude the clear environmental benefits. In addition, Kyushu Electric Power will also
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environment and society, and with the proper procedure for the equipment accreditation,
approval and license and environmental assessment in the local communities where theprojects are operated. Specifically, the accounting department selects the nominatedprojects based on the eligible criteria, the accounting department and the relevant internal
departments hold discussions, and the final decision is made by the executive officer in theaccounting department. These processes are consistent with GBP/GLP‐2.

GBP/GLP-3. Management of Proceeds:
The accounting department manages all amounts of proceeds and allocation for eachprojects using the internal system and the ledger sheet, and the total amount of proceeds
for the eligible projects that they are not be less than the proceeds through the
Sustainability Finance using the management table. The proceeds are managed in cash or
cash equivalents equal to the amount of unallocated proceeds until allocation.
GBP/GLP-4. Reporting:
Kyushu Electric Power plans to report the status of allocation of the proceeds in the
Integrated Report or on the Kyushu Electric Power website until the full amount of theproceeds are allocated. The report includes the balance of unallocated proceeds, theamount allocated, and the estimated amount (or percentage) of the proceeds allocated forrefinancing. Kyushu Electric Power will disclose, to the extent practicable, the projects
overview and the environmental benefits of the projects to be allocated. Any significant
changes in transition strategies or pathways, allocation plans, or actual results will bereported in a timely manner or in the reporting.
<SLBP/SLLP Eligibility Assessment Results >DNV confirmed the following through the materials and information provided by Kyushu ElectricPower. Followings (SLBP/SLLP‐1～SLBP/SLLP‐5) are findings and opinions of DNV against thefive requirements of the SLBP/SLLP (and SLLGLs).
SLBP/SLLP-1. Selection of Key Performance Indicators (KPIs):
The three KPIs (supply‐chain GHG emissions, supply‐chain GHG emissions (domestic
business) and amount of renewable energy to be developed) for the environmental
sustainability (transitions) defined by Kyushu Electric Power shown in Table‐2 areimportant indicators in its comprehensive transition strategy toward "Achieving Carbon
Neutrality" and "Low‐carbonization and decarbonization of power sources” as an energy
provider. The selection of KPIs is based on a rational process, and the KPIs are clearly
defined, measurable and verifiable, and has robust and reliable in accordance with
SLBP/SLLP.
SLBP/SLLP-2. Calibration of Sustainability Performance Targets (SPTs):
Kyushu Electric Power's SPT (Supply‐Chain GHG emission reduction and Amount of
renewable energy to be developed) shown in Table‐2 is meaningful and closely related to
Kyushu Electric Power’s sustainability (transitions) and business strategy required as anPage 7 of 82

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energy provider, and follows a pre‐set timeline to show significant improvements. The
SPTs shown in Table‐2 consist of three items: supply‐chain GHG emissions, supply‐chain
GHG emissions (domestic business), and the amount of renewable energy to be developed(installed capacity). Each SPT is defined as an ambitious target benchmarked against the
GHG emissions targets set by the Agency for Natural Resources and Energy and the ratio
of non‐fossil power sources in the power supply mix and the related Kyushu ElectricPower's most recent performance level (amount of renewable energy to be developed).
DNV has confirmed through its review that Kyushu Electric Power's plans are feasible forachieving the SPT in 2030.
SLBP/SLLP-3. Finance Characteristics:
The financial characteristics of Transition‐Linked Financing under the Framework areaffected by the performance of KPIs defined by the SPT. This impact is linked to changes
in the bond issue rate, loan interest rate, or other financial incentives (e.g., donations toenvironmental conservation organizations, etc.), and, is established, in formal
documentation related to bond and loan, as the finance is executed by a specific trigger
event (SPT achievement status) at a defined period/due date under the framework.
SLBP/SLLP-4. Reporting:
The information required by the SLBP/SLLP will be included in the reporting, and theframework stipulates that the reports will be published with appropriate frequency.
SLBP/SLLP-5. Verification:
Kyushu Electric Power plans to have its KPI‐related data independently verified annually byan external evaluation organization.

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Table-2 Kyushu Electric Power Transition Linked Finance KPIs and SPTs
(One or more of the following KPIs and SPTs are selected for particular Transition‐linked Finance)
KPI s
KPI 1: Supply‐chain GHG emissions

SPTs
SPT 1: 60% reduction by 2030 (compared to FY2013)(Scope 1+2+3)
KPI 2: Supply‐chain GHG emissions

SPT 2: 65% reduction by 2030 (compared to FY2013)(domestic business)(Scope 1+2+3)
KPI 3: Amount of renewable energy to be

SPT 3: 5 million kW by 2030 (domestic and overseas)developed(installed capacity)
Explanation of KPIs

Explanation of SPTs

KPIs include the items that are closely
related to Kyushu Electric Power's
materiality.

Each SPT refers to the target values in the Action Plan and islinked to the value with Kyushu Electric Power's transition
strategy.

KPI 1 and KPI2: Supply‐chain GHG
emissions
It is a core KPI for the "Low‐carbonizationand decarbonization of power sources" on
the supply side of Kyushu Electric Power,
and can be measured quantitatively andcontinuously based on the GHG Protocol.

SPT 1 and SPT 2: Supply‐chain GHG emissions
Kyushu Electric Power’s supply‐chain GHG emission reduction
target is ambitious that far exceeds Japan's reduction targetof 46% by FY2030.

KPI 3: Amount of renewable energy to be
developed
It is a key KPI that contributes to the
supply chain GHG emissions reduction bydirectly linking to " Low‐carbonization anddecarbonization of power sources.”

SPT 3: Amount of renewable energy to be developed
The development of renewable energy is the effort to thetransition closely related to SPT 1 and SPT 2.
SPT 3 (5 million kW by 2030) is drastically increased
compared to Kyushu Electric Power's past three‐year results(FY 2019: approx. 2.2 million kW, FY 2020: approx. 2.3
million kW, FY 2021: approx. 2.5 million kW); and, thedevelopment should be accelerated and expanded more thanthe past results. This is the ambitious goal that exceeds“Business As Usual”, quantitatively set based on recent
performance levels as required by the Linked Finance.
SPTs to be a trigger event may be set by the actual results inthe base year of 2013 or 2019 and the linear interpolation oftargets up to 2030, or individually set when the detailedplans are developed in the future.

On the basis of the information, including Framework, provided by Kyushu Electric Power and thework undertaken, DNV confirmed that the Sustainability Finance (Green Finance which includes
Green Bond and Loan, and the Transition Finance (Transition Bond and Loan with specific use ofproceeds / general corporate purpose)) executed by the Framework formulated by Kyushu
Electric Power and this Framework meets the criteria required by the relevant frameworks within
CTFH/CTFBG, GBP/GLP/GBGLs and SLBP/SLLP/SLLGLs, and is eligible.

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Ⅰ. Introductioni.

About the Issuer
The Kyuden Group consists of Kyushu Electric Power Co., Inc. (hereinafter, "Kyushu ElectricPower"), 67 subsidiaries and 46 affiliates as of March 2022, and is engaged in "Power andRetail business," "Transmission and Distribution business," "Other energy services business,""ICT services business" and "Other businesses.

ii.

Issuer's Initiatives for ESG/SDGs
Kyushu Electric Power has set the President as the chairman and established “Sustainability
Promotion Committee” which was the conference system to be supervised by the Board of
Directors in July 2021 in order to enhance the efforts to overall ESG (Environmental, Socialand Governance) issues such as the realization of “Kyuden Group Carbon Neutral Vision
2050”. In addition, Kyushu Electric Power has assigned a director in charge of ESG(Environment, Society, and Governance) who was responsible for governing and promoting
overall efforts in each sector of ESG, and newly established the department dedicated to ESG
promotion within the Corporate Strategy Division to develop the promotion system for
implementation of sustainability management. (see Figure below)

As a corporate group that creates the future from Kyushu, the Kyuden Group has beencreating both "Social value" and "Economic value" through its business, and promoting thesustainability management that aims to contribute to a sustainable society and increase thecorporate value of the Kyuden Group.

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Accordingly, the Kyuden Group aims to contribute to the achievement of SDGs, which is theSustainable Development Goals, set by United Nations, by specifying the materiality andtackling to resolve the major issues linked to each materiality.
Of these, the materiality to which Transition Finance is primarily concerned is "Leading theway toward a decarbonized society".
Materiality (Ideal state)
Leading the way toward adecarbonized society(Achieve carbon negativity by
2050)

Implementing continuous
improvements in energy services(Contribute to a sustainable andcomfortable future for ourcustomers)

Co‐creating a smart and vibrantsociety(Together with the Kyushu
region, promote transformation
in society and manufacturing)
Promoting growth, success anddiversity of human capital(Foster an environment thatallows diverse talent to flourish
and encourages constantinnovation)

Strengthening Governance(Establish good governancepractices to support our growth)

Key issue

Related SDGs

Decarbonize/lower the carbon intensity ofelectricity sources (by positioning renewableenergy as a main power source, operating
nuclear power in a safe and stable manner,
supplying energy overseas)
Promote electrification
Promote energy saving
Reduce the environmental impact
Provide recommendations and participate inenergy policies
Stable supply of electricity
Affordable energy
Provide solutions based around energy services

Promote digital transformation (the realizationof a smart society)
Regional vitalization (regional and local
development)
Create safe, secure, and comfortable spaces to
live
Respect human rights
Promote diversity and inclusion
Employee retention and development of humanresources
Prioritize safety and health
Promote innovation

Improve effectiveness of corporate governance
Strengthen risk management system
Thorough compliance
Strengthen supply chain management
Thorough information security
Enhancement of stakeholder engagement(building trust with our stakeholders)
Improvement and strengthening of financial
position

Figure‐1 Key issues for sustainable value creation and achievement items of main SDGs

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinioniii. Issuer's Environmental Initiatives
Kyushu Electric Power has been addressing to promote the low‐carbonization of powersource and the electrification by utilizing the renewable energy and the nuclear power
toward the realization of the low‐carbon and sustainable society under "Kyuden GroupManagement Vision 2030" formulated in June 2019 as the Kyuden Group.
Furthermore, Kyushu Electric Power formulated the "Kyuden Group Carbon Neutral Vision
2050" in April 2021, and declared its commitment to the challenge of achieving carbon
neutrality.
Moreover, Kyushu Electric Power clarified the goals toward 2050 for which the Kyuden Groupaims and revised its management targets (environmental targets) upward for 2030 bybackcasting and formulated “Action Plan” in November 2021 including the specific action
plan for the achievement of these targets, in order to contribute greatly to the realization ofcarbon neutral society as the industry's top runner in low‐carbon and decarbonization.
Through these plans, the Kyuden Group will continue to take on the challenge of "Low‐carbonization and decarbonation of power sources" and "Promotion of electrification" fordecarbonization of both energy supply and demand, and aims to become a corporate groupthat leads the decarbonization of Japan from Kyushu.
Table‐3 Kyushu Electric Power Participation in External Initiatives and Efforts
External Initiatives
Sustainable
Development Goals(SDGs)

Task Force on
Climate‐related
Financial Disclosures(TCFD)

Kyushu Electric Power's Efforts
Kyushu Electric Power has identified materiality in April 2022 asa key management issue, and has been addressing to realize its
management vision after clarifying the relationship with theSDGs.
The Kyuden Group positioned the climate change response as a
key management issue in June 2019. The Kyuden Group utilizes
the TCFD recommendations for risk and opportunity analysis
and will fulfill its accountability to stakeholders by enhancing
information disclosure in line with the framework of the TCFD
recommendations.
“Challenge Zero” is an initiative set forth by Keidanren (Japan
Business Federation) towards a “decarbonized society” in the
Paris Agreement. The participating companies and organizations
declare to take on challenges towards a decarbonized society
and their specific actions. Kyushu Electric Power registered thefollowing three challenges:

Challenge Zero

‐ Development of large‐capacity charging/discharging
equipment for heavy‐duty vehicles‐ Verification of a system to reuse lithium‐ion batteries used forprimary use in electric vehicles for large‐scale stationary storage
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iv. About the Sustainable Finance Framework
Kyushu Electric Power conducts its activities with the ambitious targets against the GHG
emission reduction in line with the GHG emission reduction targets shown in “the 6thStrategic Energy Plan” and “Electric Power Sector Transition Roadmap” formulated by
Agency for Natural Resources and Energy in order to proceed “Kyuden Group Carbon
Neutral Vision 2050” and “Action Plan”.
Kyushu Electric Power will raise the funds required to achieve this ambitious GHG
emission reduction target and transition activities as sustainable finance. In addition,
Kyushu Electric Power will enhance the power to send a message of Kyushu ElectricPower’s strategy by interlocking and expanding with the finance and aims to expand thefoundation of the sustainable finance.
Kyushu Electric Power has established the Kyushu Electric Power Sustainable Finance
Framework (hereinafter, "Framework") to implement the sustainable finance in amanner that conforms to the frameworks internationally defined.
The framework to which this framework specifically refers is described in Section II (3)below.
v.

Issuer’s Transition Strategy for decarbonization(1) Strategies by Sector (Industry) at the international/national/regional Level
Figure‐2 shows the scenario for decarbonization in the electric power sector set forth in“Electric Power Sector Transition Roadmap” developed by the Agency for Natural
Resources and Energy.
Agency for Natural Resources and Energy respectively formulated “the 6th Strategic
Energy Plan” in October 2021 and “Electric Power Sector Transition Roadmap” in February2022, which consist of the achievement of the carbon neutrality by 2050, and the efforts
by 2030 with a view to 2050. The electric power sector focuses on the emission reduction
utilizing various technologies, such as introduction and expansion of non‐fossil energy
through electrification/hydrogenation based on the decarbonization at supply side, efforts
to position renewable energy as a main power source, how to treat nuclear power andthermal power generation and enhancement/ sophistication of transmission anddistribution network.
As an indicator for the short‐ to medium‐term goal, Japanese government sets 46% of
greenhouse gas emission reduction by 2030, and will aim for 50% of reduction (compared
to 2013) as more ambitious target. In addition, for a long‐term goal, Japanese
government aims to achieve the carbon neutrality by 2050.
Kyushu Electric Power will continue to take on the challenge of "Low‐carbonization anddecarbonation of power sources" and "Promotion of electrification" to decarbonize both
energy supply and demand in accordance with the policies of the Agency for Natural
Resources and Energy, and aims to become a corporate group that leads thedecarbonization of Japan from Kyushu.

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Figure‐2 Electric Power Sector Transition Roadmap for decarbonization(Electric Power Sector Transition Roadmap, Agency for Natural Resources and Energy, February
2022)

Figure‐3 6th Strategic Energy Plan, Key Points of the Energy Supply‐Demand Outlook for
FY2030 (1)(Electric Power Sector Transition Roadmap, Agency for Natural Resources and Energy, February
2022)

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion(2) Transition strategies of the Issuer
Kyushu Electric Power has positioned its transition strategy as activities to contribute togreenhouse gas emission reduction targets consistent with “the 6th Strategic Energy Plan"
formulated by the Agency for Natural Resources and Energy, and to realize "Kyuden
Group Carbon Neutral Vision 2050" set by Kyushu Electric Power.
Table‐ 4 shows Kyushu Electric Power's long‐term and medium‐term goals, and Figure‐ 4shows Kyushu Electric Power's roadmap toward the carbon neutrality by 2050. Kyushu
Electric Power has been working to achieve virtually zero supply‐chain GHG emissions(Scope 1+2+3) and "carbon negativity" by 2050 at Kyushu Electric Power and its entire
supply chain. Kyushu Electric Power aims to reduce 60% of supply‐chain GHG emissions(Scope 1+2+3), compared to FY2013, by 2030. In accordance with the Kyushu ElectricPower’s strategy that 65% emission reduction of GHG in domestic operations, it has been
confirmed that Kyushu Electric Power would tackle to exceed the greenhouse gas
emission reduction targets that set in “the 6th Strategic Energy Plan” formulated by
Agency for Natural Resources and Energy, and address to proceed its efforts to "carbon
negativity" which exceeds the carbon‐neutral.

In addition, Kyushu Electric Power has made the specific action plan towards 2030 torealize the " Kyuden Group Carbon Neutral Vision 2050". (Table‐5 Action plan towards
2030 to achieve the 2030 management goals)

2050

2030

Table‐4 Long‐term and medium‐term goals based on the Action Plan Supply‐chain GHG emissions (Scope 1+2+3) virtually zero
 Realization of "carbon negativity" ※ as early as possible before 2050
 Electrification rate in Kyushu: 100% in household sector, 100% incommercial sector
 Supply‐chain GHG emissions (Scope 1+2+3): 60% reduction(compared to FY2013)
Of these, Emissions from domestic business: 65% reduction(compared to FY2013)
 Contribution to GHG emissions reduction for society: 7 million tons
 Amount of renewable energy to be developed 5 million kW (Japanand overseas) Electrification rate in Kyushu: 70% in household sector, 60% incommercial sector

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Figure‐4 Kyushu Electric Power Roadmap toward carbon neutrality by 2050

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Figure‐5 The Kyushu Electric Group's vision for achieving carbon neutral society

Item

GHG emissions from Kyuden
Group (FY2020)

Scope 122.11 million t‐CO2

Scope 20.0001 million t‐CO2

Scope 319.67 million t‐CO2

合計

41.78 million t‐CO2

Figure‐6 Kyuden Group Greenhouse Gas Emissions (Scope 1‐3)
Source: Kyushu Electric Power website, etc.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Table‐5 Action Plan by 2030 to Achieve 2030 Management Goals
Actions

Action Plan Outline

Positioning renewableenergy as a main powersourceIn addition to the development of geothermal and hydroelectric power
plants, which are the strengths of the Kyushu Electric Group, Kyushu
Electric Power will expand offshore wind power and biomass power
plants, which have great potential for introduction, assessing theirprofitability. Moreover, Kyushu Electric Power will also proceed toposition renewable energy as a main power source at the same time.
Through these efforts, Kyushu Electric Power aims to develop 5 million
kW of renewable energy in Japan and overseas by 2030. In addition,
Kyushu Electric Power will maximize the use of renewable energy byutilizing batteries and pumped storage hydro power, and establish
integrated control technology for distributed energy resources anddevelop an aggregation business.

Maximizing usage of
nuclear power

Nuclear power is a comprehensively superior power source for CO2
emission reduction and energy security, etc., and also contributes tosecuring the long‐term stability of electric power. Kyushu ElectricPower will make maximum use of nuclear power on the major
premise of ensuring its safety. In addition to continuing the safe andstable operation of nuclear power plants to maximize their utilization,
Kyushu Electric Power will start the full‐scale studies as soon as
possible to improve the facility utilization ratio.

Low‐carbon thermal power
generation

LNG combined cycle, which provides superior availability as an
adjusting force for fluctuations of renewable energy output, andthermal power plants, which incorporates the design and theoperation as an intermediate load response, have been making asignificant contribution to the expansion of renewable energy
introduction.
Kyushu Electric Power will actively proceed its initiatives for low‐
carbon thermal power sources, such as increasing efficiency andfading out inefficient thermal power sources by 2030, utilizing fuels
for power generation such as hydrogen and ammonia that do not emit
CO2 during combustion, and studying the application of CO2 capture
technologies, while striving to balance the expansion of renewableenergy introduction and the stability of supply.

Upgrading powertransmission anddistribution network

In order to maximize the utilization of renewable energy in Kyushu,
Kyushu Electric Power will work on wide‐area operation of the powertransmission and distribution network, such as the development andenhancement of interconnection lines and core grids, the maximum
utilization of transmission capacity, etc., based on the national masterplan. In addition, Kyushu Electric Power will work on the advancementof supply‐demand operation and grid stabilization technology throughthe use of digital technology, etc., in order to balance the massive
introduction of renewable energy with the maintenance of electricity
quality.

Contribution to increase theelectrification rate in Kyushu

Combining environmentally friendly energy sources and the resourcesof the Kyuden Group, Kyushu Electric Power take on the challenge ofmaximizing electrification, especially in Kyushu, where theelectrification is potentially great, and contribute to reducing GHG
emissions all over the society.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Kyushu Electric Power aims to achieve a 100% electrification rate in
Kyushu by 2050 and will contribute to achieving 70% in household
sector and 60% in commercial sector by 2030, such as promoting all‐electrification in household sector, electrification of air conditioning,
hot water supply, and kitchens in the commercial sector, etc.
In the industrial and transportation sectors, there are many technicalchallenges in promoting electrification, however, Kyushu ElectricPower will take on the challenge of maximizing electrification while
keeping an eye on trends in technological innovation. In the industrial
sector, Kyushu Electric Power will develop technologies of heat source
conversion equipment such as heat pumps, and take on the challengeof electrifying heat demand (hot water, steam, heating, etc.) in awide range of temperature zones in the production process. In thetransportation sector, Kyushu Electric Power aims to convert 100% ofcompany‐owned vehicles (excluding special vehicles) to EVs by 2030,
and provide services to promote the widespread use of EVs.
Kyushu Electric Power will contribute to solving regional and social
issues by providing solutions of the Kyuden Group, and co‐create thezero‐carbon society, for the cooperative needs of local governments
and others to promote carbon neutrality and strengthen resilience.
Promoting carbon neutrality
in the region

Kyushu Electric Power will promote various community‐based
initiatives, such as concluding partnership agreements with local
governments, absorbing CO2 through maintenance and managementof company‐owned forests, creating and utilizing J‐credits by utilizing
the forest resources owned by local governments, providing
renewable energy and CO2 free plans, etc.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion(3) Governance of the Issuer (for environmental management)
Kyushu Electric Power has set the President as the chairman and established“Sustainability Promotion Committee” which was the conference system to be supervisedby the Board of Directors in July
2021 in order to enhance the efforts
to overall ESG (Environmental,
Social and Governance) issues toensure for the realization of “Kyuden
Group Carbon Neutral Vision 2050”.
In addition, Kyushu Electric Power
has assigned a director in charge of
ESG (environment, society, andgovernance) who was responsible
for governing and promoting overall
efforts in each sector of ESG, andnewly established the department
dedicated to ESG promotion within
the Corporate Strategy Division todevelop the promotion system for
implementation of sustainability
management.
The Sustainability Promotion Committee is responsible for formulating strategies and basic
policies related to ESG, including climate change issues, and monitoring theirimplementation. In addition, "Carbon Neutrality and Environment Subcommittee" has been
established under this committee to deliberate on environmental issues in general,
including carbon neutrality, from a more specialized perspective.

Issuer Name: Kyushu Electric Power Co., Inc.
Framework Name: Kyushu Electric Power Co., Inc. Sustainable Finance Framework
Review provider’s Name: DNV Business Assurance Japan K.K.
Date of report: April 27, 2022

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Ⅱ.

Scope and Objectives

DNV has been commissioned by Kyushu Electric Power to provide a pre‐issuance assessment on
Kyushu Electric Power Sustainable Framework (hereinafter, “Framework”) and the Sustainable
Finance. Our objective was to implement an assessment on whether the Kyushu Electric Power's
Framework and Sustainable Finance meet the criteria established on CTFH/CTFBG,
GBP/GLP/GBGLs/GLGLs and SLBP/SLLP/SLLGLs and provide a second party opinion on theeligibility of the Framework and the Sustainable Finance to be issued.
DNV, as an independent external reviewer, has identified no real or perceived conflict of interest
associated with the delivery of this second‐party opinion for Kyushu Electric Power.
In this report, no assurance is provided regarding the financial performance of the Sustainable
Finance, the value of any investments in the Sustainable Finance, or the long‐term
environmental benefits of the transaction.

Green Finance and Transition Finance with specific use of proceeds* Below are listed based on GBP but replaced with loan‐specific items as appropriate(1) Scope of review
The review assessed the following elements and confirmed their alignment with the gist of GBP☒

Use of Proceeds☒

Process for Project Evaluation and Selection☒

Management of Proceeds☒

Reporting＊The scope of review is to be applied as a part of the evaluation of the sustainable finance (Green/Transition)with specific use of proceeds.
＊The four disclosure elements of CTFH and CTFBG are included in the scope of review(2) Role(s) of review provider (Specific use of proceeds)☒

Second Party Opinion☐

Certification☐

Verification☐

Rating☐Other (please specify):

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Transition Finance with general corporate purpose＊Below are listed based on SLBP but replaced with loan‐specific items as appropriate(1) At the launch of the bond, the structure is☒a step‐up structure☒

a variable redemption structure＊Any of the above or others (e.g., donations) is set individually based on the fundraiser's internal processes
when executing the finance.

(2) Scope of Review
The review assessed the following elements and confirmed their alignment with the gist of SLBP.
☒

assessed all the following elements(complete review)☐

only some of them (partial review)☒

Selection of KPIs☒

Bond characteristics☒

Calibration of SPTs☒

Reporting☒

Verification☒and confirmed their alignment with
the SLBP＊The scope of review is to be applied as a part of the evaluation of the Sustainable finance (Transition) withgeneral corporate purpose.
＊The four disclosure elements of CTFH and CTFBG are included in the scope of review.

(3) Role(s) of Review Provider☒

Second Party Opinion☐

Certification☐

Verification☐

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Standards/Guidelines to be Applied
No.

Standards/guidelines

Scheme owner

1.

Climate Transition Finance Handbook (CTFH)*1

International Capital Markets 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 Markets Association(ICMA), 2021

4.

Green Bond Guidelines (GBGLs) *2*3

Ministry of the Environment, 2020

5.

Green Loan Principles (GLP) *2*3

Loan Market Association (LMA) andothers, 2021

6.

Green Loan Guidelines (GLGLs) *2*3

Ministry of the Environment, 2020

7.

Sustainability Linked Loan Principles (SLLP)*4

Loan Market Association (LMA) andothers, 2021

8.

Sustainability Linked Bond Principles (SLBP)*4

International Capital Markets Association(ICMA), 2020

9.

Sustainability Linked Loan Guidelines (SLLGLs) *4

Ministry of the Environment, 2020 ＊
refer

*1

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

It confirms compliance with the four core elements (use of proceeds, process for project evaluation andselection, management of proceeds, and reporting) that must be met when implementing as a bond/loanthat meets the four elements of transition and has a specific use of proceeds (quoted from CTFBG).

*3

Green projects were assessed for eligibility using the referable technical criteria of the Climate Bond
Initiative's Climate Bond Standard.

*4

Sustainability Linked Loan: A Sustainability Linked Loan is a loan that encourages borrowers to achieve
ambitious sustainability performance targets (SPTs) set by borrowers in advance, and are any type of loan
product and/or contingent facility (bonding loan facility, guaranteed loan facility, credit contingent facility(bonding loan facility, guaranteed loan facility, letter of credit, etc.)) (Quoted from SLLP. The evaluationfor SLBP is conducted synonymously.) Note that SLLGLs is based on the idea that the SLLP (2021)
requirements can be evaluated to encompass SLLGLs, so it is not directly applicable but is used as areference.

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Ⅲ. Responsibilities of Kyushu Electric Power and DNV
Kyushu Electric Power has provided the information and data used by DNV during the deliveryof this review. DNV’s second party opinion represents an independent opinion and is intended
to inform Kyushu Electric Power and other interested stakeholders in the Kyushu ElectricPower’s Bond/Loan as to whether the established criteria have been met, based on theinformation provided to us. In our work we have relied on the information and the facts
presented to us by Kyushu Electric Power. DNV is not responsible for any aspect of the assets
referred to in this opinion and cannot be held liable if estimates, findings, opinions, orconclusions are incorrect. Thus, DNV shall not be held liable if any of the information or data
provided by Kyushu Electric Power’s management and used as a basis for this assessment
were not correct or complete

Ⅳ. Basis of DNV’s opinion
To provide as much flexibility for the issuer as possible, we have adapted our Sustainable
Finance assessment methodologies, which incorporates the requirements of the CTFH/CTFBG,
GBP/GLP/GBGLs/GLGLs and SLBP/SLLP/SLLGLs, to create a Sustainable Finance Eligibility
Assessment Protocol (hereinafter, “Protocol”). Please refer to Schedule‐2. The Protocol isapplicable to the Sustainable Finance under the CTFH/CTFBG, GBP/GLP/GBGLs/GLGLs and
SLBP/SLLP/SLLGLs.
DNV, as an independent external reviewer, provides second party opinion according to theprotocol. Our Protocol includes a set of suitable criteria that can be used to underpin DNV’sopinion. The overarching principle behind the Green Finance, the Transition Finance and theTransition‐Linked Finance as the basis for the opinion are as follows:“enable capital‐raising and investment for new and existing projects with environmental
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 externally validated
and encourage the achievement of ESG (in terms of climate transitions) of fandraisers”
As per our Protocol, the criteria against which the Sustainable Finance has been reviewed aregrouped into common elements bellow, represented by CTFH/CTFBG, GBP/GLP/GBGLs/GLGLs
and SLBP/SLLP/SLLGLs.
(1) Four elements of CTFH/CTFBG (disclosure elements)
Principle One: Issuer’s climate transition strategy and governance
The financing purpose should be for enabling an issuer’s climate change strategy.
Principle Two: Business model environmental materiality
The planned climate transition trajectory should be relevant to the environmentally‐material parts of the fundraiser’s business model.

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Principle Three: Transition is science-based including targets and pathway
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.
(2) Four elements of GBP/GLP/GBGLs and GLGLs
Principle One: Use of Proceeds
The Use of Proceeds criteria are guided by the requirement that the issuer of agreen/transition finance must use the funds raised to bond eligible activities. The
eligible activities should produce clear environmental benefits.
Principle Two: Process for Project evaluation and selection
The Project Evaluation and Selection criteria are guided by the requirements thatthe issuer of a green/transition finance should outline the process it follows when
determining eligibility of an investment using green bond proceeds, and outline any
impacts objectives it will consider.
Principle Three: Management of Proceeds
The Management of Proceeds criteria are guided by the requirements that agreen/transition finance should be tracked within the issuing organization, that
separate portfolios should be created when necessary and that a declaration of howunallocated funds will be handled should be made.
Principle Four: Reporting
The Reporting criteria are guided by the recommendation that at least Sustainability
Reporting to the bond investors should be made of the use of bond proceeds andthat quantitative and/or qualitative performance indicators should be used, where
feasible.
＊The GLGLs set out requirements (internal reviews) for loan‐specific elements. This is
identified in the green loan requirements check.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion(3) Five elements of SLBP/SLLP*1＊Please replace “Sustainability” with “Transition” in the context if necessary.

Principle One: Selection of Key Performance Indicator (KPIs)
The Fundraiser of a sustainability‐linked finance should clearly communicate its overallsustainability objectives, as set out 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. The target setting should bedone in good faith and based on a sustainability improvement in relation to apredetermined performance target benchmark.
Principle Three: Finance characteristics
The finance will need to include a financial and/or structural impact depending onwhether the selected KPIs reach (or not) the predefined SPTs. The financedocumentation needs to require 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 therelated impact and timing of such impact on the loan’s financial and/or structuralcharacteristics, with such information to be provided to those institutions participatingin the finance or to investors participating in the finance at least once per annum.
Principle Five: Verification
The Fundraiser should have its performance against its SPTs independently verified by aqualified external reviewer with relevant expertise, at least once per annum. The
verification of the performance against the SPTs should be made publicly available.
*1: The Sustainability‐Linked Finance DNV Assessment Protocol consists of five requirements set
under SLBP (2020)/SLLP (2021) and includes SLLGLs. This is based on the idea that SLLGLs wascreated in consideration of consistency with SLLP (2019), and the idea that SLLGLs can be includedby evaluating the requirements of SLBP(2020)/SLLP (2021) since SLLP(2021) is a standard in which
the contents are added/reviewed while following the requirements of SLLP(2019).

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Ⅴ. Work Undertaken
Our work constituted a high‐level review of the available information, based on theunderstanding that this information was provided to us by Kyushu 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 (Sustainable Finance Framework assessment)Creation of Kyushu Electric Power ‐specific Protocol, adapted to the purpose of the
Sustainable Finance, as described above and in Schedule‐2 to this assessment.



Assessment of documentary evidence provided by Kyushu Electric Power on the
Sustainable Finance and supplemented assessment by a comprehensive desktop
research. These checks refer to current assessment best practice and standards
methodologies;Discussions with Kyushu 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 fundraisers' management, and evaluation of the relevant
documentation (or review);



Field research and inspection (if necessary)Document creation of post‐issuance assessment results

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Ⅵ. Findings and DNV's opinion
DNV’s findings and opinion are as described in (1), (2) and (3) below.
From the CTF‐1 to 4 in (1) below are the findings and opinions of DNV against the disclosure
elements of the CTFH and CTFBG as Climate Transition Finance applied to the Sustainable
Finance.
Please see Schedule‐2 for details.
The GBP/GLP‐1 to 4 in (2) below are the findings and opinions of DNV against the requirementof the four common elements of the GBP/GBGLs /GLP and GLGLs.
From the SLBP/SLLP 1 to 5 in (3) below are the findings and opinions of DNV against therequirement of the SLBP, SLLP and SLLGLs as Sustainability (Transition)‐Linked Finance*1
applied to the Sustainable Finance.
Please see Schedule‐3 for details.
*1: Loans with potentially financial and structural changes linked to the achievement of future transition goals(1) Findings and opinions of DNV against the four common elements (disclosure
elements) of CTFH and CTFBG
CTF-1.
‐

‐

‐

‐
‐

‐

Fundraiser’s Climate Transition Strategy and Governance
Kyushu Electric Power formulated "Kyuden Group Carbon Neutral Vision 2050"
and "Action Plan" in April 2021. In addition, the efforts to Kyuden Group's
management strategy and ESG (Environmental, Social and Governance) are
inseparable, and the strategies in "Kyuden Group Management Vision 2030" aretied to ESG, respectively. Moreover, the transition strategy and path/trajectory
are shown as the medium‐ and long‐term goals for 2030 and 2050 and"Roadmap toward Carbon Neutrality by 2050".
DNV has reviewed and confirmed that Kyushu Electric Power's goals are
consistent with the Paris Agreement goals, based on the scientific evidence
quantified by Kyushu Electric Power.
Kyushu Electric Power's transition strategy incorporates the results from the
TCFD scenario analysis and the environmental targets established by the Agency
for Natural Resources and Energy.
Kyushu Electric Power has established a structure and a framework to promotetransition strategies at the management level.
Kyushu Electric Power clarifies its contribution to ESG and SDGs while minimizing
negative impacts (negative external effects) against society through its businessactivities.
Based on the evaluation of the Framework, the Kyuden Group Carbon Neutral
Vision 2050 and the Action Plan, DNV confirmed that they are well aligned with
Kyushu Electric Power's Transition Strategy. In addition, DNV confirmed that the

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Action Plan based on the Transition Strategy is reliable, ambitious andachievable.
CTF-2.

Business model environmental materiality‐

Kyushu Electric Power’s efforts for the Transition include not only emission
reduction from its own business activities (Scope 1 and 2) but also activities
that contribute to reductions in Scope 3. This is the contribution to realizing
the carbon neutrality at a supply‐side and a demand‐side as the significant
initiatives shown in various plans and strategies for decarbonization in Japan.
In other words, Kyushu Electric Power's efforts for the Transition directly
support the Transition in whole society, including the company itself, as anenergy company that is taking on the challenge of achieving carbon neutrality
by 2050.

‐

Kyushu Electric Power's roadmap is well aligned with “the 6th Strategic Energy
Plan” and “the Electric Power Sector Roadmap” formulated by the Agency for
Natural Resources and Energy, and their specific implementation plans andtargets are set and quantified in the absolute sense that they must enableoptimal solutions and further improvements.

‐

DNV confirmed that Kyushu Electric Power's plan to implement its transition
strategies were closely related to the Kyushu Electric Power's core businessactivities and activities to contribute to the CO2 reduction in the society, which
would provide the environmental benefits to the whole society, and help to
Kyushu Electric Power drive its business. The transition strategy and transition
pathway planned by Kyushu Electric Power can be related to the materiality
utilizing the GRI standard*1, ISO26000, TCFD, etc., and will contribute tosignificant environmental benefits (impact) from qualitative and quantitative
perspectives.
*1: International standard developed by the Global Reporting Initiative to provide ESG‐related
reporting, management and analysis methodologies

CTF-3.

Transition is science-based including targets and pathways‐

Kyushu Electric Power has set the transition plans, which are consistent withthe science‐based Paris Agreement, and a transition trajectory, which isconsistent with the goals of the Agency for Natural Resources and Energy.

‐

DNV confirmed that Kyushu Electric Power's transition strategy is quantified asabsolute values or ratios based on a consistent measurement methodology
with prescribed assumptions.

‐

DNV confirmed that Kyushu Electric Power's transition strategy is built on the
mid‐term (2030) and the long‐term (2050) targets that exceed the goals of
the Agency for Natural Resources and Energy as milestones.

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

2050



2030





CTF-4.

Supply‐chain GHG emissions (Scope 1+2+3) virtually zero
Realization of "carbon negativity" ※ as early as possible before
2050
Electrification rate in Kyushu: 100% in household sector, 100% incommercial sector
Supply‐chain GHG emissions (Scope 1+2+3): 60% reduction(compared to FY2013)
Of these, Emissions from domestic operations: 65% reduction(compared to FY2013)
Contribution to GHG emissions reduction for society: 7 million tons
Amount of renewable energy to be developed: 5 million kW(Japan and overseas)
Electrification rate in Kyushu: 70% in household sector, 60% inhousehold sector

Implementation Transparency‐

DNV has confirmed that the investment and deployment plans related to the
Kyushu Electric Power's Transition Strategy included the agreements for future
investments and expenditures. As a specific example, Kyushu Electric Powerplans to invest approximately 500 billion yen over the next five years(cumulative total for FY2021‐FY2025) towards the Low‐carbonization anddecarbonization of power sources, of which approximately 250 billion yen isplanned for renewable energy‐related investments.

‐

DNV reviewed the Framework and the Kyuden Group Carbon Neutral Vision
2050. Accordingly, DNV confirmed that Kyushu Electric Power showed the hightransparency on implementation, and explained the appropriateness of theimplementation with agreement, in the Framework and the Kyuden Group
Carbon Neutral Vision 2050.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion(2) Findings and opinions of DNV against the four common elements of GBP/GBGLs
and GLP/GLGLs* The four elements are criteria of sustainable finance in the format of use of proceeds instrument, andgreen bonds/loan stated below can be read as sustainable finance (bond/loan) partially.

GBP/GLP-1. Use of Proceeds
Kyushu Electric Power has defined the eligibility criteria as green/transition projects thataligned with its Transition Strategy and related handbooks, principles and guidelines(CTF‐H and CTF‐BG).
Table‐6 shows the green/transition finance eligible project categories.

Table‐6 Kyushu Electric Power Major Initiatives to Achieve Carbon Neutrality(Green/Transition Finance the Nominated Projects)
Eligible Criteria

Project Overview
Investment for development, construction, operation andrenovation of geothermal, hydroelectric, solar, wind and biomass
facilities

Renewable Energy

Investment for development of batteries, pumped storage hydropower, and the establishment of integrated control technology
for distributed energy resources and the development of
aggregation business.

Nuclear Power
Generation*

Investment to ensure continued safe and stable operation ofexisting nuclear power plants

Low‐carbonization
andDecarbonization of
power sources

Investments for decommissioning and shut down of inefficient
thermal power plants

Thermal Power
Generation

Investment for the construction of new high‐efficiency thermal
power plants
Investment for R&D and installation of facilities for co‐firing ofhydrogen, ammonia, biomass, etc. and CO2 capture, utilizationand storage technologies (CCUS)
Investment for building a supply chain for carbon‐free fuels(hydrogen and ammonia)

Power Transmission
and Distribution
Network

Promotion ofElectrification

Increasing
electrification rate in
KyushuInvestment for the development and enhancement ofinterconnection lines and backbone grids that contribute to the
expansion of renewable energy, etc.
Investment for advanced supply‐demand operation and gridstabilization technologies to improve network utilization
Investment and expenditure for sales promotion of products andservices that contribute to increasing the electrification rate,
such as all‐electrification and heat pumps, as well as investment
for introduction of EV (company‐owned vehicles) and EV‐related
businesses

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Promoting carbon
neutrality in theregion*Investment for various initiatives to promote carbon neutrality inthe region, including the cost of maintaining company‐owned
forests and purchasing carbon credits (J‐credits)

With regard to nuclear power generation, eligible criteria has been being considered in various
standards and roadmaps. DNV will closely monitor domestic and international trends, etc., andconsider including it as a future use of proceeds.

DNV has confirmed that Kyushu Electric Power plans to allocate the net proceeds fromGreen/Transition Finance to financing and refinancing the capital expenditures, operating
expenditures, investments and R&D expenses of eligible green/transition projects that inline with Kyushu Electric Power 's investment plans for implementation of its transition
strategy.
These are representative projects that directly or indirectly support the projects which bring
the significant reduction of greenhouse gas, contribute to business transformation for therealization of carbon neutrality as exemplified by CTFH/CTFBG, GBP/GLP/GLGLs. In
addition, these projects are consistent with the Electric Power Sector Transition Roadmap of
the Agency for Natural Resources and Energy, which contributes to the achievement of its
goals. These projects have been evaluated to meet the criteria required as green ortransition projects, and to bring the clear environmental benefits to transition strategies,
and they are expected to contribute to the SDGs. These processes are consistent with
GBP/GLP‐1.

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GBP/GLP-2. Process for Project Evaluation and Selection
Kyushu Electric Power confirms the following, <Confirmations>, which were stipulated in
the Framework beforehand in addition that the green/transition projects meet thecriteria required as a green or a transition projects, and contribute to its transition
strategy. Specifically, the projects are selected and evaluated by the accounting
department and the relevant internal department through the appropriate prescribed
process.
These processes have been established as internal documents of Kyushu Electric Power,and DNV confirmed that they were planned to be implemented in accordance with theappropriate processes.
DNV also confirmed that the green/transition projects implemented by Kyushu ElectricPower were consistent with the issuer's management and environmental policies, as wellas with the transition strategy, goals and pathways.
< Confirmations>
For evaluation of the eligibility of each project, DNV will confirm that the potential
negative environmental and social impacts of the projects are taken into
consideration, and that the facility certification and permits, and the environmental
assessment procedure, etc., required by the country, region and local government,
are appropriately obtained where the facilities and the projects are operated.

Evaluation and Selection☒

Conforms to the issuer’s achievement of☒environmental contribution goals☒

Documented process to determine thatprojects fit within defined categories

The project is eligible for use of proceeds☒

by green bond and transparency isDocumented process to identify and manage
potential ESG risks associated with the project

ensured.

☒The project is evaluated and selected☐(Specify):

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

Information on Responsibilities and Accountability☒

Evaluation / Selection criteria subject to☒external advice or verification☐

Other (please specify):

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

GBP/GLP-3. Management of Proceeds
DNV confirmed how Kyushu Electric would track and manage proceeds for the period ofbond issuance through redemption. Kyushu Electric Power's accounting department will
manage the expenditures for eligible projects in accordance with the internalmanagement procedures, and track the amount of the allocated and unallocatedproceeds, with respect to the funds raised through the Sustainable Finance. In addition,
the dedicated ledgers will be prepared for the management of proceeds. The unallocatedproceeds, if any, will be managed in cash or cash equivalents.

Tracking of Proceeds:☒

Some or all of the proceeds by green bonds that are planned to be allocated are systematicallydistinguished or tracked by the issuer.

☐

Disclosure of intended types of temporary investment instruments for unallocated proceeds☒

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

Additional disclosure:☒☐

Allocations to future investments only

Allocations to both existing and future☒

Allocation to individual disbursements☐

Allocation to a portfolio of disbursements☐

Disclosure of portfolio balance of☒

Other (please specify): including allocation

investments

unallocated proceeds

through affiliates and subsidiaries

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GBP/GLP-4. Reporting
DNV confirmed that Kyushu Electric Power would annually disclose the allocation statusof the proceeds and the environmental benefits in the Integrated Report or on Kyushu
Electric Power website within the limits of confidentiality obligations and as far as
reasonably practicable until the proceeds through the Green/Transition Finance are fully
allocated.
＜Reporting on allocation Status＞
 Allocation amount Balance and investment method of unallocated proceeds
 Estimated amount (or percentage) of the portion of the proceeds allocated torefinancing
If there is a material change in the allocation status during the financing period, it will be
disclosed in a timely manner.
＜Environmental benefits: Impact Reporting＞
Although all or part of the information shown in Table‐7 are planned to be disclosed
concerning the impact reporting, it may be changed depending on the Eligible Projects towhich the proceeds are allocated. For the environmental benefits, while aiming todisclose the quantitative information to the extent possible such as CO2 emission
reduction, the qualitative disclosure may be made when the quantitative disclosure isfound difficult due to the circumstances or nature of the eligible projects.
Table‐7: An example of Impact Reporting
Eligible Criteria

Example・ Project Outline
Renewable Energy

Nuclear Power
Low‐carbonization
Generationand decarbonizationof power sources

・ Installed capacity by renewable energy type (MW)・ Annual CO2 emission reduction by renewable energy
type (t‐CO2/y)・ Installed capacity of concerned nuclear power plant(MW)・ Annual CO2 emission reduction of concerned nuclear
power plant (t‐CO2/y)・ Project Outline

Thermal Power
Generation

・ Outline of power plant (installed capacity (MW), yearof starting operation, performance and efficiency, etc.)
・ Annual CO2 emission reduction (t‐CO2/y)

Promotion ofElectrification

Power
Transmission andDistribution
Network・ Project Outline
・ Status of Capital Investment for Power Transmission
and Distribution, etc.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Increasing
electrification rate
in Kyushu

・ Project Outline

Promoting carbon
neutrality in theregion・ Project Outline

・ Annual CO2 emission reduction contribution (t‐ CO2/y)・ Annual CO2 emission reduction contribution (t‐ CO2/y)

Reference: Table‐8 Example of calculation method for environmental benefits(Projects subject to Green/Transition Finance to be issued this time)
Eligible Criteria/Project Calculation method for environmental benefits

No. Category01

Eligible Criteria/Project

ThermalLow‐carbonization andPower
Decarbonization of power sources
Generation
Thermal power plant/Hibiki power

Environmental benefits

Environmental benefits (index): CO2
reductions compared to Kyushu Electric Power's

plant

thermal power generation as a whole<Project Overview>Calculation method: estimated amount of

A state‐of‐the‐art gas turbine

power generation at Hibiki power plant x (simple

combined cycle power generation

average of emission factors for all thermal

system fueled by LNG will be

power generation by Kyushu Electric Power ‐adopted (620,000 kW x 1 unit,

assumed emission factor at Hibiki power plant)

thermal efficiency 64% (low calorificvalue))
Planned construction site is city ofEnvironmental benefits (estimatedvalue):approx. 890,000t ‐ CO2/ year

Kitakyushu, Fukuoka prefecture.
Operation will be started in FY2025.

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Use of Proceeds Reporting:☐

Project‐by‐project☒

On a project portfolio basis☐

Linkage to individual bond(s)☐Other (please specify):☐

GB refinanced share of total investment

Information reported:☒

Allocated amounts☐

Other (please specify):

Frequency:☒

Annual☐Other (please specify):

Semi‐annual☐

Impact reporting (Environmental Benefits):☐

Project‐by‐project☒

On a project portfolio basis☐

Linkage to individual bond(s)☐Other (specify): Eligible Criteria Units:

Frequency:☒

Annual☐Other (please specify):☐

Semi‐annual☐

Energy savings

Information reported (expected or ex-post):☒

GHG Emissions / Savings☒

Other ESG indicators (please
specify): completion of facility
installation, size, starting year ofoperation, etc.

Means of Disclosure☐

Information published in financial report☐

Information published in sustainability report☒

Other (please specify): disclosed on Kyushu(Integrated Report)☐

Information published in ad hoc documents

Electric Power website☐

Reporting reviewed (if yes, please specify which parts of the reporting are subject to external
review)

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion(3)

Findings and opinions of DNV against the five requirements *1 of SLBP/SLLP＊1: including SLLGLs

SLBP/SLLP-1

Selection of Key Performance Indicators (KPIs）‐

DNV reviewed Kyushu Electric's KPIs related to the sustainability andconfirmed that the selected KPIs are important and relevant to Kyushu ElectricPower's core transition strategy and sustainability management.

‐

The three KPIs (supply‐chain GHG emissions, supply‐chain GHG emissions(domestic business) and the amount of renewable energy to be developed),shown in “Table‐2 Kyushu Electric Power Transition Linked Finance KPIs and
SPTs”, related to the environmental sustainability (transition) defined by
Kyushu Electric Power are material indicator for the overarchingtransition/sustainability strategies towards “Realization of carbon neutrality”
and “Low‐carbonization and decarbonization of power sources” set by Kyushu
Electric Power, as an energy provider.

‐

The key KPI for Kyushu Electric Power is the reductions of supply‐chain GHG
emissions towards " Realization of carbon neutrality " and " Low‐carbonizationand decarbonization of power sources". Since indirect emissions fromelectricity account for about 40% of GHG emissions in Japan, Kyushu ElectricPower's selection of supply‐chain GHG emissions as a KPI is fully appropriate.
This is positioned as a core KPI for the "Low‐carbonization and decarbonizationof power sources" set forth in the "Kyuden Group Carbon Neutral Vision 2050".

‐

Similarly, the amount of renewable energy to be developed (installed capacity)
is a key KPI that directly contributes to "Low‐carbonization anddecarbonization of power sources", and also contributes to reducing the
supply‐chain GHG emissions.

‐

DNV confirmed that the KPIs selected by Kyushu Electric Power wereconsistent with the "the 6th Strategic Energy Plan" and the "Electric Power
Sector Transition Roadmap" formulated by the Agency for Natural Resources
and Energy, and that the KPIs were appropriately set as comparable
indicators.

‐

From the perspective of Kyushu Electric Power's business strategy as anenergy provider, DNV believes that the efforts of Kyushu Electric Power toaddress KPIs closely related to the "Low‐carbonization and decarbonization of
power sources" set forth in the "Kyuden Group Carbon Neutral Vision 2050"
towards achieving carbon neutrality will contribute to Kyushu Electric Power’s
goals for “becoming a corporate group that leads the decarbonization of Japan
from Kyushu as a top runner in the field of low‐carbonization anddecarbonization”. In addition, DNV also believes the above‐mentioned efforts
will be a key driver for increasing profits by the maximum use of existing andnew zero emission power sources (renewable energy etc.). The KPI will also
contribute to the realization of "Kyuden Group Carbon Neutral Vision 2050"

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

and to the business strategy and the goals related to sustainability
management of Kyushu Electric Power.
‐

DNV concludes that GHG emissions as a KPI are measurable based on aconsistent methodology (GHG emissions protocol), are externally verifiable,
and can be benchmarked against an external reference. DNV concludes that
supply‐chain GHG emissions are a robust and highly reliable indicator.

‐

The 6th Strategic Energy Plan formulated by the Agency for Natural Resources
and Energy states a 46% reduction in domestic GHG emissions by FY2030,
compared to FY 2013, toward achieving carbon neutrality by 2050. These GHG
emissions reduction targets can be used as an external reference to assess
Kyushu Electric Power's ambition.

‐

DNV confirmed that the KPIs selected by Kyushu Electric would provide a clear
evaluation scope and calculation methods. See Schedule‐2 for details.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

List of selected KPIs
List of selected KPIs
 KPI 1: Supply‐chain GHG emissions
 KPI 2: Supply‐chain GHG emissions (domestic operations) KPI 3: Amount of renewable energy to be developed (installed capacity)

Definition, Scope and Parameters☒

Clear definition of each selected KPIs☐

Other (please specify):☒

Clear calculation methodology

Relevance, robustness, and reliability of the selected KPIs☒

Credentials that the selected KPIs are☒

relevant, core and material to the

Evidence that the KPIs are externallyverifiable

Issuer’s sustainability and businessstrategy.
☒

Credentials that the KPIs are measurable☒

Evidence that the KPIs can be benchmarked☐

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

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

SLBP/SLLP-2

Calibration of Sustainability Performance Targets (SPTs):‐

DNV confirmed that the SPTs shown in Table‐2 supported the supply‐chain GHG
emission reduction defined by “Low‐carbonization and decarbonization of powersources “set forth in “Kyuden Group Carbon Neutral Vision 2050”, and the SPTs
exceeded targets formulated by the Agency for Natural Resources and Energy
and the specific plans are included. Accordingly, DNV confirmed that Kyushu
Electric Power's SPTs were ambitious and proactive. DNV also confirmed thatthe achievement of SPTs was consistent with Kyushu Electric Power's efforts forthe realization of carbon neutrality.

‐

DNV concluded that the SPT was realistic, the plans were feasible, the SPT
targets outlined in the framework were achievable, based on the "Kyuden Group
Action Plan to Achieve Carbon Neutrality" and the information provided by
Kyushu Electric Power.

‐

The strategies set by Kyushu Electric Power that 60% reduction in supply‐chain
GHG emissions (SPT1) and 65% reduction in supply‐chain GHG emissions fordomestic business (SPT2) by 2030 based on FY 2013 are more ambitious that46% reduction in supply‐chain GHG emissions aimed in “the 6th Strategic
Energy Plan” formulated by the Agency for Natural Resources and Energy, andexceed “Business as Usual”.

‐

In addition, the renewable energy to be developed (SPT3) is an initiative fortransition closely related to the supply‐chain GHG emission reduction. The SPT3
(achievement of 5 million kW) by 2030, is a significant increase over past three
years in Kyushu Electric Power (FY 2019: 2.2 million kW, FY 2020: 2.3 million
kW, FY 2021: 2.5 million kW), and the development should be accelerated andexpanded more than the past results. This is an ambitious goal that goesbeyond "Business as Usual", which is set quantitatively based on the recent
performance levels required by the Linked Finance.

‐

DNV confirmed that the SPTs established by Kyushu Electric Power were tied tothe improvement of KPIs. The Kyushu Electric Power's efforts to KPI/SPT are
expected to be a driving force for the implementation of Kyushu Electric Power's
Transition (sustainability) strategy.

‐

DNV confirmed that the SPT goal‐setting process was based on the appropriate
combination of benchmarking approaches.
Guidelines for goal setting by 2030 are indicated in the Framework inaccordance with KPI information on the basis of the appropriate data
and the actual results, based on Kyushu Electric Power's actual results
up to 2019.

The SPT outlined in the Framework exceeds the SPT of goals
established by the Agency for Natural Resources and Energy, and isconsistent with the methodology calculated from the GHG emission
reduction protocol used by the Agency for Natural Resources andPage 41 of 83

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Energy. In addition, the SPT goal setting has been evaluated asambitious as an item closely related to GHG emission reduction, basedon the recent performance level of Kyushu Electric Power.
‐

DNV has concluded that the SPTs included appropriate relevance with
the GHG emission reduction targets established by the Agency for
Natural Resources and Energy. In addition, the framework is
consistent with the national guidelines that conform to theachievement of the Paris Agreement goals. Kyushu Electric Power is
supported by three KPIs/SPTs and their respective action plans torealize the " Kyuden Group Carbon Neutral Vision 2050". The goals
and the Best Available Technology or other close technology, definedby the Agency for Natural Resources and Energy are included.

DNV confirmed that the SPT goal setting was properly disclosed as follows


The timeline for SPT achievement is set up to 2030. The interim
progress to the trigger judgement of the SPT uses a linear
interpolation, etc., from 2013 to 2030 as a guide.

The base year for the SPT regarding GHG emission reduction in the
Framework is 2013, which is consistent with the base year set by the
Agency for Natural Resources and Energy.

Through the Framework, the Action Plan and the roadmap toward thecarbon neutrality by 2050, the progress status in GHG emission
reduction and the amount of renewable energy to be developed is
described in detail.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Table-2 (Reposted) KPIs and SPTs of Kyushu Electric Power Transition-Linked Finance(One or more of the following KPIs and SPTs may be selected for a particular Transition‐Linked
Finance)
KPIs

SPTs

KPI 1: Supply‐chain GHG emissions

SPT 1: 60% reduction by 2030 (compared to FY2013)

KPI 2: Supply‐chain GHG emissions

SPT 2: 65% reduction by 2030 (compared to FY2013)（domestic business）
KPI 3: Amount of renewable energy to be

SPT 3: 5 million kW by 2030 (domestic and overseas）

developed (installed capacity)
Explanation of KPIs

Explanation of SPTs

KPIs include the items that are closely
related to Kyushu Electric Power's
materiality.

Each SPT refers to the target values in the Action Plan and islinked to the value with Kyushu Electric Power's transition
strategy.

KPI 1 and KPI2: Supply‐chain GHG
emissions
It is a core KPI for the "Low‐carbonizationand decarbonization of power sources" on
the supply side of Kyushu Electric Power,
and can be measured quantitatively andcontinuously based on the GHG Protocol.

SPT 1 and SPT 2: Supply‐chain GHG emissions
Kyushu Electric Power’s supply‐chain GHG emission reduction
target is ambitious that far exceeds Japan's reduction targetof 46% by FY2030.

KPI 3: Amount of renewable energy to be
developed
It is a key KPI that contributes to the
supply‐chain GHG emissions reductions bydirectly linking to "Low‐carbonization anddecarbonization of power sources”.

SPT3: Amount of renewable energy to be developed
The development of renewable energy is the effort to thetransition closely related to SPT 1 and SPT 2.
SPT 3 (5 MW by 2030) is drastically increased compared to
Kyushu Electric Power's past three‐year results (FY 2019:
approx. 2.2 million kW, FY 2020: approx. 2.3 million kW, FY
2021: approx. 2.5 million kW); however, the development
should be accelerated and expanded more than the past
results. This is the ambitious goal that exceeds “Business As
Usual”, quantitatively set based on recent performance levels
as required by the Linked Finance.
SPTs to be a trigger event may be set by the actual results inthe base year of 2013 or 2019 and the linear interpolation oftargets up to 2030, or individually set when the detailedplans are developed in the future.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion(SPTs) Rationale and level of ambition☒

Evidence that the SPTs represent a☒material improvement☒

Credentials on the relevance and reliability of
selected benchmarks and baselines

Evidence that SPTs are consistent with☒

the Issuer’s sustainability and business

Credentials that the SPTs are determined on apredefined timeline

strategy☐

Other (please specify):

Benchmarking approach☒

Issuer own performance☒Issuer’s peers☒

Reference to the science☒

Other (please specify):☒

Issuer’s strategy to achieve description☒

Other (please specify):

Additional disclosure☒

potential recalculations or adjustments
description☒

identification of key factors that may
affect the achievement of the SPTs

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

SLBP/SLLP-3

Bond/Loan Characteristics

For the Transition‐Linked Finance (Bond or Loan) executed under the Framework, DNV
confirmed that the observation timing of specific SPTs and the trigger events withperformance requirements and the extent of their impact would be linked to theachievement of targets and interest rates of bonds, terms and conditions of loan orother financial incentives (such as donations to environmental conservation
organizations).
‐

DNV confirmed that Kyushu Electric Power considered the appropriate fallback
mechanisms (fallback alternatives), and, as a result, decided not to set up
another SPT or calculation method at this time since the risks of not being able
to calculate or observe were extremely small.

‐

Kyushu Electric Power explained that KPIs and SPTs may be changed after
discussion at internal meetings when there was a rational reason, in case that
there were any changes in business environment, business structure and KPIs,
etc., regardless of whether the event was due to external factors or the result of
Kyushu Electric Power's management decision.

‐

DNV confirmed that when there were any changes in KPIs and SPTs, Kyushu
Electric Power would disclose them in the bond disclosure documents or loan
agreement, etc.

Financial impact:☒☒

variation of the coupon
Other (please specify): financial incentive, such as donation, etc. (selecting the donations
based on the internal standard of the Issuer)

Structural characteristic:☒

Other (please specify): terms and conditions of trigger judgement (judgement date and SPT)
will be set by the period of an individual bond or loan, etc., and clarified in a legal disclosure
documentation (or other disclosure method to the public) or an agreement document.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

SLBP/SLLP-4‐

Reporting

DNV confirmed that the necessary information would be disclosed to the public
in a timely 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 (bondinterest rate, terms and conditions of loan or other financial incentives).

When targets set by the Agency for Natural Resources and Energy werechanged: Kyushu Electric Power’s ambitions for SPT will be changed after
discussion with DNV, etc. if necessary.

Information reported:☒

performance of the selected KPIs☒☒

level of ambition of the SPTs☒

verification assurance report
Other (please specify): Information on thefinancial impact when implementing trigger
judgement (information of interest rate anddonation). Validity of the adjustment andrecalculation result of KPI and SPT, 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 issuer’s
website or to a lender (in case of loan
only)

☐

Reasonable assurance☐

Other (please specify):

documents☐

Reporting reviewed

Level of Assurance on Reporting☒

Limited assurance

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

SLBP/SLLP-5‐

Verification:

DNV confirmed that Kyushu Electric Power planned to undergo independent
verification of KPI‐related data at least once a year by qualified external
evaluation agency.

Information reported:☒

Limited assurance☐

Reasonable assurance☐

Other (please specify):☐

Semi‐annual☐

KPI methodology

Frequency:☒

Annual☐Other (please specify):

Material change:☒

Perimeter☐

SPTs calibration

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ⅶ. Assessment Conclusion
On the basis of the information provided by Kyushu Electric Power and the work
undertaken, it is DNV’s opinion that the Kyushu Electric Power Sustainable Finance
Framework and the Sustainable Finance issued by Kyushu Electric Power meet thecriteria established in the Protocol, and that they are aligned with the following stateddefinition or purpose of the Sustainable Finance (Green Finance, Transition Finance andTransition‐Linked Finance) for bonds and loans that specify/unspecify the use ofproceeds, within the CTFH/CTFBG, GBP/GLP/GBGLs/GLGLs and SLBP/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 andexternally validated and encourage the achievement of ESG (in terms of climatetransitions) of fundraisers”

DNV Business Assurance Japan K.K.
April 27, 2022

Mark Robinson

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV Business Assurance, Australia

DNV Business Assurance Japan K.K.

Masato Kanedome

Hisashi Hashimoto

Project Leader

Assessment Leader

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion
About DNV
Driven 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’ decisions and actions with trust and confidence. We
continuously invest in research and collaborative innovation to provide customers and society with operational andtechnological 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 Issuer and the Second‐Party Opinion Providers, DNV : The management ofIssuer has provided the information and data used by DNV during the delivery of this review. Our statement represents
an independent opinion and is intended to inform the Issuer management and other interested stakeholders in the Bond
as to whether the established criteria have been met, based on the information provided to us. In our work we haverelied on the information and the facts presented to us by the Issuer. 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 areincorrect. Thus, DNV shall not be held liable if any of the information or data provided by the Issuer’s management andused as a basis for this assessment were not correct or complete

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

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 (as of April 2022).
In the future, green/transition finance issued under the Kyushu Electric Power Sustainable Finance Framework will be selected from one or more of 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 Kyushu Electric Power in accordance with the process basedon Kyushu Electric Power Finance Framework and, if necessary, DNV will evaluate them in a timely manner.
Eligible Criteria

Nominated Eligible Projects
Investment for development, construction, operation, and renovation of geothermal,

Renewable
Energycarbonization

Nuclear Power

andGeneration*3

Decarbonization
sources

Transition*2

〇

〇

〇

〇

(〇)

〇

Investment for the development of storage batteries and pumped storage power generation,and the establishment of integrated control technology for distributed energy resources
using these resources, and the development of aggregation business

Low‐of powerhydroelectric, solar, wind and biomass facilities

Green*1

Thermal Power
Generation

Investments to ensure continued safe and stable operation of existing nuclear power plants
Investments to shut down and discontinue inefficient thermal power〇

Investment for new high‐efficiency thermal power plants〇

Investment for R&D and installation of facilities for co‐firing of hydrogen, ammonia, biomass,〇

etc. and utilization of CO2 recovery technology (CCUS)
Investment for building a supply chain for carbon‐free fuels (hydrogen and ammonia)

Power

Investment for the development and enhancement of interconnection lines and backbonetransmission

grids that contribute to the expansion of renewable energy, etc.

Promotion ofand distribution

Investment for sophisticated supply‐demand operation and grid stabilization technologies toElectrification

network

improve network utilization

DNV Business Assurance Australia Pty. Ltd. Level 7, 124 Walker Street, North Sydney, NSW Australia, 2060. Ph: +61 (2) 9922 1966
https://www.DNV.com/assurance/

Page 50 of 83

〇

〇

〇

〇

〇

〇

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Increasing
electrification
rate in Kyushu

Investments and expenditures for sales promotion of products and services that contributeto increasing the electrification rate, such as all‐electrification and heat pumps, as well as
investments for the introduction of EV vehicles (company‐owned vehicles) and EV‐related

〇

〇

〇

〇

businesses

Promotion ofcarboncarbon neutrality in the region, including the cost of maintaining company‐owned forests

neutrality in theand purchasing carbon credits (J‐credits)regionProjects that have been qualified the eligibility as green projects can be incorporated as green projects when executing the green finance in the future. In
addition, Green projects are permitted in CTFBG to be included as a part of those when implementing the transition finance.
*2 Some projects that are currently classified as transition projects may become green projects due to the application of future technological innovations.
(e.g., application of green fuel/manufacturing processes, achieving performance that meets CO2 emission standards as a green project, etc.) Eligible
Criteria with the mark "〇" listed for both Green and Transition are classified as either or both depending on the individual project.
*3 Regarding nuclear power generation, eligibility criteria are being considered in various standards and roadmaps. Domestic and international trends, etc.
will be closely monitored, and consider including this as a future use of proceeds.
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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

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

KPI-1 Supply-chain GHG emissions(Scope 1+2+3)
KPI-2 Supply-chain GHG emissions(domestic business)(Scope1+2+3)
KPI-3 Amount of renewable energy to be developed(installed capacity)

Overview
Kyushu Electric Power selected the supply‐chain GHG emissions (Scope 1+2+3)*1 and the amountof renewable energy to be developed (installed capacity) as KPIs. The selected KPIs are key
indicators for the low‐carbonization and decarbonization of power sources as an energy provider, assuggested in the " the 6th Strategic Energy Plan" formulated by the Agency for Natural Resources
and Energy. The calculation method of supply‐chain GHG emissions complies with the GHG protocol
internationally recognized, and is based on "Greenhouse Gas Emissions Calculation, Reporting, andPublication System" in “Act on Promotion of Global Warming Countermeasures” and "Greenhouse
Gas Emissions from Supply Chains of Organizations" defined by Japanese government. Each energy
provider calculates, reports, and publishes its emissions based on this system.
In addition, the Kyuden Group calculates the amount of renewable energy to be developed (installedcapacity) by aggregating the power‐saving installed capacity of renewable energy generation
facilities. The data necessary for KPI evaluation is managed and evaluated by Kyushu ElectricPower's internal processes. In addition, GHG emissions and the amount of renewable energy to be
developed are also shown as indicators in " the 6th Strategic Energy Plan" formulated by the Agency
for Natural Resources and Energy.

*1

Scope (1+2+3) Scope 1: Direct greenhouse gas emissions by businesses themselves (fuelcombustion, industrial processes)
Scope 2: Indirect emissions from the use of electricity, heat and steam suppliedby other companies
Scope 3: Indirect emissions other than Scope 1 and Scope 2 (emissions by othercompanies related to the business activities)

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SPTs Sustainability Performance Targets

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

SPTs

Overview
SPT‐1, SPT‐2: The targets of GHG emissions reduction are defined as 46% by 2030 (compared to
FY2013) in "the 6th Strategic Energy Plan" formulated by the Agency for Natural Resources andEnergy, and SPT‐1 and SPT‐2 set by Kyushu Electric Power are much more ambitious targets thanthose targets.

SPT-1 60% reduction by 2030 (compared to FY2013)
SPT-2 65% reduction by 2030 (compared to FY2013)
SPT-3 5 million kW by 2030 (domestic and overseas)

SPT‐3: Amount of renewable energy to be developed is an effort to the Transition closely related
to SPT1 and SPT2. SPT‐3 (5 million kW by 2030) commits a significant increase compared to
Kyushu Electric Power's past three‐year actual result (FY2019: approx. 2.2 million kW, FY2020:
approx. 2.3 million kW, FY2021: approx. 2.5 million kW), and the development should beaccelerated and expanded more than the past results. This is an ambitious goal that goes beyond“Business As Usual”, which is set quantitatively based on recent performance levels as required by
the Linked Finance.
SPTs to be a trigger event may be set individually when they are set by linear interpolation, etc.
between actual result in 2013 or in 2019 which are the base year and the goal by 2030, or adetailed plan is drawn up in the future.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Schedule-3 Transition Finance Framework Eligibility Assessment Protocol

The following checklists (1‐4) are DNV evaluation procedures created for Kyushu Electric Power Transition Finance (specific use of proceeds and general corporate
purpose) from Kyushu Electric Power Sustainable 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 Kyushu Electric Power as evidence of eligibility judgment for DNV.
＊Please replace “Issuer”, “Investor” to “Borrower/Fundraiser”, “Lender” in the context in the following requirements.

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- 6th Strategic Energy
Plan- Electric Power Sector
Transition Roadmap- Integrated Report
2021- Kyuden Group ESG
Data Book 2021
- Kyuden Group Action
Plan to Achieve
Carbon Neutrality- Project List
Interviews withstakeholders

Kyushu Electric Power has established its Framework, andhas also introduced various plans and initiatives to manageand enhance the performance related to the organization's
environmental sustainability against Kyushu Electric Power's
wide range of environmental strategy.

<Suggested information and indicators>•••

A long‐term target to align with thegoals of the Paris Agreement (e.g. theobjective of limiting global warming
ideally to 1.5℃ and, at the very least,
to well below 2℃);
Relevant interim targets on the
trajectory towards the long‐term goal;
Disclosure on the issuer’s levers
towards decarbonisation, and strategic

DNV has reviewed and confirmed that Kyushu ElectricPower’s goals are equivalent to achieving the goals of theParis Agreement in accordance with the plans and initiatives
to achieve the carbon neutrality by 2050, which was thelong‐term goals with science‐based evidence quantified by
Kyushu Electric Power. Kyushu Electric Power has
established a corporate strategy in the significant
environmental aspects for the business model, based on theidentification of risks and opportunities and scenario analysis
using the TCFD guidance.
Kyushu Electric Power formulated the " Kyuden Group
Carbon Neutral Vision 2050" in April 2021, which includes"Kyuden Group Action Plan to Achieve Carbon Neutrality"(hereinafter, "Kyushu Electric Power Roadmap"). The long‐term goals of carbon neutrality by 2050, which areconsistent with the goals of the Paris Agreement, are set inPage 54 of 82

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ref.

Criteria

Requirements••

Work Undertakenplanning towards a long‐term target toalign with the goals of the Paris
Agreement;
Clear oversight and governance oftransition strategy and,Evidence of a broader sustainability
strategy to mitigate relevant
environmental and social externalities
and contribute to the UN Sustainable
Development Goals.

DNV Findings
Kyushu Electric Power Roadmap, and the medium‐termgoals for achieving those targets are also developed. Kyushu
Electric Power’s strategic plan to achieve the Transition tocarbon neutrality is disclosed in Kyushu Electric Power
Roadmap.
Specifically, Kyushu Electric Power's transition strategy
includes the environmental targets established by the
Agency for Natural Resources and Energy, as well as its
action plan to achieve the 1.5°C target utilizing TCFD
guidance. Furthermore, when a review of efforts is requiredin order to realize the continuous emission reduction in the
future, it will be implemented in a timely manner according
to the timeline based on the progress in the development ofeach technology.
Kyushu Electric Power considers the response for the
climate change, including the implementation of transition
strategies as one of the most important management
issues, and has established the system and the Framework
to promote the initiatives set forth in "Kyuden Group Carbon
Neutral Vision 2050" and Kyushu Electric Power Roadmap at
the management level.
Kyushu Electric Power considers that its approach tosustainability promotion for Kyushu Electric Power andsociety is to continue to take on the challenge of “Low‐carbonization and decarbonization of power sources” and“Promotion of Electrification” as Kyuden Group and to
become a corporate group that leads the decarbonization in
Japan from Kyushu towards decarbonization of energy
supply and demand. Kyushu Electric Power has beenpromoting various initiatives (Kyuden Group Carbon Neutral
Vision 2050 toward carbon neutrality), based on thisPage 55 of 82

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Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
concept, and through these activities, aims to contributewidely to the achievement of the SDGs, the Sustainable
Development Goals, set by the United Nations. Of these, themajor issues (materiality) to which green/transition financeis primarily related are the challenges in bridging the gap
between the actual status and the vision aiming for in the"Kyuden Group Management Vision 2030" and the "Kyuden
Group Carbon Neutral Vision 2050". Moreover, Kyushu
Electric Power sets the "contribution to a decarbonizedsociety"” in the first, and recognizes it as one of the mostimportant issues.
DNV confirmed that the Framework, the "Kyuden Group
Carbon Neutral Vision 2050" and the Kyushu Electric Power
Roadmap were well aligned with Kyushu Electric Power's
transition strategy, in accordance with the evaluation of theimplementation plans provided by Kyushu Electric Power.
Through the evaluation, DNV confirmed that theimplementation plans based on Kyushu Electric Power's
transition strategy were credible, ambitious, and achievable.

2

Business model
environmental
materiality

The planned climate transition trajectoryshould be relevant to the environmentally‐material parts of the issuer’s business model,
taking into account potential future scenarios
which may impact on current determinations
concerning materiality.

Confirmed documents:- Framework- 6th Strategic Energy
Plan- Electric Power Sector
Transition Roadmap- Integrated Report
2021- Kyuden Group ESG
Data Book 2021

Page 56 of 82

DNV assessed whether the key activities related to Kyushu
Electric Power's business were being corresponding to
Kyushu Electric Power's transition strategy which wasevaluated as contribution to the environment.
Greenhouse gas emissions of the Kyuden Group (FY2020)are as follows:
Scope 1: 22.11 million t‐CO2
Scope 2: 0.0001 million t‐CO2
Scope 3: 19.67 million t‐CO2
Total: 41.78 million t‐CO2

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken--

DNV Findings

Kyuden Group Action
Plan to Achieve Carbon
Neutrality
Project List

Interviews withstakeholders

Kyushu Electric Power's efforts to the Transition include not
only emission reduction from its own business activities(Scope 1 and Scope 2), but also Scope 3 and activities that
contribute to reductions of other companies. This willcontribute to the achievement of the carbon neutrality atboth supply‐side and demand‐side as a key initiative
presented in various plans and strategies towards
decarbonization in Japan. In other words, Kyushu ElectricPower's efforts to the Transition directly support thetransition in whole society, including its own company, as anenergy provider which are taking on the challenges toachieve carbon neutrality by 2050.
Kyushu Electric Power Roadmap is well aligned with theElectric Power Sector Transition Roadmap formulated by the
Agency for Natural Resources and Energy, and its specificimplementation plans and targets are set and quantified inPage 57 of 82

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Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
the absolute sense that they must allow for optimal solutions
and further improvement.
DNV confirmed that Kyushu Electric Power's plan toimplement its transition strategy was closely related to
Kyushu Electric Power's core business activities and activities
that contribute to the CO2 reduction in whole society, andsupport to drive the Kyushu Electric Power's business withthe contribution to the environmental aspects of wholesociety. Kyushu Electric Power's transition strategy andpathway can be linked to the materiality which utilizes the
GRI Standard*1, ISO 26000, SASB Standard*2, TCFD, etc.,
and will contribute to significant environmental benefits(impacts) from qualitative and quantitative perspectives.

*1: Global Reporting Initiative (an international standard thatprovides ESG‐related reporting, management, and analysis
methodologies)*2: Disclosure standards developed by the Sustainable
Accounting Standards Board regarding 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 ona measurement methodology which isconsistent over time);

Confirmed documents:- Framework- 6th Strategic Energy
Plan- Electric Power Sector
Transition Roadmap- Integrated Report
2021

Page 58 of 82

Kyushu Electric Power has set a transition plan that is
consistent with the Paris Agreement based on scientificevidence and a transition trajectory that is consistent withthe goals established by the Agency for Natural Resources
and Energy.
This plan provides a realistic achievement and pathway forCO2 emission reduction in absolute terms and a plan toKyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ref.

Criteria

Requirements•••

be aligned with, benchmarked orotherwise referenced to recognized,
science‐based trajectories where suchtrajectories exist;
be publicly disclosed (ideally inmainstream financing filings), include
interim milestones, and;be supported by independent assurance
or verification

Work Undertaken--

Kyuden Group ESG
Data Book 2021
Kyuden Group Action
Plan to Achieve
Carbon Neutrality
Project List

Interviews withstakeholders<Suggested information and indicators>
•

•
•
•
•

Short, medium, and long‐termgreenhouse gas reduction targets
aligned with Paris Agreement;
Baseline
Scenario utilised, 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
and absolute terms

DNV Findings
reduce CO2 emissions in absolute (total) terms to maintainthe defined levels in the future.
DNV confirmed that Kyushu Electric Power's transition
strategies were quantified as absolute values or ratios basedon a consistent measurement methodology based onprescribed assumptions. The transition targets are set
voluntarily based on the efforts utilizing the TCFD and othermeasures for CO2 emission reduction in a sustainable
manner, and they are consistent with the policies of the
Agency for Natural Resources and Energy, which serves as
the benchmark.
Specifically, Kyushu Electric has established the following
goals for transitions:

2050

2030

Page 59 of 82

Supply‐chain GHG emissions (Scope
1+2+3) virtually zero
Realization of "carbon negativity" ※Achievement of "carbon negativity" as
early as possible before 2050
Electrification rate in Kyushu: 100% inhousehold sector, 100% in commercial
sector
Supply‐chain GHG emissions (Scope
1+2+3) 60% reduction（compared to
FY2013）Of these, Emissions from domestic
operations: 65% reduction (compared to
FY2013)Contribution to GHG emissions reduction
for society: 7 million tons

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
Amount of renewable energy to be
developed: 5 million kW (Japan andoverseas)
Electrification rate in Kyushu: 70% inhousehold sector, 60% in commercial
sectorKyushu Electric Power's CO2 reductions focus not only on
emission reduction from its own business activities (Scope 1
and Scope 2), but also on Scope 3 and activities that
contribute to reductions at other companies. This willcontribute to the realization of carbon neutrality at bothsupply‐side and demand‐side as an important initiative
presented in the various plans and strategies for
decarbonization in Japan. In other words, Kyushu ElectricPower's efforts to the Transition directly support theTransition of society as a whole, including the company
itself, as an energy company challenging to achieve thecarbon neutrality by 2050.
The efforts to the Transition and the emissions of eachscope are disclosed in the “Integrated Report” and the “EGS
Data Book”, etc.

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- 6th Strategic Energy
Plan- Electric Power Sector
Transition Roadmap

Page 60 of 82

DNV confirmed that Kyushu Electric Power's investment anddeployment plans related to the transition strategy included
agreement on future investments and expenditures.
Specifically, Kyushu Electric Power plans to invest
approximately 500 billion JPY over the next five years(cumulative total for FY2021‐FY2025) toward the Low‐
carbonization and decarbonization of power sources asKyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ref.

Criteria

Requirements
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/divestments aligned to
the various levers outlined in Element 1
above;
Capex roll‐out plans consistent with theoverall strategy and climate science

Work Undertaken--

Integrated Report
2021
Kyuden Group ESG
Data Book 2021
Kyuden Group Action
Plan to Achieve
Carbon Neutrality
Project List

Interviews withstakeholders

Page 61 of 82

DNV Findings
outlined in the "Kyuden Group Carbon Neutral Vision 2050"
and the Roadmap, of which approximately 250 billion JPY isplanned for renewable energy‐related investments. This
includes projects to be implemented with green/transition
finance.
DNV confirmed that the overall investment plan (investment
amount) for the future was a plan where the investments
required to implement the transition strategy would beexecuted according to the appropriate timeline based on theinternal management structure and processes, taking into
account CTF‐1 to CTF‐3.
DNV confirmed that Kyushu Electric Power plans to allocate
the proceeds for capital expenditure and operating
expenditure, investment and R&D expenses, etc. for thenominated transition eligible projects shown in Schedule‐1.

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

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 Kyushu Electric Power Sustainable 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 Kyushu 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

1aTypes of funds

The types of green/transition finance areclassified into one of the following types
defined by GBP.
・ (Standard) Green/transition Bond/Loan・ Green/transition Revenue Bond/Loan・ Green/transition Project Bond/Loan・ Other

Confirmed documents- Framework

Through the evaluation work, DNV confirmed that Kyushu
Electric Power Transition/Green Finance fall into the following
categories:

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- Project List
- Amendment Shelf
Registration
Statement

1b

Green/transition
Project
Classification

Interviews withstakeholders
・ (Standard) Green/transition FinanceInterviews withstakeholders

Page 62 of 82

DNV confirmed that the Green/Transition Finance aimed tofund for wide range of Green/Transition projects focused on
Kyushu Electric Power's environmental goals and transition
strategy, as described in the Framework and Schedule‐1.
Specifically, all of Green/Transition Finance classification andnominated Eligible Project listed in Schedule‐1 are evaluatedas conforming to the Transition Strategy, and the proceeds
through Green/Transition Finance are planned to be financed
one or more of the nominated Green/Transition Finance
Eligible Project. If a Green/Transition project is pre‐selectedKyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
before the financing is implemented, this will be disclosed inlegal documents.
Through the assessment, DNV concludes that the nominatedGreen/Transition eligible projects will bring concrete andactual environmental benefits.
Table Kyushu Electric Power
Carbon Neutrality

Key Initiatives to Achieve(Green/Transition Finance and Nominated Projects)
Eligibility Criteria

Low‐carbonization
andDecarbonizationof power
sources

Page 63 of 82

Project Overview

Renewable Energy

Investment for development,
construction, operation, andrenovation of geothermal,hydroelectric, solar, wind andbiomass facilities
Investment for the development ofstorage batteries and pumped
storage power generation, and theestablishment of integrated
control technology for distributed
energy resources using theseresources, and the development of
aggregation business

NuclearPower
Generation

Investments to ensure continued
safe and stable operation ofexisting nuclear power plants

ThermalPower

Investments to shut down anddiscontinue inefficient thermal
powerKyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
GenerationPowertransmissi
on anddistribution network

Promotion ofElectrification

Increasing
electrificat
ion rate in
KyushuPromotionof carbon

Page 64 of 82

Investment for new high‐efficiency
thermal power plants
Investment for R&D andinstallation of facilities for co‐firingof hydrogen, ammonia, biomass,
etc. and utilization of CO2 recovery
technology (CCUS)
Investment for building a supply
chain for carbon‐free fuels(hydrogen and ammonia)
Investment for the development
and enhancement ofinterconnection lines andbackbone grids that contribute to
the expansion of renewableenergy, etc.
Investment for sophisticatedsupply‐demand operation and gridstabilization technologies toimprove network utilization
Investments and expenditures forsales promotion of products andservices that contribute toincreasing the electrification rate,
such as all‐electrification and heatpumps, as well as investments forthe introduction of EV vehicles(company‐owned vehicles) and
EV‐related businesses
Investments for various initiatives
to promote carbon neutrality in theKyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
neutrality
in theregion1c

Environmental
benefits

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
Interviews withstakeholders

region, including the cost of
maintaining company‐owned
forests and purchasing carbon
credits (J‐credits)

Green/Transition projects will contribute to goals based on
Kyushu Electric Power’s Transition Strategy, and to low‐
carbonization and decarbonized emissions through the threeeligible criteria categories indicated in 1b. The environmental
benefits realize the reduction of CO2 emissions, which has
been quantitatively or qualitatively evaluated by the issuer.
It was confirmed that, prior to the implementation of theGreen/Transition Finance, only the evaluation method forenvironment benefits (calculation method) and the item shallbe disclosed. The indicator according to the projectcharacteristics and CO2 emission reduction will bequantitatively evaluated and reported in the annual reporting.
(If the quantitative evaluation for CO2 emission reduction isdifficult due to the project characteristics, the information,such as the project outline, the status of research anddevelopment/demonstration, etc., will be reported to theextent practicable.)

1d

Refinancing rate

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- Project List
Interviews withstakeholders

Page 65 of 82

Kyushu Electric Power plans to use all proceeds for new
investments, refinancing, or both for nominated eligible
projects included in Schedule‐1. If it is clear in advancewhether to make new investment or refinance before
implementing financing, it will be disclosed in legal
documents. DNV confirmed that if it is not yet clear, theIssuer plans to disclose the estimated amount (or percentage)

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findingsof the proceeds which was allocated to refinancing throughreporting (annual report).

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

Criteria

Requirements

Work Undertaken

DNV Findings

2aProject
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):・ 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
for which 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.

Confirmed documents- Framework

DNV confirmed that the issuer had a process
document of determining the eligibility of projects forthe green/transition finance, and that the outline is
specified in the Framework.

2b

Issuer's
Environment
al and Social
Governance
Framework

Interviews with stakeholders

Confirmed documents- Framework
Interviews with stakeholders

The issuer complies with environment‐related laws,
ordinances and regulations, and considers that theenvironmental benefits such as CO2 reduction are
clear in the entire life cycle or each process during
the selection of the green/transition projects.
In the operation and implementation of the project,
each of the departments involved is committed tothe preservation of the surrounding environment.
DNV confirmed that the green/transition projects
implemented by the issuer were consistent withissuer's management and environmental initiatives,

Page 66 of 82

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
as well as with the transition strategy, goals andpathways.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

GBP/GLP ‐3 Management of Proceeds
Ref.

Criteria

3a

Tracking
procedure‐1

3b3c

Tracking
procedure‐2

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 Project.

Confirmed documents- Framework

DNV confirmed that the net proceeds funded by thegreen/transition finance could be tracked in line with
the issuer's internal system/ ledger sheet, etc. In
addition, DNV also confirmed that the systems that is
actually used and the relevant documents, etc. and thatthe management status of the proceeds was to be
proved.

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 stakeholders

Interviews with stakeholders

Interviews with stakeholders

Page 68 of 82

DNV confirmed that the issuer planned to periodically(once a quarter) review the balance of thegreen/transition finance by the internal system/ ledger
sheet, etc. described in 3a during the period from theimplementation of the green/transition finance to its
redemption.
DNV confirmed that through the confirmation process,based on the issuer's internal system/ ledger sheet andrelevant work flow, was structured to ensure that thebalance of unallocated proceeds was recognizedsequentially. DNV confirmed that the balance of
unallocated proceeds would be managed in cash or
cash equivalents, through the content in the Frameworkand verification process. DNV also confirmed that thebalance of unallocated proceeds would be disclosed
through reporting on the allocation status of proceeds.

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

GBP/GLP ‐4 Reporting
Ref.

Criteria

4aPeriodical
Reporting

Requirements

Work Undertaken

DNV Findings

In addition to reporting on the use of proceeds andthe temporary investment of unallocated proceeds,
the issuer will consider 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 each project should
be provided.
‐ Confidentiality and competitive considerations‐ Outline of each project, expected sustainable
environmental and social effects

Confirmed documents- Framework- Project List
- Information on projects
for which proceeds areplanned to be allocated

DNV confirmed that the issuer would conduct annual reporton the green/transition finance until the proceeds wereallocated, and disclose information on the allocation status,
projects for which the proceeds were allocated andenvironmental benefits. DNV confirmed that theenvironmental benefits for any or all of the following would
be disclosed, to the extent of confidentiality and as
reasonably practicable.
The Report will be disclosed in the Integrated report or on
the website.
<Allocation Status>
Allocation amount
Balance of unallocated amounts and the
management methodEstimated amount of proceeds to be allocated forrefinancing (or percentage）<Environmental Benefits>
Eligible Criteria
Low‐carbonizationandDecarbonizati
on of
power

Page 69 of 82

Renewable
EnergyNuclearPower
Generation

・Project Outline
・Installed capacity byrenewable energy type (MW)・Annual CO2 emission
reduction by renewableenergy type (t‐CO2/y)・Installed capacity ofconcerned nuclear power
plant (MW)

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings
sources

ThermalPower
Generation

Promotion ofElectrif
icationPowertransmission
anddistribution
network
Increasing
electrification
rate inKyushuPromotion ofcarbonneutrality inthe region

・Annual CO2 emission
reduction of concerned
nuclear power plant (t‐CO2/y)・Project Outline
・Outline of power plant(installed capacity (MW), yearof starting operation,
performance and efficiency,etc.)・Annual CO2 emission
reduction (t‐CO2/y)・Project Outline
・Status of Capital Investment
for Power Transmission andDistribution, etc.
・Project Outline
・Annual CO2 emission
reduction contribution (t‐CO2/y)
・Project Outline
・Annual CO2 emission
reduction contribution (t‐CO2/y)

The currently planned reporting for the green/transition
project is described in the section of GBP/GLP‐4. Reportingin this document.

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Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

Schedule-5 Transition-Linked Finance (Transition Finance with general corporate purpose)
Eligibility Assessment Protocol
Since the Kyushu Electric Power Sustainable Finance is executed as a General Corporate Purpose transition bond or loan, which does not specify the use ofproceeds, it is evaluated by applying the five elements of SLLP SLBP and required for eligibility evaluation of a bond or loan that does not specify the use ofproceeds defined by CTFH and CTFBG.
The checklist below (SLLP/SLBPB1～5) is a DNV evaluation procedure created for the Kyushu Electric Power Sustainable Finance (Transition Bond or Loan withgeneral corporate purpose) based on the requirements of SLLP and SLBP.
The "confirmed documents" in the Work Undertaken include public or private documents (materials inside the issuer), etc., and are provided by Kyushu ElectricPower as evidence of eligibility judgment for DNV.

SLLP/SLBP‐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 performanceis measured using sustainability KPIs thatcan be external or internal. The KPIs should
be material to the fundraiser’s coresustainability and business strategy andaddress relevant environmental, social
and/or governance challenges of theindustry sector and be under management’s
control. The KPI should be of high strategic
significance to the fundraiser’s current and/or future operations;

Confirmed documents:- Framework- Integrated Report 2021
- Kyuden Group ESG
Date Book 2021
- Kyuden Group Action
Plan to Achieve Carbon
Neutrality

DNV has reviewed Kyushu Electric Power sustainability
KPI, and confirmed that the chosen KPI was material andrelevant to the company’s core transition strategy andsustainability management.

Interviews withstakeholders

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

Core to Kyushu Electric Power’s business strategy is toplay the role of supporting the social infrastructure as anenergy provider. Moreover, core to Kyushu ElectricPower’s transition (sustainability) strategy is identified as
two sustainability issues (materiality) to achieve thecarbon neutrality.
•

Low‐carbonization and decarbonization of powersources•

Promotion of Electrification

Among these, the material KPI for the realization ofcarbon neutrality is to reduce GHG emissions centered on
the Low‐carbonization and decarbonization of power

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DNV Findings
sources. This is explained as three medium‐to long‐termtargets and the Action Plan in “Kyuden Group Carbon
Neutral Vision 2050”, being focused on emission
reduction from Kyushu Electric Power’s own company andthe supply chain toward the achievement of carbon
neutrality by 2050.
This is clearly communicated in the framework associatedwith Kyushu Electric Power's transition (sustainability)
strategy.
The chosen KPI is outlined in detail in Schedule‐2, andentails:
KPI
KPI 1: Supply‐chain GHG emissions (Scope 1+2+3)
KPI 2: Supply‐chain GHG emissions (Scope 1+2+3)（domestic business）
KPI 3: Amount of renewable energy to be developed(installed capacity)
The three KPIs related to an environmental sustainability(transition) defined by Kyushu Electric Power, Supply‐
Chain GHG Emissions, Supply‐Chain GHG Emissions(domestic business) and the amount of renewable energy
to be developed, shown in Table‐2 “Kyushu Electric Power
Transition Linked Finance KPIs and SPTs” are the key
indicators for the comprehensive transition (sustainability)
strategy toward “Achieving Carbon Neutrality” and “Low‐carbonization and decarbonization of power sources” setby Kyushu Electric Power as an energy provider.

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The key KPI for Kyushu Electric Power is to reduce thesupply‐chain GHG emissions in order to "achieving carbon
neutrality" and " Low‐carbonization and decarbonizationof power sources ". Since indirect emissions fromelectricity account for about 40% of GHG emissions inJapan, it is fully appropriate that Kyushu Electric Powerselects the supply‐chain GHG emissions as a KPI. This ispositioned as a core KPI for "Low‐carbonization anddecarbonization of power sources" set forth in the"Kyuden Group Carbon Neutral Vision 2050”.
Similarly, the amount of renewable energy to be
developed (installed capacity) is a key KPI that directly
contributes to "Low‐carbonization and decarbonization of
power sources" and reduces the supply‐chain GHG
emissions.
DNV believes that the deployment of the three KPIs will
enable a targeted approach to achieve Kyushu Electric's
power goal for the Low‐carbonization and decarbonizationof power sources. The selected KPIs for the Low‐
carbonization and decarbonization of power sources are
consistent with Kyushu Electric Power's objectives toapproach as an energy provider, or are measurable as
Kyushu Electric Power's more wide‐ranging transition(sustainability), are the efforts with transparency, and areeasy to understand for annual evaluation.
From the perspective of Kyushu Electric Power's businessstrategy as an energy provider, DNV believes that Kyushu
Electric Power's efforts to address KPIs closely related tothe "Low‐carbonization and decarbonization of powersources" set forth in the "Kyuden Group Carbon Neutral
Vision 2050" for achieving carbon neutrality will

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DNV Findings
contribute to Kyushu Electric Power's goal of becoming"aiming to become a corporate group that leads thedecarbonization of Japan from Kyushu as a top low‐
carbon runner", and be a key driving force for theincreasing profits by maximum utilization of existing andnew zero‐emission source (renewable energy, etc.). In
addition, the KPI will also contribute to the alignment ofboth realization of Kyuden Group Carbon Neutral Vision
2050 and Kyushu Electric Power's goals related to thesustainability management and the business strategy.

1b

KPI ‐
Measurability

KPIs should be measurable or quantifiable
on a consistent methodological basis;
externally verifiable; and able to bebenchmarked, i.e. as much as possible using
an external reference or definitions tofacilitate the assessment of the SPT’s level ofambition.
Fundraiser are encouraged, when possible,
to select KPI(s) that they have alreadyincluded in their previous annual reports,
sustainability reports or other non‐financial
reporting disclosures to allow investors toevaluate historical performance of the KPIs
selected. In situations where the KPIs havenot been previously disclosed, fundraiser
should, to the extent possible, provide
historical externally verified KPI values
covering at least the previous 3 years.

Confirmed documents:- Framework- 6th Strategic Energy
Plan- Electric Power Sector
Transition Roadmap- Integrated Report 2021
- Kyuden Group ESG
Date Book 2021
- Kyuden Group Action
Plan to Achieve Carbon
Neutrality
Interviews with stakeholders

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DNV concludes that the GHG emissions KPI is measurable
on a consistent methodological (GHG emissions protocol)
basis, externally verifiable and able to be benchmarked toexternal references. DNV concludes that the indicator forthe supply‐chain GHG emissions is highly robust andreliable.
DNV confirmed that the KPIs selected by Kyushu ElectricPower were consistent with “the 6th Strategic Energy
Plan” and "Electric Power Sector Transition Roadmap"
formulated by the Agency for Natural Resources andEnergy, and that the KPIs were set as comparable
indicators appropriately.

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

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Criteria

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Work Undertaken

DNV Findings

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
Interviews with stakeholders

DNV confirmed that the KPI chosen by Kyushu ElectricPower provided a clear evaluation scope and calculation
methodology. DNV also confirmed that one of the KPIs,
GHG emissions, was calculated and reported inaccordance with the GHG Emissions Protocol, and that
one of the KPIs, the amount of renewable energy to be
developed, was the installed capacity of power
generation facilities that would be installed and start
operation.
The three KPIs are the indicator used in “the 6thStrategic Energy Plan" formulated by the Agency for
Natural Resources and Energy.

SLLP/SLBP ‐2. Calibration of SPT（Sustainability Performance Targets）
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2aTarget 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- 6th Strategic Energy
Plan- Electric Power Sector
Transition Roadmap- Integrated Report
2021- Kyuden Group ESG
Date Book 2021

DNV confirmed that SPT supported the supply‐chain GHG
emission reduction defined in “Low‐carbonization anddecarbonization of power sources” set forth in "Kyuden
Group Carbon Neutral Vision 2050”, and was the goal toexceed the goal set by the Agency for Natural Resources
and Energy. In addition, DNV confirmed that the SPT
included the specific plans, and was ambitious, realistic andmeaningful. DNV also confirmed that the achievement of
SPT is in line with the Kyushu Electric Power’s initiatives toachieve the carbon neutrality.

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DNV Findings

Kyuden Group Action
Plan to Achieve
Carbon Neutrality
Interviews withstakeholders

Achievement of SPT is a necessary response to GHG
emission reduction, which is closely related to theenvironmental issues as an energy provider, and ismeaningful for Kyushu Electric Power’s Business. Kyushu
Electric Power’s three medium‐to long‐term goals set out
in the “Kyuden Group Carbon Neutral Vision 2050” will
work toward achievement of carbon neutrality by 2050,
and SPT will be provided as an annual goal until 2030 tomeasure progress.

-

DNV concludes that SPT is realistic, the plan is feasible,
and it is likely to achieve the SPT objectives outlined in theframework, based on “Kyuden Group Action Plan toAchieve Carbon Neutrality” provided to DNV. It was
confirmed that 60% of supply‐chain GHG emission
reduction and 65% of supply‐chain GHG emission
reduction in domestic business by 2030 based on FY2013
set by Kyushu Electric Power would exceed the targets
described in “the 6th Strategic Energy Plan” formulated by
the Agency for Natural Resources and Energy.
Similarly, it was also confirmed that the plan to increase
the amount of renewable energy to be developed (installedcapacity) set by Kyushu Electric Power up to 5 million kW
by 2030, which exceeded the targets described in “the 6thStrategic Energy Plan” formulated by the Agency for
Natural Resources and Energy.
This is expected to be a driving force for Kyushu ElectricPower's efforts to implement its transition (sustainability)
strategy.

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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- 6th Strategic Energy
Plan- Electric Power Sector
Transition Roadmap- Integrated Report
2021- Kyuden Group ESG
Date Book 2021
- Kyuden Group Action
Plan to Achieve
Carbon Neutrality
Interviews withstakeholders

DNV confirmed that the chosen SPTs were associated witha material improvement of the KPI. This corresponds to
60% of reduction by 2030, compared to FY2013. 60%
reductions of GHG emissions are more ambitious target
than 46% reductions described in “the 6th Strategic
Energy Plan” formulated by the Agency for Natural
Resources and Energy, and exceed “Business as Usual”.

Confirmed documents:- Framework- 6th Strategic EnergyPlan- 6th Strategic Energy
Plan- Integrated Report
2021- Kyuden Group ESG
Date Book 2021
- Kyuden Group Action
Plan to Achieve
Carbon Neutrality

DNV confirmed that the SPT target setting process was
based on an appropriate combination of benchmarking
approaches:

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 trackrecord on the selected KPI(s) is
recommended and when possible
forward‐looking guidance on the KPI
2. The SPTs relative positioning versus thefundraiser’s peers where comparable orPage 77 of 82

In addition, the renewable energy development is theefforts to the Transition closely related to the supply‐chain
GHG emission reduction of the supply chain. SPT 3 (5million kW by 2030) is drastically increased compared to
Kyushu Electric Power's past three‐year results (FY 2019:
approx. 2.2 million kW, FY 2020: approx. 2.3 million kW,
FY 2021: approx. 2.5 million kW); and, the development
should be accelerated and expanded more than the past
results. This is an ambitious goal which exceeds the“Business as Usual” quantitatively set based on the recent
performance level as required by the Linked‐Finance.

・

DNV confirmed that the Framework provided theguidance for the target setting up to 2030 through the
KPI information based on the appropriate data and the
Kyushu Electric Power’s actual results up to 2019.

・

DNV concludes that the SPT outlined goes beyond the
SPT of the target set by the Agency for Natural
Resources and Energy, and is line with the method
calculated from the GHG emission reduction protocol

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

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Criteria

Requirements
available, or versus industry or sector
standards

Work Undertaken

DNV FindingsInterviews withstakeholders

3. Systematic reference to science‐based
scenarios, or absolute levels (e.g.
carbon budgets) or official
country/regional/international targets
or to recognised Best‐Available‐
Technologies or other proxies

using by the Agency for Natural Resources andEnergy.
・

DNV concludes that the SPT is put in an appropriate
context of GHG emission reduction targets developedby the Agency for Natural Resources and Energy. This
Framework is also consistent with national guidelinesthat are aligned with the achievement of the Paris
Agreement targets. Kyushu Electric Power aresupported by three KPIs/SPTs for the realization of"Kyuden Group Carbon Neutral Vision 2050" and theirrespective action plans.

Kyushu Electric Power is supported by three medium‐ andlong‐term goals for the realization of "Kyuden Group
Carbon Neutral Vision 2050” and their respective actionplans.
These include the goals, Best Available Technology orother close technologies set by the Agency for Natural
Resources and Energy.
2050

2030

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Supply‐chain GHG emissions (Scope
1+2+3) virtually zero
Realization of "carbon negativity" ※asearly as possible before 2050
Supply‐chain GHG emissions (Scope
1+2+3) 60% reduction(compared to
FY2013)Of these, Emissions from domestic
business: 65% reduction (compared to
FY2013)

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

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DNV Findings
Amount of renewable energy to be
developed: 5 million kW (Japan andoverseas)

2dTarget setting– disclosures

Disclosures on target setting should makeclear reference to:
1.

The timelines of target achievement,
the trigger event(s), and the frequency
of SPTs

2.

Where relevant, the verified baseline orreference point selected for
improvement of KPIs as well as therationale for that baseline or reference
point to be used

3.

Where relevant, in what situations
recalculations or pro‐forma adjustmentsof baselines will take place

4.

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

Confirmed documents:- Framework- 6th Strategic Energy
Plan- Electric Power Sector
Transition Roadmap- Integrated Report
2021- Kyuden Group ESG
Date Book 2021
- Kyuden Group Action
Plan to Achieve
Carbon Neutrality
Interviews withstakeholders

DNV confirmed that the SPT target setting was properly
disclosed as follows:・The timeline for SPT achievement is set up to 2030.
The interim progress to the trigger judgement of the
SPT uses a linear interpolation, etc., from 2013 to2030 as a guide.

・The base year for the SPT regarding GHG emission
reduction is 2013. This is consistent with the baseyear (2013) set by the Agency for Natural Resources
and Energy.

・Progress status of achievement for the GHG emission
reduction and the amount of renewable energy to be
developed are described in the Framework, the Action
Plan and the Roadmap to achieve the carbon
neutrality by 2050 in detail.

After review of Kyushu Electric Power’s “Kyuden Group
Action Plan to Achieve Carbon Neutrality”, DNV concluded
that the SPTs were realistic and that the plan was viableand possible to meet the SPT targets outlined in the
Framework.

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SLLP/SLBP ‐3. Loan Characteristics
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

3a

Loan
Characteristi
cs – SPT
Financial/str
ucturalimpactThe 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 inclusion of trigger event(s)under the framework was in line with therequirements outlined by SLLP/SLBP.

Loan
Characteristi
cs – Fallback
mechanism

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

3bInterviews withstakeholders

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 withstakeholders

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Regarding the Transition‐Linked Finance (Bond orLoan) executed under the Framework, DNV confirmedthat the observation timing for the specific SPT, thetrigger events with performance requirements andtheir extent of the impact were linked to the target
achievement and the financial incentives.
DNV confirmed that Kyushu Electric Power has
reviewed an appropriate fallback mechanism, andconsequently would not set another SPT or calculation
method at this time since the risk of being
uncalculated or unobservable was negligible.
Kyushu Electric Power explained that Kyushu ElectricPower may change the KPI and the SPT due toboth/either external factors and/or Kyushu ElectricPower’s management decision result, such as changesof Kyushu Electric Power's business circumstances,changes of business structures and KPI where
reasonable demonstration on the discussion with DNV,
etc.

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

SLLP/SLBP ‐4. Reporting
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

4aReportingFundraisers of SLLs should publish, and keep readily
available and easily accessible:

Confirmed
documents:- Framework

DNV concludes that necessary information, as
required by SLLP/SLBP, will be published in a timely
manner and kept publicly available:

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 withstakeholders

3. Any information enabling investors to monitor thelevel of 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.

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 KPI performance for the SPT: After execution of theTransition‐Linked Finance, Kyushu Electric Power will
undergo the verification by the external institution,etc. at least once a year by the redemption or thecompletion of repayment, and disclose theinformation in the Integrated report or on its
website, or to the lender only in case of Loan.
 SPT achievement status: Will be subject to annual
verification from an independent reviewer and it isused to determine financial characteristics (loanconditions or other financial incentives)
 If the target formulated by the Agency for Natural
Resources and Energy is changed: Kyushu ElectricPower will discuss with DNV, etc. concerning thedegree of ambition for SPT, and its targets will bechanged if necessary.

Kyushu Electric Power Co., Inc. Sustainable Finance Framework Second Party Opinion

SLLP/SLBP ‐5. Verification
Ref.

Criteria

Requirements

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 confirmed that Kyushu Electric Power plans to undergo
independent validation of KPI‐related data at least once a year
by qualified external evaluation agency with relevant
expertise in SPT trigger events

Interviews withstakeholders

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