INVESTOR BRIEFING
13 April 2022

Tokyo Electric Power Company Holdings, Inc. (9501: TSE)
Chubu Electric Power Co., Inc. (9502: TSE)
Disclosure of Asset Resilience to a Net Zero by 2050 Pathway
Executive summary
Despite repeated investor demands to align capital expenditure, production and emissions plans with the Parisclimate goals, TEPCO, Chubu and their most carbon-intensive joint venture JERA are moving in the opposite
direction by expanding the liquefied natural gas (LNG) and coal power sectors.
TEPCO, Chubu and JERA’s actions are bets against the climate goals of the Paris Agreement,
undermining their own net zero emissions commitments.
TEPCO and Chubu have both made net zero emissions by 2050 commitments,1 but, through their joint venture,
JERA, are pursuing energy-related projects and activities that are incompatible with meeting this goal. The
International Energy Agency (IEA)’s landmark Net Zero Emissions by 2050 (NZE2050) scenario made it crystal
clear that achieving this goal requires no new gas fields, no new unabated coal-fired power plants, and rapid
declines in power generation from coal and gas. As further stated by the IEA, “Also not needed are many of theliquefied natural gas (LNG) liquefaction facilities currently under construction or at the planning stage.”
Yet JERA is continuing to develop new coal and gas power stations, and new gas fields and infrastructure.
These plans pose unacceptable risks to investors, as they risk exposing TEPCO and Chubu to stranded fossil
fuel assets as the world moves to align with the climate goals these companies claim to support. To properly
assess the extent of climate-related financial risks they are exposed to, investors are increasingly demanding
clear and useful disclosures from the companies they invest in.
Market Forces and Kiko Network have therefore filed shareholder proposals (full details on pages 9 and 10),
requesting TEPCO and Chubu disclose an assessment of group-wide energy-related asset resilience under a
net zero pathway.

1

Note TEPCO only commits to bringing the emissions from energy supply to net zero by 2050.

Contacts
Sachiko Suzuki E-mail: sachiko.suzuki@marketforces.org.au
Megu Fukuzawa E-mail: megu.fukuzawa@marketforces.org.au
Yasuko Suzuki E-mail: suzuki@kikonet.org

1

We urge investors to engage with TEPCO and Chubu about the subject matter of this proposal togain further disclosure, and vote for these proposals if such disclosure is not forthcoming.

Betting against the Paris climate agreement
The NZE2050 is modelled to provide a 50% chance of limiting global warming to 1.5°C. It should be
regarded as bullish on future fossil fuel demand, as other scenarios with less reliance on unprovennegative emissions technologies and a higher chance of achieving the Paris Agreement’s 1.5°C goal
project coal, oil and gas demand to fall even faster. For example, an analysis of such scenarios showsthat, globally, from a 2020 baseline:●

Coal production falls 69% by 2030 and 82% by 2040●

Oil production falls 31% by 2030 and 59% by 2040●

Gas production falls 28% by 2030 and 45% by 2040.

However, even using the key conclusions of the NZE2050, the below comparison with TEPCO, Chubu and
JERA policies and practice demonstrates these companies are betting against the Paris Agreement’s
climate goals, and undermining their own net zero by 2050 commitments.

Table 1. NZE2050 compared with TEPCO, Chubu and JERA policies and practice
NZE2050 conclusions2

TEPCO, Chubu and JERA policies

TEPCO, Chubu and JERA practice“Beyond projects alreadycommitted as of 2021, there
are no new oil and gas
fields approved fordevelopment in ourpathway… Also not needed
are many of the liquefied
natural gas (LNG)
liquefaction facilities
currently under construction
or at the planning stage.”

No commitments from TEPCO,
Chubu or JERA to refrain fromdeveloping new gas fields or LNG
infrastructure.

The vast majority of TEPCO and Chubu’s
exposure to thermal power generation andfuel sourcing is through JERA, which iscurrently responsible for 15% of Japan’sannual emissions (2020). JERA’s current
business plans also see a sizable expansionof its LNG segment.
JERA is pursuing significant involvement in
the LNG sector, including gas fields, LNG
terminals3 and LNG to power projects4 incountries such as Australia, Bangladesh,and Vietnam. Many of these projects would
not come online until the second half of thisdecade, by which point LNG trade would
have commenced a rapid decline under
NZE2050.

“Inter‐regional LNG trade
increases from 420 bcm in2020 over the next five
years but it then falls toaround 160 bcm [-62%] in2050”.

In December 2021, JERA purchased a
12.5% equity stake in the new Barossa gas

2

NZE2050 statements and data from: IEA Net Zero by 2050 report; World Energy Outlook 2021 and associated dataset
Bidder for Matarbari LNG Terminal, Shareholder of Summit International which is a sponsor of Matarbari Summit LNG Terminals,
the Can Na LNG Terminal and Tien Lang 1 Industrial Park Hai Phong Terminal.
4
Shareholder of Summit International which is a sponsor of Matarbari Summit LNG Power Plant, Bidder on Bac Lieu and Ca Na 1,
Sponsor of Hai Phong Phase 1 and 2
32

field, a controversial project in northern
Australia opposed by First Nations
communities, which has been labelled ‘botha major financial risk and a serious climate
risk’. In addition, a recent court proceeding
filed in Korea is raising doubts on the
project’s ability to secure finance.
“Phase-out of unabatedcoal in advanced
economies by 2030” &“Phase-out of all unabatedcoal power plants by 2040.”

No commitments from TEPCO,
Chubu or JERA to phase out coal
power by any date.

JERA is constructing 3 additional coal-fired
power plants in 2022 (Yokosuka, Taketoyo,
Indonesia-Cirebon.
Yokosuka, located in the outskirts of Tokyo,
is under construction. The Yokosuka projectis highly contentious due to local oppositionand ongoing litigation.

“No new final investment
decisions should be taken
for new unabated coalplants [as of 2021].”

Taketyo coal-fired power plant Unit 5,
located in Aichi prefecture, is slated to start
its operation this year.
JERA states that it will "phase out all
inefficient coal-fired power plants (units) by
2030," but of the 12 coal-fired units owned
by JERA, only Hekinan Power Station Unit 1(700 MW) and Unit 2 (700 MW) would meetthe definition of "inefficient coal (SC and
Sub-C)."
Another project is located in Cirebon,
Indonesia. The project is also facing local
opposition and ongoing investigation onbribery.

Absolute emissions frompower generation fall 57%
from 2020-2030.

TEPCO and Chubu have committed
to reducing CO2 emissions by 50%
from the electricity sold tocustomers by 2030 from 2013
levels. This includes emissions fromgroup companies such as JERA.
However, if adjusted to a 2020
baseline, TEPCO’s target would only
result in a 17% reduction by 2030,
from 84 megatonnes of carbon
dioxide equivalent (MtCO2-e) in 2020
to 70 MtCO2-e in 2030. For Chubu,
the same adjustment equates to a
23% reduction from 41.7 MtCO2-e in2020 to 32.4 MtCO2-e in 2030. Bothof these targets fall woefully shortof what the NZE2050 requires.
JERA aims to reduce emissions
intensity by 20% compared to theJapanese government’s benchmark

3

JERA’s operations produce approximately
169 MtCO2-e annually, or 15% of Japan’sannual emissions (2020).
Neither TEPCO, Chubu or JERA havedisclosed detailed plans to reduce theirabsolute emissions in line with NZE2050.
As shown above, JERA is developing new
highly emissions intensive power generation
projects.

for thermal power generation in
FY2030. This does not guarantee anabsolute CO2 emissions reduction
and it is entirely possible that JERA’s
absolute emissions increase,depending on the size andcomposition of its power generation
portfolio.

Significant exposure to coal assets with no clear phase out plan
The electricity TEPCO and Chubu deliver to their customers is predominantly sourced from fossil fuels,
accounting for 78% and 70% respectively in 2020. Neither TEPCO, Chubu, nor JERA has a clear coalphase out plan. JERA’s domestic thermal power generation capacity has no equal in Japan. JERA supplies
a third of electricity in Japan and is the largest coal power generator.
JERA’s “Zero CO2 Emissions 2050” announced in October 2020 lacks the near-term detail and ambition toalign with the Paris climate goals. Although JERA says it is committed to shutting down inefficientcoal-fired power plants in Japan, it is understood that only one power plant (Hekinan Power Station, Unit 1
and 2) is subject to shutdown. JERA has disclosed no plans to retire the coal-fired power plants in Japanand overseas in line with what climate science requires.
At present, renewable energy accounts for only 1% of JERA’s business through its stake in offshore windoverseas. Although JERA claims renewable energy as one of the pillars of its Zero CO2 Emissions 2050,
the Company has no quantitative targets to increase renewable energy supply, indicating its willingness toprolong the use of coal.

4Chart 1. Top 20 thermal power generator in Japan by ‘maximum outputs’ in kilowatt

Source: Energy Information Centre (October 2021)

Doubling down on LNG risk
As indicated above, JERA is actively pursuing significant expansion in the LNG sector. JERA has stakes ingas fields such as Barossa in Australia. This project is seen as a significant financial risk on top of theobvious climate risks it presents. In addition, JERA is also involved in approximately five LNG importterminals5 and LNG to power projects with nameplate capacity of 11.6GW6 in countries such as
Bangladesh and Vietnam. This is particularly concerning in light of the IEA’s finding that many of the LNG
facilities currently under construction or at the planning stage are not required in a net zero by 2050
pathway.
Emerging Asian markets cannot be relied on to replace the LNG demand decline expected globally under
any credible Paris-aligned scenario. Even before taking climate policy into account, IEEFA analysis
examining the proposed pipeline of LNG-to-power projects in Vietnam, Thailand, the Philippines,
Cambodia, Myanmar, Pakistan and Bangladesh has found 62% of proposed LNG import terminal capacityand 61% of proposed gas-fired power capacity is unlikely to be built due to unfavourable project andcountry market fundamentals, and financial market constraints. Where JERA is increasing its exposure to
LNG assets in these countries, it risks these investments becoming stranded. The inherent vulnerability of5

Bidder for Matarbari LNG Terminal, Shareholder of Summit International which is a sponsor of Matarbari Summit LNG Terminals,
the Can Na LNG Terminal and Tien Lang 1 Industrial Park Hai Phong Terminal.
6
Shareholder of Summit International which is a sponsor of Matarbari Summit LNG Power Plant (2,400MW), Bidder on Bac Lieu
(3,200MW) and Ca Na 1 (1,500MW), Sponsor of Hai Phong Phase 1 and 2 (4,500MW)

5

LNG is echoed by former Governor of the Bank of England, Mark Carney, who recently stated a shift torenewables is irreversible, despite the short-lived price hikes.

Chart 2. Likely feasibility of proposed LNG capacity additions in emerging Asia

Source: Examining Cracks in Emerging Asia’s LNG-to-Power Value Chain

IEA’s Net Zero Emissions by 2050 and investor expectations
Given the emissions falls required to align with the climate goals of the Paris Agreement and NZE2050,
investors are increasingly demanding companies show a clear pathway to achieve their net zerocommitments. Climate Action 100+ (CA100+) has identified companies are generally failing to back their
net zero commitments up with strategies and plans to achieve them, noting disclosures in areas such as
decarbonisation strategy and capital allocation alignment are especially inadequate. Although TEPCO and
Chubu are not subject to CA100+, many of the member investors, such as New York City Pension Funds
and Government Pension Investment Fund (GPIF) will have stakes in these companies. As outlined below,
requests for improved climate-related financial disclosures from utilities around the world have seen strong
investor support.
Neither TEPCO, Chubu, nor JERA has set near-term plans genuinely aligned with net zero by 2050, andtheir short-term emissions reduction targets fall well short of alignment with this goal. This undermines thegoal of net zero emissions by 2050, which all three companies have made commitments to.
An update on the TCFD guidance published in 2021 also reflects such investor concerns and recommends
companies set and disclose clear metrics and targets, and sound transition plans, to support and guidetheir management of climate change transition risks. In Japan, disclosures based on the TCFD
recommendations are required for Tokyo Stock Exchange Prime Market-listed companies from April 2022

6

onwards, which would include TEPCO and Chubu. Key investor expectations from the TCFD
recommendations are as follows:●

Describe how the company’s strategy aligns with a global temperature goal (e.g. 1.5°C). Merelycommitting to net zero by 2050 is inadequate without 1.5°C-aligned intermediate targets andstrategies to achieve them●

Disclose the assumptions the company adopts for transition plans (e.g. commodity prices, demand
scenarios). The assumptions should be applied consistently across the Company in managing thebusiness (e.g. investment decisions)●

Describe how the company’s course of action contributes to greenhouse gas (GHG) emissions
reduction●

Test the robustness and achievability of the transition plan and targets using multiple climate
scenarios, and disclose the results.

The assumptions being requested in the proposal are based on investor expectations as outlined in
the TCFD, Climate Action 100+ and other investor initiatives (see details in Table 3). Moreover,companies are already providing disclosure on the assumptions being sought from TEPCO and
Chubu.

TEPCO and Chubu’s inadequate climate targets, metrics, and disclosures
The disclosures of both TEPCO and Chubu fail to provide decision-critical information, as they lack manyof the features discussed above. Specifically, the companies’ disclosures do not address the criticalquestion of how resilient their fossil fuel-related assets are to the Paris Agreement or a credible net zero by2050 pathway, given the companies’ own commitments to this goal.
TEPCO has not conducted any analysis using the NZE2050. Its latest disclosure (December 2021) isbased on the IEA’s outdated World Energy Outlook 2019.
Chubu has conducted an analysis using NZE2050. However, there is no alignment between the scenario’s
conclusions and the company’s strategies and targets. For example, while Chubu acknowledges key
milestones in NZE2050, such as no new or expanded coal mines, oil and gas fields after 2021, and a
global phase-out of unabated coal-fired power plants by 2040, these milestones are not included in
Chubu’s Roadmap and measures for net zero. Chubu is therefore actively and knowingly misaligningits strategy with a net zero by 2050 pathway.

7

TEPCO and Chubu have not disclosed plausible pathways to achieve their own 2030 and 2050 targets.
For instance, there is nothing in either company’s disclosures to demonstrate the resilience of their carbon
intensive assets, current and future, owned by TEPCO Group and Chubu Group, including a joint venturesuch as JERA, to a net zero by 2050 scenario.
At present, TEPCO and Chubu’s assumptions and estimates remain a mystery to investors. Investors also
remain uninformed about the details of new technologies TEPCO, Chubu and JERA are proposing as a key
foundation of their decarbonization strategies, such as ammonia, hydrogen and carbon capture andstorage (CCS), including the life cycle GHG emissions and the cost competitiveness of these technologies.

Ammonia claims lack credibility
JERA has said it would reduce emissions at its coal power stations with the use of ammonia co-firing.
However, without clarifying the process by which ammonia would be produced and used in its power
plants, the likelihood is that this would not make any significant reduction in overall emissions released
and may in fact increase net emissions.
Almost all of today's hydrogen/ammonia production uses fossil fuels as the feedstock, with significant
carbon emissions as a result. This is termed "grey hydrogen/ammonia". To achieve emissions reductions,companies are proposing to pair this production with carbon capture and storage (CCS) - so called "bluehydrogen/ammonia". CCS is controversial, with significant financial and technical uncertainties, putting
JERA's claim that it will not procure grey ammonia and will require at least 60% of emissions to be
captured in the production process in serious doubt.
Aside from the costs and risks of unreliable, safe and permanent CO2 storage that has prevented coal
power with CCS from becoming an industrial-scale solution for thermal power generation, recent
peer-reviewed research has found blue hydrogen to be only 12% less emissions intensive than greyhydrogen (135 g CO2-e/MJ compared to 153 g CO2-e/MJ). Furthermore, JERA will allow carbon that is
captured in the production of ammonia to be used for enhanced oil recovery, which is common practice inthe US and contributes to more fossil fuel production and CO2 emissions. Finally, a study by Japaneseengineering company JGC estimated including 20% ammonia co-firing at coal power plants would almost
double the cost of electricity.
Climate risk-concerned investors should be wary of any company making claims about the future use ofammonia co-firing, as it presents as an expensive, energy-intensive method for generating electricity withemissions reductions that are dubious, to say the least.

8

If investors are presented with claims of ammonia co-firing, they should receive clear and convincing
answers to the following questions before taking those claims seriously:●

To what extent does the use of ammonia at 20% co-firing impact the thermal efficiency of yourpower generation assets and how will this impact the revenue generated by power generation
assets?

●How are you proposing to source ammonia, specifically the split between blue and green
ammonia?

●

What will be the overall cost of co-firing with 20% ammonia at your power generation assets andhow will this impact the cost of electricity generated from your assets?

●

What is the scale of absolute emissions generation involved in the process of sourcing andtransporting your proposed ammonia feedstock? How does this compare to the emissions thatwould be reduced at the sites of power generation?

Engagement has not led to adequate changes
NGOs inside and outside of Japan have been engaging with TEPCO and Chubu for many years.
Traditional engagement has not been fruitful, with TEPCO and Chubu failing to disclose information about
their significant climate risk exposure individually and through JERA. Our interactions with TEPCO, Chubu
and JERA have not resulted in further disclosure or actions to demonstrate the companies areappropriately managing these risks or aligning their strategies with their own net zero commitments.

Details of shareholder proposals
The shareholder proposals request TEPCO and Chubu disclose an assessment of Group-wide
energy-related asset resilience under a net zero emissions by 2050 scenario. Shareholders require thisinformation as the current asset-related decisions made by TEPCO and Chubu (individually and throughtheir joint-venture JERA) raise significant questions about the assumptions and estimates underlying theCompany’s energy-related assets. Shareholders require this information to properly assess the extent ofclimate-related financial risks to which they are exposed.
We urge investors to engage with TEPCO and Chubu about the subject matter of this proposal togain the requested further disclosure, and vote for this proposal if such disclosure is notforthcoming.

9

While the text submitted to TEPCO and Chubu is in Japanese, we provide an English translation below:
TEPCO:
Partial amendment to the Articles of Incorporation (disclosure of asset resilience in line with a Net Zero by 2050
Pathway)
1. Details of the proposal
The following clause shall be added to the Articles of Incorporation:
Chapter: “Compatibility with Decarbonized Society”
Clause: “Disclosure of Asset Resilience to a Net Zero by 2050 Pathway”
1. To promote the long-term success of the Company, given the risks and opportunities associated withclimate change, the Company shall include annually in its corporate reporting an assessment of how a net
zero by 2050 pathway would affect the assumptions, costs, estimates, and valuations underlying theCompany’s energy-related assets. The assessment shall include all energy-related assets of all groupcompanies and business segments.
2. Omitting proprietary information, the disclosures shall include key assumptions and estimates, including
those related to long-term commodity demand, long-term commodity and carbon prices, asset lives,
future asset retirement obligations, capital expenditures and impairments.
Chubu:
Partial amendment to the Articles of Incorporation (disclosure of asset resilience in line with a Net Zero by 2050
Pathway)
1. Details of the proposal
The following clause shall be added to the Articles of Incorporation:
Chapter: “Compatibility with Decarbonized Society”
Clause: “Disclosure of Asset Resilience to a Net Zero by 2050 Pathway”
1. To promote the long-term success of the Company, given the risks and opportunities associated withclimate change, the Company shall include annually in its corporate reporting an assessment of how a net
zero by 2050 pathway would affect the assumptions, costs, estimates, and valuations underlying theCompany’s energy-related assets. The assessment shall include all energy-related assets of all groupcompanies and business segments.
2. Omitting proprietary information, the disclosures shall include key assumptions and estimates, including
those related to long-term commodity demand, long-term commodity and carbon prices, asset lives,
future asset retirement obligations, capital expenditures and impairments.

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Shareholder resolutions in Japan & Amendments to Company Articles of Incorporation●●●

The proposal to amend the company’s articles of incorporation in part is the most commonly usedapproach to make shareholder proposals in Japan, and the approach taken in this proposal. Around
two-thirds of the shareholder proposals filed in 2021 took this form.
Under Japanese corporate law, the sole legal pathway for a shareholder proposal on climate change is
via an amendment to a company’s articles of incorporation.
The legal effect of such shareholder proposals is the same as the “special resolutions” on climate change
filed and passed at UK companies including Barclays, BP, Royal Dutch Shell, Rio Tinto and Anglo
American, which take binding effect as part of the companies’ constitutions.
-- Client Earth

Increasing investor support for climate proposals in the utilities sector
Similar requests for disclosures around the world have seen strong investor support. The tables below
show some recent examples of shareholder resolutions and investor initiatives, including the TCFD, which
encourage the disclosure of GHG emissions and related targets, as well as key assumptions including
those related to long-term commodity demand, long-term commodity and carbon prices, asset lives,
future asset retirement obligations, capital expenditures and impairments. Table 3 also provides examples
of companies making these disclosures.

Table 2: Examples of climate resolutions seeking disclosure in various jurisdictions
Company

Year

Country

StatusResolution Text

Exxon

2022

USA

Filed

Seeking an audited report assessing how applying theassumptions of the IEA Net Zero by 2050 pathway would
affect the assumptions, costs, estimates, and valuations
underlying its financial statements, including those related
to long-term commodity and carbon prices, remaining
asset lives, future asset retirement obligations, capital
expenditures and impairments.

Duke Energy

2022

USA

Resolution
Withdrawn,
Agreement
ReachedShareholders request that Duke revise its net zero by 2050
target, and any relevant interim targets, to integrate Scope
3 value chain emissions consistent with guidelines such as
the CA100+ and SBTi, or publish an explanation of why theCompany does not view inclusion of those emissions as
appropriate.

KansaiElectric

2021

Japan

18.3% vote

Amendment to the Articles of Incorporation: Businessreform toward the realisation of a carbon-free society
through decarbonizing the power generation business,
including disclosure of medium to long term climate risks
and an emission reduction plan.

Chevron2021

USA

47.8% vote

Seeking an audited report to shareholders on whether andhow a significant reduction in fossil fuel demand,11

envisioned in the IEA Net Zero 2050 scenario, would affectits financial position and underlying assumptions.
BP

2019

UK

BP
recommended
shareholders
vote for the
resolution;
99% vote

Include in its Strategic Report and/or other corporate
reports, as appropriate, for the year ending 2019 onwards,
a description of its strategy which the Board considers, ingood faith, to be consistent with the goals of Articles 2.1(a)and 4.1 of the Paris Agreement (the ‘Paris Goals’) as wellas capital expenditure...and metrics and targets….

Table 3: Investor expectations of disclosure of GHG targets and assumptions, andexamples of disclosure from other companies’ reporting

Shareholder proposal
disclosure requests

Investor expectations

Other companies disclosure

GHG emissions targets

Scope 3 GHG emissions are
increasingly understood as animportant indicator of risk, as risk isembedded in buying inputs or
selling products that are carbon
intensive, as stated in the recent
TCFD update in 2021. The TCFD
update includes setting a reductionin Scope 1, 2 and 3 targets as an
example of quantified climate
related targets.

According to TCFD analysis of 2,500
organizations within the MSCIAll Country World Index (ACWI Index)
from 2017–2019, organizations disclosing
Scope 3 GHG emissions grew from 28% to34%.

Climate Action 100+, an investor
initiative of 700 investors
representing $68 trillion in assets,demands companies take action to
reduce greenhouse gas emissions inlinewith the Paris Agreement. It
assesses companies on their shortterm (up to 2025), medium term
(2026 to 2035) and long term (2036
to 2050) GHG reduction targets,
including Scope 3.
The Net Zero Framework of the Paris
Aligned Investment Initiative, a
global collaboration supported byfour regional investor networks –AIGCC (Asia), Ceres (North
America), IIGCC (Europe) and IGCC
(Australasia), lists “Short & medium
term emissions reduction targets(scope 1, 2 and material
scope 3)” and “quantified plan todeliver targets” as key metrics for12

BP has set a target to reduce the lifecycle
emissions intensity of sold energy products(including physically traded products andmarketing sales) by 5% by 2025 from 2019
levels, and 15-20% by 2030.
Eni has set a target to reduce net scope 1-2
emissions by 65% by 2025 from 2018 levels.
The company is also targeting a 35%
reduction in scope 1-3 emissions fromupstream, midstream and downstream by2030.

assessing the alignment of assets(such as investee companies) with a
net zero emissions by 2050
pathway.
Long-term commodity
demandThe Institutional Investors Group on
Climate Change (European investor
group) discuss the importance of
disclosure of assumptions related toassets based on accounting
standards in their Investor
Expectations for Paris-aligned
Accounts: “Accounting assumptions
or estimates that ignore structuralchanges to demand that come from
Paris-alignment will tend tomisrepresent companies’ economic
position.”
The updated TCFD guidance states:“Disclosure of the amount andextent of an organization’s assets orbusiness activities vulnerable toclimate-related transition risks
allows users to better understandpotential financial vulnerability
regarding issues such as possible
impairment or stranding of assets,
effects on the value of assets andliabilities, and changes in demandfor products or services.”

Long-term commodity andcarbon prices

The TCFD update discusses theimportance of internal carbon prices
for:“Performance measurement – For
example, determining
carbon-adjusted earnings per
share, estimating expected
profitability, incentivizing energy
saving, identifying revenue
opportunities and risks, managing
procurement and supply chains
Position management – For
example, valuation of assets
Investment decisions – For
example, identifying low-carbon,
high-return investment
opportunities, planning capital
investments, determining
cost-benefit and net present value of
projects”

13

Equinor presents net present value
sensitivities under four IEA scenarios against
the company’s central planning scenario,
allowing investors to gauge the company’s
own demand expectations. Santos discloses
a similar analysis.
Shell presents its commodity priceprojections alongside projections fromexternal scenarios, which allows investors to
broadly understand the level and direction of
the company’s demand assumptions.
Eni specifies that it views the IEA’s
Sustainable Development Scenario as its“main reference for assessing the risks andopportunities associated with energy
transition”.

Disclosure of long-term commodity priceassumptions is commonplace among energy
companies.
Shell discloses a comparison between its
future oil price assumptions and a range ofother scenarios.
Equinor discloses its long-term commodity
price assumptions, and states clearly thatthese are not consistent with achieving the
IEA NZE or SDS.
BP and Eni both disclose long-term
commodity price assumptions as well.

Asset lives and future asset
retirement obligations, andimpairments

IIGCC’s Investor Expectations for
Paris-aligned Accounts discuss theimportance of disclosure ofassumptions related to asset lives
based on accounting standards:● “disclosure of the key
assumptions on which cash
flow projections have been
based and management’s
approach to determining thevalue assigned to these key
assumptions...Where
climate-related risks could
significantly affect therecoverable amount of acompany’s assets, information
about how the effect has beenfactored into recoverable
amount calculations would be
relevant.”● “...companies to disclose key
assumptions used where assets
are recognised at fair value. Fairvalue measurements may
incorporate a number ofpossible scenarios. When thefair value of an asset is affectedby climate-related risks
including the effect of andpotential changes to laws andregulations with respect tomanaging such risks, acompany may need to disclose
how it factors climate-related
risk into the calculations.”● “Companies are required toprovide a brief description of
the nature of any contingent
liability, and where practicable,
an estimate of its financial
effect and an indication of theuncertainties relating to theoutflow of resources for settling
the obligation”

Eni discloses the potential impact ofclimate-related risks and opportunities on anorganization’s financial position in terms offair value of assets. “In order to verify the
resilience of Eni’s asset portfolio, asensitivity analysis was also carried out on
all CGUs (Cash Generating Units) in the
upstream sector. The stress test, performed
under the IEA SDS scenario, showed thatthe overall book values of the assets werestable with a reduction in fair value ofaround 11%, or around 5% in the event ofcontractual and fiscal recoverability of thecosts of direct CO2 emissions.”

Capital expenditures

The TCFD update suggests as a
metric “the amount of capital
expenditure, financing, orinvestment deployed toward
climate- related risks andopportunities.”

BP provides a target for capital allocation“by 2025, more than 40% of our capital
expenditure will be in our transition growthbusinesses, and around 50% by 2030.”

14

Table 4: Coal-fired power plants/units owned by JERA
Plant Name

Unit

Prefecture

City/Town

Capacity
(MW)

Start
operation

Technology

Hirono5

Fukushima

Hirono-machi

600.00Jul. 2004

USC

Hirono6

Fukushima

Hirono-machi

600.00Dec. 2013

USC

Hitachinaka

1

IbarakiTokai-mura

1000.00

Dec. 2003

USC

Hitachinaka

2

IbarakiTokai-mura

1000.00

Dec. 2013

USC

Yokosuka

New 1

Kanagawa

Yokosuka

650.002023

USC

Yokosuka

New 2

Kanagawa

Yokosuka

650.002024

USC

Hekinan1

Aichi

Hekinan

700.00Oct. 1991

SC

Hekinan2

Aichi

Hekinan

700.00Jun. 1992

SC

Hekinan3

Aichi

Hekinan

700.00

Apr. 1993

USC

Hekinan4

Aichi

Hekinan1000.00

Nov. 2001

USC

Hekinan5

Aichi

Hekinan1000.00

Nov. 2002

USC

Taketoyo

5

Aichi

Taketoyo-cho

1070.00

Aug. 2022

USC

Disclaimer
Informational purposes only – This communication is provided solely for informational purposes only andis not, and should not be construed as, investment advice or investment recommendations for the
purposes of the Financial Instrument Exchange Act of Japan.
No joint-exercise of voting rights – Nothing in this written communication, nor in any related oral
discussion, is intended to be, nor should it be construed as, an offer, an acceptance or a consent, to enter
into an agreement for the joint exercise of voting rights or any other shareholder’ rights for the purposes of15

the Financial Instrument Exchange Act and Foreign Exchange and Foreign Trade Act of Japan. If needs be,
it is hereby emphasised that each shareholder exercises its shareholder’s rights independently based uponits own decision and shall not be held liable for its exercise of its shareholder’s rights in any event or in any
result, as a breach of any discussion between the shareholders.
No proxy solicitation – Nothing in this written communication, nor in any related oral discussion, isintended to be, nor should it be construed as, a “solicitation for proxies” for the purposes of the Financial
Instrument Exchange Act of Japan. The shareholder is not soliciting or seeking any authorization by anyother shareholders to exercise their voting rights or any other shareholders’ rights on their behalf or as
their agent at the annual shareholders’ meeting.

16