株式会社関電工
アニュアルレポート 2018 2018年 3月期

KANDENKOINTEGRATEDREPORT 2022

This corporate report is printed on Forest Stewardship Council (FSC)-certified paper made of wood from responsibly managed forests.
It was also printed using vegetable oil inks.

Greetings

CONTENTS

Thank you for your interest in “KANDENKO INTEGRATED REPORT 2022.”
We provide end-to-end engineering services ranging from planning, design and execution to maintenance andrenovation, regarding electrical work and information and communication work by making use of our
proprietary technologies, expertise and methods in the fields of building infrastructure, telecommunications
infrastructure and electric power infrastructure.
Recently, we have been focusing on utilizing the technologies and expertise we have cultivated to date todevelop solar, wind power and other renewable energy power generation businesses, and expand into railways,
water supply and other social infrastructure fields, and also to develop robotic and IoT-driven technologies.
Furthermore, in order to facilitate the sustainable future development of the Company, which is a laborintensive company, we are striving to nurture human resources that can support our future by, for instance,enhancing and strengthening our employee education, promoting the active participation of women, andreforms for work practices and annual leave systems.
Going forward, the Kandenko Group remains committed to pursuing thorough compliance and improving safety
and quality as the cornerstone of good management. We intend to devote all our energies to the creation ofhigh corporate value and the formation of strong corporate structures, and contribute to the enduring
development of society as a partner that supports social infrastructure for safe and comfortable daily living.

About Kandenko
01 …… Greetings/Table of Contents
03 …… Corporate Motto, Corporate Philosophy and Charter of Corporate Behavior
05 …… Outline of the Kandenko Group
07 …… At a Glance
Value Creation Story
09 …… Message from the President
15 …… Value Creation Trajectory
17 …… Value Creation Process
19 …… Fiscal 2021-2023 Medium-Term Management Plan
21 …… Financial Strategy & Capital Policy
23 …… Reinforce Human Capital and “People First”
Strengthening Foundations for Realizing Value Creation
25 …… Business Review by Division
25 …… Building Infrastructure Work
27 …… Social Infrastructure Work
33 …… Research and Development Activities
37 …… Initiatives to Strengthen Foundations for Future Growth
39 …… Productivity Innovation Initiatives
Sustainability
41 …… Sustainability Management
45 …… Information Disclosure Based on TCFD Recommendations
49 …… Environmental Initiatives
51 …… Disaster Prevention and Recovery Initiatives
52 …… Occupational Safety and High-Quality Construction
53 …… Employee Initiatives
57 …… Respect for Human Rights
58 …… Maintaining and Improving Partnerships with Partner Companies and Material Suppliers
59 …… Social Contribution Activities
61 …… Roundtable Discussion with Outside Directors
65 …… Corporate Governance
71 …… Management Structure
Financial, Non-financial & Corporate Data
75 …… Financial, Non-financial & Corporate Data

Tool map
To facilitate communication with its stakeholders, the Kandenko Group conveys multifaceted information by means ofvarious tools. In addition to the information provided in this report, we make available on our website the Group’s services,

Hiroshi Yamaguchi

Toshio Nakama

Chairman and Director

President and Director

CSR activities, and other diverse information.

The Company’s website: https://www.kandenko.co.jp/
Integrated Report
Financial information

Non-financial information

Website “Shareholders & Investors Information” (in Japanese)

Website “Sustainability” (in Japanese)

https://www.kandenko.co.jp/ir

https://www.kandenko.co.jp/sustainability

Quarterly Financial Results and Reference Documents for Financial Results

Securities Report

Editorial Policy
This integrated report introduces various aspects of the Company for the purpose of facilitating stakeholders’ understanding ofour businesses and medium- to long-term value creation.

Corporate Governance Report

Reporting Period
From April 1, 2021 to March 31, 2022
(Includes reports on some activities outside this period)<Notes on proper use of the business result forecast>
The business result forecast and other forward-looking statements herein are based on the information currently available
and certain assumptions deemed reasonable by the Company, and thus actual results may differ significantly from these
forecasts due to a wide range of factors.

KANDENKO
1
1 │ 株式会社関電工

Integrated Report 20222

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

| Corporate Motto, Corporate Philosophy and Charter of Corporate Behavior |Kandenko is one of Japan’s leading firms in general
infrastructure works centering on electric works athome and abroad for 78 years since its establishment.
Imagine looking down from the air on the Marunouchi area in Tokyo, Japan’s finance and economic
center, and you will see that Kandenko was involved in the construction of most of the buildings
there. Not only in and around the capital, but throughout the nation, Kandenko has provided endto-end engineering services ranging from design and execution to maintenance and renovation,
regarding electrical, telecommunications, air conditioning and sanitation systems and other kinds ofbuilding infrastructure.
Upgrading electrical infrastructure, the main artery of cities is also an important business of ours.
From power plants to households, we play a part in stable energy supply to support urban functions.
Our mission is to protect the lives of people, the economy, and a safe and comfortable environment.
With incomparable experiences and excellent technological capabilities, Kandenko is committed tofulfilling this mission.
Delivering electricity with secure construction, we light buildings with high-quality facilities andlighten the spirits of the people living inside. Kandenko aims to be an exceptionally brilliant company
that illuminates the nation.

Kandenko Group Charter of Corporate Behavior

I. Principles of Corporate Behavior
The Kandenko Group acts in accordance with the following basic principles in order to contribute to the developmentof society through sound business activities based on thorough compliance and fulfill our responsibilities as acommitted member of society.
1. We strive to stay abreast of society’s needs at all times, pursue technological innovation that we have confirmed
to be fully effective and safe for society, and provide optimal services.
2. We commit to communicate broadly with our customers, local communities, shareholders, investors, business
partners, and other parties involved with the Kandenko Group, to disclose corporate information proactively andfairly, and promote highly transparent and open business activities.
3. We respect human rights in all aspects of our business activities and strive to ensure fair and transparent businessactivities that comply with relevant laws and regulations as well as social norms and their underlying ethos. We
aim to be a company that is worthy of society’s trust, not only by eliminating acts of collusion, etc., but also by
maintaining appropriate relationships with political parties, governmental authorities, and other organizations.
4. We thoroughly protect and manage all forms of information, including personal and customer information,across all aspects of our business activities.
5. As the globalization of our business progresses, we commit to comply with the laws of each country and regionin which we operate, and respect international norms and further take into account local cultures, customs, andstakeholder interests as well, and contribute to social and economic development through business activities
deeply rooted in relevant countries and communities.
6. We prioritize safety in all aspects of our business activities, respect the individual attributes, personalities, anddiversity of our employees, and strive to create comfortable and cheerful working environments.
7. To help tackle environmental issues, we will actively promote environmentally-conscious business activities, suchas renewable energy use, energy conservation, waste reduction, and recycling.

Corporate Motto“People first”

Corporate Philosophy

1 ···Based on respect for humanity, Kandenko fulfills its duty of corporate social
contribution and contributes to creating richer human environments.

2 ···By anticipating the needs of customers and seeking technological innovation,
Kandenko provides optimal services and facilities.

3 ···By working for human resource development and continual improvement,
Kandenko aims to be a future-oriented company.

8. We will take a resolute stand against antisocial forces and organizations that pose a threat to civic order andsafety, and eliminate all actions that could be suspected to derive from inappropriate relationships.
9. Top management will demonstrate leadership and work to familiarize all Group employees with the spirit of theCharter, while also striving to maintain a clear grasp of internal and external opinions and establish effective
systems for the Kandenko Group.
10. If inappropriate situations arise that run contrary to this Charter, top management will strive to resolve any issue
themselves, investigating the cause and taking action to prevent a reoccurrence. In addition, the top
management will promptly and accurately disclose information to society and impose strict penalties on relevant
parties, including themselves.

II. Employee Code of Conduct
All employees will strive to provide customers with ever-improving services in terms of high levels of safety, security,and quality through fair and appropriate business activities, to be constantly aware of their roles and responsibilities asa member of the Kandenko Group, and to conduct their daily work with a full understanding of the following matters:
1. Matters relating to compliance with laws and regulations
2. Matters relating to relationship with society
3. Matters relating to fair trading
4. Matters relating to information management
5. Matters relating to employee behavior and responsibilities
6. Matters relating to the creation of an even better corporate culture

3

KANDENKO

Integrated Report 2022

4

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

| Outline of the Kandenko Group |The Kandenko Group consists of Kandenko Co., Ltd. and 30 consolidated subsidiaries. Our main business is infrastructure
work business, and we receive orders for and execute electrical engineering, environmental facilities and systems, andrenovation work; information & communication work; overhead and underground power distribution line engineering
work; and electric power & civil engineering work related to power generation and transformation, overhead transmission
lines, underground transmission lines, civil engineering, nuclear power, and wind power generation.
We also engage in other businesses such as electrical equipment sales business, real estate business and lease business,and power generation business.

Business FlowsTEPCO Group

Other customers

Electricity sales

Real estate
rental/lease

Electricalequipment sales

Electricity sales

Real estate rental

Construction work

Design estimate

Construction
security

Construction
work

Construction
work

Kandenko Group5KANDENKO

S aitama Power TechnoCo., Ltd.
Ibaraki Power Techno Co., Ltd.

Chiba K - Techno Co., Ltd.

Tochigi Power Techno Co., Ltd.

Saitama K - Techno Co., Ltd.

 unma Power Techno Co.,GLtd.

Electricalequipment
sales

Tama K - Techno Co., Ltd.
Shizuoka K - Techno Co., Ltd.

Tower Line Solution Co., Ltd.

HANDENKO CORPORATION

Sato Kensetsu Kogyo Co., Ltd.

Kanko Power Techno Co., Ltd.

NETSAVE Co., Ltd.
Tokyo Kouji Keibi Co., Ltd.
Bay Techno Co., Ltd.

Electrical equipment sales
business
KANKO SYOJI CO., LTD.

Real estate business, leasebusiness
K asset management Co., Ltd.

 ishikanto Power Techno
NCo., Ltd.
S hizuoka Power TechnoCo., Ltd.

 anagawa Power Techno
KCo., Ltd.

Other business

Chiba Power Techno Co., Ltd.

Kanagawa K - Techno Co., Ltd.

Gunma K - Techno Co., Ltd.

¥238.2 billion
55.5%

Tokyo Dome

¥40.5 billion
9.5%

Mobile communications base station installation work

¥102.2 billion
23.8%

Overhead power distribution line work using theindirect hot-line method

Electric Power & Civil Engineering Work

Infrastructure work businessTochigi K - Techno Co., Ltd.

The segment has a wide range of achievements fromplanning of new installation and renewal, to design,
construction, and maintenance, in all types of network
infrastructure, including upgrades to optical fiber cable
networks, installation of transmission base stations formobile communications, and construction of networks forcable TV and municipalities.

The segment covers installation and maintenance work ofoverhead and underground power distribution lines thatdeliver electricity directly to households, stores, and othercustomers. The segment demonstrates advanced technicalcapabilities using safe and efficient construction methods,
tools, and work vehicles, and has a complete construction
system in place in order to respond quickly andappropriately to unforeseen situations caused by natural
disasters such as earthquakes, lightning, and heavy rain.

Infrastructure work business, other business

Ibaraki K - Techno Co., Ltd.

The segment meets the various needs of customers fromequipment diagnosis to design, proposal, construction,and maintenance, not only in the installation andexpansion of electrical facilities, air-conditioning andsanitation, and instrumentation infrastructure, but also in
the renewal of existing infrastructure, for various structures
including office buildings, factories, hotels, department
stores, theaters, and hospitals.

Power Distribution Line Engineering Work

Kandenko Co., Ltd.

Kanko Facilities Co., Ltd.

Electrical engineering, environmental facilities and systems, and renovation work

Net sales/
composition ratio(non-consolidated)

Information & Communication Work

Customers

 awasaki Setsubi Kogyo
KCo., Ltd.

Infrastructure work business

Real estate
rental/lease

The segment is engaged in electrical work in nuclear
power plants, in addition to work on power stations andsubstations, and on transmission lines. Recently, thedivision has also been building wind power plants andsolar power plants and interconnecting lines to thetransmission line networks. Kandenko’s comprehensive
know-how and extensive experience have been highly
evaluated, helping us to receive many orders.

¥47.9 billion
11.2%

Substation equipment enhancement work

Other business(Electrical equipment sales business/real estate business and lease business/power generation business)

Power generation businessChoshi Wind Development
Co., Ltd.
Koma Solar Power Co., Ltd.
Maebashi Biomass Power
Co., Ltd.

Power generation businessIn order to achieve carbon neutrality by 2050 and realize sustainable development ofsociety, it is essential that we expand the introduction of renewable energy.
Kandenko has engaged in the design and construction of numerous solar and wind
power plants and participated in experimental studies of renewable energy in andoutside Japan. We conduct power generation business using the technology andknow-how accumulated in these projects.

Kama Solar Power Plant

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About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Financial, Non-financial &Corporate Data

Sustainability| At a Glance |Financial Information

Non-financial information
Operating profit

Net sales

Consolidated

495,567¥(Millions of Yen)

563,550

507,205

2017

2018

616,1432019

millionConsolidated

30,643¥(Millions of Yen)

556,0452020

495,567*2021

29,261

2017

Profitmillion2018

30,041

2019

20,315¥

million(Millions of Yen)

34,69330,012

Consolidated

Number of employees

2020

10,264

persons(Persons)

30,6432021

Consolidated

19,05819,70320172018

22,515

Non-consolidated

7,619

Number of new recruits

persons(Persons)

10,003 10,154 10,264
9,571 9,818
20,147

New graduates

persons

Year-round recruitment

79

333
305

314

7,619
7,350 7,497
6,976 7,202

2019

2020

156

2021

106

100
Non-consolidated

429,021¥

million(Millions of Yen)

444,452

2017

25,416¥

million493,128

2018

540,2022019

486,3272020

429,021*2021

Consolidated(%)

24,843

2017

27,77324,146

2018

2019

2020

466,837

¥

%

2021

16,91917,084201720182017 2018 2019 2020 2021

19,408201920202017 2018 2019 2020 2021

2017 2018 2019 2020 2021

2021

Directors’ average attendance at Board of
Director’s meetings

Dividend / Consolidated

28

¥

99

(Yen)

7.8

2017 2018 2019 2020 2021

17,524 17,935

Dividend /Dividend payout ratio

million

9.3

8.5

79

million24,730 25,416

New orders received

7.3

17,935¥

Non-consolidated

74(Millions of Yen)

(Millions of Yen)

ROE

8.8

Non-consolidated

persons(Persons)(Persons)

331 331

20,315

314

24

7.3

26

28

28

28

Number of Skills Competitions winners

Gold

SilverBronze%Electrical
Installations

16

28

30

Information
Network Cabling

2

6

11

Plumbing andHeating

4

6

3(Millions of Yen)

506,026

2017

2018

2019

Non-consolidated

2020

496,088

513,919

507,522466,837※

2021

2017

7.3

2018

2019

Dividend payout ratio / Consolidated

%

(%)

8.7

Electricity usage
2020

2021

28.2

%

(%)

8.2

Compared to fiscal 2010

22.0

%

(MWh)

24,501
23,116 22,559 22,460 23,585* In Electrical Installations, one first place winner and two second placewinners in the World Skills Competition.

8.9
7.6

7.3

2017

2018

2019

2020

25.7

27.0

25.4

2017

2018

2019

28.4

28.2

2020

2021

2021

2017 2018 2019 2020 2021
2017

2018

2019

2020

2021

*From fiscal 2021, the Accounting Standard for Revenue Recognition, etc. are applied (Accounting Standards Board of Japan ("ASBJ") Statement No. 29).

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KANDENKO

Integrated Report 20228About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Financial, Non-financial &Corporate Data

Sustainability| Message from the President |We encourage each and every
employee to make transformations
and aim for sustainable growth andnew value creation.

Capture Changes in the Market
Environment and Respond toOpportunities and Risks
The Kandenko Group has set a long-term vision to
become a green innovation company that contributes tothe realization of a decarbonized and resilient society
toward 2044, the 100-year anniversary of our founding.
We are now promoting a three-year Medium-Term
Management Plan (fiscal 2021 to 2023), which will be
the first stage of this.
Looking at the current market environment, in addition
to the resumption of planned projects that were
postponed or frozen due to the COVID-19 pandemic,
there is demand for equipment renewal and office/commercial facility rebuilding aimed at digitalization anddecarbonization, driving private construction investment
on a rising trend. In addition, with the government’s
2050 carbon neutrality declaration, investment related torenewable energy is increasing. Further, there is a needto strengthen the resilience of electric power
infrastructure in preparation for intensifying natural
disasters.
On the other hand, there are still concerns about the
impact on the domestic economy and construction
market made by skyrocketing resource and energy prices
and disruptions to supply chains.
Under these circumstances, we recognize newopportunities for business expansion. They include
invigoration of capital investment in strong markets suchas data centers and semiconductors, construction ofwind and solar power generation facilities, progress ininfrastructure development for the spread of EVs, andthe growing needs for decarbonization and energy
saving in customer facilities. Investment in electric power
infrastructure has been restrained until now, but in the
future, it is expected that the power transmission anddistribution network built during the period of higheconomic growth will be upgraded in stages, andinterconnection line reinforcement work will be donewith the aim of strengthening the power infrastructure.
In contrast, business development risks include theimpact of rising prices and the tight supply situation of
construction materials and equipment. Furthermore,considering that a legal cap on overtime work will beapplied from April 2024 and that the working populationin Japan is expected to decline in the long term,
dramatically improving productivity is an urgent issue for
the Company.

Fiscal 2021 Review and Current
Developments
Looking at the consolidated results for fiscal 2021, thefirst year of our Medium-Term Management Plan, due to

Fiscal 2021 Business Results
Consolidated results (Billions of Yen)

Non-consolidated results (Billions of Yen)

Net sales of completed
construction contracts

New orders received¥466.8 (down 1.4%* YoY)

Net sales of completed
construction contracts

429.0 (down 3.2%* YoY)

Operating profit

25.4 (up 2.8% YoY)

Ordinary profit

26.7 (up 3.2% YoY)

Profit17.9 (up 2.3% YoY)

Operating profit

Ordinary profit
President and Executive Officer

Toshio Nakama

Profit attributable toowners of parent¥495.5 (down 3.4%* YoY)

30.6 (up 2.0% YoY)

31.7 (up 2.3% YoY)

20.3 (up 0.8% YoY)

*The above predicted changes for net sales of completed construction contracts and new orders received are reference values calculated after applying the AccountingStandard for Revenue Recognition, etc. to the fiscal 2020 results.

9

KANDENKO

Integrated Report 202210About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

| Message from the President |fewer deliveries of large-scale new construction projects,
as well as the sluggish recording of sales based on thepercentage-of-completion method, the net sales ofcompleted construction contracts decreased to ¥495,567
million (down 3.4%* year on year). In terms of profits,
increased renovation work due to the strengthening ofarea management and thorough company-wide cost
reduction measures contributed to surpassing fiscal 2020
figures, including operating profit of ¥30,643 million (up2.0% year on year), ordinary profit of ¥31,754 million (up2.3% year on year), profit attributable to owners ofparent of ¥20,315 million (up 0.8% year on year).
Fiscal 2022 is the second year of our Medium-Term
Management Plan, and we recognize that it will be avery important year for achieving our final goals andfurther growth. As for our earnings forecast, we expect
both consolidated and non-consolidated earnings toexceed fiscal 2021. Currently, we have a high level ofsales information and volume of construction work inhand compared to the past, and based on results
obtained over the past year, we are making companywide efforts to achieve our performance targets.

Progress of Medium-Term
Management Plan
“Change! And Create the Future From a New Starting
Point” is the slogan of our Medium-Term Management
Plan. We have set numerical targets for fiscal 2023 of
net sales of ¥580.0 billion, operating profit of ¥36.0

billion, ROE of 8% or higher, ROIC of 8% or higher, anda dividend payout ratio of 30% or above.
To achieve these goals, based on a fundamental
commitment to promote ESG management, we arefocusing on five areas as key policies, namely“productivity innovation,” “rebuild earnings base bydemonstrating our comprehensive strengths,” “strengthenfoundations for future growth,” “promote soundmanagement activities,” and “reinforce ‘people first.’”In terms of productivity innovation, we have reformed
our business processes, including conversion of worksite
tasks to back-office tasks, such as construction blueprint
creation and technical review. We are also promoting
construction technology innovation by expanding the
introduction of prefabrication and modular unit
construction methods based at the Rokugo Center (inRokugo, Ota-ku, Tokyo). We are also striving to expand
the functions of our worksite support system and further
promote the use of smartphones distributed to all
employees. In April 2022, these efforts were highly
evaluated, and we were selected as a “DX-certified
operator” by the Ministry of Economy, Trade andIndustry. We will continue to work on continuous
improvements to reduce the workload and realize
reforms of work practices and annual leave systems.
In terms of rebuilding our earnings base bydemonstrating our comprehensive strengths, our active
sales activities targeting growth markets anddiversification of renewal proposals were successful, andas mentioned earlier, we now have an abundance ofsales information and volume of construction work in

Fiscal 2022 Business Results (Forecast)
Consolidated results (Billions of Yen)

Non-consolidated results (Billions of Yen)

Net sales of completed
construction contracts

New orders received¥496.0 (up 6.2% YoY)

Net sales of completed
construction contracts

473.0 (up 10.3% YoY)

Operating profit

26.5 (up 4.3% YoY)

Ordinary profit

27.5 (up 2.8% YoY)

Profit18.0 (up 0.4% YoY)

Operating profit

Ordinary profit

Profit attributable toowners of parent

11

KANDENKO¥542.0 (up 9.4% YoY)

32.0 (up 4.4% YoY)

32.8 (up 3.3% YoY)

20.8 (up 2.4% YoY)

hand. Going forward, we will continue to work on earlycollection of sales information with an eye to the future,and focus on developing total solution services that
contribute to the decarbonization of customer
infrastructures, disaster prevention, and business
continuity plan needs.
In response to recent concerns about the tight supply
of construction materials and equipment, we willthoroughly visualize our delivery status and carefully
manage progress, and will also take, as appropriate,
prompt and suitable measures to deal with risingprocurement costs.
As part of our initiatives to strengthen our foundations
for future growth, we started a regional microgrid
construction project in Isumi City, Chiba Prefecture, andare strengthening our sales and construction systems toacquire EV charger installation work. In addition, we areproceeding with the development of verification
experiment facilities that will contribute to thedevelopment of the local 5G market. In order to further
strengthen the presence of the Kandenko Group, we
believe that it is necessary to promote further

collaboration between the building infrastructure andsocial infrastructure divisions and to develop a companywide promotion system.
In promoting sound management activities, we areworking to improve the effectiveness of our governanceas a company listed on the Prime Market, based on theintent and content of the revised Corporate GovernanceCode. First, regarding the composition of the Board of
Directors, we welcomed one new independent outside
director in June 2022, making four of the thirteen
directors independent outside directors. Furthermore, asa revision of the meeting structure, we have newly
established a Senior Management Committee and areworking toward deeper discussion of themes by the
Board of Directors. In addition, we established the Group
Business Planning Department to strengthen managementof group companies and promote area management
based on the characteristics of each company. We willcontinue to strengthen governance and improvetransparency, and strive to ensure safety and quality,
which are the very core of our management, and ensure
thorough compliance, with the aim being to become acompany always trusted by society.

Integrated Report 2022

12About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

| Message from the President |In terms of reinforcing “people first,” in addition torealizing reforms of work practices and annual leavesystems through the measures to improve productivity
mentioned above, we are promoting the creation of awork environment where each employee can fully
demonstrate their abilities and work energetically. As
part of this, we have introduced a retirement age of 65
from fiscal 2022, so that veteran employees with awealth of experience and advanced technology and skills
can continue to play active roles in the Company.
Furthermore, we are working on revising personnel andwage systems, in order to improve the motivation of
employees with advanced expertise and promote theearly development of practical skills of young employees.
In July 2022, we have appointed our first two femaleline managers indicating our focus on promoting
diversity, and we intend to incorporate more diverse
values and perspectives into our future business activities.
As a labor-intensive company, our employees are ourmost important management resource. We will continue
to actively employ measures that contribute tostrengthening human resource development andimproving employee engagement.

ESG Management Aimed at Providing
Greater Social Value
As part of the promotion of ESG management, the basic
policy of our Medium-Term Management Plan, weestablished and announced our Basic Sustainability Policy
in June 2022. In addition to clarifying our stance on
contributing to a sustainable society, we identified
materialities (important issues) for corporate value
creation and the business foundation continuation.
We have always been aware of the importance ofcontributing to society through our business, as part ofour corporate social responsibility indicated in our
Corporate Philosophy. In 2019, when a typhoon struck
Chiba Prefecture, causing a large-scale power outage,
the entire Company was involved in recovery work. This
was an opportunity to reaffirm our reason for existence,
which is to play a role in the stable supply of electricity
and to support the sustainability of society.
In addition to identifying materialities (important
issues), we also expressed our support for the TCFD (Task
Force on Climate-related Financial Disclosures). We see
climate change as one of our most importantmanagement issues, and disclose important information

Key Policies in Our Medium-Term Management Plan

Productivity Innovation

Strengthen Foundations
for Future GrowthBusiness process reform and construction
technology innovation

Establish a presence in the fields
of decarbonization, disasterprevention, and BCP and
accelerate global expansion

Rebuild Earnings Base by Demonstrating
Our Comprehensive Strengths
Strengthen our proposal capabilities,
profit-generating capacity and work
execution abilities, and strengthen sales
expansion in growth areas

Promoting ESG
Management

Promote Sound
Management Activities
Instill a deep awareness of safety, quality,
and compliance, and ensure management transparency

13

KANDENKO

Reinforce“People First”
Create systems that enable diverse human resources
to fully demonstrate their abilities, and develop
human resources to create the future

related to climate change based on theserecommendations. Through the analysis of climatechange risks, we were able to go deeper into ourexisting risk management and recognize even more
opportunities. We will reflect the content of this analysis
in our management strategies and refine our value
proposals for decarbonization, disaster prevention, andBCP. As our next challenge, we will consider expanding
the scope of disclosure from the current Scopes 1 and 2
to include Scope 3.
We will focus on providing value to customers who
aim for decarbonization as an environmental theme, andwork to establish a presence to become a green
innovation company. At the same time, we will focus on
reducing CO2 emissions within the Company, such asenergy saving and conversion of construction vehicles to
EVs.
In order to provide greater social value, we will deepen
our existing businesses and promote ESG management
as a foundation for creating innovation. The starting
point of value creation mentioned in our slogan,“Change! And Create the Future From a New Starting
Point,” is nothing less than changing the mindset of eachand every employee. By linking this to behavioral change
throughout the Company, we aim to be a company thatgrows together with all of its stakeholders.

Becoming a Green Innovation
Company
In the future, with the rapid progress of digitaltechnology, it will be possible to enjoy more convenientand higher quality services in a timely manner. On theother hand, it is expected that the future social structure
will undergo major changes, including the emergence ofmany issues such as declining population in Japan andintensifying natural disasters. The reality is that many
hurdles remain to be overcome in order to achieve
realization of the decarbonized society that the world iscurrently aiming for. In the energy industry, power
networks will be even more complex and interactive by
the spread of distributed power sources and EVs, andthe evolution of power storage technology.
I believe that the “green innovation company” weare currently aiming to become, is a company that
contributes to solving these social issues and is neededby everyone in society. A green innovation company
creates new value in the energy and environment fields
and contributes to the realization of a recycling-oriented
society. With decarbonization and resilience as our
main themes, we will incorporate peripheral areas

into our core construction business and provide social
infrastructure and utility services that support ourcustomers. Making the most of the technology andknow-how that we have cultivated as a general
infrastructure company, we will also be responsible forthe comprehensive maintenance and construction of
infrastructure and services committed to theelectricity value chain, from power plants all the way
down to outlets. To that end, it is necessary that wepractice human capital management in pursuit of
the health and job satisfaction of employees, andfoster a corporate culture of continued growththrough constant self-innovation.
By steadily promoting initiatives for the materialities(important issues) which I mentioned earlier, and by
striving to improve corporate value through the practiceof sustainability, which is the basis of our Corporate
Philosophy, we intend to pave the way for our
employees, who will lead the next generation, to becomea green innovation company.

Integrated Report 2022

14About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Sustainability

Financial, Non-financial &Corporate Data

| Value Creation Trajectory |Net Netsalessales(Millions(Millionsof yen)of yen)600,000
600,000

Since its founding in September 1944, Kandenko has conducted business in a wide range of fields withthe aim of ensuring the mutual prosperity of its customers and the communities where it works and finds
its purpose in this pursuit, and grown to become one of Japan’s leading general infrastructure companies.
This section presents the Company’s history of stably supplying electric power and supporting people’s
lives alongside postwar development in Japan.

500,000
500,000

Net sales/Operating profit
Net sales

OperatingOperatingprofitprofit(Millions(Millionsof yen)of yen)Operating profit
400,000
400,000

Figures in and before fiscal 1998 show
non-consolidated net sales/operating profit.
*From fiscal 2021, the Accounting Standard for Revenue
Recognition, etc. are applied (Accounting Standards Board ofJapan (“ASBJ”) Statement No. 29).

30,00030,000300,000
300,000

20,00020,000200,000
200,000

10,00010,000100,000
100,000

0 0

0 0

1944
1944

1940

1950
1950

1955
1955

1960
1960

1950

1970
1970

1960

Company Establishment and Japan’s Postwar Recovery PeriodBusiness Development
September 1944
Kanto Denki Koji Co., Ltd., wasestablished.
Head office at 2 Tameikemachi, Akasaka
Ward (current Minato Ward), Tokyo

1965
1965

1975
1975

1970

1985
1985

1990
1990

1980

From Rapid Growth Period to Stable Growth Period
1958
Tokyo Tower
completed.

Late 1940’s
Large-scale transmission line
works gain momentum

1980
1980

1995
1995

2000
2000

1990

2000

September 1959
The Company provides
disaster recovery support
beyond its jurisdiction in thewake of the Isewan Typhoon

1981

Power distribution network in
Nepal upgraded.

1991
Tokyo Metropolitan GovernmentNo.1 Building completed.

2010
2010

2015
2015

2020
2020

2010

Transition from Showa to Heisei Era

1968

Kasumigaseki Building
completed as the firstskyscraper in Japan.

2005
2005

Working to Realize a Sustainable Society
2012®
TOKYO SKY TREE , the world’s
highest self-supporting
broadcast tower opened.

2019

Japan National Stadium completed.

Courtesy of Taisei Corporation

Strengthening our Fundamental Base

September 1984
March 1960

Around 1947

Transport of power poles by hand-drawn cart
November 1955

Introduced pillar-erecting vehicle for power
distribution line engineering work

15

KANDENKO

Built Technical Staff Training Center (current Education& Training Center) in Ibaraki prefecture
September 1960

February 1970

Listed on the First Section of the Tokyo Stock Exchange
1971

Moved head office to Yushima 4-chome, Bunkyo-ku, Tokyo

Introduced aerial work platform trucks for
power distribution line engineering work

October 1961

August 1973

Listed on the Second Section of the Tokyo Stock Exchange

Set our People First slogan

Company name changed to Kandenko Co., Ltd.
July 1986

The Company participated in the Japanese
Antarctic Research Expedition for the first time.
December 1988

Moved head office to newly constructedbuilding at Shibaura 4-chome,
Minato-ku, Tokyo (current location)
Formulated our Corporate Philosophy
Formulated our Corporate Motto “People First”

January 1990

December 2006

Started TV commercials

Formulated the Kandenko Group Charterof Corporate Behavior

July 1993

Set up the Tsukuba Technology
Research & Development Institute(currently Technology Research &Development Institute)

July 2015

Established Fukushima Division

October 2012

March 2016

Capital participation in Choshi Wind
Development Co., Ltd.
(started power generation business)

Formulated our growth strategy

October 1997

October 2014

Launched Kandenko website

Introduced regional headquarters system

April 2020

Achieved record high consolidated
business result

Integrated Report 2022

16About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Financial, Non-financial &Corporate Data

Sustainability| Value Creation Process |The Kandenko Group has always provided high-quality equipment and services from a long-term perspective inthe fields of building infrastructure, telecommunications infrastructure, and electric power infrastructure as partof our quest to promote a harmonious existence between people, nature, and society.
We intend to help solve social issues by accurately grasping changes in our business environment, such as
the declining population, aging population, and decarbonization, and providing new value at the same time.

Input
Financial CapitalStrengthsof theCompany

Total assets¥470.9 billion
Free cash flow

Number of employees (consolidated)

Experience

10,264

Intellectual Capital
R&D investment

Research anddevelopment

Customerconfidence

Solutions cycle

Quality

Manufacturing Capital

31 companies

Stable supply of electric power

Maintenance and updates for aging social infrastructure

Provision of stable communication services

Energy-saving initiatives for building infrastructure

OutputFinancialNewbusiness

Provide valuable services tocustomers through virtuous cycle
Infrastructure
proposal

Net sales

Cater to customer needs

Work oninfrastructure

Apply expertise

O&M

Link with customers

Technology
development

Patents (excluding trademarks)

Kandenko Co., Ltd. andconsolidated subsidiaries

Restoration of infrastructure damaged by natural disasters

Business Cycle¥1.6 billion
138

Provision of comfortable living environments

Technology¥17.9 billion
Human Capital omestic population decline andD
aging society
Reforms of work practices and annual
leave systems
Digital transformation

Building infrastructure,social infrastructure business cycle

Social Issues

 ealization of a decarbonized society
R
Response to climate change
Maintenance and development ofsocial infrastructure

Value to be Provided to Society¥495.5 billion

Provide expertise,
new construction methods

Work oninfrastructure

Technology
development

Solutions

Meet customer needs

Strategic
business

Infrastructure
proposal

Operating profit¥30.6 billion
ROIC

Building infrastructure,social infrastructure

7.0%
ROE

Data provision

7.3%

O&M
Strategic
business

Expand business

Dividend payout ratio
Newbusiness

Create services

28.2%

Anticipate
customer needs

Domestic bases

131 locations
Overseas bases

3 locations

Social and Relationship Capital
Number of industry-academia
collaborating institutions

Materialities (Important Issues)
Materialities forcorporate value
creation

For details, see page 42
Environment

Maintenance and constructionof safe and comfortable social
infrastructure

Number of renewableenergy power plants

GovernanceContribution to a
decarbonized society

Environmental, Social
Energy consumption

down 21.0%(compared to fiscal 2009)

10 universities

Natural Capital

Promotion of
innovation

SocialReinforcing “people first” (human resources)
Materialities forbusiness foundation
continuation

Strengthening sound management foundation

22 locations

Corporate Motto, Corporate	Ratio of renewableenergy in consumed
power

4.1%

Philosophy and Charter of Corporate Behavior
Reinvestment

17

KANDENKO

Integrated Report 202218

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

| Fiscal 2021-2023 Medium-Term Management Plan |As part of the Fiscal 2021-2023 Medium-Term Management Plan, with the aim of helping solve social issues including the
Sustainable Development Goals (SDGs) under ESG management promotion, we intend to deepen our existing businesses,
while challenging innovation derived from new ideas rather than an extension of existing avenues, and striving todevelop as the next-generation Kandenko Group that will continue to grow together with all our stakeholders.

Create the Future
Change! And
from a New Starting Point

Quantitative Plan

While sales fell short of the announced figures, the target for
operating profit was achieved.
Our challenge is to further improve profitability and capital efficiency.

Qualitative Plan

Achieved results in deepening existing businesses, including rebuilding
our earnings base, and promoting ESG management. Our challenge isto accelerate growth investment for productivity innovation and DX
realization, and to further strengthen our foundations for growth overthe medium to long-term.

Key policies

1.

2. Rebuild earnings base by demonstrating our comprehensive strengths
4. Promote sound management activities 5. Reinforce “people first”

Productivity innovation

3. Strengthen foundations for future growth

Key policy

1

Productivity Innovation

2023 GOALSNet sales ∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥580.0 billion

Operating profit∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ ¥36.0 billion

ROE∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 8% or above

ROIC∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙∙ 8% or above

Dividend payout ratio∙∙∙∙∙∙30% or above

Energy consumption∙∙∙Down 30% (compared to fiscal 2009)

Key policy

2

Rebuild Earnings Baseby Demonstrating
Our Comprehensive Strengths

Ratio of renewable energy in consumed power ∙∙∙ 15% or higher

Becoming a green innovation company
O&M

Renewableenergy related

Key policy

Datacenters

Offshore wind power
Transmission lines
Storage batteries

SmartcitiesSmart gridOne-stopbuilding
infrastructureservice

Building infrastructureNewbusiness

Overseasbusiness
Domestic
business

1%

2%

Social infrastructure

Overseas
infrastructure

Renovation

Railways
Roads
Water supplyNewbusiness(non-consolidated)

Building infrastructure

44%
Decarbonization

Key policy

4

Promote Sound Management

Domestic
business

12%

Breakdown of
Fiscal 2020 sales

70%

5%

85%

for Future Growth

Domestic business

Overseasbusiness(non-consolidated)(Group)Strengthen Foundations

Local 5G

10%

Domestic
business

3

Activities

Building infrastructure(Group)Disasterprevention,
BCP

Breakdown of
Fiscal 2044 sales

15%

Collaboration

Key policy

5Social infrastructure

Social infrastructure

41%*including power distribution
materials and overseas affiliates

NOW
19

KANDENKO

Reinforce “People First”*including overseas
affiliates

2023

2044
100-yearanniversary

We will steadily promote labor-saving and manpower-saving atconstruction sites by reforming business processes, including
converting worksite tasks to back-office tasks, and utilizing
prefabricated and modular units.
Active promotion of digitalization (certification as a DX-certified
operator determined by the Ministry of Economy, Trade and Industry)
Issues include securing human resources and rebuilding thepromotion system for the realization of DX

Practice strategic sales activities centered on growth fields bycollecting sales information early and enhancing quality and quantity
Ensure profitability through thorough and continuous costmanagement
Amidst intensifying competition, soaring material prices, and a severelabor shortage, our challenges are to acquire strategic renewal stockand secure work execution abilities from a medium to long-term
perspective

Launched the regional microgrid construction project for Isumi City
Strengthen system to expand EV charger installation work
Establishment of a system for providing comprehensive service “Total
Build & Support,” which contributes to the development of the local
5G market						(Establishment of a Local 5G Lab, making NextCadix Ltd. a subsidiary)
Expansion of overseas business (order and construction system)
Our challenge is to further strengthen inter-departmental
collaboration and cooperation to promote proposals for
decarbonization, disaster prevention and business continuity plans

Strengthening group governance (establishment of a new Group
Planning Department)
Promoting initiatives to address sustainability issues			(Formulation of Basic Sustainability Policy, information disclosure
based on TCFD recommendations)First Japanese construction company to join the “EV100”

Building an age 65 retirement system
Consecutive victories in two occupations (electrical and plumbing) at
the 59th National Skills Competition
Continue active recruitment activities
Strengthening training of young employees and early developmentof their practical skills
Our challenge is to visualize human capital and rebuild a humanresource portfolio strategy that matches our management strategy
Integrated Report 2022

20

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Financial, Non-financial &Corporate Data

Sustainability

Financial Strategy & Capital Policy
Achieving the Medium-Term Management Plan and establishinga financial foundation for sustainable growth beyond
areas, after conducting a thorough examination of theirprofitability and investment recovery capability. As aresult, our capital investment was ¥9,125 million anddepreciation and amortization was ¥7,435 million.
While the cash flows from investing and financing
activities resulted in an outflow, due to the cash inflow
from operating activities, cash and cash equivalents infiscal 2021 increased by ¥10,236 million from the end of
the previous fiscal year to ¥67,423 million.
The Kandenko Group’s basic policy is to reliably secure
the necessary funds for business operations. For working
capital and capital investment funds, we raised funds
from our own funds and borrowings from financial
institutions. Short-term borrowings are mainly procured
for working capital, and long-term borrowings are mainly
procured for capital investment. In addition, while notes
payable, accounts payable for construction contracts andother accounts for most of our liabilities, our borrowings
are relatively small, and our equity ratio remains at ahigh level of 60.3% as of the end of fiscal 2021.

Hitoshi Sugizaki
Senior Managing Officer, Acting Division Manager of Corporate Divisionand Head of Accounting & IT Unit

Looking back on fiscal 2021 trends from afinancial perspective
In fiscal 2021, the first year of the Medium-Term
Management Plan, we worked on active sales expansion in
growth markets and diversification of renewal proposals. In
addition, we promoted measures to improve productivity,
such as promoting the use of digital technology andenhancing our worksite support system. As a result, while
net sales of completed construction contracts cannot be
simply compared with the previous year due to theapplication of the “Accounting Standard for Revenue
Recognition,” in terms of profits, we were able to secure alevel that surpassed that of the previous fiscal year. This is
an indication that the cost management measures we havethoroughly implemented throughout the Company in recent
years have become widespread, and we believe that ourearning power is steadily improving.
The demand for working capital of the KandenkoGroup is mainly derived from construction costs such as
material costs and subcontracting costs in theinfrastructure work business, as well as operating
expenses, such as selling, general and administrative
expenses. Demand for funds for investment purposes isderived from capital investment represented by theconstruction and acquisition of office buildings,
construction vehicles and machinery. In fiscal 2021, weinvested in the development of business bases in
preparation for disasters, production equipment that
contributes to productivity improvement, the digitaltechnology field, and the expansion of new business
21

KANDENKO

Recognition of financial issues and achievementof our Medium-Term Management Plan
As a financial issue for sustainable improvement ofcorporate value, we recognize that further improvements
in profitability and efficiency are required.
In the Medium-Term Management Plan, we have set afinancial target of 8% or higher for ROE and ROIC inconsolidated results for fiscal 2023. We have set a target
of 8% or more for ROE, taking into account the
expected equity spread (ROE - cost of equity) over the
medium to long-term, assuming that the current cost ofequity is approximately 5%. In order to increase ROE
reliably and continuously, we must maintain financial
soundness and further increase our top line, which is tosay, our earning power. We believe that investing inbusinesses with positive ROIC will naturally raise the top
line and ROE. At the same time, in preparation for
sudden changes in the business environment, it will also
be important to secure a solid financial base that enables
us to increase ready liquidity and make continuous
investments for growth.
We will continue to implement various measures tostrengthen profitability and steadily increase our earning
power. At the same time, we will strengthen
management of working capital such as trade receivables
and improve the efficiency of funds through our groupfinancial system, in order to establish a stronger financial
structure. Also, we are considering strategic investments
to expand our business areas and alliances with external
parties. In addition to cash on hand, we will consider
diversified financing from the financial and capital
markets.
We continue to recognize shareholder returns as animportant management issue. While maintaining stabledividends as our basic policy, we intend to actively pay

dividends by improving earnings. Our Medium-Term
Management Plan aims for a consolidated dividend
payout ratio of 30% or more in fiscal 2023, the final
year of the plan. In fiscal 2022, taking into account ourcurrent performance, we have increased the interim andyear-end dividend forecasts by ¥1 each to ¥15, to
respond to the ongoing support of our shareholders. As
a result, we plan to increase our annual dividend pershare for fiscal 2022 by ¥2, from ¥28 to ¥30.

Financial base for becoming a green innovationcompany in 2044

monitoring the asset efficiency of each business andadapting group management to changes in the businessenvironment.
The measures that the finance department should takefrom now on is to prepare the financial base for the
Kandenko Group to take on the challenge of newtechnologies and new business fields amid a major shift
in society as a whole. In addition, we recognize that it isnecessary to ensure the soundness and transparency offinancial decision-making to ensure thorough risk
management and maximize profits from a medium tolong-term perspective.

The Kandenko Group, with its vision of becoming agreen innovation company in 2044, the 100-year
anniversary of our founding, will further accelerate
initiatives in the fields of decarbonization and resilience,
and will take on the challenge of creating new value
with the aim of achieving a sustainable future. In orderto achieve this goal, it is required to appropriately
allocate management resources such as diverse humanresources and technologies possessed by the KandenkoGroup to each business so that they can be utilized as
effectively as possible. Therefore, we plan to determine
whether the business is designed to generate sufficient
returns while taking capital costs into consideration. We
aim to continuously improve corporate value by

We believe that dialogue with stakeholders, including
shareholders and investors, is extremely beneficial in
having them gain a deeper understanding of theKandenko Group, as well as in utilizing their opinions in
our management and turning them into qualitative
improvements. We will continue to engage in dialogue,
establish a solid financial base, improve capitalprofitability, and take on the challenge of going farther
and deeper than ever through contributions to solvingsocial issues. We hope you will continue to look forward
to the Kandenko Group’s efforts to create greater social
value.

Net sales/Operating profit (Consolidated)

Capital investments/Depreciation and amortization (Consolidated)■ Net sales (Millions of Yen) ■Operating profit (Millions of Yen)

■ Capital investments (Millions of Yen) ■Depreciation and amortization (Millions of Yen)

616,143
563,550

Message to all our stakeholders

13,578556,045507,205

12,295495,567*
9,752

34,69329,261

30,04130,01230,643*

6,188

6,457

Fiscal 2018

Fiscal 2019

7,317
7,246

9,125
7,435

5,101

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2021

Fiscal 2017

Fiscal 2020

Fiscal 2021

*From fiscal 2021, the Accounting Standard for Revenue Recognition,etc. are applied (Accounting Standards Board of Japan (“ASBJ”)
Statement No. 29).

Cash flows (Consolidated)

Status of dividends (Consolidated)■Operating cash flow (Millions of Yen) ■Free cash flow (Millions of Yen)

■ Annual dividends (Yen)

28,251

29,155

27,15018,12017,926
15,674

11,469

25.70

24.00

27.00
26.00

Dividend payout ratio (%)
28.40

28.20

28.00

28.00

25.40
28.00

12,873
11,901

1,454
Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2021

Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal 2021

Integrated Report 2022

22

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

Reinforce Human Capital and “People First”
Investments in human capital for medium to long-term growth
Human resources development that create thefutureHiroyuki Enoki
Executive Managing Officer, Head of Management Planning Unit,
Corporate Division

As a labor-intensive company, we recognize that securing
and training human resources is the starting point for us
to continue contributing to the development of safe andcomfortable communities and to continue supportingsocial infrastructure. With our Corporate Motto “People
First,” the Company will actively implement measures forthe future, in order to respect the diverse personalities ofour employees, create an environment where they canfully demonstrate their abilities in each field, and be agood company for each and every employee.
In recent years, we have continued to hire more than
300 regular recruits and 100 people with experiencefrom other companies every year. The steady growth of
regular recruits and the various sorts of knowledge
provided by people with experience at other companies
are indispensable for the further growth of the Company,
and we will continue systematic hiring of humanresources.
As stated in our Medium-Term Management Plan, theCompany focuses on the construction of building
infrastructure and social infrastructure equipment as thecore of its business. At the same time, in the future, wewill expand our business in various domains in order toimplement management strategies that are in line withchanges in the social environment. We are aiming tobecome a green innovation company by 2044, the 100year anniversary of our founding. To realize this goal, we
will train employees looking 10 to 20 years ahead inorder to respond to changes in our business portfolio in
the future.
23

KANDENKO

In the future, more than ever before, we will need
employees who can execute their duties making full useof their specialized knowledge, technology, and skills. We
will focus on training such personnel, and will also work
to develop the necessary internal frameworks andtraining systems. We will also deepen the technology,
skills, knowledge, and know-how necessary on the front
lines of worksites, which are our earnings base, todevelop human resources who will lead the entire
infrastructure work industry.
We have also created a succession plan to develop
management candidates who have the foresight to see
the changing times, and who can indicate the future
direction of the Company as a whole. In addition to
management education for employees at the executive
officer level, we also collaborate with external educational
institutions to develop the next generation of executive
officers, and provide education so that employees canlearn high-level leadership skills, and financial andmanagement strategies. For employees at the section
manager level and below, as human resource
development for the next-generation and the generation
after that, we select candidates and conduct training on
business management.

Diverse human resources demonstrate theirabilities
The rapidly declining birthrate and aging population in
Japan is causing a decline in the working population. On
the other hand, the growing healthy life expectancy inJapan indicates that senior individuals will also have more
opportunities to play active roles in the Company as well.
In these circumstances, we have introduced a retirement
age of 65 from April 2022, with a goal of having
employees maintain and improve their motivation, andhaving them continue to be active on the front lines fora long time. In addition, we will create an environment
in which senior individuals can play an active role, andwe will select excellent human resources early on,
including young employees with advanced abilities, andintroduce measures to prevent the organization frombecoming rigid.
Initiatives for health management are also importantmeasures. Employee health management is one of themost important matters for the Company to promote
the active participation of a wide range of age groups.
In order to protect the physical and mental health of
our employees, we are striving to create a work
environment with the aim of improving engagement.
Specifically, we are implementing various initiatives,
such as developing a health support system throughcollaboration with specialized medical staff and healthinsurance associations (collaborative health program),and holding walking events inviting Mr. Toshiaki

Hirose, who is the former captain of the Japanesenational rugby team and is our corporate
communication captain (CCC).
Promoting diversity is another major theme. We believethat one of the most important factors in promoting the
career advancement of female employees is changing themindset of employees. We are focusing on companywide education and training in order to eliminate theharmful effects of unconscious bias and build aworkplace where all employees can play an active role inflat standing positions. In addition, we provide
opportunities to share daily worries and hold deeper
exchanges by holding “Kandenkomachi,” an opinion
exchange meeting for women working at worksites that
goes beyond the boundaries of departments andaffiliations, in order to support the active participation of
female technical and engineering staff. In addition, we
opened two farms in Itabashi-ku, Tokyo and Ichikawa
City, Chiba Prefecture from fiscal 2021, with the aim offurther promoting the advancement of people withdisabilities. They can enjoy the work of harvesting crops
and feel a sense of accomplishment by collaborating withcolleagues to cultivate crops every day in an environment
designed with full consideration for safety. The harvested
crops are also used as ingredients for meals at our
Education & Training Center and other facilities.

infrastructure. The Company’s strength is its ability tounite as one even in difficult situations, in order to build
various infrastructure and protect them. This sense of
mission has been handed down from generation to
generation, and is part of Kandenko’s DNA, passed
down to each and every employee today. At the sametime, we also have a responsibility to ensure that thebaton is passed on to the next generation. We will workon human resource development while maintaining abalance between the flexibility to adapt to the everchanging world and continuity to keep protecting things
unchanged. In order to continue being a company where
each and every employee can take pride in their workand be glad to have joined the Company, we willcontinue to actively invest in enhancing human capital.

Appealing workplaces and diverse work styles
We distribute smartphones to all employees for the
purpose of confirming their safety status in the event ofa natural disaster and speeding up informationtransmission within the Company. As a result, employees
can now access internal systems regardless of location,
whether they are at home or away. In addition, we helda “smartphone use contest” to widely solicit ideas fromour employees, as we can expect further improvements
in operational efficiency and convenience by expanding
the use of smartphones. Employees who submit usefulideas are commended, and feasible ideas are put into
practical use as needed.
With the introduction of various work styles such as
remote working, we have come to recognize the issuesof management and evaluation becoming difficult anddiminishing communications. For this reason, we
incorporate management methods suitable for various
work styles into training for line managers. In addition,
by further promoting “K. Assertion” activities aimed atcreating an open workplace environment, we aim to be
a company that offers a high level of psychologicalsafety, and is comfortable and rewarding to work for.

Flexible response to change and inheritance of
our DNA
Since the Company was founded, we have contributed
to the development of society as a whole through themaintenance and construction of building and social

Training in progress (Training for next generation leaders/NGG training)

Integrated Report 202224

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Sustainability

Financial, Non-financial &Corporate Data

| Business Review by Division |Building Infrastructure Work

DescriptionofBusiness

Electrical engineering, environmental facilities and systems, and renovation work

Electrical engineering work: Work on electrical facilities and equipment inside all typesof buildings and structures, building interiors, control equipment, and interior network
Environmental facilities and systems, and renovation work: Work on air conditioning
and sanitation systems as well as water, heat and disaster prevention systems

Nobuhiro Iida
Executive Vice President and Executive Officer, Division Manager
of Sales Division

Electrical engineering, environmental facilities
and systems, and renovation work engages
in new construction and maintenance, as wellas improvement of functionality, of building
infrastructure in office buildings, factories,
and commercial facilities. In addition to
improving productivity through businessprocess reforms, we will strengthen ourability to make proposals to develop solution
services that respond to decarbonizationneeds, for which further growth indemand is expected.
Review of fiscal 2021
New orders received for lodging and entertainment
facilities decreased compared to the previous fiscal year,
but we were able to achieve better results than theprevious fiscal year due to strong demand for new
construction of data centers, in addition to strong orders

from booming industries such as the semiconductor
industry.
By region, orders increased in western Japan as well as
in eastern Japan, which is our base. We have built a
construction management and technical proposal systemthat allows us to quickly respond to customer needs, andworked to strengthen and enhance cost management
and engineering functions. This has led to the acquisitionof large-scale production base projects forsemiconductors, EV batteries, etc., as well as urban
redevelopment projects. In environmental facilities andsystems, and renovation work, which is the priority area
for strengthening, we handled large-scale projects suchas data centers and high-performance logistics facilities,
resulting in a year-on-year improvement in our results.
On the other hand, net sales of completed
construction contracts decreased compared to theprevious fiscal year, due in part to large-scale
redevelopment projects in central Tokyo with long
construction periods still being underway.
As a result, in fiscal 2021, new orders received totaled¥267,648 million, an increase by ¥5,929 million or 2.3%
year on year, net sales of completed construction
contracts totaled ¥238,296 million, a decrease by¥13,941 million or 5.5% year on year. Construction
contracts brought forward totaled ¥309,176 million, an
increase by ¥29,352 million or 10.5% year on year.
On the other hand, in response to the legal cap on
overtime work to be applied from April 2024, we will
establish a new “Technical Assistant Team” in the head
office. We have also established a system to perform
some worksite tasks in the back office, and put thissystem into operation. As a result, works that had been
performed at major new construction sites nationwide,such as technical examination and preparation of blueprints and construction instructions, have been
centralized at the head office, as part of the efforts to
reduce the workload of worksite supervisors.

Current situation and future initiatives
In fiscal 2022, we expect to receive orders from growthfields where capital investment sentiment is strong, andprogress in large-scale new construction is expected. As
such, our results are expected to exceed those of theprevious fiscal year in terms of both new orders received
and net sales of completed construction contracts. As thisis the second year of the Medium-Term Management Plan,
this division is working on “business process innovationand thorough use of digital technologies” and “practicing
sales activities with an eye on the medium to long-term
market” as priority items of our management policy.

Improving worksite productivity throughconversion to back-office tasks and prefabricatedand modular unitsFirst, in terms of “business process innovation andthorough use of digital technologies,” the “Site Work
Assistant Team” newly established in the head officein July 2022, will centrally process worksite paper
work. By doing so, together with the above-mentioned
Technical Assistant Team responsible for worksite
technical work, we will promote strengthening of theconversion to back-office tasks of worksite tasks.
In addition, we will start an initiative to remotely
support inspection work that requires staff to bepresent by using wearable cameras and worksite
production management systems (worksite support
systems) making full use of ICT.
We are also working to further reduce the burden
on worksite operations and improve productivity bystrengthening the use of prefabrication and modular
unit construction methods, in which parts are cut anddrilled in advance at off-site factories.
At our off-site factories, we would like to further
increase the production capacity, systematize delivery
to worksites, and expand the number of sites where
this system is used nationwide.
In the medium term, we will unify the functions of
the off-site factories, Technical Assistant Team, and Site
Work Assistant Team, and aim to establish anorganization that can provide total support forworksites, in terms of both technology and paper work.
Practicing sales activities with an eye on themedium to long-term market
With regard to “practicing sales activities with an eye
on the medium to long-term market,” in addition toinvesting in real estate development in urban areas,
we also expect continued growth in investment indata center development in response to the digital
shift of society, and investment related to the
manufacture of automobiles and in-vehicle batteries
accompanying the progress of CASE. We will build aflexible proposal, design, construction and maintenancesystem to meet all needs of our customers.
Against the backdrop of social demand for therealization of carbon neutrality by 2050, customer
needs are increasing for installation of solar power
generation, storage batteries, and EV charging
infrastructure, as well as for renewal of infrastructure
for decarbonization. In addition, interest in power

New orders received

KANDENKO

In the electrical engineering, environmental facilities andsystems, and renovation work, the industries of ourcustomers are diverse, so the technology and know-how
required for the decarbonization of facilities are not all
the same. In order to accurately respond to eachcustomer’s needs while always keeping up with advanced
technology, we need to promote the introduction of newtechnologies and knowledge, including collaboration withexternal parties, and work on developing humanresources capable of innovating at the same time.
As the trend toward realization of a decarbonizedsociety progresses, we will refine our knowledge andtechnology not only in electrical work, but also in thefields of air conditioning and sanitation systems, andplant equipment. By integrating these assets, we will
focus on proposing solution services throughout the life
cycle of building infrastructure, from design, newinstallation, and renewal, to energy management.

(Millions of Yen)

265,741

264,633

261,718

267,648

296,525
266,520

252,237

235,040

Fiscal 201725

Toward realization of solution services thatmeet decarbonization needs

Net sales of completed construction contracts(Millions of Yen)

263,342saving and energy saving measures is increasing in
response to soaring electricity costs.
In July 2022, we strengthened our solution sales by
establishing a new “Carbon Neutral Solution Team”
specializing in decarbonization-related markets in orderto actively propose technologies and services thatmeet customer needs, such as the central monitoring
system “EcoBACS,” which visualizes energy
consumption in building infrastructure and achievesenergy savings through automatic optimization control.
Strengthening profit-generating capabilities andrisk countermeasures
Strengthening our ability to generate profits is one of
the basic policies of our Medium-Term Management
Plan. We have heightened our awareness of cost
control and profit generation through thorough risk
assessment in our order acquisition strategy,
examination of VE (value engineering) in the backoffice, and thorough process progress management
during the construction period. Recently, however,there are increasing concerns about rising prices anddelays in delivery of electrical construction materials,
due to skyrocketing global raw material prices andsupply chain stagnation. Therefore, we will take timely
and appropriate measures to minimize the impact.

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2021

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

238,296

Fiscal 2021
Integrated Report 2022

26

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Sustainability

Financial, Non-financial &Corporate Data

| Business Review by Division |In fiscal 2022, we forecast new orders received of¥39.0 billion and net sales of completed construction
contracts of ¥39.0 billion. In order to achieve these goals,
we will work to steadily receive orders.

Social Infrastructure Work
Information &Communication WorkSocial Infrastructure Work

DescriptionofBusiness

Power Distribution
Line Engineering Work

Information & Communication Work	Installation of optical fiber cables and related equipment for electric power
providers and telecommunications providers
Construction and maintenance of networks for cable TV and municipalities
Construction and maintenance of mobile communication base stations

Eisaku Shimizu
Executive Managing Officer, Division Manager of Social Infrastructure
Division, and Head of Information & Communication Unit

Information & communication work supports
the evolution and development of a smart
society in response to ever-advancing
technological innovation. While fulfilling therole of a “nervous system” that reliably controls
energy, we aim to expand into the local 5G
field and provide total solution services.
Fiscal 2021 review and current developments
New orders received in fiscal 2021 include an increase in
5G (fifth generation mobile communication system) basestation installation work from telecom carriers, and theacquisition of large-scale Fiber-to-the-Home (FTTH)
installation work from independent cable TV operators.
However, new orders received fell below the previous
fiscal year, due mainly to decreased orders forcommunications infrastructure construction from theTEPCO Group, renewal construction for large-scale cable
27

KANDENKO

Electric Power &Civil Engineering WorkTV operators coming to an end, and decrease in largescale communications-related public office construction.
Net sales of completed construction contracts increased
due to the completion of renovation work for large-scale
cable TV operators and highway-related construction.
As a result, in fiscal 2021, new orders received totaled¥38,207 million, a decrease by ¥4,671 million or 10.9%
year on year, net sales of completed construction contracts
totaled ¥40,532 million, an increase by ¥841 million or
2.1% year on year, and construction contracts brought
forward as of March 31, 2022 totaled ¥16,510 million, adecrease by ¥2,324 million or 12.3% year on year.
Currently, the environment for receiving orders for
information & communication work is being driven by
the government’s “Vision for a Digital Garden City
Nation” measures. Digital-related investments are
increasing in a wide range of industries, including energy
companies and transportation companies, as well as
public offices, communications companies, and data
center companies. In addition, following the introductionof the “Revenue Cap System” in fiscal 2023, electric
power companies are required to reliably implement
measures to renew aging equipment and reinforce
resilience from a long-term perspective for power security
communication equipment. Furthermore, we intend tofulfill our role as a partner responsible for the “nervous
system” of power security communication, by actively
making proposals to improve construction andmaintenance works and enhance their productivity.
Mobile communications carriers are focusing on
installing 5G base stations in order to increase the area
coverage of 5G, which has a narrower coverage area
than 4G. While there are concerns about the impact of
COVID-19 pandemic and the situation in Ukraine on the
supply of materials and equipment, construction work is
expected to continue to increase.
The industry as a whole is entering the final stages ofthe shift to FTTH, which cable TV operators have beenpromoting for some time. In addition to sales activities
targeting independent cable TV operators who have notyet deployed FTTH, we plan to develop sales activities
targeting companies which have deployed fiber optic
cables only to their main lines, for which we will propose
early completion of the complete shift to FTTH.

Strengthening productivity, work execution
abilities, and foundations for future growth
Productivity innovation is the first key policy in our
Medium-Term Management Plan, and the entire division
is promoting measures that contribute to improving theefficiency of operations not bound by conventional
methods. In the first fiscal year of the plan, in parallelwith the centralization of routine work that had been
carried out at each office, the introduction of RPA, andthe digitalization of construction management work bybuilding a construction support system, we havelaunched a countermeasure project aimed at reducing
the workload, and have started working on various
examination working groups toward the legal cap on
overtime work that will be applied from fiscal 2024.
In addition, the busy season, as well as the work content
and characteristics, differs depending on the work categoryof the information & communication work, such ascommunication cable equipment work, cable TV equipment
work, and mobile equipment work. In order to enable
flexible and agile allocation of construction personnel, weare conducting training with partner companies to develop
multi-skilled employees who can conduct multiple work
categories. We plan to further focus on these efforts in the
future, as they will strengthen the work execution abilitiesof the entire division and aid in compliance with the legal
cap on overtime work.
In terms of strengthening our foundations for future
growth, we have begun developing fourth and fifth
pillars, following on the three work categories mentioned
above. We are particularly focused on local 5G
infrastructure construction and service provision, in which
local governments, companies, and cable TV operators
take the lead in building their own networks in their own
buildings and premises.
As a foothold toward this end, we obtained a local 5G
license ourselves, and in April 2022, we opened the “Local
5G Lab,” the first verification experiment facility for anelectric power construction company. Here, you canexperience the performance and convenience of a local 5G
system that is actually in operation. Furthermore, it is very
useful in promoting the fact that Kandenko can provide
one-stop services from consulting, survey design, licenseacquisition, operation and maintenance, in addition to
wireless equipment installation work.

Over 50 groups of customers have visited this facility inthe half year since it was opened. They represent various
industries, such as electric power, communications, cableTV, equipment manufacturers, construction, securities,
government agencies, and more, so we feel that they
have great expectations for local 5G.
Going forward, we intend to work on co-creation of
new businesses centered on local 5G while hearing out
the needs and requests of these customers. In doing so,
we will collaborate with NextCadix Ltd., a softwaredevelopment company which we acquired as a subsidiary
in September 2021, in order to strengthen our systemfor providing total solutions.

Aiming for comprehensive solutions for energy
and information communication
As the speed of technological innovation continues toaccelerate and efforts toward digitalization expand
throughout society and industry, it is essential that we
provide new value to our customers in order for thisdivision to continue to grow sustainably. While continuing
to actively incorporate the latest technologies, we arealso considering forming alliances with external parties
that have technologies which we do not. At the sametime, we intend to combine the engineering capabilities
we have cultivated so far with knowledge of outsiders to
discover and nurture the seeds of new value.
Looking ahead to the future of information andcommunications, we aim to be a division that plays apart in comprehensive solutions for energy andinformation and communications, in order to contributeto the realization of a decarbonized and resilient society.

Many customers come to tour our local 5G lab

New orders received

Net sales of completed construction contracts(Millions of Yen)

(Millions of Yen)

44,64635,548

Fiscal 2017

Fiscal 2018

38,745

Fiscal 201942,879Fiscal 2020

38,20737,651

Fiscal 2021

Fiscal 2017

41,790Fiscal 2018

44,852

Fiscal 201939,691

40,532

Fiscal 2020

Fiscal 2021
Integrated Report 2022

28

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Sustainability

Financial, Non-financial &Corporate Data

| Business Review by Division |Social Infrastructure Work

DescriptionofBusiness

Power Distribution Line Engineering WorkWork on overhead power distribution lines: Construction and maintenance ofoverhead power distribution lines facilities involving power poles with power cables
Work on underground power distribution lines: Construction and maintenanceof underground distribution lines facilities involving power cables underground

Mitsuru Fujii
Managing Director and Executive Officer,and Acting Division Manager of Social Infrastructure Division

Progress on improving productivity andstrengthening profitability

Power distribution line engineering work
supports the stable supply of electric power,with top-class construction systems andtechnical capabilities in Japan. In addition tocontributing to the expansion of orders forrenewable energy-related construction, we
aim to realize a sustainable society while
pioneering new growth areas.

Productivity innovation, the first key policy of theMedium-Term Management Plan, is the highest priority
issue for addressing the legal cap on overtime work thatwill be applied from fiscal 2024. For this reason, we aremaking business process reforms by improving worksite
support systems and reviewing worksite paper work,
while we also work on research and development of
items that contribute to work load reduction, such as
assist suits, assist tools, and small diameter curved piping
method. At the same time, we are working to improve
efficiency by thoroughly applying digital technology, suchas remote worksite management using mobile devices
and wearable devices.
In the second key policy, rebuilding our earnings base,
we are focusing on initiatives to strengthen our work
execution abilities. In parallel with the promotion of multiskilled workers and flexible sharing of human resources
between departments that we have worked on so far, we
will flexibly allocate work execution abilities over a wide
area according to the work volumes. In addition, we areworking to support the human resource development ofpartner companies, to maintain and secure work execution
abilities in the future. In addition, by using the technology
and knowledge we have cultivated so far, we are working
to secure orders for undergrounding of power lines
outside the Kanto region, and to secure more orders forgeneral construction work such as EV charger installation

Fiscal 2021 review and current developments
In fiscal 2021, both orders and completions decreased
due to sluggish acquisition of construction work fromgeneral customers (other than TEPCO) for undergroundpower distribution line engineering work. On the other
hand, in overhead power distribution line work, measures
we have taken to improve productivity have steadily
produced results, and TEPCO’s construction has grown.
As a result, new orders received totaled ¥104,240
million, a decrease by ¥44 million or 0.1% year on year,
and net sales of completed construction contracts totaled¥102,264 million, a decrease by ¥413 million or 0.4%
year on year, both of which maintained the same level as
the previous fiscal year. Construction contracts brought
forward as of March 31, 2022 totaled ¥24,122 million,
an increase by ¥1,975 million or 8.9% year on year.
29

Looking at the order environment surrounding power
distribution line engineering work, since the revenue cap
system which obligates electric power companies tosystematically update equipment will start in fiscal 2023,
we expect TEPCO construction to perform steadily,
centered on gradual equipment maintenance and aging
measures. As the national and local governments are
expected to advance plans to promote the undergroundingof power lines, we believe that it is necessary to steadily
capture related demand. For wind and solar power
generation infrastructure, which are the key to realizing adecarbonized society, we will develop sales activities incollaboration with electric power & civil engineering work
divisions, and proceed with the development of sales andconstruction systems to meet the demand for installationof EV chargers, which is expected to spread and expand
driven by the policy of the national government.
As for performance in fiscal 2022, we expect progressin a large amount of work on hand for both overhead
power distribution line work and underground power
distribution line work, so we forecast new orders receivedof ¥106.0 billion and net sales of completed construction
contracts of ¥105.0 billion.

KANDENKO

work. We are striving to strengthen our ability to generate
profits by working on these measures together withproductivity improvement measures mentioned earlier.
During the remaining two years of the Medium-Term
Management Plan, we will accelerate these initiatives
while steadily implementing measures to strengthen our
foundations for future growth. By doing so, our division
will work as one to contribute to the achievement of thegoals set for fiscal 2023 and the realization of a green
innovation company beyond.

Role aimed at realization of a decarbonized andresilient society
In power distribution line engineering work, we are making
efforts to reduce CO2 emissions, such as by switching tobattery-powered aerial work platforms and electrifying
hydraulic tools used in business operations. In addition tothis, we are actively developing sales activities for EV charger
installation work and renewable energy related work. We
believe that societal demand will continue to grow for
initiatives aimed at realizing a decarbonized society.
We also recognize that our mission of supporting theelectric power infrastructure, which we have inherited
since our founding, will remain unshakable even in theresilient society we face in the future.
We intend to evolve into a division that grows with thedevelopment of society by accurately grasping new demands
arising from social changes and contributing to theestablishment of a sustainable and resilient power supply
system.

Work on overhead power distribution lines (Kanagawa Prefecture)

New orders received(Millions of Yen)

99,637*

100,825*

Fiscal 2017

Fiscal 2018

107,001*

104,285*

104,240

Fiscal 2019

Fiscal 2020

Fiscal 2021

Net sales of completed construction contracts(Millions of Yen)

93,240*96,499*Fiscal 2017

Fiscal 2018

106,181*

102,678*

102,264

Fiscal 2019

Fiscal 2020

Fiscal 2021

Cable connection work for underground distribution lines facilities (Tokyo)* Reference figures after application of the “Accounting Standard for Revenue Recognition.”

Integrated Report 202230

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Sustainability

Financial, Non-financial &Corporate Data

| Business Review by Division |Social Infrastructure Work

DescriptionofBusiness

Electric Power & Civil Engineering WorkPower generation and transformation work: Work on power stations and substations, and renewableenergy power generation
Transmission lines work: Work on overhead transmission lines
Civil engineering work and underground lines work: Work on underground transmission lines, andcivil engineering work using C.C. Box technology
Nuclear power work: Regular inspections and maintenance of nuclear power plant facilities and equipment

Koichi Nakahito
Managing Director and Executive Officer,and Acting Division Manager of Social Infrastructure Division

Electric power & civil engineering work engages
in renewable energy-related projects as its
growth driver, which continue to be introduced
more broadly. We will utilize the technicalcapabilities and work execution abilities wehave cultivated so far to demonstrate ourcomprehensive strengths, in pursuit ofachieving carbon neutrality.
Fiscal 2021 review and current developments
In fiscal 2021, orders for power generation andtransformation work, transmission line work, civilengineering and underground lines work, and nuclear
power work increased, as we won projects such as pipeline
work near Matsuzakidai, Inzai City (Chiba Prefecture), theAmaterasu Shiroishi Solar Farm extra-high voltage substation
work (Miyagi Prefecture), Amada Fuji sales office extra-highvoltage substation renewal work (Shizuoka Prefecture), andconstruction of the National Route 4 electric wire utility
tunnel in Kizawa, Oyama City (Tochigi Prefecture). However,
due to a reactionary decline following the large-scale
renewable energy-related construction orders received in theprevious fiscal year, new orders received for the division as
31

KANDENKO

a whole fell below the previous fiscal year to ¥56,740
million, a decrease by ¥8,051 million or 12.4% year on
year, and the ratio of orders received from generalcustomers other than the TEPCO Group was 69.6%.
In terms of net sales of completed construction
contracts, while completions based on the progressstandard was sluggish for transmission lines work,
underground lines work, and civil engineering work, due
to an increase in power generation and transformation
work and nuclear power work, we secured roughly thesame level as the previous fiscal year at ¥47,928 million,a decrease by ¥695 million or 1.4% year on year. As of
March 31, 2022, the construction contracts brought
forward remained at the high level of ¥90,989 million,
an increase by ¥8,812 million or 10.7% year on year.
In the current order environment, many projects related
to renewable energy are being planned, and large-scale
offshore wind power generation projects are attracting
attention in particular. In this growth field, we will use ourconstruction know-how for ultra-high voltage substations
and cable connection technology for long-distanceunderground transmission line work as we engage in efforts
to expand orders for a wide range of projects, from power
plant work to private lines and substation work.
In addition, capital investment by users of extra-highvoltage power service such as large-scale factories hasrecovered to the same level as before COVID-19 pandemic.
As such, we will actively develop collaborative sales withelectrical engineering, environmental facilities and systems,
and renovation work divisions, and carry out the designand construction of everything from extra-high voltage
power intake and transformer equipment in factories topower transmission lines of electric power providers.
Entering fiscal 2022, with the situation in Ukraine andthe rapid depreciation of the yen, there are concerns about
our procurement costs rising and our customers revising
their plans. However, under the national policy of aiming toachieve carbon neutrality by 2050, it is possible that manyplans will be advanced in the medium to long-term andthey will be put into operation at one time. For this reason,
we will promote proposal-based sales in accordance withactive information gathering, and work to strengthen andexpand our design capabilities and work execution abilities.

delivered materials that leads to labor saving at worksites,
worksite patrols using web cameras, and document
preparation using tablet devices, as they are expected tobe highly effective. At the same time, we are working tostrengthen the management of each project by appointing
project managers, and to pass on technology and knowhow through tours and guidance by veteran employees.
Next, in strengthening our ability to generate profits, weare achieving results by setting targets before the start ofconstruction and working as a team to closely manage theprogress of construction processes, as well as by working
with a sense of speed in formulating and implementing
support measures that ascertain the needs of worksites byutilizing web conferences and other means. By sharing
good practices, know-how, and methods obtained in thismanner with people at many other worksites as appropriate,
we are aiming to raise the level of the entire division.
Meanwhile, our biggest issue is securing andstrengthening work execution abilities. In particular, there
are many renewable energy-related projects for which we
receive collective orders as collaborative projects involving
multiple work categories, such as power generation andtransformation work, transmission lines work, and civilengineering work. For this reason, we are striving tostrengthen our work execution abilities by making ourconstruction workers multi-skilled and providing advanced
technical support as appropriate. In particular, we plan toincrease our strengths by increasing the number ofengineering staff responsible for connecting cables thathave a voltage of 154 kV or higher. Furthermore, we will
strengthen our design capabilities through cooperation withgroup companies. We are striving to continuously secure
regular and year-round recruits, and we will also promote

human resource development that contributes to their early
development of practical skills.In fiscal 2022, the second
year of our Medium-Term Management Plan, we anticipatea record high in new orders received of ¥75.0 billion, driven
by large-scale renewable energy-related construction
projects. As of the beginning of fiscal 2022, the amount ofconstruction contracts brought forward is at a high level of¥90.0 billion. As a result, we are forecasting net sales ofcompleted construction contracts of ¥55.0 billion, an
increase of ¥7.0 billion from fiscal 2021.

Construction of wind power plant

Construction of solar power plant

New orders received(Millions of Yen)

64,79258,901

56,74051,82945,824Progress of improving productivity andstrengthening earnings baseIn terms of the progress of business development basedon the Medium-Term Management Plan, we arepromoting a drastic review of business processes andmeasures to improve efficiency in order to improve
productivity. In particular, we will continue to expand theintroduction of prefabricated and modular units ofRenewable energy is expected to be more common in the
future, but as the amount of power generated is affectedby weather conditions, we believe that the need forconstruction of storage battery facilities will increase
rapidly in order to adjust to fluctuating power supply anddemand. In addition to strengthening our efforts so far,we will aim to offer our customers the facility design andoperation that are optimal for both renewable energy
power generation and storage battery, taking into
consideration multiple uses such as balancing supply anddemand and disaster prevention. In the future, we will
also explore the development of green hydrogenproduction equipment using electricity generated fromrenewable energy sources, and we aim to contribute to
the advancement of next-generation energy usage.
Finally, to support a sustainable future and contribute toaddressing environmental and social issues, we aim tobecome a leader in total solution services, including
planning, design, construction, operation, and maintenance,in addition to traditional “construction contracting.”

Net sales of completed construction contracts(Millions of Yen)

50,184

Aiming to contribute to a sustainable society

50,331

48,62347,928

Fiscal 2019

Fiscal 2020

Fiscal 2021

35,127

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2021

Fiscal 2017

Fiscal 2018

Integrated Report 2022

32

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Sustainability

Financial, Non-financial &Corporate Data

| Research and Development Activities |Fiscal 2022 basic policy on technology development

Toshiaki Makino
Senior Executive Managing Officer,
Division Manager of Strategy & Technology Development Division

Review of our activities in fiscal 2021
The research and development division consists of theTechnology Development Unit established within the Strategy& Technology Development Division, with the Technology
Development Department and Technology Research &Development Institute as subordinate organizations. The
division provides technological support and cooperates withworksites and customers, while promoting research andtechnology development aimed at expanding KandenkoGroup’s business domains and solving issues.
In fiscal 2021, based on the Medium-Term
Management Plan, we have mainly worked on themes
such as: labor-saving and manpower-saving inconstruction work by using IoT, AI, and robots, applying
digital technologies to worksite risk countermeasures,proposals for resilience of power and communication
infrastructure, and promotion of technology development
through industry-academia collaboration.
The use of transport robots and drones and theautomation of power transmission line extension work
have been successful in labor-saving and manpower-savingin construction work. In addition, our BLuE measurement
recording support system is contributing to improving
work efficiency at many worksites. In particular, BLuE
received the Minister of Economy, Trade and Industry
Award at the “JECA FAIR 2022 Product Competition” inJune 2022, and it has been well evaluated.
In terms of worksite risk countermeasures, approachsensors that prevent electric shock accidents by giving
alarm sound and flashing when the worker approaches
the live part are more widely being introduced. This isalso attracting attention from outside of the Company,
and we have received many inquiries from electric powercompanies and railway companies as well.
In fiscal 2021, we actively provided dozens of technicalcooperation and proposals to construction sites in order
to bolster the resilience of power and communication
infrastructure. When considering resilience, it is very
important how much we suppress the damage whendisaster strikes and how to recover quickly, so we areworking to improve our ability to respond by creating a
database of our past experience and know-how.
In promoting technology development through industryacademia collaboration, we are making progress in joint
research with Tokyo Denki University, with whom wesigned a comprehensive industry-academia partnership
33

KANDENKO

agreement in 2020, and we achieved results such as
optimizing the seismic construction method for cable racks.
Industry-academia collaboration has brought great benefits
to the Company in terms of speeding up development andacquiring knowledge of the latest technological trends.
As represented by these, we believe that we made steadyprogress toward achieving our goals in fiscal 2021. The newly
established Technical Strategy Team is also leading the way interms of internal and external deployment of development
results. On the other hand, we also recognize the importanceof appropriately reviewing the direction of our research anddevelopment, while accurately ascertaining the ever-changing
needs of society and ever-advancing technology.

Policies and themes in future technology
development plans
The priority items for fiscal 2022 are to continue researchand development related to digitalization androbotization, which are directly linked to productivity
improvement as a general infrastructure company, and tocontinue to deepen the fields of disaster prevention and
BCP and decarbonization, which contribute to thesustainable development of society.
Digitalization and robotization are very important themes
as the legal cap on overtime work is about to be applied.
In order to meet the needs of worksites, in terms ofdigitalization technology, we aim to expand the functionsof BLuE and increase the number of target measuring
equipment to 100 models by the end of fiscal 2023, while
we will also promote the use of power failure and recovery
simulation software. We will also strive to strengthen thedevelopment of and improve the environment for humanresources who specialize in robotization technology anddata analysis technology, and promote research anddevelopment that meets worksite needs.
Next, in the field of disaster prevention and BCP, using
the knowledge and know-how that we have accumulated
through our abundant experience in restoring
infrastructure after natural disasters, we have been
providing various products we developed, such astransformer seismic resistance devices as a countermeasureagainst earthquakes, lightning, and electromagnetic waves.
In addition to continuing to promote the use of theseresources, we will expand the range of research anddevelopment to flood and volcano countermeasures topropose comprehensive disaster prevention solutions, andPriority items

Expansion from existing business

The Research and Development Division supports our
growth strategy toward becoming a 100-year company
by giving shape to the solutions that customers requireand providing the technology necessary at construction
worksites. We will contribute to the creation of asustainable society based on three key terms: digital androbotics, disaster prevention and BCP, anddecarbonization.

2021

Discovering themes of disaster prevention and
BCP and decarbonization, while continuing thedevelopment for digitalization and robotization

Technology development related todecarbonization that contributes tosustainable growthTechnology development related
to disaster prevention and BCP
Technology development related todigitalization and robotization that contributes
to improving the efficiency of existing businesses

2022

2023

we will work on our research and development while
receiving knowledge from external sources.
Technology development related to decarbonization is thetheme that we should strengthen the most in the medium
to long-term. There are two main approaches to our efforts,
one of which is related to the use of energy represented by
ZEB. For example, we are planning to add energy demandprediction functions and deterioration diagnosis functions tothe central monitoring system EcoBACS, which centrally
manages the operation status of building infrastructure, andaim to build a system that contributes to overall optimization
using local 5G and other technologies. The other approachis related to the circular economy and recycling-oriented
resource use. We are currently expanding the introductionof prefabrication and modular unit construction methods, as
they have the potential to significantly change the structureof the supply chain at construction sites in the future. Goingforward, we will consider methods to recycle materials andequipment supplied to worksites.
In addition, the research and development division
recognizes intellectual property strategy as an importantfactor in the sustainable growth of the Company, andimplements systematic initiatives. With theaforementioned keywords of digitalization androbotization, disaster prevention and BCP, anddecarbonization, we are working to create intellectual
property for construction technologies that have not yet
become apparent. At the same time, through thevisualization of technical information, we carry out thenecessary discovery of intellectual properties prior to theimplementation of management strategies and researchand development strategies, and we plan to promote theutilization of 138 intellectual properties owned by theCompany (as of March 2022, excluding trademarks).

2030

2044

unlike manufacturers, of being able to immediatelyreflect the opinions from worksites to the process of
research and development, and implement thetechnology. This advantage is proven by our industryleading number of intellectual property holdings. In orderto harness the potential of this advantage for future
leaps forward, we recognize the need to improve ouranalysis technology and multifaceted thinking, as well as
to further heighten our cost awareness.
And we, the research and development division, will
create the technologies necessary for our sustainablegrowth, and provide solution services that will not only
meet societal needs such as decarbonization andresilience, but also contribute to the development of theconstruction industry as a whole. At the same time, bydemonstrating our function as an in-house think tankand promoting research and development that leads to
new businesses, we will play the role of a growth engine
for realizing our vision of becoming a green innovationcompany by 2044, when we celebrate our 100-year
anniversary.
R&D expenses (Millions of Yen)
1,663
1,381

1,428

1,522

1,217

Role of the research and development divisionin sustainable growth
The Kandenko Group, which conducts businesses
centered on infrastructure work, has an advantage,

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2021

Integrated Report 2022

34

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Financial, Non-financial &Corporate Data

Sustainability| Research and Development Activities |Development of “approach sensors”

Research and Development System

Examples of Initiatives

Based on the Medium-Term Management Plan, in order to contribute to solving a wide range of social issues in addition
to the issues facing construction sites, the Kandenko Group is focusing its efforts on three areas: technology development
related to digitalization and robotization, technology development related to disaster prevention and BCP, and technology
development for the realization of a carbon-neutral society.
In fiscal 2021, we will conduct research and development activities with a particular focus on technology developmentthat creates worksite earning power. In terms of technology development that contributes to robotization, we havedeveloped robots that support the transportation of materials and equipment, as well as energy demand forecasting
software for a carbon-neutral society. In addition, we have promoted the strengthening of technology development
through industry-academia collaboration, starting with research and development based on a comprehensive partnershipagreement with Tokyo Denki University. R&D expenses in fiscal 2021 were ¥1,663 million.

Technology Research & Development Institute

Development of electrical material andequipment transport robot
As construction workers decrease in number and growolder, reducing the workload and improving work
efficiency in transporting materials and equipment has
become a major issue. Therefore, we are developing arobot for transporting electrical equipment and materials
equipped with automatic following, unmanned transport,
step detection, automatic stop, and other functions. We
will strive to expand the functions of this robot andimprove its operation method to save labor and improvesafety in onsite work.

In order for conventional live wire alarm devices to work,
the main body of the device must be close to a live part.
For this reason, we have worked jointly with Sanwa
Electric Instrument Co., Ltd. to develop and commercialize
the “approach sensor”, a helmet-mounted live wire alarm
device that gives alarm sound and flashes when any partof the body approaches a live part, to warn the wearerof danger. This approach sensor adopts a completely
new principle of electricity detection that focuses on the
charged state of the person wearing it, and it has beenhighly evaluated both in Japan and overseas, for its highlevel of development technology and the degree ofcontribution to electrical safety. By promoting the use ofthis approach sensor, we are working to prevent electric
shock accidents and enhance work safety.

The Technology Research & Development Institute consists of a researchbuilding, experiment building, and outdoor testing site. In thelaboratories of the experiment building, we conduct basic experiments
to respond to new construction technologies and conduct verification
experiments for development results. The institute also houses special
equipment, such as electron microscopes and X-ray inspection
equipment, to enable us to respond to any kind of onsite technicalissues. Recently, we have introduced analysis systems, including various
simulations, and we are working to disseminate more reliable results byusing those systems in combination with experimental validation.

High-Voltage Laboratory
The High-Voltage Laboratory is made up of a test room, physical test room, working room, and outdoor water tank usedfor voltage resistance tests. In the test room, we have large-scale experiment devices, including a 350 kV-AC voltage
generator, a 1,800 kV-impulse voltage generator, and a high current generator. We use this testing equipment to test
lightning damage and verify countermeasures, and conduct voltage resistance tests on products. We have received
requests from many customers to use the facility because other companies in the industry do not have any similar facilities.

Development of “energy demand forecasting software”
Predicting consumption of energy such as electricity and gas is anindispensable technology for optimizing energy consumption in building
infrastructure and for the power supply and demand balancing market,
including VPP. Accuracy and immediacy are required for such predictions,but the issues with conventional general methods are the large margin oferror and the long time required to give predictions. Therefore, we are using
not only weather information but also the data we have accumulated so far,to develop an energy supply and demand forecasting software with higher
accuracy and superior responsiveness. Going forward, we will contribute to
the realization of a decarbonized society by optimizing energy management
using this software.

Intellectual Property Initiatives
Intellectual properties owned by the Company are focused on construction methods, tools, and equipment that lead to
improvements in construction efficiency and ensuring safety and quality. In addition to these worksite construction
technologies, possessing a large number of digitalization technologies that have been attracting attention in recent years isdirectly linked to our competitive advantage in the industry. Therefore, we are actively patenting these technologies.
In addition to continuing these efforts, we will work on research and development in areas such as carbon neutrality,
disaster prevention, and BCP, while using external resources
such as industry-academia collaboration, and will work to
Number of patents held by the Company
convert the results into intellectual property.
143
140
As of March 2022, we hold 138 patents, of which 74 are
138
138
related to tools and equipment, 49 are related to construction
123
methods and inspection methods, and 3 are related to digitaltechnology and information processing, along with 12 othervarious patents. This number of patents in our possession gives
us a great advantage over other companies. We will continue
to deepen our existing technologies to strengthen ourcompetitiveness, and work to build an intellectual property
portfolio with a view to new fields that will contribute to the
expansion of our business areas and services.
Fiscal 201735

KANDENKO

Fiscal 2018

Fiscal 2019

Fiscal 2020

Development and application of methods for small diameter curved piping
Along with progress of the plan to promote undergrounding of power lines, we have started developing new construction
methods, one of which is the small diameter curved piping method. This method makes it possible to perform buried
piping work without drilling, significantly shortening the work process. In addition to saving labor and manpower in onsite
work, it greatly contributes to improving the work environment, since it eliminates the need to remove obstacles such as
sidewalks and walls.
First process(roadway)

Second process(user)(roadway)

Push jacking
pipe(user)

Pull laid pipe

Fiscal 2021

Integrated Report 2022

36

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

Initiatives to Strengthen Foundations for Future Growth
The Kandenko Group creates synergy as a general infrastructure company by bringing together the technologies
and know-how possessed by both the building infrastructure and social infrastructure divisions. We are also aiming
to strengthen our foundations for future growth, such as by establishing a presence in fields where medium tolong-term demand is expected, such as disaster prevention, BCP, and decarbonization. Here, we will introduce someof these initiatives.

Isumi City Regional Microgrid Construction Project
In July 2021, we started the Isumi City regional
microgrid construction project jointly with Isumi City,
Chiba Prefecture and TEPCO Power Grid, Inc. Isumi
City, located in the southern part of the Boso
Peninsula, is undertaking countermeasures against
natural disasters, based on lessons learned from thedamage by a typhoon in 2019. This project is intended
to establish a stable power supply system for areas inwhich the city hall and junior high schools designatedas evacuation centers are located, which will be
important bases in the event of disasters.
In parallel with this project, we are now proceedingwith the final verification experiment of the power supply
system in the regional microgrid. In this verification
experiment, we are collecting practical data assuming
black start, which is the process of starting power supply
with power generation equipment in the region in theevent of a power outage, as well as the behavior whensystem equipment fails. In addition, a major feature ofthis power supply system is that it uses LP gas generatorsdeveloped by the Company for power supply balancing.
Conventional power supply systems for regional
microgrids often combine solar power generation andstorage batteries, and they have the issue of reoccurring

power outages when the storage batteries are drained.
By incorporating a disaster-resistant LP gas-fueled
generator, we have made the system capable of copingwith long-term power outages.
The results obtained from this verification experimentwill be used in Isumi City’s regional microgrid project.
We will accumulate know-how through this project andcontribute to the realization of a sustainable and resilient
society.

Initiatives for Local 5G
Since the advent of the next-generation communication
standard 5G, the shift of society to digital transformation isaccelerating. We see this as a major business opportunity,
and we are focused on initiatives for local 5G, in which
local governments and companies take the lead in building
their own 5G networks in specific regions and buildings.
Since local 5G networks are independent of outside
networks, they are effective in ensuring high security
and maintaining communication functions in the eventof a disaster. It is expected that they can be used invarious scenarios, such as smart cities and VPPs (virtual
power plants).
We participated in a development verification projectin Urasoe City, Okinawa Prefecture implemented by the

Ministry of Internal Affairs and Communications. We arealso undertaking various initiatives such as opening a
new Local 5G Lab, a verification experiment facility anda place for promotion to customers, and we arecommitted to the accumulation of more knowledge andknow-how.
Going forward, we will continue to use theengineering capabilities we have cultivated as a general
infrastructure company to provide one-stop services fromplanning to design, construction, and maintenancerelated to local 5G, as we aim to realize various ideasthat accurately ascertain the needs of our customers.

Using local 5G for emergency restoration of TV broadcasting in the event of adisaster (Urasoe City, Okinawa Prefecture)

Racks for storing core servers, etc. installed in the Local 5G Lab

What are regional microgrids?
A regional microgrid is a self-sufficient power
supply network within a certain area, built using
renewable energy power generation. With thissystem, environmental burden can be reducedwith the use of renewable energy, and in theevent of a major power outage, it serves as a
backup for the power transmission and distribution
system managed by electric power companies. This
increases the continuity of the power supply, andmakes it possible to create an environmentfriendly and disaster-resistant community.

(1) Power outage due to disaster

Isumi City regional microgrid

Generalhousing, etc.
(users)Chiba Prefecture(2) Power
cutoffSolar power
generation
Storagebatteries,etc.

(3) Power
supplySolar power
generation

Junior highschools(designatedevacuation
center)37

KANDENKO

Initiatives for EV Charging Stations

City Hall(disaster
prevention
base)Electric powercompany

Isumi City

The shift from gasoline vehicles to electric vehicles (EVs) is
progressing rapidly, aimed at the realization of a decarbonizedsociety. In Japan as well, it is assumed that the rapid development
and expansion of EV charging infrastructure will be needed in thenear future, and we hope to capture this demand and work to
expand our market share. In addition, we will build a track recordof EV charger installation work, accumulate new technology andknow-how, and aim to build a comprehensive platform for EV
charging stand installation and construction.

Integrated Report 2022

38About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

Productivity Innovation Initiatives
Based on the key policy of productivity innovation in the Medium-Term Management Plan, which started from fiscal
2021, the Kandenko Group is improving the efficiency of on-site construction with the use of prefabrication
construction method, and saving labor and manpower in onsite work by introducing IoT, AI, and robots, while also
promoting operational efficiency by thoroughly utilizing digital technology. Here, we will introduce some of these
initiatives.

BLuE Measurement Recording Support System
In June 2022, at JECA FAIR 2022 (the 70th Japan
Electrical Construction Association Expo), the largest
electrical equipment exhibition in Japan, the BLuE
measurement recording support system developed by theCompany won the Minister of Economy, Trade andIndustry Award.
BLuE wirelessly connects measurement instruments
such as illuminance meters and insulation resistancemeters to PCs and tablets, and automatically inputs eachmeasured value into drawings.
Previously, it was necessary to handwrite values
measured on-site and then manually enter them into PC,
but BLuE enables to significantly reduce the workload
and eliminate the use of paper.

6Go Center, Off-Site Factory Serving as a Base for Prefabrication
Currently, there is a need to reduce workloads and save
manpower at construction sites in order to cope with the
declining working population in the construction industry.
We are promoting the introduction and expansion of the
prefabrication construction method as a measure to solve
this issue.
Prefabrication increases work efficiency by manufacturing
and assembling components in a factory, which werepreviously completed at worksites, and only performing
installation work on-site. Our prefabrication facility is locatedat 6Go Center in Higashirokugo, Ota-ku, Tokyo.
In addition to cable processing and rack assembly, 6Go
Center is also responsible for the storage of completed
components and timely transportation to worksites, andwe plan to further expand facilities and hire more
personnel in the future.

It has already received positive feedback from manycustomers due to its high versatility and ability to support
various formats.

Worksite Support System
We have developed a worksite support system as part of
the revision of the worksite management process aimed
at improving productivity, reducing work load andefficient worksite support.
As this system is designed to be accessed via a
network, it is capable of sharing information fromremote locations in a timely manner. With this system, in
addition to centralizing management of worksite progress

Cable rack assembly work

status, conversion of administrative tasks to back-officetasks, and provision of construction technology andknow-how to young employees, it is expected to be
used as big data in the future by accumulating
construction information.
We will continue to improve this system as a standard
tool for worksite management.

Overview of prefabrication
6Go Center
Delivery

Auto wire skinning machine for automatic cable cutting and terminal processing

Primary material
order

Functions as a processing
factory

Selected as a DX-certified Operator by the Ministry of Economy, Trade and Industry

Company (server)
Proce
ssing

Overview

Components are delivered just in time, and only
installation is done at worksites
Work time including travel time within theworksite is significantly reduced
Ensures work safety in a well-organizedenvironment, and averages construction quality
Contributes to reduction of industrial waste on-site
39

KANDENKO

Order with detailed drawings
Primary material
supplier(electrical materials store)

Check withprocessing
drawings,
start
manufacturin
g after
approval, anddeliver

DeliveryEffects

Processing
drawing
room

Order

Among tasks of processing, assembly, andinstallation done at worksites, it handles
processing and assembly
The factory creates processing drawings basedon drawing data from worksites, and performs
processing after worksite checks the drawings

Inspection
Shipping

Packing
Material
manufacturer

Material stock function
WorksiteOn April 1, 2022, the Company was certified as aDX-certified operator by the Ministry of Economy, Tradeand Industry.
The Digital Transformation Certification is a system bywhich the Ministry of Economy, Trade and Industry
certifies businesses that have formulated management
visions, developed DX strategies and systems, and areready to promote DX (DX-Ready), based on the “Act on
Facilitation of Information Processing.”
Using the acquisition of this Digital Transformation
Certification as an opportunity, we will promote DX in
the construction field, including further improvement of
production efficiency using the data accumulated in ourworksite support system that we are building toundertake new production methods.

Going forward, we will continue to accurately trackchanges in the business environment such as population
decline, aging, and decarbonization, while also
contributing to solving social issues such as SDGs
(Sustainable Development Goals) by providing new value
through DX promotion.

Integrated Report 202240

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Financial, Non-financial &Corporate Data

Sustainability

Sustainability Management

Basic Sustainability Policy

Identification of Materialities (Important Issues)

The Kandenko Group is committed to increasing corporate value through sustainability, which is the foundation of our
Corporate Philosophy, and is working to contribute to value creation for all stakeholders, environmental conservation, andthe sustainable development of society.

The Kandenko Group has identified materialities (important issues) to solve social issues through our business activities andto grow sustainably together with society.
Materialities (important issues) will be incorporated into the Medium-Term Management Plan and into action plans, andwill be reviewed annually.

Creating a rich environment
Through our sound management and business activities, we will work to protect the global
environment, including reducing CO2 emissions and preventing disasters, as well as to create social,living, and working environment in which people can live rich and happy lives.

Identification processes
STEP 1

Identifying social issues

The ESG Promotion Committee, consisting of the Management Planning Department andother leading departments, has been established to identify social issues by referring toand analyzing international guidelines such as ISO 26000 and GRI Standards, and the SDGs.

In order to bring mutual prosperity to everyone, including our shareholders, customers, local
communities, and Group employees, we will pursue employee health and job satisfaction, andfoster a corporate culture of continuous growth through continuous self-improvement.

STEP 2

Evaluating the importanceof social issues

With regard to the social issues identified in STEP 1, we identified issues of highimportance from two perspectives, namely, importance to stakeholders (society) and
importance to the Kandenko Group.

Change and diversity

STEP 3

Evaluating measures andreviewing validity

We evaluated the measures to be taken for the issues identified in STEP 2, taking into
account their relevance to the Medium-Term Management Plan, and we reviewed the issues
by seeking opinions from outside experts, in order to confirm the validity of our evaluations.

STEP 4

Identification of Materialities(Important Issues)

We identified materialities (important issues) the Kandenko Group should address throughour business activities based on deliberations and discussions at the Management Council
and Board of Directors meetings. Going forward, we will continue to review our efforts
based on the status of our initiatives and the business environment.

Working for everyone

By maximizing the abilities of our human resources, who have diverse ideas and characteristics, wewill work to create high value-added services that anticipate the changing times and customer needs.

Under our management vision, “Becoming a 100-Year Company supporting society,” the Kandenko Group isaiming to become a “green innovation company” that can contribute to the creation of safe and comfortablecommunities and provide high value to society and our customers through the integration of building infrastructure andsocial infrastructure businesses, which are our core businesses.
We have formulated a three-year Medium-Term Management Plan starting in fiscal 2021, and are promoting five key
policies, namely productivity innovation, rebuilding our earnings base by demonstrating our comprehensive strengths,
strengthening foundations for future growth, promoting sound management activities, and reinforcing “people first.” In
addition to these key policies, from fiscal 2022, in order to promote management that incorporates sustainability into ourbusiness strategy, we identified materialities as issues that the Kandenko Group should particularly focus on from among awider range of social issues, and incorporated materialities into our key policies.
The Kandenko Group will target the areas of “decarbonization” and “resilience (disaster prevention + BCP)” andstrive to form the foundation for contributing to the realization of sustainable cities and regions beyond these target areas.

Importance to stakeholders

Sustainability and Management VisionHigh

Environment

Public policy

Society

Resource recycling and waste
Diversity & inclusion
Compliance and risk
management

Climate change
Energy conservation and renewable energy
Safety and quality
Maintenance and development of social infrastructure

Human resources development
Disaster prevention and recovery
Innovation
Information security
Supply chain
Corruption prevention

Human rights
Workstyle reform
Digital transformation
(DX)

Water
Biodiversity
Environmental management

Fair evaluation and treatment

Labor-management relations
Local community

Employment
Anti-competitive practices

Tax
Transparency andinformation disclosure

Importance to the Kandenko Group

Safe and comfortable life for people

Enhance value for companies and other customers
Materialities
for corporate

value
creation

Realization of sustainable cities and regions

Decarbonization

Resilience (disasterprevention + BCP)

Maintenance and construction of safe
and comfortable social infrastructure ccupational safety and high-quality
O
construction
Disaster prevention and recovery initiatives
Maintenance and development ofsocial infrastructure

KANDENKO

High

Promotion of innovation

Contribution to a decarbonized society nhancement of operational efficiency
E
and technological innovation
Pursuit of new business models

Response to climate change
Energy conservation and expansion ofrenewable energy
Contribution to a recycling-based society

Reinforcing “people first” (human resources)

Materialities
for businessfoundation
continuation

Respect for human rights Diversity & inclusion Reforms of work practices and annual leave systems
Strengthening human resource development
Maintaining and improving partnerships with partner companies and material suppliers

Strengthening sound management foundation
Thorough compliance and risk management

41

Governance

Ensuring information security

Integrated Report 202242About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

Sustainability Management

Materialities (Important Issues)

Maintenance and construction of safe and comfortable social infrastructure

Related SDGs

The Kandenko Group will fulfill its mission of constructing safe and comfortable facilities,
maintaining and developing social infrastructure, and providing disaster restoration and recovery
work, and will contribute to the realization of a sustainable society by solving urban and regional
problems and creating new communities.
For society and customers

Kandenko initiatives

Construction and maintenance of electric power facilities
that support daily life and business activities
Renovation and maintenance of facilities, BCP measures
Railways, roads, water supply, and local 5G-related
construction
Participation in creating new communities (regional
microgrids, smart cities, etc.)
Initiatives for urban data center development business

Ensuring occupational safety (compliance with rules andprocedures)
Thorough implementation of rules for building safe,
high-quality facilities
Thorough health management
Research and development of technologies andconstruction methods to improve occupational safety
and quality

Contribution to a decarbonized society

Related SDGs

The Kandenko Group will promote our internal initiatives to reduce environmental burden, while
also contributing to the creation of a rich social environment through the construction ofrenewable energy-related facilities and the introduction of decarbonization and energy-saving
solutions in office buildings, factories, and other public facilities.

Reinforcing “people first” (human resources)

Related SDGs

In order to exemplify our “People first” philosophy that aims for mutual prosperity of all people
in society, we believe that the Kandenko Group must work together with our partners, including
partner companies and material suppliers, to pursue high value-added services by improving ourtechnologies and skills.
We call this “people first,” and we promote it as the driving force behind our businessactivities, in order to contribute to society.
Kandenko initiatives
Training professional human resources who are trusted by our customers (job leveltraining and on-the-job training)
Communication (mutual understanding through dialogue and communication)
Maintaining and improving partnerships with partner companies and material
suppliers, etc.
Promotion of workstyle reforms (review business processes, use remote working andIT equipment)
Promotion of diversity (promote advancement of women, hire people withdisabilities, encourage male employees to take parental leave)
Enhancement of educational programs (enhance training content, use VR/AR)
Development and sharing of human rights and procurement policies

Strengthening sound management foundation

Related SDGs

The Kandenko Group ensures management transparency through risk management andcompliance, which are the basic premise of management, and promotes management to remain
trusted by society.

For society and customers

Kandenko initiatives

Propose decarbonization and energy conservation solutions
for facility construction and operation
Promotion of renewable energy power generation business
Construction of renewable energy related facilities

Reduce CO2 emissions from construction
Research and development of environmentally-conscious
technologies and construction methods
Reduce energy consumption through equipment upgrades, etc.
Promote introduction of EV vehicles
Control and properly dispose of waste

Promotion of innovation

Kandenko initiatives
Maintaining and strengthening governance structure
Appropriate risk and process management
Thorough compliance
Maintaining and strengthening information security measures

Related SDGs

In anticipation of the future of the construction industry, the Kandenko Group will pursue efficient
operations and promote technological innovation through the use of digital technology and other means,as well as pursuing a business model that contributes to high-quality facility construction,
decarbonization, and resilience through collaboration with diverse partners within and outside the Group.

43

For society and customers

Kandenko initiatives

Provide high-quality equipment by deepening
prefabrication and modular unit construction methods
Rapid and efficient restoration in the event of a natural
disaster
Facility water damage prevention

Business process redesign
Advancement of construction methods and management
processes (use of IoT, AI, robotics, and drone technology)
Improvement of operational efficiency by setting up a backoffice and improving IT systems
Joint research with universities, local governments, otherindustries, etc.

KANDENKO

For more information, please visit our “Sustainability” website.
>>>
https://www.kandenko.co.jp/sustainability (in Japanese)
Integrated Report 2022

44About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Materialities

Information Disclosure Based on TCFD Recommendations

Environment

SocialContribution to a decarbonized society

Governance

Climate change-related information disclosure(disclosure based on TCFD recommendations)
The Kandenko Group views climate change as one of the most important management issues, and is
working to reduce greenhouse gas emissions both internally and externally. In June 2022, we expressed
our support for the Task Force on Climate-related Financial Disclosures (TCFD).
In accordance with the Corporate Governance Code, which was revised in June 2021, we disclose thefollowing important information regarding climate change based on the TCFD recommendations.

Scenario groups used
Temperature increase (2100)
4°C increase

IEA WEO−

IPCC RCP
RCP8.5IPCC SSP
SSP5-8.5 (fossil fuel dependent)

2°C increase

APS (all countries that pledged net-

RCP2.6

SSP1-2.6 (emphasis on sustainability)

1.5°C increase

zero achieves net zero)
NZE(all countries that pledged netzero achieves net zero)

Financial impact calculation used

Introduction of carbon tax

SSP1-1.9 (emphasis on sustainability)
FloodsEquivalent to 4°C

with reference to 1850-1900

Governance

Equivalent to 2°C
Equivalent to 1.5°C

Source: United Nations Intergovernmental Panel on Climate Change (IPCC)
Sixth Assessment Report (AR6) Working Group I, Climate Change 2021

In order to address environment-related issues, we have established an ESG Promotion Committee, consisting of
the Management Planning Department and other leading departments, to formulate important policies andmeasures concerning environmental issues in general, including our response to climate change, and important
policies are reviewed and examined at meetings of the Management Council and the Board of Directors.
We incorporate the determined policies and measures in our management and business plans, implement
them, and follow up on their progress and impact to make further improvements and introduce new initiatives.

Reference: Materialities(important issues)
Important risks/
opportunities

Key risks and opportunities associated with climate change
The Kandenko Group provides end-to-end engineering services ranging from planning, design and execution to maintenance andrenovation, in the fields of building infrastructure, telecommunications infrastructure and electric power infrastructure.
With regard to the risks associated with climate change, we analyzed three scenarios for two categories of risks, which
are the “risks associated with the transition to a decarbonized society,” which will cause significant impact during thetransition under the 1.5°C and 2°C scenarios, and the “risks associated with the physical impacts of climate change,”
which will cause significant impact if the 4°C scenario is reached due to the failure to reduce global CO2 emissions.
Based on this analysis, we examined the impact on the Company and our response measures assuming short-term tolong-term risks in light of materialities (important issues), while some of the risks have not yet been calculated. We
calculated the maximum impact to be about 0.5% of sales, although the impact varies by scenario. We have concluded
that opportunities are directly related to important social issues such as energy conversion from fossil fuels to non-fossil
fuels, energy conservation, increasing demand for renewable energy, and disaster preparedness, that require short- to
medium-term responses.
Based on these, the Kandenko Group will fulfill its mission of “maintaining and building social infrastructure” andrespond to the issue of “contributing to a decarbonized society” with “decarbonization” and “resilience (disasterprevention + BCP)” solutions.
The following scenarios are used when considering the risks and opportunities associated with the transition to a
decarbonized society and the intensification of natural disasters.
Scenarios of transition to a decarbonized society
Scenarios developed by the International Energy Agency (IEA) under which the temperature increase at the endof this century is equivalent to 1.5°C (NZE) and 2°C (APS) compared to pre-industrial times
Scenarios of intensification of natural disasters
Scenarios developed by the Intergovernmental Panel on Climate Change (IPCC) under which the temperature
increases at the end of this century is equivalent to 1.5°C (SSP1, RCP1.9), 2°C (SSP1, RCP2.6), and 4°C (SSP5,
RCP8.5) compared to pre-industrial times

KANDENKO

Extreme weather and intensification of natural disasters*Calculated as of 2040, looking ahead to 2044, when the Company will celebrate its 100-year anniversary

Transition to a decarbonized society

Strategy
Risks and opportunities that may arise in the future as a result of climate change are identified in line with TCFD
recommendations and their importance is assessed from a materiality perspective.
Of these risks and opportunities, scenario analyses were conducted for the introduction of a carbon tax andflood and storm surge damage, based on the results of future projections by public agencies assuming 1.5°C,
2°C, and 4°C temperate increases, and the financial impact as of 2040* was calculated.

Storm surgeHigh physical risk impact

Change in global average temperature

45

Financial, Non-financial &Corporate Data

High transition risk impact

Maintenance and construction of safe and comfortable social infrastructure
Contribution to a decarbonized society
Promotion of innovation
Reinforcing “people first” (human resources)
Strengthening sound management foundation
Importance *1 *2 Timing*3

Impact on the Company

Increase in demandfor electricity due Opportunity
to higher
electrification rate
Expansion of needfor energy-saving Opportunityand decarbonizing
infrastructure
Increased demand
for renewable
Opportunity
energyWidespread use Opportunityof EV vehicles
Introduction of Risk
carbon tax
Strengthening of
decarbonization
Risk
policies

Increase in order opportunities due toexpansion of power generation andtransmission infrastructureHigh

Short- tomedium-term

Strengthen sales and construction systems
and technological capabilities forrenewable energy-related construction

Increased demand for ZEB and energysaving infrastructure and increasedorder opportunities

High

Short- tomedium-term

Promote sales proposals that take
into consideration the reductionof environmental burdenHigh

Short- tomedium-term

Strengthen sales and construction systems
and technological capabilities for renewableenergy-related construction
Strengthen system to expand
EV-related construction work
Reduce CO2 emissions by renovating own
facilities, promoting EV vehicles, etc.
Promote technologicaldevelopment related todecarbonization
Ongoing initiatives to tackle environmentrelated issues, and appropriate
information disclosure including
responding to TCFD recommendations
Participation in creating newcommunities such as smart cities
Initiatives for urban data center
development business
Enhance menu of proposals for
decarbonization, BCP, etc.
Reinforcement of construction
and management systems
Strengthen health management
Promote technology development
to improve the working
environment (digitalization,
robotization)
Renovate facilities to extend
building life and enhance theworking environment
Strengthen partnerships withpartner companies and material
suppliers
Establish disaster-resistant offices
taking business continuity into
consideration

Increased demand for infrastructure andfacilities related to renewable energy
and increased order opportunities
Increased opportunities for EV-related
construction orders
Taxation on CO2 emissions from businessactivities
Potential loss of order opportunities if
advantages are lost due to environmentconscious requirements (e.g., technology)
Delays in addressing environmental
issues by the Company could lead to adrop in investment from shareholders
and orders from customers

Short- tomedium-term
Medium to Short- tohighmedium-term
HighMedium to Short- tohighmedium-term

Mainstreaming
ESG
investments

Risk

Creation ofsustainable cities
and regions

Opportunity

Increased opportunities for infrastructure
solutions and orders

High

Short- tomedium-term

Increase in needfor disasterresistant buildings
and infrastructure

Opportunity

Increased opportunities for solutions andorders related to BCP measures for local
governments and companies

High

Short- tomedium-term

Medium tohighMedium- tolong-term

Medium tohighMedium- tolong-term

Medium tohighMedium- tolong-term

Increase inaveragesummertemperature

Risk

Increasing
intensity andfrequency ofnaturaldisasters

Risk

Flooding andstorm surges

Risk

Major countermeasures

Increased health risks (heat stroke, infectious
diseases, etc.) at construction sites
Worsening of personnel shortages following thedeterioration of the working environment, and increased
costs associated with securing additional personnel
Fall in production capacity due to disasterdamage to employees and partner companies
Supplies suspended due to disaster damageat material suppliers, and additional costs
incurred to secure alternative materials
Decline in profitability due to material price hikes
Office replacement costs, asset
impairments, and lower sales caused byflooding at bases*1 Method of evaluating importance (opportunity)
Scores “probability” and “impact” to determine importance(1) “Probability”: Assumed from external reports, and the Company’splans and policies, etc.
(2) “Impact”: Assumed based on market size, production capacity,
competitive advantage, etc.

Medium to Short- tohighmedium-term

Relation toMateriality*2 Method of evaluating importance (risk)
Scores “probability” and “impact” to determine importance(1) “Probability”: Assumed based on external reports, past impacts, etc.
(2) “Impact”: Assumed based on severity of impact, impact on main divisions, scope of
impact, etc.
*3 Timing is assumed to be short-term (2030), medium-term (2050), and long-term (2100)
Integrated Report 2022

46

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Contribution to a decarbonized society

Materialities

Information Disclosure Based on TCFD Recommendations

Environment

SocialFinancial, Non-financial &Corporate Data

Sustainability

Governance

Financial impact of climate-related risks*1
O f the significant risk s, the impac t on sales andordinar y profit was calculated for the
introduc tion of the carbon tax, which has a
predic table financial impac t, and for theincidence of floods and storm surges, which arethought to have a significant impac t. While wewill continue to implement ac tion plans based on
the result s of such calculations, we will also
work to refine the calculation methods we use
and expand their scope.

Risk Management(1) A dditional costs from introduction of tax systems(such as carbon tax)
Significant risk

Financial impact (2040)*2

Introductionof carbon tax

1.5°C: approx. 0.12% of sales (approx. 2.2% of ordinary profit)
2°C: approx. 0.1% of sales (approx. 1.9% of ordinary profit)
4°C: no impact(2) D amage due to natural disasters (inundation ofbases due to flooding and storm surges)
Significant risk

Financial impact (2040)*2

Inundation ofbases due toflooding andstorm surge

1.5°C: approx. 0.3% of sales (approx. 5% of ordinary profit)
2°C: approx. 0.4% of sales (approx. 8% of ordinary profit)
4°C: approx. 0.4% of sales (approx. 8% of ordinary profit)

Management of risks, including risks related to climate change, is undertaken in conjunction with major departments
and the Management Planning Department. Policies and measures are formulated based on the state of initiatives andthe business environment, and important policies are reported to the Management Council and the Board of Directors.
In addition, the risks and opportunities identified in accordance with the TCFD recommendations are incorporated into
the Medium-Term Management Plan and action plans, and reviewed annually, in light of materialities (important issues).
Specifically, the financial impact of the risks with high probability and high impact is estimated and reflected inmanagement strategies and financial plans. With regard to risks with low probability and high impact, we will engage
in thorough future efforts to gather information, and with regard to risks with high probability and low impact, we willcontinue to monitor their financial impact.

*1 Calculated on the assumption that all individually assumed risks occur simultaneously*2 F inancial impact is the percentage of Kandenko’s non-consolidated sales and profit in
FY2020

Method of calculating the financial impact ofclimate-related risks(1) Additional costs from introduction of tax
systems (such as carbon tax)
Financial
impactSales

Ordinary
profitSales

Ordinary
profit2050(medium-term)
Sales Ordinary
profitFuture scenarios of carbon tax prices used

1.5°C
increase

Approx.
0.08%

Approx.
1.4%

Approx.
0.12%

Approx.
2.2%

Approx.
0.15%

Approx.
2.7%

We adopted the following scenarios from the World
Energy Outlook 2021 provided by the IEA (International
Energy Agency).

2°C
increase

Approx.
0.07%

Approx.
1.3%

Approx.
0.1%

Approx.
1.9%

Approx.
0.12%

Approx.
2.2%

Method of calculation
Current CO2 emissions x future amount of carbon tax

1.5°C increase: NZE2050 (Net Zero Emissions by 2050
Scenario)
2°C increase: APS (Announced Pledges Scenario)

2030 (short-term)

4°C
increase

2040

−

−

−

(2) A
 dditional costs and damage due to natural disasters(Inundation of bases due to flooding and storm surge)
Calculate additional costs and damage (future - present)
due to natural disasters. Additional costs and damage arecalculated by determining the inundation depth (current
and future) at each base in the event of flooding or storm
surge, using data published by public agencies, and by
calculating office replacement costs, decrease in sales,
and asset damage at each base in accordance withgovernment calculation methods based on actual
inundation damage.

Future scenarios for inundation depths used
We adopted the following scenarios provided by theIntergovernmental Panel on Climate Change (IPCC).
		Flooding: AR5 (Fifth Assessment Report) RCP scenario(equivalent to 2°C or 4°C increase)		Storm surge: AR6 (6th Assessment Report) SSP scenario(equivalent to 1.5°C, 2°C, and 4°C increase)

47

KANDENKO

Financial
impact1.5°C
increase(stormsurge)

2030 (short-term)
Ordinary
Sales
profit2040
2100 (long-term)
Ordinary
Ordinary
Sales
Sales
profitprofitApprox.
0.1%

Approx.
0.3%

2°C
increase(flooding,storm
surge)

Approx.
0.3%

4°C rise(flooding,storm
surge)

Approx.
0.3%

Approx.
3%

Approx.
6%

Approx.
6%

Approx.
0.4%

Approx.
0.4%

Approx.
5%

Approx.
8%

Approx.
8%

Approx.
0.3%

Approx.
0.9%

Approx.
1.1%

Our greenhouse gas emission calculations
cover Scope 1 and Scope 2 of our business(non-consolidated)*, and we calculated thatgreenhouse gas emissions in fiscal 2020
were 24,542t-CO2 (location-based) and
24,699t-CO2 (market-based).
While continuing to promote efforts toachieve zero greenhouse gas emissions by
2050, we will also work towards expanding
the scope of our calculations to include
Scope 3 in the future.

Scope* Financial impact is the percentage of Kandenko’s non-consolidated sales and profit in
fiscal 2020.

Method of calculation

Indicators and Targets

Approx.
6%

Approx.
17%

Approx.
21%* Financial impact is the percentage of Kandenko’s non-consolidated sales and profit in
fiscal 2020.

Scope3

Scope3

Scope2Mining of raw
materials, etc.

Disposal of products
and goods

Use of electricity andheat supplied by othercompanies

Current scope
Suppliers, etc.

Users ofproducts and goods

Kandenko

Scope3

Scope3

Manufacture of raw
materials, etc.

Transportation of
raw materials, etc.

Scope1
Fuel combustion

Scope 1 and Scope 2 of the Company’s (nonconsolidated) business are covered*.
In the future, we will work to expand thescope of coverage to include Scope 3.

Scope3

Scope3

Transportation of
products and goods

Use of products andgoods

Scope3
Commuting, businesstravel, sales*E xcludes electricity usage paid as common service expenses,
etc., such as usage at temporary offices on worksites.

Fiscal 2020 greenhouse gas emissions

Classification

Target: Kandenko non-consolidated (fiscal 2020)

Scope 1 (fuel combustion)*1

Calculation criteria: calculation method based on GHG
ProtocolScope of calculation: S cope 1 (fuel combustion), Scope 2(electricity and heat use)
*Scope 1: Confirming the actual use of greenhouse gases
other than CO2 (such as SF6).
*Scope 2: Excludes electricity usage paid as common
service expenses, etc., such as usage at
temporary offices on worksites.

Scope 2 (electricity use)

Emissions (t CO2)
10,6972

Location criteria*

13,1043

Market criteria*

13,261(Location criteria)

24,542(Market criteria)

24,699

Scope 2 (heat use)
Total (Scope 1+2)741

*1:  (annual use of each fuel x unit calorific value of each fuel x CO2 emission factor ofeach fuel) The unit calorific value of each fuel and CO2 emission factor of each fuel are
based on the System for Greenhouse Gas Emissions Calculation, Reporting, andPublication under the Act on Promotion of Global Warming Countermeasures*2: C alculated based on an average emission factor (using a factor that takes into accountthe distance from the power plant to consumer office)*3: Calculated based on the adjusted emission factor (for fiscal 2021 reporting) for eachelectric utility provider as stipulated in the Act on Promotion of Global WarmingCountermeasures (using emission factors determined in contracts between theelectricity retailer and the office)Integrated Report 202248

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Materialities

Environmental Initiatives

Environment

SocialSafety, Environment & Quality Committee

President

Head Office
Safety & Environment Division

To realize a sustainable society, the Company strives for
management in which business activities are in harmony
with nature from a long-term view in every situation as a
general infrastructure company.

Main department
Environment Department

Construction Headquarters

Responsible department

Sales Division
Social Infrastructure Division

Safety & Environment Department

Regional Headquarters

Responsible department

Activity Plan
1. W
 e will follow environmental and legal regulations
and reduce environmental risk to fulfill our corporatesocial responsibility.
2. To realize a low-carbon, recycling-based society, we will
work to conserve energy, save resources, promote recycling,
and prevent pollution through the development, design,and execution of environmentally-conscious technologies.
3. W
 e consider environmental conservation to be an
important management issue. We are committed tomaking continual improvements to our environmental
management system (EMS).
4. We will educate all employees who engage in ourbusiness operations about the environment and raise
their environmental awareness.
 e will build bridges of cooperation to regional society and
5. W
contribute to creating a society considerate of biodiversity.

Structure for Promoting the Environmental
Management System
To facilitate a deep review of its policies and initiatives in
the field of environmental conservation activities,
Kandenko appoints a Safety, Environment & Quality
Committee chaired by the company president. Under thecontrol of the Environment Department of Safety &Environment Division, the departments set up to promote
environmental activities are as follows: in theConstruction Headquarters, the Safety & Environment
Department; and in the Regional Headquarters, theSafety & Environment Team of the General Control
Department, and the Safety & Environment Group.
Regional Headquarters. We have also compiled andapplied an Environmental Management Manual thatcomplies with the ISO 14001 international standard to
help us promote our environmental management system
more effectively.
49

KANDENKO

Financial, Non-financial &Corporate Data

Contribution to a decarbonized society

Governance

The human race has enjoyed many benefits of industrial and economic development, but these benefits
have come at the cost of global warming, pollution, and ecological destruction. A great burden has thus
been placed on the global environment.
Coexistence with the natural environment, the foundation of our existence, is essential for any healthysociety. This is also a theme that we must continually keep in mind in our business activities.
At Kandenko, we take the long-term view that it is corporate management’s vital social responsibility tohave an environmental vision leading to the creation of a sustainable society. We will do our part toleave a safe, sound environment for future generations by implementing initiatives that reduce theburden on the environment.

Basic Policy on the Environment

Sustainability

Tokyo Sales Division
Kitakanto & Hokushinetsu Sales Division
Higashikanto Sales Division
Minamikanto & Tokai Sales Division
Nishikanto Sales Division
West Japan Sales Division

Regional Headquarters
Fukushima Division

Safety & Environment Team,
General Control Department

Responsible department
Safety & Environment Group

Initiatives to Reducethe Environmental Burden
Amid intensifying global environmental issues, we believethat we can contribute to protecting the soundbiodiversity of the ecosystem and realize a sustainable
society by implementing systematic and efficientenvironmental conservation measures in all aspects ofour business activities.
In addition to promoting environment-friendly
procurement, Kandenko’s initiatives for environmental
conservation include efforts to reduce the consumptionof resources and energy and measures to improveindustrial waste recycling rates and convert waste into
valuable resources. By ensuring strict compliance withenvironmental laws and regulations, we are also working
to eliminate environmental risk, enhance environmental
awareness, and further integrate environmental
conservation activities. As a corporate member of arecycling-based society, Kandenko seeks to create a richhuman environment and implement unceasing innovation,
contributing in this way to activities that conserve theglobal environment.

Examples of Initiatives
Achievement of ZEB Oriented appraisal standard
The Company has achieved the ZEB Oriented appraisal
standard in the renovation project of our Education &Training Center (Ushiku-shi, Ibaraki Prefecture). This is thesecond building in Japan to achieve the standard andmarks the first case as a renovated building.
ZEB stands for net zero energy buildings. The term
refers to buildings aimed at reducing annual energy
consumption to virtually zero by integrating energysaving technologies with energy-creating ones. A
nationwide campaign is now in progress to popularize
ZEB.
This “ZEB Oriented” is a newly-established appraisal
standard for large buildings that consume large amounts ofenergy. Through the renovation, the Education & Training
Center reduced energy consumption by as much as about
35% by adopting a high-efficiency air conditioning system,in addition to making about 1,000 glass windows doublepaned and laying insulating materials on the roof.

Power generation business
Generation of electricity from wind and solar power is inprogress as a way to utilize natural energy. Kandenko
has engaged in the design and construction of numerous
solar and wind power generation systems andparticipated in experimental studies of renewable energy
in and outside Japan. Leveraging our accumulated
technologies and expertise, we operate a power
generation business using renewable energy since fiscal
2012.
Power plants in operation (Excerpt)
Maximum output
ChoshiWind Power Plant
Yagi Wind Power Plant
Shiraoka
Solar Power Plant
Kaminokawa
Solar Power Plant
Sosa Solar Power Plant
Shin-Koga
Solar Power Plant
Ushikuma
Solar Power Plant
Kama
No.1 Solar Power Plant
Kama
No.2 Solar Power Plant
Maebashi
Biomass Power Plant
Kami Ketto
Hydroelectric Power Plant

13.5MW(9 windmills with acapacity of 1.5 MW each)

9.0MW(6 windmills with acapacity of 1.5 MW each)

Location
Choshi-shi, Chiba
Choshi-shi, Chiba

1.5MW Shiraoka-shi, Saitama
1.75MW

Kaminokawamachi,
Kawachi-gun, Tochigi

1.5MW

Sosa-shi, Chiba

1.5MW

Sakaimachi,
Sashima-gun, Ibaraki

1.5MW

Kama-shi, Fukuoka

13.75MWKama-shi, Iizuka-shi,
Fukuoka

5.0MW

Kama-shi, Fukuoka

 perational launch of Kami Ketto HydroelectricO
Power Plant
The Kami Ketto Hydroelectric Power Plant, which
Kandenko had been constructing in Tsunan-machi,
Nakauonuma-gun, Niigata Prefecture since 2016, wascompleted and started its operation in June 2020.
This power plant employs a mechanism to generate
electricity by effectively utilizing the drop from the checkdams in the middle of the Nakatsu River that joins the
Shinano River. It generates roughly 6,500MWh of power
per year. This is equivalent to the electricity consumed byapproximately 1,200 regular households, or an
approximate 3,000 ton reduction in CO2 emissions.
We adopted a water mill format for the plant’s
construction that enables us to contain the power plant’s
development in a more compact area. We also adopted adesign that helps conserve the surrounding naturalenvironment by, for instance, repurposing unused drainage
tunnels that were built at the time of the dam’s
construction to discharge water.
We will continue to utilize the technology and expertise
we have cultivated as a general infrastructure company
engaged in the energy business to the utmost and engage
in further environmentally-conscious business activities.

6.75MW Maebashi-shi, Gunma
990kW

Tsunanmachi,
Nakauonuma-gun, Niigata
View of the check dam and Kami Ketto Hydroelectric Power Plant
Integrated Report 202250

About Kandenko

Value Creation Story

Materialities

Disaster Prevention and Recovery Initiatives

Environment

SocialGovernance

May
2012

Damage bytornado in
Northern
Kanto

Damage by
September tornado in
Saitama &
2013
Chiba

Damage by

February
heavy snow in
2014
Gunma

Damage by
September heavy rain in
Kanto &
2015
TohokuApril
2016

Damage by
Kumamoto
Earthquake(Indoor electricalengineering)

August2016

Damage by
Typhoon No.9

September- Damage by
October typhoons Faxai
and Hagibis
2019

Fiscal 2022 Health and Safety Policy
Based on our “People First” motto, we view health and safety initiatives as one of the top priorities of our corporate
activities, and are committed to eradicating occupational accidents and maintaining the physical and mental health of all
those involved in our corporate activities.

Activity guidelines
SafetyHealthWe are working on the following priority items to eradicate
occupational accidents.
Strengthen onsite risk management capability
Enhancing safety education
Apply digital technologies to onsite risk countermeasures
Improve communication with affiliated companies andpartner companies and support safety activities

We are working on the following priority items to maintainmental and physical health.
Promote reforms of work practices and annual leave systems
Promote mental health measures
Ensure the health of employees and create acomfortable working environment

Basic Policy on Quality
We pursue technological innovation that contributes to safety and security and provide top-quality services andinfrastructure across the whole equipment lifecycle from planning and proposal through to post-installation maintenance.
1. We will anticipate customer needs and use advanced technologies and sophisticated skills toprovide a level of quality that will satisfy our customers.
2. We will continue to research and develop technologies and improve operations, and always create
Activity
valuable products.
3. We, together with all our employees and organizations, will strive to consistently improve ourguidelines
quality management systems in order to maintain and improve quality.
4. We will conduct education and training, improve technology and pass on skills, and promotereliable human resource development.

Quality Management System
We establish quality management systems (QMS) in accordance with the ISO 9001 requirements based on our Basic Policy
on Quality, and seek to achieve sustainable growth.
ISO 9001 external authentication acquisition status

Izu Office (Shizuoka Prefecture) with enhanced BCP measures

Category of
construction

Division/Office
Cost Management Division, Sales Division, Tokyo Sales
Division, Kitakanto & Hokushinetsu Sales Division,
Higashikanto Sales Division, Minamikanto & Tokai Sales
Division, Nishikanto Sales Division, West Japan Sales
Division, Fukushima Division

Social Infrastructure Work

Learning from the long-term power outage at a power distribution office
which acted as a base for disaster recovery during Typhoon Faxai in 2019,
we have deployed vehicle-mounted emergency generators to power
distribution business areas to establish a system for responding quickly inthe event of a disaster, and we have conducted a series of drills to practice
operating emergency generators in anticipation of power outages.
We recently constructed a power distribution office with reinforced BCP
measures to further enhance our ability to respond to natural disasters.
Conventionally, we needed to connect emergency generators to each pieceof equipment in the office, which required the laying of numerous
temporary cables. At the new office, power can be supplied from electricaloutlets simply by connecting emergency generator cables to the BCP
connection board, thereby enabling the establishment of a more rapid
recovery system.
Currently, this system is installed at three offices in Chiba, Ibaraki, andShizuoka Prefectures. The system will be expanded to other power
distribution offices in the future, thereby enabling us to fulfill our social
responsibility as a company that supports the stable supply of electric power.

BCP connection board and emergency generator connection training
KANDENKO

Health and Safety Initiatives

Quality Initiatives

Strengthening our response to intensifying natural disasters
Kandenko initiatives to prepare for large-scale power outages

51

Financial, Non-financial &Corporate Data

Occupational Safety and High-Quality Construction

Building
Infrastructure
Work

March
2011

The Great
East Japan
Earthquake

Sustainability

Maintenance and construction of safe and comfortable social infrastructure

Responding after natural disasters occur
Kandenko believes that, as part of its social responsibility as a company that is involved in supplying public utilities, it isour duty to devote all of our strength to the expedited restoration of electrical infrastructure for the stable provision ofelectric power in the event of a disaster. We would like to take this opportunity to introduce initiatives we implemented
following the Great East Japan Earthquake.

Strengthening Foundations
for Realizing Value Creation

Social Infrastructure Division (excluding Nuclear Energy
Department)
Power Engineering Unit, Social Infrastructure Construction Center
Information & Communication System Unit Communication
Infrastructure Construction Center
Power Distribution Unit, Tokyo Power Distribution Branch

Rokkasho Office, Tokai Office, Kashiwazaki Kariwa Office,Tsuruga Office, Fukushima Division

Registration scope

Registration organization
and registration number

Design and construction of electricalinfrastructure
Design and construction of air
conditioning, water supply and drainage,
and sanitation systems

Management System
Assessment Center
MSA-QS-4553

Registration date: September 1, 1997 (Valid through February 27, 2023)
Design and construction of electricaland communication infrastructure, civilengineering work, and water supply andsewage, gas, and railroad infrastructureManagement System
Assessment Center
MSA-QS-4734

Registration date: February 24, 2021 (Valid through February 23, 2024)
Design, construction, and ancillary
service of electricity, instrumentation,and machinery devices involved in theconstruction, repair, and regularinspection of nuclear power plants,
nuclear fuel handling facilities, andrelated infrastructure

Registration Body
for IS, Inc.
RB-Q11039

Registration date: February 16, 2001 (Valid through February 28, 2025)
Integrated Report 202252

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Reinforcing “People First” (Human Resources)

Materialities
GovernanceTraining
Training is designed to equip Kandenko employees with the necessary skills commensurate with their positions, and to
improve the skills of all employees.
List of training systems
Company Employees

systems to develop excellent human resources.
An outline of specific initiatives is as follows.
1. Personnel development

Business skill training for
operations professionals

New directors

Follow-up introductory
training
New employee
introductory training

Training for next
generation leaders

MOT training
NGG training

OJT: Guidance and training through workplace operation

Company-specific and job level training

The Company has continuously worked to establish

2. W orkplace culture and environment that foster
human resourcesA workplace where everyone can learn from eachother and grow togetherA workplace where employees can speak andconsult with others frankly
A workplace where each employee can exert theirown abilities

Group Company
Employees

Business skills training (lectures open to public)

Outline of Initiatives
for Human Resources Development

New team leader training

Elective training

PC skill improvement and IT tool training

capabilities of each employee.

Training for managers
at each level

Selected training

Training for developing overseas
construction personnel

growth, the Company will develop and raise theTraining for new officers

Specialist training

Training for floor managers, operations
managers, and onsite managers

trusted by society and customers” necessary for sustained

1. P rofessional workforce trusted by society andcustomers
Human resources committed to a mission to live up
to the trust and expectations of customers andmake contributions to society
Human resources equipped with high skills necessary
to provide the best services and facilities
Human resources respecting diverse values to copewith changes in the times and ceaselessly striving forself-development and ingenuity

Officers

Managerial positions

While continuously nurturing a “professional workforce

Personnel We Aspire to Be

General positions

Basic Policy on Human Resources
Development

Joint training

Basic and entry-level tospecial advanced training

Level

Compliance, information security and legal affairs (e-learning)

Under the corporate motto of “People First,” the Company strives for “human resources development,”“reforms for work practices and annual leave systems,” and “creation of an open workplaceenvironment.” Through these measures, we work to realize a working environment where each
employee can take an active role by fully realizing their potential.

Assertive communication training

SocialOJT leadership, promotion andinstructor training

Environment

Training for year-round new hires| Employee Initiatives |Financial, Non-financial &Corporate Data

Sustainability*White boxes indicate training available to employees of group companies

Training: Training for professional expertise and skills
Self-development: Support upskilling of employees,

Example of a human resource development roadmap: technical position (electrical engineering)

Training Programs

such as acquisition of qualifications
2. D evelopment of a workplace culture andenvironment that fosters human resources
3. Development of a human resources development
system (standardization of development methods)

Developmentof personnel

53

KANDENKO

On-the-job training (OJT)

Developmentof workplaceculture andenvironment

Train human resources to be worksite representatives on large-scale sites within 10 years of joining the Company

1st year

OJT training is a program whereby senior employees in
the workplace encourage junior employees to acquirebusiness abilities by providing guidance on practicalknowledge and skills in daily operations.
OJT training is also important as a way for expert
employees to pass on technologies and skills to young
employees.

ActionPlan

Improvement

Formulation of plans
Human
resourcesdevelopment
through OJT

2nd year

3rd year

4th year

5th year

6th year

7th year

8th year

9th year

10th year

11th year
and onward

Worksite operation management

Responsibilities
OJT period
Worksite supervisor

Training modelOJTContinuous humanresourcesdevelopment
Developmentof human
resourcesdevelopment
systemDevelopment policyGroup seminars

Self-development

Acquire basic worksite
management knowledge

Improve cost management/equipment accident prevention measures/worksite management skills

On-sitetraining
Basic training /follow-up training

Second-class electrician

Worksite representative

On-site work
Training to improve production technology skills/job level training/special training/human skills
Fire defense equipment officer Class A,
instrumentation engineer

1st grade construction managing engineer (supervising engineer)

Third-class chief electricity engineer, associate professional engineer, professional engineer

Self-development

Check

Do

Evaluation and validation

Implementation of training

In acquiring national qualifications required for duties,
the Company provides various support to employees who
are willing to learn and grow on their own. Support
includes in-house seminars and bearing expenses forcorrespondence education programs, external workshops,
and examinations.

Examples of qualifications recommended by the Company
1st grade construction managing engineer
Third-class chief electricity engineer
Professional engineer and associate professional engineer
Fire defense equipment officer
First-class electrician
Construction accounting specialist
Integrated Report 2022

54About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Materialities| Employee Initiatives |Environment

SocialTo create a workplace environment with greater
openness, Kandenko is currently engaging in “K.
Assertion” activities under the slogan of “Voice yourfindings and appreciate voices.” Assertion* is acommunication method to develop smooth relationships,
and the Company’s understanding of assertion is “torespect oneself and others, and frankly voice findings,
questions, and opinions.” Continuous promotion of thisactivity will encourage proactive communication among
employees and solidify relationships of trust. Also, theactivities will improve work quality and productivity as
they strengthen inter-organizational cooperation and aid
in preventing disasters and accidents.
*A ssertions are communication skills to assert oneself properly withoutcausing distress in other persons. Generally, disparities in position makeit difficult to assert oneself, but using this skill enables frankcommunication based on mutual respect, without superiors imposing
their opinions on others or subordinates feeling timid. This provides
additional assurance to employees in the workplace that they areallowed to voice their questions and opinions.

(Outline of activities)
Formulating assertion through web conferencing
Expand awareness and awareness-raising activities byutilizing smart devices
Implementing practical assertion training at seminars,
etc.
Implementing assertion through practical operations
Superiors

Reforms of Work Practices and Annual Leave Systems
To realize a company where each employee can work
energetically in every workplace, the Company promotes
various work practices and annual leave systems while
enhancing health management measures for employees.

Leading and implementing reforms by managers
including executives
Shifting to a work-life balance mindset
Strengthening the occupational health system andencouraging self-care obligations

Priority items and issues to be addressed
Priority items
1. Proper
managementof work hours

3. Implementation oflabor management
education

5. Enhanced healthmanagement

2. Thorough management of
employees working long hours
Managers

4. Shift to well-balanced
work practices

Double the number of women (36) in managerial
positions four years from now at the end of fiscal 2024.

Speak out

Superiors

Subordinates

Facilitatecommunication• Correcting long working hours, operational improvement • Human
resources development • Health management • Encourage and support
promotion of various human resources • Proper management ofwork hours • Facilitate acquisition of days oﬀ and vacations
Promotion of Diversity

Interorganizational
cooperation
Achievingan openworkplaceenvironment
Deterring power
harassment
Active communication

Improvement of work quality
Improvement of productivity

Reinforcing “People First” (Human Resources)

In October 2018, Kandenko established a Diversity
Promotion Team. So that each employee can demonstrate
his or her capabilities irrespective of gender, nationality,
age, or bodily features, we are working to develop a
lively workplace environment in conjunction with “reforms
for work practices and annual leave systems” and“measures for human resources development.”
Also, by respecting the diverse ideas of employees, we
aim to raise corporate value and become a company thatwill continue to be trusted.

Kandenko SunSun School Family Visit Day
This event, which started in fiscal 2019, is part of our worklife balance initiatives designed to promote communication
between families and workplaces and create a comfortableworking environment while also helping the families who
support our employees on a daily basis deepen theirunderstanding of our company’s business.
Our Corporate Communications Captain (CCC), Toshiaki
Hirose, a former Japanese national rugby team member,participated in the August 2022 event. Participants listened
to an audio version of the picture book, “We Are All
Different,” and played mini games that involved parents
and children exercising together. Mr. Hirose engaged withthe participants and communicated the importance ofrecognizing diversity and working together.

Details of initiatives Introduce training on diverse management-classhuman resource development
Conduct training to raise awareness of opportunities
among female employees themselves
Formulate a policy for developing female technicaland engineering positions (role models)Consider policies for expanding the range of duties
for female employees

Details of initiatives
Introduce e-learning to promote understanding ofchildcare leave
Create awareness-raising posters to promote maleparticipation in childcare
Conduct PR activities featuring employees who havetaken childcare leave
Build a papa-mama parenting community

Create an affable atmosphere

KANDENKO

Period of the action plan
April 1, 2021, to March 31, 2025 (four years)

Create childcare leave interview sheet

Issues to be addressed55

We have formulated an action plan with the aim ofcreating an attractive workplace where diverse humanresources can play an active role while respecting eachother’s values and differences, and everyone cancontinue working with peace of mind. An overview of
the action plan and major initiatives are as follows.

Raise paternity leave take-up rate to 30% or higher

Make a request

Prevention ofdisasters andaccidents

Promoting the advancement of women

Targets and details of initiatives

Basic policy

Employees

Showappreciation
Listenattentively

Financial, Non-financial &Corporate Data

Governance

Reforms of Work Practices and Annual
Leave Systems
Diversity & Inclusion

K. Assertion

Sustainability

Examples of Initiatives
Scheduled grant of annual paid leave (10 days)(Average number of paid leave taken in fiscal 2021: 15.8 days)
Remote working
The Company is working to create an environment thatallows flexible workstyles by introducing a remote
working system for all employees, while also promoting
the establishment of satellite offices.
Health management initiatives
In July 2017, we established a Health Improvement Team.
Since then, based on our “People First” motto, we haveendeavored to create a working environment that aims
to improve engagement by protecting the mental andphysical health of each and every employee.

 andenkomachi, a community of female technicalKand engineering staff
We hold Kandenkomachi opinion sharing meetings withthe aim of reforming the awareness of female employees
appointed at worksites and to expand the range of theirduties. These meetings also provide an opportunity to
deepen exchanges between worksite supervisors.
Organizing Sun Cafe Meetings
We provide a venue for information exchange regardingchildrearing and casual communication among parenting
employees. We support employees raising children,
regardless of their gender, in balancing work and childrearing through easing their anxiety and sharing problems.
Compilation of Support for Work-Life Balance Handbook
As an aid to supporting employees’ work-life balance, thehandbook provides various information such as in-housesystems related to child-rearing and sends messages tobosses who are working with junior colleagues preparing
for maternity leave and child-rearing leave.
Dissemination of nursing care information
We hold regular online seminars and have establishedindividual consultation desk.
Promoting employment of persons with disabilities
We operate two farms (an indoor hydroponic farm and an
outdoor greenhouse cultivation farm) in Tokyo and thesurrounding suburbs with the aim of employing andfurthering the activities of people with disabilities. Bothfarms have built facilities
that are designed to ensure
safe working conditions,and provide an environmentthat allows each individual
to demonstrate his or her
unique abilities.

Integrated Report 2022

56

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Materialities

Respect for Human Rights

Kandenko Group Human Rights Policy
Since its founding, Kandenko has conducted businesswith the aim of ensuring the mutual prosperity of its
customers and the communities where it works and finds
its purpose in this pursuit. Respect for human rights isthe foundation of our business activities.
Through this Policy, the Kandenko Group will remaincommitted to pursuing thorough compliance and improving
safety and quality, and contribute to the enduring
development of society as a partner that supports social
infrastructure for safe and comfortable daily living.

1. Commitment to respect human rights
Based on our corporate motto, “People First,” ourCorporate Philosophy, “Based on respect for humanity,
Kandenko fulfills its duty of corporate social contribution
and contributes to creating richer human environments,”
and the “Principles of Corporate Behavior” in the
Kandenko Group Charter of Corporate Behavior, we
recognize that initiatives to respect human rights are an
important social responsibility and we respect humanrights in all aspects of our business activities.
This Policy is based on international norms related tohuman rights, including the United Nations International
Bill of Human Rights, the ILO Declaration on Fundamental
Principles and Rights at Work, and the Guiding Principles
on Business and Human Rights, and clarifies the approachof the Kandenko Group in fulfilling its responsibility torespect human rights, and has been formulated based
partly on the opinions of outside experts.
The Kandenko Group complies with all applicable laws
and regulations in the countries and regions in which it
operates.
In cases in which there is a conflict between
internationally recognized human rights standards andthe laws and regulations of each country or region, we
will pursue methods that respect internationallyrecognized human rights standards.

2. Scope of application
This Policy applies to all officers and employees of theKandenko Group, and we expect and encourage all its
stakeholders in all processes of our business activities tounderstand and support this Policy.

3. Initiatives for the respect of human rights(1) Prohibition of discrimination and unfair treatment
The Kandenko Group works to eliminate any
discrimination based on race, ethnicity, nationality, placeof birth, gender, gender identity, sexual orientation, age,disability, religion, creed, career, or other personal
characteristics, and prohibits all acts of harassment that
infringe a person’s personality or dignity, including
power harassment, sexual harassment and maternity
harassment, to ensure a safe and comfortable working
environment.
We also prohibit all forms of forced labor and childlabor, and work to respect human rights byprotecting personal information and privacy.
(2) Improvements to the working environment
The Kandenko Group works to maintain a safe andhygienic working environment based on respect for
57

KANDENKO

Environment

SocialGovernancehuman rights. We will comply with laws, regulations andlabor agreements of each country and region, including
working hours stipulated in laws and regulations andpaying wages above the minimum wage.
We will engage in sincere dialogue and discussion
with our employees or their representatives, and work
to build constructive relationships. We will also
respect the right to collective bargaining inaccordance with international labor standards.
(3) Relationships with communities
As a member of the local communities in which we
operate, the Kandenko Group will respect the needfor environmental conservation in cooperation withthe local community, including preventing
environmental destruction, pollution, and climatechange in order to create richer human environments,
and we will conduct our business activities withconsideration for the rights of local residents who use
or reside on the land.
In our business activities in regions in which
indigenous peoples reside, we will understand theirunique cultures and customs, and comply with thelaws, regulations and international agreements of thecountries and regions in which we do business.

4. Information disclosure, dialogue and discussion
The Kandenko Group will work to improve its humanrights initiatives through regular information disclosureand dialogue and discussion with its stakeholders.

5. Remediation
The Kandenko Group will establish a whistle-blowing
contact that can be used even by business partners, etc.
in addition to its officers and employees, and continue tobuild an effective framework to respond to reports, andwill appropriately respond to issues related to humanrights. All reports will be kept strictly confidential andadverse treatment of informants will be prohibited.

6. Implementation of human rights due diligence (process
to identify, prevent, and mitigate negative impacts)
The Kandenko Group will work to establish andcontinuously implement a framework to identify, preventand mitigate negative impacts on human rights related
to its business activities in accordance with the Guiding
Principles on Business and Human Rights.
If negative impacts are identified, appropriate andeffective remedial measures will be taken. In the eventthat the Kandenko Group’s business activities are related
to a negative impact on human rights in a business
relationship, we will take appropriate measures to correct
the situation in accordance with this Policy.
We will not tolerate any intimidation or coercion ofhuman rights defenders, and we will not be complicit insuch activities.
The Kandenko Group will provide human rights
training and education to its officers and employees, asnecessary to practice this Policy.

7. System to respect human rights
In order to fulfill our responsibility to respect human rights,
the Kandenko Group has established a Human Rights
Awareness Promotion Committee in Kandenko, which ischaired an officer in charge of labor affairs and humanresources, and which will engage in initiatives based on thisPolicy. Group companies will also work together with
Kandenko in this regard.

Sustainability

Financial, Non-financial &Corporate Data

Reinforcing “People First” (Human Resources)

Maintaining and Improving Partnerships with Partner Companies and Material Suppliers
3. Ensure health and safety

Kandenko Group Procurement Policy
The Kandenko Group is committed to contributing to thesustainable development of society through the provisionof high-quality services by building, maintaining, andimproving partnerships with our business partners.
The Kandenko Group kindly requests that our business
partners engage in the following acts, and that theyencourage their business partners to engage in the same acts.
1. Respecthuman rights
7. Developinternal
frameworks

6. Information
security(properly manage
workers)

2. Comply
with laws,
regulations andsocial norms

Kandenko Group
Procurement Policy

5. Be
environmentallyconscious

3. Ensure
health andsafety4. Ensurequality

1. Respect human rights (properly manage workers)
Respect the human rights of workers, and strive tosecure employment and improve working conditions.
(1) E nsure a safe and comfortable working environment by
taking measures to prevent any acts that infringe on
personality and dignity; discrimination based on race,
ethnicity, nationality, place of birth, gender, gender
identity, sexual orientation, age, disability, religion, creed,
career, or other personal characteristics, as well as power
harassment, sexual harassment, maternity harassment, andnursing care harassment.
(2) Do not use labor that is not based on the worker’s free
will (forced labor) or labor by children under the minimum
employment age (child labor), and endeavor to respect theright to collective bargaining.
(3) Abide by working hours stipulated in laws and regulations,pay workers an amount above the minimum wage inaccordance with their actual working conditions, andproperly maintain a wage ledger. Efforts should also bemade to prevent excessive labor.

2. Comply with laws, regulations and social norms
Comply with all applicable laws, regulations, standards,
and social norms in all countries and regions where you
conduct business, whether in Japan or overseas.
(1) E liminate any conduct that violates criminal codes, antimonopoly laws, construction industry-related laws, andlabor-related laws, etc., such as conduct that impedes theproper execution of business.
(2) Do not respond to any unreasonable demands from antisocial forces, or engage in any acts that use or arecomplicit with such demands.
(3) When importing or exporting materials and equipment orproviding technology to an overseas company, check that
there is no conflict with security export control rules.

We request that you endeavor to secure a safe andcomfortable working environment.

(1) C omply with labor standards laws, industrial safety andhealth laws, etc., and promote activities to prevent
accidents at construction sites, etc.
(2) Monitor and give appropriate consideration to the healthof workers.
(3) Inform our employees if workers are injured in an
accident, etc. or have any other health problems or if you
notice any such signs in our business area.

4. Ensure quality
In addition to realizing safe and high quality facilities andservices, we also request that you take the following
initiatives in anticipation of events and safety and quality
issues that may arise in connection with such facilities
and services.
(1) E stablish and properly operate a system to maintain andimprove quality, including a clear management system andchecking framework.
(2) Check that the products and technologies you provide
comply with laws, regulations, and standards.
(3) If a quality issue is found in a product you have provided,
provide information and explanations as appropriate.

5. Be environmentally conscious
We request that you endeavor to conduct your businessactivities with adequate consideration for environmental
conservation.
(1) C ooperate with the 4Rs (refuse, reduce, reuse, recycle) of theconstruction by-products at construction sites, etc., and withthe reduction and proper disposal of industrial waste.
(2) When manufacturing materials and equipment, endeavor
to take environmental measures such as reducing CO2
emissions and preventing chemical pollution.
(3) When undertaking construction work, select andimplement materials, equipment, and construction
methods that have minimal impact on the environment,
and take all possible measures for construction pollution
prevention and environmental conservation.

6. Information security
Pay sufficient attention to the protection of confidential
information handled in connection with operations andendeavor to ensure information security.
(1) C orrectly record and properly manage all information
related to business in accordance with laws, regulations,and internal regulations, etc.
(2) Prevent leaks to external parties or the loss of confidential
information, customer information, and personal
information contained in materials provided or loaned by
the Company, and eliminate unauthorized use of suchinformation.

7. Develop internal frameworks
Strive to develop internal frameworks on the assumptionof stable provision of materials and services.
(1) C ontinuously work to improve productivity to ensure
market competitiveness and provide products and services
at stable prices.
(2) Collaborate with the parties involved in raw material
procurement, logistics, and distribution to appropriately
address risks and aim to ensure a stable supply ofmaterials and equipment.
(3) We request your cooperation to enable the continuationor prompt restoration of our core business in the event of
a disaster or other unforeseen circumstances that make it
difficult for you to maintain a continuous supply.
Integrated Report 2022

58

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Materialities

Social Contribution Activities
We Are All Different picture book conveys
the importance of diversity: Kandenko x
Toshiaki Hirose Connection Support Project
We are currently developing “Kandenko x Toshiaki Hirose
Connection Support Project” with the former captain of theJapan national rugby team Toshiaki Hirose as our new
Corporate Communication Captain (CCC). In November 2021,
we published a picture book entitled “We Are All Different”
which was produced by the
project members, mainly young
employees, together with Mr.
Hirose.
Based on the key message
of “connecting individuality
to create an exciting future,”
we will continue to scrum
together with our CCC Mr.
Hirose and contribute tobuilding the field in which
everyone can respect eachThis book was written to illustrateother’s individuality and playthe importance of diversity by tellingthe story of various animals working
an active role.
together to carry a tree fruit.

Mr. Hirose and project members

Shibaura Elementary School (Tokyo)

We have donated more than 1,000 copies to kindergartens,
elementary schools, foster homes, and libraries, etc.
throughout Japan, including Shibaura Elementary School
which is located next to our head office.

Osaka Prefectural Library (Osaka Prefecture) Yokohama Rugby School (Kanagawa Prefecture)

Meisei Kindergarten (Tokyo)

59

KANDENKO

Miyakoji Elementary School(Fukushima Prefecture)

Environment

SocialSustainability

Financial, Non-financial &Corporate Data

Reinforcing “People First” (Human Resources)

GovernanceSponsored “Green Future Classroom,” juniorgolf lessons

Sponsorship of the “All-Japan High School
Rugby Football Championship”

Cooperation with regular inspections of the
Nirayama Reverberatory Furnaces“Green Future Classroom,” organized by the Japan Golf
Association and sponsored by the Company, was held in
September and October 2022. Green Future Classroom isa junior golf lesson program that started in 2017 to help
nurture the minds and bodies of children who will leadthe next generation. 2022’s Classroom was held tocommemorate the Japan Senior Open Golf Championship2022 (Shiga Prefecture) and the Japan Women’s Open
Golf Championship 2022 (Chiba Prefecture), and lessons
took place at the respective tournament sites.
The 30 children who participated received lessons fromprofessional golfers and got to experience playing golf on
the beautifully maintained courses. The Green Future
Classroom was a great success, and we received
comments from the participants, such as, “It was my firsttime playing golf, but a professional player taught me how
to play and it was fun!” “It was difficult but I had fun. I
got an autograph of a professional player. I will treasure
this memory!”

Kandenko aims for social contribution through sports
promotion and has been sponsoring the “All-Japan HighSchool Rugby Football Championship” organized byassociations such as the All Japan High School Athletic
Federation and the Japan Rugby Football Union, since
the 97th Championship in 2017.
Through sponsoring this championship, held atHanazono Rugby Stadium, the representative symbol ofhigh school rugby, we support the development of Japan
rugby and the futures of the high school students whowill carry the rugby world forward.

We cooperated with regular inspection work of the
Nirayama Reverberatory Furnaces, which is part of theSites of Japan’s Meiji Industrial Revolution on the World
Heritage List.
The Nirayama Reverberatory Furnaces, which were used
to melt iron to make cannons and other items, werecompleted in 1857 and registered as a World Heritage Site
in 2015. A team from Shizuoka Branch’s Izu Officecooperated with
Izunokuni City, which
manages the facility,
in checking and taking
photographs of thestate of thereverberatory furnace
walls. The team also
pruned trees on thesite.

Sponsoring the Japanese Para-Sports Association

Participation in the Kyu-Can-Cho Project

The Japanese ParaSports Association (JPSA)
was established after theInternational Stoke
Mandeville Games were
held in 1964, to
encourage and promote
sports for people withdisabilities in Japan.
In support of the JPSA’s vision toward “a society
where everyone can enjoy the value of sports” and of“creating a vibrant, inclusive society,” Kandenko signed
an official partnership agreement with the association
to further encourage and promote para-sports.
Moving forward, the Company will continue tosupport para-sports to revitalize regional communities
and ensure pleasant and fulfilled lives.

As part of our social contribution activities, we havestockpiled 1,500 cans of bread at our head office as partof the Kyu-Can-Cho Project undertaken by Pan Akimoto
Co. Ltd., an activity to support measures against world’s
hunger.
The Kyu-Can-Cho Project collects stockpiled canned
bread before its expiration date and sends the bread, viaNGOs, as relief supplies to people suffering from hunger
around the world. In Japan, the canned bread has beendelivered to disasterstricken areas, and theempty bread cans arealso used in place ofbowls at disastersupport sites.

The Mount Fuji Reforestation Project

The MICHINOKU Future Fund

The Mount Fuji Reforestation Project was undertakenwith the goal of protecting the nearly untouched forest
ecosystem, fearing the loss of Mount Fuji’s rich forest
resources and the natural ecosystem. (Operated by theOrganization for Industrial, Spiritual and Cultural
Advancement – International, Japan)
Kandenko has participated in these activities since 2017,
through which Kandenko employees and their families
have assisted in efforts such as tree planting and theinstallation of nets to prevent damage from feeding deer.
Participants come andlisten to talks on thenatural environment ofMount Fuji, and raise theirawareness ofenvironmental protection
while deepening theirunderstanding of Mount
Fuji.

The MICHINOKU Future Fund, a charitable foundation,
provides full scholarships to children who lost theirparents in the Great East Japan Earthquake so that they
can pursue higher education (college, junior college, or
vocational education) after graduating from senior highschool. Recipients do not have to repay enrollment or
tuition fees. The fund was established in 2011 by threeprivate sector companies, with a fourth company joining
the project in April 2013.
We endorsed and have been donating to the fundsince fiscal 2016. We
believe that providing
support to children so thatthey do not abandon
higher education andcontinue to follow their
dreams and goals will also
support reconstruction
efforts.
Integrated Report 2022

60

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Materialities| Roundtable Discussion with Outside Directors |Environment

SocialKoji Tanaka

Hajime Saito

Takashi Uchino

Miwako Ando

Outside Director

Outside Director

Outside Director

Outside Director

Takashi Uchino: Looking back on fiscal 2021, we
worked to enhance the structure and strengthen thefunctions of the Board of Directors based on revisions of
the Corporate Governance Code. The first fiscal year of
the Medium-Term Management Plan has also started,and senior management has held many discussions while
confirming our progress. With Mr. Tanaka’s new
appointment in June 2022, the number of independent
outside Directors has increased by one, to four out of
13. We are very encouraged to have Mr. Tanaka on ourteam, as he has a wealth of experience in corporate
management and is well versed in the electric power
sector. His joining our team also expands the skill matrixof the Board of Directors and increases its diversity.
Hajime Saito: The Company transitioned to the Prime
Market in April 2022, and there were several points ofdiscussion regarding the market selection for thistransition. The first point was strengthening governance as
61

KANDENKO

Financial, Non-financial &Corporate Data

Strengthening sound management foundation

GovernanceWe aim to be a company that survives while
maintaining dialogue with society.

Changes in the Board of Directors infiscal 2021

Sustainability

a company listed on the Prime Market. That is to say,what is the so-called skill matrix, the balance and diversityof knowledge, experience, and abilities required of our
Board of Directors? The second point is whether there is alively exchange of opinions between outside officers andthe business execution side regularly besides at meetingsof the Board of Directors. Third, as a company involved inelectric power infrastructure, what is the direction andprogress of the Medium-Term Management Plan in
response to social demands? From these perspectives, I
would say the past year has been a period of repeateddiscussions on how Kandenko should operate, and are-examination of ideal corporate management itself.
Miwako Ando: It has been one year since I was
appointed as an outside Director in June 2021, and I
have been able to see Kandenko in my own way. I feltthat discussions by the Board of Directors were lively at
the time I was appointed, and they have become evenlivelier over the past year. I was a little nervous at first
because I had never been involved in corporate
management myself, but in addition to the experienceand knowledge I have cultivated as a public prosecutor, I

have actively expressed observations and questions fromthe perspective of an ordinary citizen. In response to my
input, I have received sincere answers from Chairman
Hiroshi Yamaguchi, President Toshio Nakama, and internal
people. As a result, I feel that progress has been madetoward revitalizing discussions at the Board of Directors, as
Mr. Saito said. We, the outside Directors were able toinspect construction sites, and also participate in theregular workplace gatherings, in which the Directors
directly explain management issues and the Medium-Term
Management Plan and exchange opinions with staff on
the front line of worksites, which I found very meaningful.
Koji Tanaka: I was appointed as an outside Director thisJune. In addition to being involved in the electric powerand energy field and new business fields for many years,
I have also gained experience as a director of companies
involved in chemicals, construction machinery, logistics,
and other industries. Kandenko is a company that
supports electric power infrastructure and values people,
in addition to placing importance on worksites andtechnology. As such, I would like to contribute to theimprovement of corporate value by making use of myexperience. The theme of the Medium-Term Management
Plan is “Change! And Create the Future from a New
Starting Point.” And in this theme, I can feel the will tochange into a company that leads the era. I am
committed to providing full support to this initiative.

Issues in the Board of Directors’
effectiveness evaluation
Uchino: I believe that the effectiveness of the Board of
Directors in fiscal 2021 has steadily increased due to theaforementioned strengthening of governance, theestablishment of the Nomination and Remuneration
Committee, and the revision of the compensation system
for Directors. To further improve the effectiveness, weare now reviewing agenda setting and management
methods for key issues that will lead to medium to longterm growth of the entire Group, including revising ourbusiness portfolio.
Ando: In the effectiveness evaluation, issues were raised
regarding the composition of the Board of Directors.
Currently, I am the only female Director, and I cannot
deny that there is still room for improvement at
Kandenko in terms of promoting the advancement of
women, when compared to trends in society as a whole.
Of course, I don’t think this will be achieved easily. One
of my goals is to welcome a female officer from within
the Company in the near future. In terms of appointing
female employees to managers, which will create thefoundation for my goal, we appointed two female line
department managers for the first time in July 2022. I
hope they will advance their careers to the position of

Career Summary
Apr. 1982	Full-time lecturer, Department of Management, Gakushuin University
Faculty of Economics
Apr. 1985	Assistant Professor, Department of Management, Gakushuin University
Faculty of Economics
Apr. 1990	Professor, Department of Management, Gakushuin University Faculty of
Economics (until Mar. 2019)
Apr. 1992 Planning Director, The Gakushuin School Corporation (until Mar. 1997)
Jun. 2013 Director, the Company (current)
Oct. 2013 Representative Director, Institute Of Management Studies, Japan (current)
Apr. 2019 Professor emeritus, Gakushuin University (current)

Executive Officer or Director, and become role models
for future female employees. The Nomination andRemuneration Committee will continue to holddiscussions, including the perspective of creating aninternal environment that is conducive to careeradvancement for women.
Saito: With regard to the invigoration of the Board of
Directors, I think it is extremely important that we havea common awareness of issues. As a labor-intensive
company, Kandenko currently faces urgent challenges in
improving productivity and workstyle reforming in
preparation for the application of the legal cap on
overtime work. For this reason, interest in digitalizationand technology development is rising, and this trend
could be an opportunity for not only Kandenko but theconstruction industry as a whole to make drasticchanges. In that sense, I believe that the Board of
Directors must clarify the issues and then hold a series of
discussions on them to ensure effective governance.
Tanaka: The effectiveness evaluation for fiscal 2021 was
conducted before I assumed office, but I have looked
over the materials. Effectiveness evaluation at Kandenko
is based on a questionnaire answered by each Director.
The questions are in accordance with the principles of
the Corporate Governance Code, so it is easy to conduct
fixed-point observations with continuity over multiple
years. On the other hand, since the content of thequestions is wide-ranging, I think it is necessary to holdcontinuous discussions for further improvements in our
effectiveness. As an example of another company’s

Integrated Report 2022

62About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Materialities| Roundtable Discussion with Outside Directors |Career Summary
Apr. 1979 Joined The Dai-Ichi Kangyo Bank, Limited
Apr. 2009	Managing Executive Officer and Head of Internal Audit Group of Mizuho
Financial Group, Inc.
Jun. 2009	Managing Director and Head of Internal Audit Group, Mizuho Financial
Group, Inc.
Apr. 2010	Managing Director, Head of Risk Management Group, Head of Human
Resources Group, and Head of Compliance Group, Mizuho Financial Group, Inc.
Apr. 2011 Deputy President & Executive Officer of Mizuho Securities Co., Ltd.
Jun. 2011	Deputy President and Deputy President & Executive Officer of Mizuho
Securities Co., Ltd.
May 2015 Deputy President, Mizuho Capital Co., Ltd.
Apr. 2016 President, Mizuho Capital Co., Ltd. (until Apr. 2019)
Jun. 2019 Director, the Company (current)

approach to improving the effectiveness of its Board of
Directors, the company provides a separate opportunityfrom meetings of the Board for discussion between
outside Directors and the business execution side, and also
evaluates the effectiveness of the Board with a third-party
organization. However, Kandenko’s Board of Directors has
made considerable improvements so far, so I hope they
will continue to make improvements by deepening their
discussions while continuing to address basic matters.

Environment

Social63

KANDENKO

Financial, Non-financial &Corporate Data

Strengthening sound management foundation

Governancechange ourselves while ascertaining changes in society
and the market from a long-term perspective. Key points
in this process is that in some instances, it may benecessary to achieve this through collaboration withexternal parties, rather than relying solely on our own
strengths, and that all employees should be aware of thisfact. For example, rather than completing a single
investment plan on our own, it is important to verify costeffectiveness of collaborating with outside parties as well.
Ando: With the application of the legal cap on overtime
work approaching in April 2024, it is important for each
employee to work toward productivity innovation. Andeven within the contract structure unique to theconstruction industry, I believe that demonstrating a“people first” attitude to protect employees will help
protect Kandenko’s people-first approach. In addition, as
a key policy of our Medium-Term Management Plan, we
have set the eradication of serious accidents along withproductivity innovation, and I am very impressed to see
the stance of “people first” as the basis of this plan.
There are many challenges ahead, but I believe that we
can achieve that goal if each and every one of ouremployees takes responsibility and pride in working
diligently on the Medium-Term Management Plan.
Uchino: As we at Kandenko aim to achieve the goals of
our Medium-Term Management Plan and growth beyond
that, it is essential that we break away from thecontractual and passive culture peculiar to theconstruction industry, as well as the corporate culture
such as its principle to observe precedents and its

Progress of the Medium-Term
Management Plan from an outside
perspective
Uchino: Our long-term vision is to become a green
innovation company by 2044, and I believe the MediumTerm Management Plan made via back cast from there is achallenging, impressive, and grand plan. Looking at ourcurrent situation, we are a labor-intensive company, so oururgent issues include maintaining technology andconstruction capabilities, and as Mr. Saito said earlier,adapting to the legal cap on overtime work. While investingin human capital, I believe that we must further accelerate
our ongoing efforts to improve operational efficiency, laborsaving and manpower saving by using digital technology.
Saito: I recognize that the current Medium-Term
Management Plan sends the message that we will also

Sustainability

Career Summary
Apr. 1985 Appointed as a Public Prosecutor
Jan. 2014 Chief Prosecutor of Tokushima District Public Prosecutors Office
Jul. 2015 Chief Prosecutor of Kumamoto District Public Prosecutors Office
Jul. 2016 Public Prosecutor of Supreme Public Prosecutors Office
Mar. 2017 Retired as a Public Prosecutor
Apr. 2017 Professor of Graduate School of Law of Hosei University (current)
Jun. 2019 Registered as an Attorney-at-Law (current)
Jun. 2021 Director, the Company (current)

vertically segmented organizational behavior. Also,
compared to when the Medium-Term Management Plan
was formulated, it is fortunate that COVID-19 pandemic
is settling down, but the end is still not within sight. In
addition, the business environment is changing due tointernational political instability triggered by the situationin Ukraine, energy and food problems, rapid depreciationof the yen, and climate change issues. In thesecircumstances, so-called sustainability and ESG
management are more strongly required than ever. Eachone of these waves could not have been imagined when
the plan was first formulated, and they could collide witheach other to form even bigger waves. In thisenvironment, I believe that we must reaffirm a strong
sense of urgency and work on our Medium-Term
Management Plan.
Tanaka: In the manufacturing industry, where a legal
cap on overtime hours has already been applied,
workstyles have changed significantly compared to thepast, and I feel that we are also producing results thatlead to the application of human capital. While things
don’t go the same way in the construction industry, but
that’s why I think we have an opportunity not only to
improve productivity, but also to transform the businessitself. Everyone at Kandenko is very hard working, so I
expect them to pool their wisdom and ideas beyond theboundaries of their departments, and overcome barriers
to work as one.

for improvement in terms of promoting such superior
technology outside the company. I believe that visualizing
such technologies and linking them to the solutions
business through collaboration with external parties willlead to sustainable growth. Extracting such growthpotential as much as possible is an opportunity for senior
management to show their skills, and as an outside
Director, we would like to offer advice in various ways.
Tanaka: Speaking as someone who has been involved in
the energy field for many years, I believe the field ofgreen innovation will become increasingly necessary in the
future, and I think Kandenko has tremendous potential inthis field. In addition, as Mr. Saito said, Kandenko has alarge customer base. Therefore, we can expect to develop
as a general infrastructure service company, expanding thescope of our business to contribute to solving problems,and improving the value of customer infrastructure not
only in electric power but the energy field in general.
Uchino: This is somewhat of a repetition of what Ms.
Ando said, but I have the feeling that Kandenko has been
quietly performing its tasks. Moving forward, we will haveto take advantage of the changing times and grow byengaging in dialogue with external parties, while
confronting social issues. We have great expectations forthe leaps forward we will make in the future.

Toward the realization of a green
innovation company
Uchino: The keyword green innovation has, as its threecores, decarbonized society, recycling-based society, anda society in harmony with nature. As well as being a
global trend, there is no doubt that it will act as a strong
tailwind and growth opportunity for Kandenko, which isa general infrastructure company. It is of utmost
importance that we commit to society with a strategy forbecoming a green innovation company.
Saito: Kandenko is in a very advantageous position to
propose infrastructure to various customers in allprocesses, from the upstream production stage of energy
to the downstream stage. Our future theme is how we
can utilize this advantage to improve corporate value,and I believe that we should aim to be a solution
company by actively engaging in exchanges, including
human resources, in various situations.
Ando: I believe we have a technological advantage, as
Kandenko has accumulated ample technology and knowhow related to energy conservation and decarbonization
through infrastructure works and power transmission
works that we have worked on so far. However, I believethat due to its corporate culture, Kandenko still has room

Career Summary
Apr. 1974 Joined Hitachi, Ltd.
Apr. 2011	Representative Executive Officer, Executive Vice President and Executive
Officer, Hitachi, Ltd.
Jan. 2014	Chairman and Outside Director, Mitsubishi Hitachi Power Systems, Ltd.
(until Mar. 2018)
Jun. 2014 Outside Director, Hitachi Metals, Ltd. (until Jun. 2015)
May 2016	President, The Institute of Electrical Engineers of Japan (IEEJ) (until May
2017)
Jun. 2016 Director, Hitachi Chemical Company, Ltd. (until Jun. 2017)
Apr. 2017	Representative Executive Officer, Executive Vice President and Executive
Officer, CEO, Nuclear Energy Business Unit, Hitachi, Ltd.
Apr. 2018 Advisor, Hitachi, Ltd. (until Apr. 2020)
Jun. 2018 Director, Hitachi Chemical Company, Ltd. (until Jun. 2019)
Jun. 2018 Director, Hitachi Construction Machinery Co., Ltd. (until Jun. 2019)
Jun. 2018	Chairman of the Board, Outside Director, Hitachi Transport System, Ltd.
(until Jun. 2020)
Jun. 2022 Director, the Company (current)

Integrated Report 202264About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Materialities| Corporate Governance |Environment

SocialFinancial, Non-financial &Corporate Data

Strengthening sound management foundation

GovernanceCorporate Governance

Basic Corporate Governance Policy

As Kandenko’s operating environment changes dramatically, we are working to make management more

In keeping with the content and the spirit of the Corporate Governance Code established by the Tokyo Stockefficient and transparent while ensuring the fairness of business execution. We realize that Kandenko’s

Exchange, Kandenko implements a basic corporate governance policy that sets out its basic approach with thecontinued existence as a company with high value to its stakeholders depends on a robust corporate

aim of enhancing the practical effectiveness of corporate governance.

governance system. We are therefore unstinting in our efforts to strengthen corporate governance.

*Please see our website for more specific details. >>> https://www.kandenko.co.jp/company/governance

Board of Directors

Corporate Governance System
Gener al Meeti n g o f Sh areh o l d ers
Appointment, dismissal

Appointment,
dismissal

ReportReportReportDecision-making, monitoring and oversight

Audit by Audit & Supervisory Board Members

Audit & Supervisory Board Members(Audit & Supervisory Board)

Board of Directors (Directors)
Audit
Supervisionandoversight

ReportDecision-making,monitoring and oversight,
business execution

President /Director
responsible forbusiness

ReportNomination andCompensation Committee
Audit,
reportSenior Management
Committee

Safety, Environment &Quality Committee

ReportAudit
Business execution

Directors,
executive officers(Division managers, department
managers, branch heads)

Internal Control
Division(Compliance consultations)Appointment,
dismissal

Board of Auditors

Auditing
OfficeInternal Control
Committee“17”
The Kandenko Board of Directors, which consists of 13
members including four outside Directors, meets regularly
once a month, and additionally whenever necessary, todiscuss important business matters and to reach final
decisions, taking account of the contributions of the
independent Directors and other considerations. The Board
also oversees the execution of business by the Directors. A
designated corporate department is in place to provide
support to the outside Directors, for instance by briefingthem where necessary on items due to be discussed at
Board meetings. Important managerial issues, including
those that will be brought up at a Board of Directors’
meeting, are discussed by the Management Council, whichmeets regularly each week and additionally whenevernecessary. In these ways, we strive for rational corporate
administration. Moreover, we have introduced an Executive
Officer system, which separates managerial oversight frombusiness execution, to accelerate the decision-making
process and reinforce business execution while enhancing
the efficiency of the Directors’ business execution system.
To foster swift responses to changes in the operating
environment and invigorate management, Directors’ terms
are limited to one year from the time of appointment.
Number of meetings held in fiscal 2021

Outline of the Corporate Governance System

Accountant audit

Independent
Accounting
AuditorNumber of meetings held in fiscal 2021 “15”Kandenko has employed an Auditor system for sometime. Five Auditors, including three from outside theCompany, conduct audits appropriately based on legal
requirements and Kandenko’s audit policy. The outside
members heighten our system’s independence andneutrality. They attend our Board of Directors’ meetingsand other important meetings, where they express their
independent and objective opinions. Auditors, including
outside members, meet with the Company’s Directors ona regular and irregular basis to ask about the state of
the latter’s work. We provide the Auditors with the
Auditing Office to enable the complete and effective
fulfillment of their duties.

Independent Accounting Auditor
Employees

Affiliated companies

65

Sustainability

KANDENKO

Kandenko has appointed Inoue Audit Corporation as its
independent accounting auditor. The three CPAs who
audit Kandenko’s accounts are Masami Hiramatsu,
Katsuhiro Suzuki, and Masamichi Sakuma, none of whom
has audited our accounts for over seven consecutive
years. Three other CPAs, three persons who has passed
the CPA examination, and two additional persons assist
with the account audit.

Nomination and Compensation Committee
Kandenko established the Nomination and Compensation
Committee, the majority of whose members are
independent outside directors, to ensure transparent
procedures relating to the nomination and compensationof directors.
The outline of the committee is as follows.
Name:
Nomination and Compensation Committee
Composition:	Chairman (committee chair), President,
independent outside directors
Matters for discussion: Matters related to thecompensation of directors and Audit &Supervisory Board Members, and othermatters related to corporate governanceand compliance

Effectiveness evaluation
To secure the effectiveness of the Board of Directors, theCompany carries out self-evaluations by all Directors andAuditors after the end of each fiscal year regarding theeffectiveness of the Board of Directors. The content of theevaluation is analyzed and assessed by the Board of
Directors. In the self-evaluation implemented in April 2022,
opinions were raised on discussion agendas and operationsof the Board of Directors, the composition of the Board of
Directors, and response to the Corporate Governance Codein line with the selection of the Prime Market, but theoverall effectiveness of the Board of Directors in fiscal 2021
was judged to have been secured.
The Company will continue to raise the effectivenessof the Board of Directors as a whole in light of these
opinions.

Internal audit
For internal auditing, 6 staff of the Internal Audit Division
carries out the audit in accordance with the Internal
Control Enhancement Plan. The audit results are reported
to the Internal Control Committee and the Management
Council, and as appropriate to the Board of Directors, toenable any required remedial action to be taken.
Independent Accounting Auditor and the Internal Audit
Division report their findings at the Board of Auditors andregularly discuss these matters with the Auditors, including
outside members. Opinions are exchanged whenevernecessary so that cooperation is ensured. While the
Auditors (including outside members), Independent
Accounting Auditor, and the Internal Audit Division carryout their audits, they receive regular reports on the stateof maintenance and operation of internal control fromeach division responsible for business execution.
Integrated Report 2022

66

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Strengthening sound management foundation

Materialities| Corporate Governance |Environment

Policy on Appointment of
Directors and Auditors
The Company has determined the diversity and size of its
Board of Directors in consideration of its businesscharacteristics and the need to ensure the effectivenessof its governance function.

AuditorDirector

Name

Corporate
ESG /Finance /management Compliance Accounting

Humanresources
and labor

Governance

The Company’s policy in appointing directors andauditors, regardless of their gender, nationality, etc., is toselect individuals with extensive experience, insight, etc.,that will contribute to the sustainable growth of theCompany and the enhancement of its corporate value overthe medium to long term. These individuals are determinedby the Meeting of the Board of Directors after deliberation
and review by the Nomination and Remuneration
Committee. The following skills matrix indicates theknowledge, experience and abilities of Directors and s.
Operation
Sales /
andPurchasing
Marketing management

New
Business

Technology
development/DX /IT

Overseas
Business

Hiroshi Yamaguchi
Toshio Nakama
Shoichiro Kashiwabara
Yuji Ueda
Shinichi Miyauchi
Nobuhiro Iida
Mitsuru Fujii
Shinji Takahashi
Koichi Nakahito
Takashi Uchino
Hajime Saito
Miwako Ando
Koji Tanaka
Toru Yukimura
Hidekazu Tanaka
Sumihito Okawa
Takashi Suetsuna
Shoichi Muto

Outside Directors and Outside Auditors
Outside Directors and outside Auditors
Currently, the Company has four outside Directors andthree outside Auditors. We appoint outside Directors andoutside Auditors to fulfill monitoring and oversightfunctions and to enhance transparency, so in accordancewith the Companies Act and other regulations, we lookfor candidates whose experience and insight, etc. outside
the Company will be useful to Kandenko, and who canoversee and audit the Directors’ execution of duties froman independent and neutral standpoint. Regarding
outside Auditors, the Board of Auditors meeting firstagrees on the candidates, the Board of Directors
approves them, and then they are presented at a general
meeting of shareholders for a vote. In the case ofoutside Directors, the Board of Directors nominates anumber of outside Director candidates who meet theindependence criteria listed below, giving due
consideration to the practical effectiveness of its
operations. For outside members of the Board ofAuditors, the Board of Directors nominates a number ofcandidates with the ability to audit the execution ofbusiness by the Directors from a position of
independence and objectivity.
67

SocialKANDENKO

Financial, Non-financial &Corporate Data

Sustainability

7. T he candidate is a business executive of a company with areciprocal relationship with Kandenko through outside
officers.
8. The candidate has a relative (a spouse or relative within
the second degree of kinship) to whom any of 1 to 6
above applies (restricted to officers and senior employees).
9. T he candidate has triggered any of 2 to 8 above in thepast five years.

Remuneration for Directors andAuditors, etc.
Matters concerning the Policy for theDetermination of the Details of Remunerationfor each Director

Independence Criteria for Outside Directors andOutside Audit & Supervisory Board Members
Kandenko considers candidates for outside director andoutside Audit & Supervisory Board Members to be
independent as long as they do not trigger any of thefollowing exclusion criteria:

1. T he candidate is or has been a business executive ofKandenko or a Kandenko’s subsidiary.
2. T he candidate is a business executive of a major
shareholder of Kandenko (a shareholder with 10% or moreof the voting rights including indirect holdings) or abusiness executive of a company of which Kandenko is amajor shareholder.
3. T he candidate is a business executive of a major creditorof Kandenko (a creditor who has provided loans of morethan 1% of consolidated assets in the most recent fiscal
year).
4. T he candidate is a business executive of a major businessclient of Kandenko (a client accounting for more than 1%of consolidated net sales of completed construction
contracts in the most recent fiscal year) or a businessexecutive of a company of which Kandenko is a major
business client.
5. The candidate is a representative employee or an employeeof an accounting auditor of Kandenko.
6. T he candidate is a person who has, or a member of agroup that has, received from Kandenko material benefits
or gifts of high value (more than ¥10 million excluding
corporate officers’ remuneration).

The Company has passed a resolution on the Policy for
the Determination of the Details of Remuneration foreach Director (“Decision-Making Policy”) at the Meetingof the Board of Directors after deliberation and review
by the Nomination and Remuneration Committee, which
was established to improve effectiveness and ensure thetransparency of the Board of Directors. The outline of
the Decision-Making Policy is as follows.
Remuneration, etc. for Directors shall be within the
total amount of remuneration approved by a General
Meeting of Shareholders, and shall consist of basic
remuneration, bonuses and restricted share-based
remuneration (outside Directors only receive basic
remuneration and bonuses). Remuneration, etc. for each
Director is determined according to the Director’s
responsibilities, and the details are resolved at the
Meeting of the Board of Directors after deliberation andreview by the Nomination and Remuneration Committee.
Proposals for the payment of bonuses, which take into
consideration its nature linked with business performance,
are submitted to a General Meeting of Shareholders forapproval. Basic remuneration is paid regularly eachmonth and bonuses are paid promptly after approval atan Annual General Meeting of Shareholders.
Restricted share-based remuneration is paid at a certain
time each year within the remuneration limit approved at
a General Meeting of Shareholders, with the aim ofallowing Directors to share the benefits and risks of stock
price fluctuations with shareholders and to motivate
Directors to further contribute to raising share prices andimprove medium- to long-term corporate value. The
percentage of the restricted share-based remuneration ineach Director’s remuneration is set at 10%.

Matters concerning Resolutions of the General
Meetings of Shareholders Regarding
Remuneration, etc. for Directors and Auditors
Based on a resolution of the 93rd Annual General
Meeting of Shareholders held on June 28, 2007, theCompany set the total remuneration for Directors at no
more than ¥780 million per year. This resolution wasapplicable to 16 Directors. Furthermore, based on a
resolution of the 107th Annual General Meeting of
Shareholders held on June 29, 2021, the Company
decided to pay Directors (excluding outside Directors)
restricted share-based remuneration within the scope of
the abovementioned limit on remuneration, and such
remuneration to be paid in order to grant shares withrestriction on transfer shall be monetary remuneration
claims, the total amount of which shall not exceed ¥100
million per year, and the maximum number of commonshares to be issued or disposed of shall not exceed
200,000 shares per year. This resolution was applicable
to 11 Directors.
Based on a resolution of the 93rd Annual General
Meeting of Shareholders held on June 28, 2007, theCompany set the total remuneration for Auditors at no
more than ¥120 million per year. This resolution wasapplicable to 5 Auditors.

Reason for the Board of Directors to havedetermined that the details of remuneration,etc. for each Director observe the DecisionMaking Policy
The details of remuneration, etc. for each Director are
deemed to observe the Decision-Making Policy, as theNomination and Remuneration Committee has conducted
a deliberation and review with regard to the consistency
with the Decision-Making Policy, and the Board of
Directors passed its resolution based on the results ofsuch deliberation and review.

Amount of remuneration, etc. for Directors and Auditors
Amount of remuneration, etc.

Classification

Number ofrecipients

Total
remuneration,
etc.

Basic
remuneration

Bonuses

Restricted
share-based
remuneration

Directors(of which, outside Directors)

19(4)¥492million(¥30million)¥350million(¥25million)¥110million(¥4million)¥31million(−)

Auditors(of which, outside Auditors)

5(3)¥87million(¥33million)¥87million(¥33million)

−
(−)

−
(−)

* The number of recipients and the amount of remuneration, etc. includes five Directors who retired at the conclusion of
the 107th Annual General Meeting of Shareholders held on June 29, 2021.

Integrated Report 2022

68About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Materialities| Corporate Governance |State of Progress of the Internal
Control System
Based on the Basic Policy for Enhancing the Internal
Control System adopted by the Board of Directors(enacted April 2006, revised May 2015), Kandenko has
established an Internal Control Committee chaired by thecompany president that discusses issues relating to theinternal control system. The Company also lays downinternal control regulations that set out the basic principles
of internal control and management regulations foraffiliated companies that set out relevant management
principles. Through these and other measures, Kandenko
has put in place a system to ensure appropriate businessconduct by the Company and by the corporate groupconsisting of Kandenko and its subsidiaries. Additionally,
to promote adaptation to the internal control reporting
system introduced in fiscal 2008 in accordance with the
Financial Instruments and Exchange Act, the Company has
set up a department in charge of reviewing internal
controls relating to financial reporting in order to promote
appropriate operation and evaluation and to ensure thecredibility of financial reporting.

Environment

SocialTo clarify important points in the Kandenko Group’sbusiness activities and encourage deeper inculcation ofcompliance, we have enacted the Kandenko Group
Charter of Corporate Behavior, and we are promoting its
establishment and raising the awareness of all Group
employees about the Charter. We have set up acompliance consultation point for employees and aninternal system where legal violations can be reported.
We are working to establish and maintain a corporate
culture of fairness and transparency.
In its attitude toward antisocial forces, the whole
Kandenko organization is committed to a resolute stancerejecting any action that could raise suspicion of an
inappropriate relationship. Backing this stance are theKandenko Group Charter of Corporate Behavior and theInternal Control Enhancement Plan adopted by the Internal
Control Committee, which form the basis for education,
training, and related activities to ensure compliance andpromote full awareness throughout the organization.

Risk Management System
The Kandenko Group operates a set of internal
regulations on risk management. Having categorized anddefined risks relating to business operations item by item,
Kandenko devises countermeasures to match their degreeof impact and likelihood of occurrence. In addition to
taking advance measures of this kind to prevent risk,
Kandenko has designated reporting channels andresponse systems in place for the event of the riskmaterializing.
Additionally, the Internal Control Committee meets
periodically to check the operating status of the risk

69

KANDENKO

Financial, Non-financial &Corporate Data

Strengthening sound management foundation

Governancemanagement system and to analyze and evaluate risk
status and related matters, while the establishment of a
dedicated Internal Control Division serves to strengthen
the risk management system.
Described below are factors that could possibly have asignificant impact on decisions made by investors.
In recognizing that there is the potential for such risks
to occur, the Kandenko Group is undertaking efforts toavoid their occurrence as well as formulating
countermeasures in the event such risks occur.
Moreover, the statements described below regarding
the future reflect judgments made by the KandenkoGroup based information available up to the end of the
fiscal year ended March 31, 2022.

Changes in the business environment
In the event that significant changes occur in thebusiness environment, such as decreases in constructionrelated investments or capital investment in electric
power facilities and equipment exceeding projectedchanges, it is possible that the actual financial
performance or other results of the Company could be
affected. Sales to the TEPCO Group account for about
30% of the Kandenko Group’s sales.

Fluctuations in the cost of materials or labor costs

Compliance System

Sustainability

Should the cost of materials or labor costs increasesignificantly, and the increase cannot be reflected in thecontracted fees, it is possible that the actual financial
performance or other results of the Company could be
affected.
To address this risk, the Company discusses reflecting
such cost increases in construction contracts and works
to reduce costs by diversifying the supply chain andother measures.

Work and related risks
If work undertaken by Kandenko turns out to beseriously defective or an accident occurs in the course ofwork, it is possible that the actual financial performanceor other results of the Company could be affected.
To address this risk, the Company is working to ensure
construction quality by analyzing factors and taking
countermeasures against facility accidents, and providing
training, etc. using past accidents as examples.

Credit risk of client company
In the construction industry, the contracted fee for eachtransaction is very large, and in many cases, the contract
is subject to the payment of a large construction fee atthe handover of the completed construction. Should theclient company suffer from a credit shortage before theCompany can receive payment of the construction fee, it
is possible that the actual financial performance or otherresults of the Company could be affected.
To address this risk, the Company strives to preventthe occurrence of bad debts by thoroughly checking thecredit status of client companies.

Asset holding risk
As it is necessary to have such assets as real estate andsecurities for business activities, should something
happen, such as a significant decline in the fair value ofthe held assets, or a dramatic drop in the profitability of
the real estate for business purposes, it is possible thatthe actual financial performance or other results of theCompany could be affected.

To address this risk, the Company manages real estate
for business purposes by monitoring impairment andother risks. Of investment securities, cross-shareholdings
are investigated annually by the Board of Directors, etc.
in terms of the significance of holdings and asset
efficiency, etc. and, in principle, shares whose holding
significance has declined are sold.

To respond to this risk, the Company has established a
COVID-19 task force, and is taking measures such as
developing working styles, ensuring vaccination
opportunities through occupational vaccinations,monitoring the impact on material delivery deadlines andprospects, and thoroughly checking the credit status ofclient companies.

Liability for employees’ retirement benefits

Climate change risk

Should the fair value of pension assets decline, or should
there be changes in the assumptions, such as the returnon investments or discount rate, used to calculate theliability for employees’ retirement benefits, it is possiblethat the actual financial performance or other results of
the Company could be affected.
To address this risk, the Company has established abasic policy for the management of pension assets andregularly assesses the assets under management.

Owing to physical risks associated with climate change,
including decreased production capacity caused byincreased health risks (heat stroke, infectious diseases,etc.) at construction sites due to higher average summer
temperatures, and damage to our bases, employees, andpartner companies caused by increasingly severe andmore frequent natural disasters; and decreased
profitability caused by supply disruptions or soaring
material prices due to damage to material suppliers, it ispossible that the actual financial performance or otherresults of the Company could be affected.
Owing to the risks of transition to a decarbonizedsociety, including increased costs in line with theintroduction of a carbon tax, etc., and lost orderopportunities due to delays in the Group’s response tocustomer and social demands for climate change
countermeasures, it is possible that the actual financial
performance or other results of the Company could be
affected.
To address these risks, we have established an ESG
Promotion Committee, consisting of the Management
Planning Department and other leading departments, toformulate important policies and measures concerning
environmental issues in general, including our response
to climate change, and important policies are deliberated
and reviewed at meetings of the Management Council
and the Board of Directors.

Legal regulations
The Company is subject to legal regulations, including
the Construction Business Act, the Antimonopoly Act,and the Industrial Safety and Health Act. Should there
be any changes, such as the revision or repeal of legal
regulations, or the enactment of new legal regulations,or if changes are made to criteria for their application oradministrative sanctions are handed down based on thelegal regulations, it is possible that the actual financial
performance or other results of the Company could be
affected.
To address this risk, each division responsible forbusiness execution and the legal affairs division
constantly monitor trends such as the revision, abolition,and establishment of new legal regulations, and strive tocomply with legal regulations by checking their response
and state of compliance.

Risk of information leakage
In the event that a large amount of damage is incurred
as a consequence of the theft of information due tocyberattacks or the falsification or loss of system data, it
is possible that the actual financial performance or otherresults of the Company could be affected.
To address this risk, the Company has developed
internal regulations and work to strengthen the securityof its information systems and educate its employees.

Disaster risk
If business activities are interrupted or delayed due tothe occurrence of natural disasters, such as large-scale
earthquakes and typhoons, it is possible that the actual
financial performance or other results of the Company
could be affected.
To address this risk, the Company has developed
internal regulations, and is taking measures such as
informing employees, implementing measures against
power-outages at its offices, and promoting thestockpiling of emergency supplies.

A new virus pandemic
If COVID-19 causes damage to the health of Kandenko
employees, a delay in materials procurement, a decreasein construction capacity, or a delay in collecting payments
for construction projects, it is possible that the actual
financial performance or other results of the Company
could be affected.

Systems to Ensure Appropriate Business Conduct
by Kandenko and the Corporate Group Consistingof Kandenko and Its Subsidiaries
Kandenko has put in place a system to promote
information sharing with its subsidiaries, under which the
Kandenko Board of Directors receives reports onimportant matters relating to the business conduct ofsubsidiaries, including their accounting and internal
control operations.
Moreover, for the purpose of risk management at
subsidiaries, internal regulations are in place whose basic
aim is to prevent crisis situations in advance and tominimize the impact on business activities in the eventthat a crisis situation materializes. Additionally, Kandenko
provides advice and other support for the creation of risk
management systems at subsidiaries, and periodicallychecks and evaluates the status of risk management at
its subsidiaries.
By periodically receiving reports from its subsidiaries,
Kandenko is able to check their conduct of business,
ascertain the state of management operations at thesubsidiary, and offer advice and other measures to tackle
management issues.
In parallel, the Internal Audit Division carries out internal
audit of subsidiaries in accordance with the Internal
Control Enhancement Plan. The audit results are reported
to the Internal Control Committee and the Management
Committee, and as appropriate to the Board of Directors,
to enable any remedial action to be taken.
Integrated Report 2022

70

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Materialities| Management Structure | (As of July 1, 2022)

Environment

SocialSustainability

Financial, Non-financial &Corporate Data

Strengthening sound management foundation

GovernanceDirectors
Chairman and Director

President and Executive Officer

Managing Director and Executive Officer

Managing Director and Executive Officer

Hiroshi Yamaguchi*

Toshio Nakama*

Mitsuru Fujii

Shinji Takahashi

Tenure as Director:
1 yearTenure as Director:
7 years

Administrative delegation,
jurisdiction, and responsibility
Acting Division Manager ofSocial Infrastructure Division in charge of
Safety & Environment Division

Administrative delegation,
jurisdiction, and responsibility
Division Manager of Minamikanto &Tokai Sales Division and Branch Manager
of Kanagawa Branch

Tenure as Director:
1 yearTenure as Director:
1 yearHiroshi Yamaguchi was appointed as Director as he has knowledge ofbusiness activities related to corporate management, ESG and compliance,
operation and management, purchasing, new business, technology
development/ DX/IC, and overseas business. The Company has judged that
his experience and insight, etc. gained as Chairman and Director willcontribute to the Company’s sustainable growth and enhancement of ourcorporate value over the medium to long term.
Significant Concurrent Positions outside the Company:
President of General incorporated association Japan Electrical Construction Association

Toshio Nakama was appointed as a Director as he has knowledge ofbusiness activities related to corporate management, ESG and compliance,
human resources and labor, sales and marketing, and operation andmanagement. The Company has judged that his experience and insight,
etc. gained as President and Executive Officer will contribute to theCompany’s sustainable growth and enhancement of our corporate value
over the medium to long term.

Mitsuru Fujii was appointed as a Director as he has knowledge of businessactivities related to ESG and compliance, sales and marketing, andoperation and management. The Company has judged that his experienceand insight, etc. gained as Head of Power Distribution Unit, Social
Infrastructure Division and as Managing Director and Executive Officer, etc.
will contribute to the Company’s sustainable growth and enhancement ofour corporate value over the medium to long term.

Executive Vice President and Executive Officer

Executive Vice President and Executive Officer

Managing Director and Executive Officer

Shoichiro Kashiwabara*

Yuji Ueda

Koichi Nakahito

Administrative delegation,
jurisdiction, and responsibility
Division Manager of Corporate Divisionin charge of Overall Operations andInternal Control Division

Administrative delegation,
jurisdiction, and responsibility
In charge of Overall Operations, Group
Business Department and International
Business Division

Tenure as Director:
7 years

Tenure as Director:
4 years

Administrative delegation,
jurisdiction, and responsibility
Acting Division Manager of Social
Infrastructure Division in charge ofStrategy & Technology Development
Division
Tenure as Director:
1 year

Shoichiro Kashiwabara was appointed as a Director as he has knowledge ofbusiness activities related to corporate management, ESG and compliance,
finance and accounting, human resources and labor, sales and marketing, andpurchasing. The Company has judged that his experience and insight, etc.
gained as Executive Vice President and Executive Officer, etc. will contribute to
the Company’s sustainable growth and enhancement of our corporate value
over the medium to long term.

Yuji Ueda was appointed as a Director as he has knowledge of businessactivities related to corporate management, sales and marketing, newbusiness, technology development/DX/IT, and overseas business. The
Company has judged that his experience and insight, etc. gained as aManaging Director of TEPCO Energy Partner, Inc. and as Executive Vice
President and Executive Officer, etc. of the Company will contribute to theCompany’s sustainable growth and enhancement of our corporate value
over the medium to long term.

Executive Vice President and Executive Officer

Executive Vice President and Executive Officer

Shinichi Miyauchi

Nobuhiro Iida

Administrative delegation,
jurisdiction, and responsibility
Division Manager of Social Infrastructure
Division

Administrative delegation,
jurisdiction, and responsibility
Division Manager of Sales Divisionin charge of Overall Operations and Cost
Management Division

Tenure as Director:
3 years

Shinichi Miyauchi was appointed as a Director as he has knowledge ofbusiness activities related to sales and marketing, and purchasing. The
Company has judged that his experience and insight, etc. gained as Senior
Managing Director and Executive Officer, etc. will contribute to theCompany’s sustainable growth and enhancement of our corporate value
over the medium to long term.

Shinji Takahashi was appointed as a Director as he has knowledge ofbusiness activities related to sales and marketing, and operation andmanagement. The Company has judged that his experience and insight,
etc. gained as Division Manager of Minamikanto & Tokai Sales Division,
and Branch Manager of Kanagawa Branch and Managing Director andExecutive Officer will contribute to the Company’s sustainable growth andenhancement of our corporate value over the medium to long term.

Koichi Nakahito was appointed as a Director as he has knowledge ofbusiness activities related to operation and management, new business, andtechnology development/DX/IT. The Company has judged that his
experience and insight, etc. gained as Deputy Executive General Managerof the Social Infrastructure Division and as Managing Director and Executive
Officer, etc. will contribute to the Company’s sustainable growth andenhancement of our corporate value over the medium to long term.

Tenure as Director:
2 years

Nobuhiro Iida was appointed as a Director as he has knowledge of businessactivities related to sales and marketing, purchasing, and overseas business.
The Company has judged that his experience and insight, etc. gained as
Managing Director and Executive Officer, etc. will contribute to theCompany’s sustainable growth and enhancement of our corporate value
over the medium to long term.
※は代表取締役

71

KANDENKO

Integrated Report 2022

72

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Materialities| Management Structure | (As of July 1, 2022)

Environment

SocialSustainability

Financial, Non-financial &Corporate Data

Strengthening sound management foundation

GovernanceOutside Directors

Full-time Audit & Supervisory Board Members
Outside Director

Outside Director

Full-time Audit & Supervisory Board Member

Full-time Audit & Supervisory Board Member

Takashi Uchino

Hajime Saito

Toru Yukimura

Hidekazu Tanaka

Tenure as Director:
9 years

Tenure as Director:
3 years

Tenure as Audit & Supervisory Board Member:
2 years

Tenure as Audit & Supervisory Board Member:
2 years

Takashi Uchino was appointed as a Director as the Company believes that
his knowledge of ESG and compliance, finance and accounting, humanresources and labor, sales and marketing, and new business and technology
development/DX/IT as well as experience and insight gained as a university
professor and business management studies expert, will contribute to thesustainable growth of the Company and the enhancement of its corporate
value over the medium to long term.
Significant Concurrent Positions outside the Company:
Representative Director of Institute Of Management Studies, Japan

Hajime Saito was appointed as a Director as the Company has judged that
his expertise in corporate management, ESG and compliance, finance andaccounting, human resources and labor, and new business, as well as his
experience and insight gained as a director of Mizuho Financial Group, Inc.
and Mizuho Securities Co. Ltd., will contribute to the Company’ssustainable growth and enhancement of our corporate value over the
medium to long term.

Toru Yukimura was appointed as an Auditor as he has knowledge ofbusiness activities related to corporate management, finance andaccounting, human resources and labor, sales and marketing,purchasing, and technology development/DX/IT. The Company has
judged that his experience and insight, etc. gained through his service
as a business manager will contribute to the effective auditing of theCompany.

Hidekazu Tanaka was appointed as an Auditor as he has knowledge ofbusiness activities related to sales and marketing, operation andmanagement, new business, technology development/DX/IT. The
Company has judged that his experience and insight, etc. gained as
Executive Officer, etc. will contribute to the effective auditing of theCompany.

Outside Audit & Supervisory Board Members

Outside Director

Outside Director

Outside Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

Miwako Ando

Koji Tanaka

Sumihito Okawa

Takashi Suetsuna

Tenure as Director:
1 yearTenure as Director:—

Tenure as Outside Audit &Supervisory Board Member:
14 yearsTenure as Outside Audit &Supervisory Board Member:
6 years

Miwako Ando was appointed as a Director as the Company believes her
knowledge of ESG and compliance, and human resources and labor, as
well as her experience and insight gained as a prosecutor and lawyer, willcontribute to the sustainable growth of the Company and the enhancementof its corporate value over the medium to long term.
Significant Concurrent Positions outside the Company:
Professor of Graduate School of Law of Hosei University
Attorney-at-law

Koji Tanaka was appointed as a Director as he has knowledge related tocorporate management, ESG and compliance, sales and marketing,operation and management, new business, technology development/DX/IT,
and overseas business as his experience and insight gained as
Representative Executive Officer and Executive Vice President of Hitachi,Ltd. The Company has judged that he will contribute to the Company’ssustainable growth and enhancement of our corporate value over the
medium to long term.

Sumihito Okawa was appointed as an Auditor as he has knowledge ofcorporate management, ESG and compliance, finance and accounting,human resources and labor, new business, and overseas business. The
Company has judged that his experience and insight, etc. gained throughserving in positions that include Audit & Supervisory Board Member of ANA
HOLDINGS INC. and ALL NIPPON AIRWAYS CO., LTD. will contribute to theeffective auditing of the Company.

Takashi Suetsuna was appointed as an Auditor as he has knowledge of
ESG and compliance, finance and accounting, human resources and labor,
and overseas business. The Company has judged that his experience andinsight, etc. gained through serving in positions that include senior officialof administrative agencies as well as an outside officer of Marubeni
Corporation, Totetsu Kogyo Co., Ltd., JCR Pharmaceuticals Co., Ltd., Aioi
Nissay Dowa Insurance Co., Ltd., and Keikyu Corporation which willcontribute to the effective auditing of the Company.
Significant Concurrent Positions outside the Company:
Outside Director, Totetsu Kogyo Co., Ltd.
Outside Director, JCR Pharmaceuticals Co., Ltd.
Outside Auditor, Keikyu Corporation

Outside Audit & Supervisory Board Member

Shoichi Muto
Tenure as Outside Audit &Supervisory Board Member:
3 years

Shoichi Muto was appointed as an Auditor as he has knowledge of ESG
and compliance, operation and management, and technology development/
DX/IT. The Company has judged that his experience and insight, etc. gained
through serving in positions at Tokyo Electric Power Company Holdings willcontribute to the effective auditing of the Company.

73

KANDENKO

Integrated Report 2022

74About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Financial, Non-financial &Corporate Data

Sustainability| Consolidated 11-Year Financial Summary |(Millions of yen)

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

441,786

447,741

437,930

436,682447,673

470,943507,205

563,550

616,143556,045495,567

8,034

7,364

8,284

9,388

16,416

26,39729,26130,012

34,69330,04130,643

1.8

1.6

1.9

2.1

3.7

5.6

5.8

5.3

5.6

5.4

6.2

Ordinary profit

9,070

8,301

9,089

10,336

17,077

27,34530,03130,79535,56531,04331,754

Profit attributable to owners of parent

1,876

3,952

4,226

4,615

9,412

17,591

19,05819,70322,515

20,147

20,315Comprehensive income

4,381

8,238

7,327

11,984

7,137

18,422

22,927

20,31915,68529,222

19,831

Total assets

359,726

364,008359,933

366,177

407,681424,874

443,751459,854488,701

456,999

470,967

Total net assets

178,757

184,269

189,692

193,345

197,980

213,356

230,810

245,954

255,821

279,459

293,514

ROE (%)

1.1

2.2

2.3

2.5

4.9

8.8

8.8

8.5

9.3

7.8

7.3

ROA (%)

2.5

2.3

2.5

2.8

4.4

6.6

6.9

6.8

7.5

6.6

6.8

Equity ratio (%)

48.54

49.49

51.45

51.44

47.22

48.72

50.51

51.85

50.62

59.17

60.30

Net assets per share (yen)854.31

881.41906.29922.05942.42

1,013.33

1,097.36

1,167.30

1,211.13

1,323.90

1,389.96

Earnings per share (yen)

9.18

19.34

20.69

22.59

46.07

86.11

93.31

96.46

110.23

98.64

99.45

Cash dividends per share (yen)

12.00

12.00

12.00

14.00

14.00

20.00

24.00

26.00

28.00

28.00

28.00

Net cash provided by (used in) operating activities

13,035

15,401

r2,2182,921

18,042

6,751

11,46928,251

29,155

12,87327,150Net cash provided by (used in) investing activities

1,583

r12,748

r5,8392,253

r7,101

r17,867

r10,015

r10,131

r13,481

r972

r9,224

Net cash used in financing activities

r5,423

r2,900

r4,540r3,74319,807r169

r7,857

r9,153

r7,151

r26,317

r7,789Cash and cash equivalents at end of period

50,72550,55038,69740,15770,89959,61254,09963,06871,57957,18767,423

Number of employees (persons)

8,746

8,732

8,821

8,839

8,915

9,244

9,571

9,818

10,003

10,154

10,264

For the fiscal years ended March 31

Net sales
Operating profit
Operating profit ratio (%)

75

KANDENKO

Integrated Report 2022

76

About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

| Consolidated Financial Statements |CONSOLIDATED BALANCE SHEETKANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESMARCH 31, 2021 AND 2022
(Millions of Yen)

(Thousands of U.S. Dollars)

2022

2021

2022

Assets(Thousands of U.S. Dollars)

2021

2022

2022

¥88,832¥80,241$657,713

Liabilities
Current liabilities

Current assets
Cash and deposits*5¥58,478*5¥67,614*5$554,213

Notes receivable, accounts receivable from completed
construction contracts and other*5

192,200*1, *5

185,675*1, *5

1,521,926

Costs on construction contracts in progress

4,999

5,007

Securities
*7

Other
Allowance for doubtful accounts
Total current assets

11,116

*7

9,547

*7

Notes payable, accounts payable for construction
contracts and other
Short-term borrowings

*5

7,402

*5

6,792

*5

55,672

595

711

5,827

Income taxes payable

3,976

6,815

55,86078,254

Advances received on construction contracts in progress

12,644

Provision for warranties for completed construction

40,975

12,287

20,888171,213

(544)

(556)

(4,557)

278,545

288,170

2,362,049

Lease liabilities*2

12,349

*2

146

158

101,221
1,196

5,546

*7

9,927

*7

81,368

Other

25,797*230,306*2

248,409

Total current liabilities

144,952

Provision for loss on construction contracts*7

147,290

1,207,295

Non-current liabilities

Non-current assets

Long-term borrowings

Property, plant and equipment

*5

7,249

*5

*5

1,694

1,385

Lease liabilities

6,607

54,155
13,885

Buildings and structures*5

100,603*5

102,322*5

838,704

Deferred tax liabilities for land revaluation

Machinery, vehicles, tools, furniture and fixtures*5

62,992*5

63,979*5524,418

Retirement benefit liability

15,836

13,813

113,22160,042

1,486

12,180*4, *5495,868

1,542*4, *560,496

Other*4, *5

Total non-current liabilities

32,58630,162

247,229

177,539

177,452

1,454,524

Land

*4

6,573

*4

6,560

*4

53,770

3,361

3,685

30,204

Construction in progress

633

1,246

10,213

Accumulated depreciation(116,032)(118,799)(973,762)

Share capital

10,264

10,264

84,131

Total property, plant and equipment

111,601

112,930

925,655

Capital surplus

6,441

6,456

52,918

5,804

5,694

46,672Retained earnings

242,999257,625

2,111,680

(588)

(561)

(4,598)259,118

273,784

2,244,131

14,681

14,315

117,336

(245)

(189)

(1,549)Leased assets

Intangible assets

Investment securities

Net assets
Shareholders’ equity

Total shareholders’ equity*3, *5

46,975*3, *5*5

7,524

48,274*3, *5

9,180

7,870

Deferred tax assets
Other

Total liabilities

Treasury shares

Investments and other assets

*5

8,000

395,688
75,245*5

65,573

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land

*4

(5,247)*4(5,276)*4(43,245)

Allowance for doubtful accounts(1,322)(1,284)(10,524)

Remeasurements of defined benefit plans

2,110

1,342

11,000Total investments and other assets

61,04864,171

525,991

Total accumulated other comprehensive income

11,29910,191

83,532

178,453

182,797

1,498,336

9,042

9,538

78,180279,459

293,5142,405,852¥456,999¥470,967$3,860,385¥456,999¥470,967$3,860,385

Total non-current assets
Total assets
The accompanying notes are an integral part of financial statements.

77(Millions of Yen)

KANDENKO

Non-controlling interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of financial statements.

Integrated Report 2022

78About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Financial, Non-financial &Corporate Data

Sustainability| Consolidated Financial Statements |CONSOLIDATED STATEMENT OF INCOMECONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2021 AND 2022

KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2021 AND 2022
(Millions of Yen)

(Thousands of U.S. Dollars)

2021
Net sales of completed construction contracts
Cost of sales of completed construction contracts*2¥556,045
500,893*2*325,110*3¥495,567$ 4,062,024

438,846*2

3,597,098

26,077464,926
213,745*3

30,64330,041

Operating profit (loss)

2022
*1

56,721

55,151Gross profit (loss) on completed construction contracts
Selling, general and administrative expenses

2022
*1

(Millions of Yen)

251,172

Profit (loss)

Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

Total other comprehensive income

Interest income

20

23

188

Dividend income

950

976

8,000

Comprehensive income

Foreign exchange gains

78

149

1,221

Comprehensive income attributable to

Other

318

316

2,590

1,368

1,466

12,016

Interest expenses

205

187

1,532

Other

160

168

1,377

Total non-operating expenses

366

355

2,909

31,04331,754

260,278

Gain on sale of investment securities

846

254

2,081

Other

89

–

–

Total extraordinary income

936

254

2,081

Total non-operating income
Non-operating expenses

Ordinary profit (loss)

2021

2022

2022

¥20,818¥20,925$171,516

5,230

(382)

(3,131)

59

55

450

3,114

(767)

(6,286)

Other comprehensive income

Remeasurements of defined benefit plans, net of tax

Non-operating income(Thousands of U.S. Dollars)

Comprehensive income attributable to owners of parent
Comprehensive income attributable tonon-controlling interests

*1

8,403

*1

(1,093)*1(8,959)¥29,222¥19,831$162,549

28,46019,237

157,680

¥762

¥594

$4,868

The accompanying notes are an integral part of financial statements.

Extraordinary income

Extraordinary losses
Loss on COVID-19

*5

691

*5

514

4,213

*5

Loss on retirement of non-current assets

133

286

2,344

Loss on disaster

10

150

1,229

Provision of allowance for doubtful accounts for
subsidiaries and associates

650

–

–

Other

243

78

639

Total extraordinary losses

1,729

1,031

8,450

Profit (loss) before income taxes

30,25130,978

253,918

Income taxes - current

8,766

10,90789,401

Income taxes - deferred

665

(854)

(7,000)Total income taxes

9,432

10,05282,393

Profit (loss)

20,81820,925

171,516

670

609

4,991

¥20,147¥20,315

Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent$

166,516

The accompanying notes are an integral part of financial statements.

79

KANDENKO

Integrated Report 2022

80About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Financial, Non-financial &Corporate Data

Sustainability| Consolidated Financial Statements |CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2021

YEAR ENDED MARCH 31, 2022
(Millions of Yen)

(Millions of Yen)

Shareholders’ equity

Balance at beginning of period

Share capital

Capital surplus

Retainedearnings¥10,264¥6,352¥228,341

Shareholders’ equity
TreasurysharesTotal shareholders’equity¥(587) ¥244,370

Balance at beginning of period

Changes during period

Share capital

Capital surplus

¥

¥

10,264¥

242,999

Treasuryshares¥

Total shareholders’equity(588) ¥259,118

Changes during period

Changes in equity interest inconsolidated subsidiaries

89

89

Changes in equity interest inconsolidated subsidiaries––

Purchase of shares of
consolidated subsidiaries

(0)

(0)

Purchase of shares of
consolidated subsidiaries––

Dividends of surplus(5,514)(5,514)

Dividends of surplus(5,719)(5,719)Profit (loss) attributable toowners of parent

20,147

20,147

Profit (loss) attributable toowners of parent

20,315

20,31526

26

Reversal of revaluation
reserve for land

29

29

(0)

(0)

Purchase of treasury shares

00

Disposal of treasury shares

Reversal of revaluation
reserve for land
Purchase of treasury shares

0

Disposal of treasury shares
Net changes in items otherthan shareholders’ equity

Balance at end of period

(0)

27

42

26

14,666(561) ¥273,784

14–

89

14,658¥10,264¥6,441¥242,999(0)14,747–

Total changes during period¥(588) ¥259,118

Balance at end of period¥

10,264

Accumulated other comprehensive income
Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesBalance at beginning of period(0)

Net changes in items otherthan shareholders’ equity

Total changes during period¥9,513

Revaluation
reserve for land

plans

14
¥

6,456

14,625¥

257,625¥

Accumulated other comprehensive income

Remeasurements Total accumulated Non-controlling Total net assetsinterestsof defined benefit other comprehensive

Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesincome¥(305) ¥(5,221) ¥(973) ¥3,012¥8,438¥255,821

Changes during period

Balance at beginning of period¥14,681

Remeasurements Total accumulated Non-controlling Total net assets
Revaluationinterestsof defined benefit other comprehensive
reserve for landplansincome¥(245) ¥(5,247) ¥2,110¥11,299¥9,042¥279,459––

Changes during period

Changes in equity interest inconsolidated subsidiaries(89)

Purchase of shares of
consolidated subsidiaries–

Changes in equity interest inconsolidated subsidiaries(0)

Purchase of shares of
consolidated subsidiaries–

Dividends of surplus(5,514)

Dividends of surplus(5,719)Profit (loss) attributable toowners of parent

20,147

Profit (loss) attributable toowners of parent

20,315

Reversal of revaluation
reserve for land

26

Reversal of revaluation
reserve for land

29

Purchase of treasury shares(0)

Purchase of treasury shares(0)

Disposal of treasury shares

0

Disposal of treasury shares

42

Net changes in items otherthan shareholders’ equity

5,168

59

(26)

3,084

8,286

693

8,980

Net changes in items otherthan shareholders’ equity

(366)

55

(29)

(767)

(1,107)

496

(611)

Total changes during period

5,168

59

(26)

3,084

8,286

603

23,638

Total changes during period

(366)

55

(29)

(767)

(1,107)496

14,054¥(245) ¥(5,247) ¥2,110¥11,299¥9,042¥279,459¥(189) ¥(5,276) ¥1,342¥10,191¥9,538¥293,514

Balance at end of period¥14,681

The accompanying notes are an integral part of financial statements.

81

6,441

Retainedearnings

KANDENKO

Balance at end of period¥14,315

The accompanying notes are an integral part of financial statements.

Integrated Report 2022

82About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Financial, Non-financial &Corporate Data

Sustainability| Consolidated Financial Statements |CONSOLIDATED STATEMENT OF CASH FLOWSKANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2021 AND 2022

YEAR ENDED MARCH 31, 2022
(Thousands of U.S. Dollars)(Millions of Yen)

Shareholders’ equity
Share capital
Balance at beginning of period$84,131

Capital surplus$52,795

Retainedearnings$1,991,795

Changes in equity interest inconsolidated subsidiaries

2022

Increase (decrease) in allowance for doubtful accounts¥30,251
7,246
(56)

¥30,978
7,435
(25)

$253,918
60,942(204)

Increase (decrease) in provision for loss on construction
contracts

524

4,380

35,901(2,447)
(971)
205
(846)

(2,240)(1,000)187(254)(18,360)(8,196)
1,532(2,081)

650

–

–

5,580

6,546

53,655290

1,568

12,852

Increase (decrease) in trade payables(12,726)(8,591)(70,418)

Increase (decrease) in advances received on construction
contracts in progress(2,386)(294)(2,409)Other, net(22)25,291
971(225)(13,163)
12,873(4,136)34,551
1,000(187)(8,214)
27,150(33,901)
283,204
8,196(1,532)(67,327)
222,540

2,732
4,000
(5,758)323(1,412)
1,461
(990)
507
(1,835)(972)––(7,241)45(1,958)
1,367
(940)
1,046
(1,543)(9,224)––(59,352)368(16,049)
11,204(7,704)
8,573(12,647)(75,606)

560
(621)

(620)
(632)

(5,081)(5,180)(20,000)

–

–

(672)
(5,514)(68)(26,317)24(14,391)
71,579¥57,187(760)(5,719)(56)(7,789)100
10,23657,187¥67,423(6,229)(46,877)(459)(63,844)819
83,901
468,745$552,647$(4,819) $2,123,918

Depreciation and amortization––

Increase (decrease) in retirement benefit liability
Interest and dividend income–

Dividends of surplus(46,877)(46,877)

Profit (loss) attributable toowners of parent

166,516

166,516

Interest expenses
Loss (gain) on sale of investment securities
Provision of allowance for doubtful accounts for subsidiaries
and associates
Decrease (increase) in trade receivables

Reversal of revaluation
reserve for land

237

114

Disposal of treasury shares

Decrease (increase) in costs on construction contracts inprogress

237
(0)

(0)

221

344

Purchase of treasury shares

Net changes in items otherthan shareholders’ equity

Subtotal–

114

119,877$84,131$52,918$2,111,680

Total changes during period
Balance at end of period2022

Cash flows from operating activities
Profit (loss) before income taxes–

Purchase of shares of
consolidated subsidiaries

2021

Total shareholders’
Treasury shares
equityChanges during period

213

Interest and dividends received

120,213Interest paid$(4,598) $2,244,131

Income taxes refund (paid)
Net cash provided by (used in) operating activities

Accumulated other comprehensive income
Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesBalance at beginning of period$120,336

Remeasurements Total accumulated Non-controlling Total net assets
Revaluationinterestsof defined benefit other comprehensive
reserve for landplansincome$(2,008) $(43,008) $17,295$92,614$74,114$2,290,647

Changes during period–––

Dividends of surplus(46,877)

Profit (loss) attributable toowners of parent

166,516

Reversal of revaluation
reserve for land

237

Purchase of treasury shares(0)

Disposal of treasury shares344(3,000)

450

(237)

(6,286)(9,073)

4,065(5,008)

Total changes during period(3,000)

450

(237)

(6,286)(9,073)

4,065

115,196$(1,549) $(43,245) $11,000$83,532$78,180$2,405,852

KANDENKO

Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of investment securities
Loan advances
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Repayments of long-term borrowings
Redemption of convertible bond-type bonds with shareacquisition rights
Repayments of lease liabilities
Dividends paid
Other, net
Net cash provided by (used in) financing activities

Net changes in items otherthan shareholders’ equity$117,336

The accompanying notes are an integral part of financial statements.

83

Proceeds from sale and redemption of securities

Proceeds from collection of loans receivable

Purchase of shares of
consolidated subsidiaries

Balance at end of period

Cash flows from investing activities
Net decrease (increase) in time deposits

Proceeds from sale and redemption of investment securities

Changes in equity interest inconsolidated subsidiaries(Thousands of U.S. Dollars)

Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

*1

*1

*1

The accompanying notes are an integral part of financial statements.
Integrated Report 2022

84About Kandenko

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

Notes to Consolidated Financial Statements
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2021 AND 2022

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

4.Significant accounting policies(1) Evaluation methods for significant assets

Kandenko Co., Ltd. (the “Company”) and its consolidated subsidiaries(the “Companies”) maintain their accounting records and prepare
their financial statements in accordance with accounting principles
generally accepted in Japan, which are different in certain respects as
to the application and disclosure requirements of International
Financial Reporting Standards. The accompanying financial statements
have been compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments
and Exchange Act of Japan.

For the convenience of readers, the accompanying consolidated
financial statements as of and for the year ended March 31, 2022
have been translated from yen amounts into U.S. dollar amounts at
the rate of ¥122 =U.S. $1.00, the exchange rate prevailing on March
31, 2022.
As permitted by the Financial Instruments and Exchange Act ofJapan, amounts of less than one million yen have been omitted. As aresult, the totals shown in the accompanying consolidated financial
statements (both in yen and in dollars) do not necessarily agree withthe sum of the individual amounts.

SIGNIFICANT MATTERS PROVIDING THE BASIS FOR THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
1. The scope of consolidation(2) Name of major non-consolidated subsidiary:(1) Number of consolidated subsidiaries: 30

THAI KANDENKO CO., LTD.

Names of the consolidated subsidiaries
Kawasaki Setsubi Kogyo Co., Ltd.
Kanko Facilities Co., Ltd.
Kanagawa K - Techno Co., Ltd.
Chiba K - Techno Co., Ltd.
Saitama K - Techno Co., Ltd.
Ibaraki K - Techno Co., Ltd.
Tochigi K - Techno Co., Ltd.
Gunma K - Techno Co., Ltd.
Tama K - Techno Co., Ltd.
Shizuoka K - Techno Co., Ltd.
HANDENKO CORPORATION
Kanko Power Techno Co., Ltd.
Kanagawa Power Techno Co., Ltd.
Chiba Power Techno Co., Ltd.
Saitama Power Techno Co., Ltd.
Ibaraki Power Techno Co., Ltd.
Tochigi Power Techno Co., Ltd.
Gunma Power Techno Co., Ltd.
Nishikanto Power Techno Co., Ltd.
Shizuoka Power Techno Co., Ltd.
Tower Line Solution Co., Ltd.
Sato Kensetsu Kogyo Co., Ltd.
NETSAVE Co., Ltd.
Tokyo Kouji Keibi Co., Ltd.
Bay Techno Co., Ltd.
KANKO SYOJI CO., LTD.
K asset management Co., Ltd.
Choshi Wind Development Co., Ltd.
Kama Solar Power Co., Ltd.
Maebashi Biomass Power Co., Ltd.

85

KANDENKO(Reason for excluding from the scope of consolidation)
All of the non-consolidated subsidiaries are small in scale and haveno material impact on the consolidated financial statements in termsof total assets, net sales, profit or loss (amount corresponding toequity interest) and retained earnings (amount corresponding toequity interest).

2. Application of equity method(1) Number of non-consolidated subsidiaries and affiliatesthat are accounted for by the equity method: None
(2) Name of the major non-consolidated subsidiaries andaffiliates that are not accounted for by the equity
method:THAI KANDENKO CO., LTD.
(Reason for excluding from the scope of the equity method)
Non-consolidated subsidiaries and affiliates that are not accounted
for by the equity method have immaterial impact on the consolidated
financial statements in terms of profit or loss (amount corresponding
to equity interest) and retained earnings (amount corresponding toequity interest), and are not material, taken as a whole.

3. Accounting period of consolidated subsidiaries
The year-end date for consolidated subsidiaries is the same as theconsolidated year-end date.

(a) Securities
i. Held-to-maturity securities
		 Amortized cost method (straight-line method)
ii. Available-for-sale securities
		 Those other than shares with no quoted market price, etc.:
		 Fair value method (Unrealized gains or losses, net of applicabletaxes, are comprehensively reported as a component of net
assets and the cost of securities sold is computed using themoving-average method.).
		 Shares with no quoted market price, etc.:
		 Stated at cost determined by the moving-average method.
(b) Derivatives
Fair value method(c) Inventories
Costs on construction contracts in progressStated at cost determined by the specific cost method.

(2) Depreciation methods of significant depreciable assets(a) Property, plant and equipment (excluding leased assets)
Depreciated mainly by the declining-balance method
Useful life and residual value are determined on the same basis
as that of the method provided in the Corporation Tax Act.
Useful lives of certain buildings are deemed as 30 years
although their useful lives based on the Corporation Tax Act are
longer than 30 years.
(b) Intangible assets (excluding leased assets)
Straight-line method
Software for internal use is amortized by the straight-line method
over an estimated useful life (5 years).
(c) Leased assets
Leased assets related to finance lease transactions that do nottransfer ownership are depreciated using the straight-line method
based on the assumption that the useful life equals the leaseterm, and the residual value equals zero.

(3) Accounting policies for significant allowance andprovisions(a) Allowance for doubtful accounts
The allowance for doubtful accounts is provided for to theamount sufficient to cover possible losses on collection. It
consists of the estimated uncollectible amount with respect toidentified doubtful receivables and an amount calculated byapplying the percentage of actual losses on collection
experienced in the past to remaining receivables.
(b) Provision for warranties for completed construction
To provide for possible future expenses under warranties forcompleted construction contracts, provision for construction
contracts completed during the year is provided based on future
estimated amount.

(c) Provision for loss on construction contracts
To provide for future losses on construction orders, provision for
estimated losses is provided for uncompleted construction
contracts at the end of the year that are likely to incur losses
and the amount can be reasonably estimated.

(4) Accounting method relating to retirement benefits(a) Method of attributing expected retirement benefit to periods
Method of attributing expected retirement benefit to periods isallocated by the straight-line basis (the expected benefit divided
by the total service years would be deemed as arising in eachperiod).
(b) Amortization of actuarial gains and losses and past service
cost
Past service cost is amortized by the straight-line method over acertain period (5 years) within the average remaining years ofservice of the eligible employees when incurred. Actuarial gains
and losses are amortized by the straight-line method over acertain period (5 years) within the average remaining years ofservice of the eligible employees commencing with the following
periods.

(5) Accounting policies for significant revenues andexpenses
Recognition of net sales of completed construction contracts andcosts of completed construction contracts
The Companies recognize revenue based on the following five step
approach.
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performanceobligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a
performance obligation
The Companies’ main businesses are electrical work, plumbing workand other work on facilities. As for these construction contracts, theCompanies’ performance of an obligation creates or enhances anasset, and the customer controls the asset as the asset is created orenhanced. Therefore, the Companies estimate the degree of progress
toward satisfaction of a performance obligation, and recognizes
revenue based on the degree of progress over a certain period oftime. Because costs incurred are considered to contribute to and bebasically proportional to the degree of progress in satisfaction of aperformance obligation, the input method based on costs incurred isapplied to measure the degree of progress. In the case where thedegree of progress cannot be reasonably estimated and incurredcosts over that time are expected to be recovered, revenue isrecognized using the cost recovery method. However, for construction
contracts for which the period from the transaction commencement
date to the time when the performance obligation is expected to becompletely satisfied is extremely short, revenue is not recognized overa certain period of time, and the Companies consider that theperformance obligation is satisfied at the time of delivery andrecognizes revenue at that point in time.
Integrated Report 2022

86About Kandenko(d) Method for evaluating the effectiveness of hedges
The Companies evaluate the effectiveness of their hedging
activities by comparing cumulative changes in cash flows on thehedging instruments with cumulative changes in cash flows on
the related hedged items. However, the evaluation of hedging
effectiveness is omitted for interest rate swaps to which the
exceptional accounting is applied.

Consideration for a transaction is mainly received in stages
during the contract period in accordance with the progress ofsatisfaction of performance obligations, and the remaining amount isbasically paid within one year after all the performance obligations
are satisfied.

(6) Significant hedge accounting method(a) Hedge accounting method
The Companies use the deferral hedge accounting method.
However, the exceptional accounting is used for interest rate
swaps that meet specified matching criteria.
(b) Hedging instruments and hedged items
Hedging instruments:
Interest rate swaps
Loans payable
Hedged items:(c) Hedging policy
In accordance with internal approval procedures for derivativetransactions, interest rate fluctuation risks related to the hedged
items are hedged to a certain degree.

(7) Method and period of amortization of goodwill
Goodwill is amortized by the straight-line method over the estimatedperiod that the benefits are expected to be received, not exceeding
20 years.

(8) Cash and cash equivalents in the consolidated
statements of cash flows
Cash and cash equivalents include cash in hand, readily available
deposits and short-term investments with maturities of three months
or less from the purchase date whose value is not subject tosignificant fluctuation risk.

SIGNIFICANT ACCOUNTING ESTIMATES(1) Amounts recorded in the consolidated financial statements for the year ended March 31, 2022
Millions of Yen

Thousands of U.S. Dollars

2021

2022

2022

¥289,468¥312,949$2,565,155(2) Information on the details of significant accounting estimates for identified items
As for construction contracts, the degree of progress toward satisfaction of a performance obligation is estimated, and net sales of completed
construction contracts are recognized based on the degree of progress over a certain period of time. The input method based on costs incurred isapplied to estimate the degree of progress, and assumptions used in this estimation is working budget for which total construction revenue andtotal construction cost are reasonably estimated.
Total construction revenue and total construction cost on which recognition of revenue by the method where revenue is recognized as
performance obligations are satisfied over a certain period of time is based were estimated using working budget reasonably estimated for eachconstruction contract as of March 31, 2022. However, in the development of the working budget, since the situation changes after the start ofconstruction, including conclusion of an amendment agreement, a change of construction specifications and additional cost incurred during
construction, the estimation of working budget is subject to uncertainty. Although the working budget is reviewed timely and appropriately, any
deviation from actual results in the future may have impact on the Companies’ financial position and operating results.

(1) Amounts recorded in the consolidated financial statements for the year ended March 31, 2022
Millions of Yen

Thousands of U.S. Dollars

2021

2022

2022

¥5,546¥9,927$81,368(2) Information on the details of significant accounting estimates for identified items
To provide for future losses on construction orders, provision for estimated losses is provided for uncompleted construction contracts at the endof the year that are likely to incur losses and the amount can be reasonably estimated.

Sustainability

Financial, Non-financial &Corporate Data

The estimated amount of losses is calculated based on working budget reasonably estimated for each construction contract with total
construction revenue deducted from total construction cost. In the development of the working budget, since the situation changes after the startof construction, including conclusion of an amendment agreement, a change of construction specifications and additional cost incurred during
construction, the estimation of working budget is subject to uncertainty. Although the working budget is reviewed timely and appropriately, any
deviation from actual results in the future may have impact on the Companies’ financial position and operating results.

CHANGES IN ACCOUNTING POLICIESApplication of Accounting Standard for Revenue
Recognition
The Companies have applied the “Accounting Standard for Revenue
Recognition” (Accounting Standards Board of Japan (“ASBJ”)
Statement No. 29, March 31, 2020) and relevant ASBJ regulations
from the beginning of the year ended March 31, 2022, and haverecognized revenue at the time the control of promised goods orservices is transferred to the customer at the amount expected to bereceived upon exchange of said goods or services.
Major changes due to the application of the Accounting Standard
for Revenue Recognition, etc. are as follows.

As for construction contracts in Engineering, previously, thepercentage-of-completion method was applied for construction
contracts that the outcome of the construction activity is deemedcertain during the course of the activity, and the completed-contract
method was employed for other construction contracts. However, forall construction contracts, the method has been changed to the one
where revenue is recognized over a certain period of time as
performance obligations are satisfied. The input method based on
costs incurred is applied to estimate the degree of progress inrelation to satisfaction of performance obligations. In the case where
the degree of progress cannot be reasonably estimated, but expenses
incurred are expected to be recovered, revenue is recognized using
the cost recovery method. However, for construction contracts forwhich the period from the transaction commencement date to thetime when the performance obligation is expected to be completely
satisfied is extremely short, revenue is not recognized over a certain
period of time, and the Companies consider that the performanceobligation is satisfied at the time of delivery and recognizes revenue
at that point in time.

(2) Revenue recognition for subcontract processing with
supply of materials for value

2. Provision for loss on construction contracts

KANDENKO

Strengthening Foundations
for Realizing Value Creation(1) Revenue recognition for construction contracts

1.	Recognition of net sales of completed construction contracts calculated by the method where revenue isrecognized as performance obligations are satisfied over a certain period of time

87

Value Creation Story

As for subcontract processing with supply of materials for value inEngineering, previously, the total amount of service contracts withcustomers was recognized as revenue. However, for cases where therepurchase condition for materials supplied for value is attached andfor transactions in which the Company does not effectively control
materials supplied for value, the method has been changed to theone where revenue is recognized at the net amount derived bydeducting prices of the materials supplied for value from the total
amount of the service contract.

As a result of the application of the Accounting Standard for
Revenue Recognition, etc., net sales of completed construction
contracts for the year ended March 31, 2022 decreased by ¥44,464
million ($364,459 thousand), but there is no effect on profit or loss.
While the application of the Accounting Standard for Revenue
Recognition, etc. is subject to the transitional treatment provided forin the proviso to paragraph 84 of the Accounting Standard for
Revenue Recognition, there is no cumulative effect up to thebeginning of the year ended March 31, 2022. In accordance with thetransitional treatment provided for in paragraph 89-2 of the
Accounting Standard for Revenue Recognition, figures for the year
ended March 31, 2021 have not been restated in accordance with
the new approach to presentation.
There is no effect on per share information.
In accordance with the transitional treatment provided for inparagraph 89-3 of the Accounting Standard for Revenue Recognition,
information related to the year ended March 31, 2021 has not beenstated in “REVENUE RECOGNITION.”

Application of Accounting Standard for Fair Value
Measurement, etc.
The Companies have applied the “Accounting Standard for Fair Value
Measurement” (ASBJ Statement No. 30, July 4, 2019) and relevant
ASBJ regulations from the beginning of the year ended March 31,
2022, and have applied the new accounting policy provided for by
the Accounting Standard for Fair Value Measurement, etc.
prospectively in accordance with the transitional measures provided
for in paragraph 19 of the Accounting Standard for Fair Value
Measurement, and paragraph 44-2 of the “Accounting Standard for
Financial Instruments” (ASBJ Statement No. 10, July 4, 2019). The
application of the Accounting Standard for Fair Value Measurement,
etc. has no effect on the consolidated financial statements for theyear ended March 31, 2022.
Moreover, in “FINANCIAL INSTRUMENTS,” the Companies havedecided to provide a note on matters regarding the breakdown byfair value level of financial instruments, etc. and other matters.
However, in the note, information related to the year ended March
31, 2021 has not been stated, in accordance with the transitional
treatment provided for in paragraph 7-4 of “Implementation Guidanceon Disclosures about Fair Value of Financial Instruments” (ASBJ
Guidance No. 19, March 31, 2020).

Integrated Report 2022

88

About Kandenko

ACCOUNTING STANDARDS, ETC. NOT YET EFFECTIVE· “ Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, June 17, 2021, AccountingStandards Board of Japan)

associations, etc. which are recorded at the amount corresponding toequity holdings on a net basis on the balance sheet” also needed to
be examined to a certain degree.

(1) Outline(2) Scheduled date of application

The revision of the “Implementation Guidance on AccountingStandard for Fair Value Measurement” (ASBJ Guidance No. 31) on
June 17, 2021 was published after the revision made to the previous
one, which, at the time of publication on July 4, 2019, was to be
examined basically for one year after the publication of the“Accounting Standard for Fair Value Measurement” because
examination of “measurement of fair value of investment trusts” wasconsidered to require a certain period of time to have consultation
with involved parties, etc. and a note on fair value of “investments in

These accounting standard and implementation guidance will beapplied from the beginning of the year ending March 31, 2023.

(3) Effects of the application of this accounting standard,etc.
The effects of the application of the “Implementation Guidance on
Accounting Standard for Fair Value Measurement” on the
consolidated financial statements are currently undetermined.

CHANGES IN PRESENTATION

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS
The amount of “decrease (increase) in other inventories” in “cashflows from operating activities,” which was presented as a separate
item in the year ended March 31, 2021, is included in “other” fromthe year ended March 31, 2022 due to lower materiality. The
consolidated financial statements for the year ended March 31, 2021
have been reclassified to reflect this change in presentation.

As a result, ¥416 million presented as “decrease (increase) inother inventories” in “cash flows from operating activities” in the
consolidated statement of cash flows for the year ended March 31,
2021, has been reclassified to “other.”

ADDITIONAL INFORMATION
Accounting estimates on the novel coronavirus disease
Major accounting estimates that may have impact on amounts ofassets/liabilities and revenue/expenses due to the spread of the novel
coronavirus disease (COVID-19) infections are allowance for doubtful
accounts, plan assets (retirement benefit accounting), deferred tax
assets and impairment loss.

Under the circumstances that it is uncertain when the COVID-19
pandemic will come to an end, as a result of carefully examining
available information such as past results and the current state, andaccounting standards, and making estimates based on assumptions
that are considered reasonable, impact of the accounting estimateson amounts in the consolidated financial statements for the year
ended March 31, 2022 and the year ending March 31, 2023 is
insignificant.

NOTES TO CONSOLIDATED BALANCE SHEET
Because the amount of “raw materials and supplies” in “current
assets,” which was presented as a separate item in the year ended
March 31, 2021, is 1-% or less of the total amount of assets, thisitem is included in “other” in “current assets” from the year ended
March 31, 2022. The consolidated financial statements for the year
ended March 31, 2021 have been reclassified to reflect this change inpresentation.

As a result, ¥5,035 million, which was presented as “rawmaterials and supplies” in “current assets” in the consolidatedbalance sheet for the year ended March 31, 2021, has been
reclassified to “other.”

NOTES TO CONSOLIDATED BALANCE SHEET*1.	Amounts of receivables and contract assets from contracts with customers included in notes receivable, accounts receivable from completed
construction contracts and other
Millions of Yen
Notes receivable

NOTES TO CONSOLIDATED STATEMENT OF INCOME
Because the amount of “foreign exchange gains,” which was
included in “other” in “non-operating income” in the year ended
March 31, 2021, has exceeded 10% of the total amount of nonoperating income, this item is presented as a separate item from theyear ended March 31, 2022. The consolidated financial statements forthe year ended March 31, 2021 have been reclassified to reflect thischange in presentation.
As a result, ¥396 million, which was presented as “other” in“non-operating income” in the consolidated statement of income forthe year ended March 31, 2021, has been reclassified to ¥78 millionof “foreign exchange gains,” and ¥318 million of “other.”

89

KANDENKO

Financial, Non-financial &Corporate Data

Sustainability

Because the amount of “loss on retirement of non-current assets”
and “loss on disaster,” which was included in “other” in“extraordinary losses” in the year ended March 31, 2021, has
exceeded 10% of the total amount of extraordinary losses, this item
is presented as a separate item from the year ended March 31, 2022.
The consolidated financial statements for the year ended March 31,
2021 have been reclassified to reflect this change in presentation.
As a result, ¥387 million, which was presented as “other” in“extraordinary losses” in the consolidated statement of income forthe year ended March 31, 2021, has been reclassified to ¥133 millionof “loss on retirement of non-current assets,” ¥10 million of “loss on
disaster,” and ¥243 million of “other.”Thousands of U.S. Dollars

2022

2022

¥14,191$116,319

Accounts receivable from completed construction contracts

107,526

881,360

Contract assets

63,926523,983*2. Amounts of contract liabilities included in advances received on construction contracts in progress and current liabilities “other”

Advances received on construction contracts in progressMillions of Yen

Thousands of U.S. Dollars

2022

2022

¥12,349$101,221

15

122

Current liabilities “Other”*3. Amounts of non-consolidated subsidiaries and affiliates’ stocks included in investment securities
Millions of Yen
Investment securities (Stocks)
Investment securities (Investments in capital)

Thousands of U.S. Dollars
2022

2021

2022

¥2,880¥3,955$32,418

0

627

5,139

Integrated Report 2022

90

About Kandenko*4.	The Company revalued its land held for business use in accordance with the “Act on Revaluation of Land” (the Act No. 34, March 31, 1998)
and recorded revaluation reserve for land in the net assets section.
(a) Method of revaluation:
Revaluation was made by reasonably adjusting the market value of standard sites as stipulated by the Article 2, Clause 1 of the“Enforcement Order of the Act on Revaluation of Land” (Cabinet Order No. 119, March 31, 1998) and value determined by the method
for calculating taxable land price of land holding tax in accordance with the Article 16 of the Land-holding Tax Act as defined andpublished by the Commissioner of National Tax Agency as stipulated by the Article 2, Clause 4 of the “Enforcement Order of the Act on
Revaluation of Land.”(b) Date of revaluation:
March 31, 2002
*5. Assets pledged as collateral and secured obligations(1) Assets pledged as collateral provided by the Company’s subsidiaries and secured obligations
Millions of Yen

Thousands of U.S. Dollars
2022

2021

2022

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Sustainability

Financial, Non-financial &Corporate Data

*7.	Both costs on construction contracts in progress relating to construction contracts that are likely to incur losses and provision for loss on
construction contracts are presented without offsetting.
Amount of costs on construction contracts in progress corresponding to provision for loss on construction contracts
Millions of Yen

Thousands of U.S. Dollars

2021

2022

2022

¥91

¥122

$1,000

NOTES TO CONSOLIDATED STATEMENT OF INCOME*1. Revenue from contracts with customers
	Net sales of completed construction contracts are not presented separately as revenue from contracts with customers and as other revenue.
The amounts of revenue from contracts with customers are presented in “REVENUE RECOGNITION, 1. Information on disaggregation ofrevenue from contracts with customers.”¥1,809¥[–]¥1,913¥[–]$15,680

$[–]

83

[–]

104

[–]

852

[–]

Buildings and structures

1,183

[381]

1,089

[349]

8,926

[2,860]

2021

2022

2022

Machinery, vehicles, tools, furniture and fixtures

7,174[3,994]

6,714[3,722]55,032[30,508]¥4,049¥6,801$55,745

Land

747

[–]

747

[–]

6,122

[–]

7

[–]

7

[–]

57

[–]

Total

¥11,005¥[4,375]¥10,575¥[4,072]$86,680$[33,377]

Short-term borrowings¥632¥[335]¥642¥[345]$5,262$[2,827]

Cash and deposits
Notes receivable, accounts receivable from completed
construction contracts and other

Investments and other assets – Other (lease deposits)

Long-term borrowings
Total

7,249

[3,938]6,607[3,592]54,155[29,442]¥7,881¥[4,273]¥7,249¥[3,938]$59,418$[32,278]

Note: The figures in the brackets show factory foundation mortgaged assets, etc. and related obligations.

Thousands of U.S. Dollars
2022

2021

–

$–

26

–

–

Investment securities

32

11

90

Investments and other assets – Other(long-term loans receivable)

128

74

606

85

$696

¥0

¥187

¥

2022

Land

¥

6. Contingent liabilities(1) The Company provides guarantees for the employees’ loans from financial institutions.
Millions of Yen
Employees (housing loans)Thousands of U.S. Dollars*3. Principal accounts and amounts in selling, general and administrative expenses are as follows.
Millions of Yen
Employees’ salaries and allowances

Thousands of U.S. Dollars

2021

2022

2022

¥12,462¥12,969$106,303

767

520

4,262

Retirement benefit expenses

Millions of Yen

Millions of Yen

Total

Millions of Yen

4. Total amount of research and development expenses included in general and administrative expenses and manufacturing costs(2) Assets pledged as collateral for the loans of the investing company of the Company and its subsidiaries

Buildings and structures*2. Provision for loss on construction contracts included in cost of sales of completed construction contracts

Thousands of U.S. Dollars

2021

2022

2022

¥692

¥583

$4,778

Thousands of U.S. Dollars

2021

2022

2022

¥1,522¥1,663$13,631*5. Loss on COVID-19
For the year ended March 31, 2021
Loss on COVID-19 is mainly cooperation money for staying home paid to subcontractors as a result of suspension and postponement ofscheduled work due to the impact of the declaration of a state of emergency and expenses for measures against the spread of COVID-19 for
employees as well as fixed costs incurred in overseas bases during the period of closure upon request of local governments (subsidies fromlocal governments were deducted).
For the year ended March 31, 2022
Loss on COVID-19 is mainly cost that is attributable to a decline in the operating rate in association with restrictions on construction
categories (prohibition of concurrent involvement in work areas) upon request of a local government for construction activities at overseas
bases.

(2) The Company has provided guarantees for work performance guarantees for contracts for work of its affiliated companies, etc.
Millions of Yen
VIETNAM KANDENKO CO., LTD.

91

KANDENKO

Thousands of U.S. Dollars

2021

2022

2022

¥–

¥304

$2,491

Integrated Report 2022

92

About Kandenko

NOTES TO CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Financial, Non-financial &Corporate Data

Sustainability

2. Matter related to dividends(1) Dividends paid
Resolution

Class of shares

Total dividends

Ordinary general
meeting ofshareholders on June
26, 2020

Common shares

Board of directors’
meeting on October30, 2020

Common shares*1. Reclassification adjustments and tax effects relating to other comprehensive income
Millions of Yen

Thousands of U.S. Dollars

2021

2022

2022

¥8,364¥(279)$(2,286)

Reclassification adjustments

(833)

(254)

(2,081)

Amount before income tax effect

7,531

(534)

(4,377)

Income tax effect(2,301)

152

1,245

Valuation difference on available-for-sale securities

5,230

(382)

(3,131)

Valuation difference on available-for-sale securities:
Gains (losses) arising during the year

16

22

180

Reclassification adjustments

59

55

450

Amount before income tax effect

76

78

639

Income tax effect

(16)

(22)

(180)

Deferred gains or losses on hedges

59

55

450

4,355

(217)

(1,778)

131

(888)

(7,278)Amount before income tax effect4,487(1,105)(9,057)

Income tax effect(1,373)

338

2,770

Remeasurements of defined benefit plans, net of tax

3,114

(767)

(6,286)¥8,403¥(1,093)$(8,959)

Remeasurements of defined benefit plans:
Gains (losses) arising during the year
Reclassification adjustments

Total other comprehensive income

Record date

Effective date

¥2,655 million¥13.0

March 31, 2020

June 29, 2020

¥2,859 million¥14.0

September 30,
2020

December 4, 2020

(2) Dividends whose record date fell in the year ended March 31, 2021, but whose effective date comes after March 31, 2021
Resolution

Class of shares

Total dividends

Source ofdividend funds

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on June29, 2021

Common shares¥2,859 million

Retained earnings¥14.0

March 31, 2021

June 30, 2021

Deferred gains or losses on hedges
Gains (losses) arising during the year

Dividends per share

For the year ended March 31, 2022
1. Matters related to class and number of issued shares and class and number of treasury shares(Shares)
As of April 1, 2021

Decrease

Increase

As of March 31, 2022

Shares issued:
Common shares
Total

205,288,338––

205,288,338

205,288,338––

205,288,338

1,030,585

895

48,174

983,306

1,030,585

895

48,174

983,306

Treasury shares:
Common shares

NOTES TO CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Total

For the year ended March 31, 2021
1. Matters related to class and number of issued shares and class and number of treasury shares

Notes:
1. Increase in number of common shares in treasury shares is due to repurchase of shares less than one unit.
2.	Decrease in number of common shares in treasury shares is due to the sales of shares less than one unit in response to demand for purchase and the disposal of shares as restricted share-based
remuneration.

(Shares)
As of April 1, 2020

Increase

Decrease

As of March 31, 2021

Shares issued:
Common shares
Total

205,288,338––

205,288,338

205,288,338––

205,288,338

Treasury shares:
Common shares
Total

1,029,767

896

78

1,030,585

1,029,767

896

78

1,030,585

Notes:
1. Increase in number of common shares in treasury shares is due to repurchase of shares less than one unit.
2. Decrease in number of common shares in treasury shares is due to the sales of shares less than one unit in response to demand for purchase.

2. Matter related to dividends(1) Dividends paid
Resolution

Class of shares

Total dividends

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on June29, 2021

Common shares¥ 2,859 million$23,434 thousand

¥14.0
$0.11

March 31, 2021

June 30, 2021

Board of directors’
meeting on October
29, 2021

Common shares¥ 2,860 million$23,442 thousand

¥14.0
$0.11

September 30,
2021

December 6, 2021

(2) Dividends whose record date fell in the year ended March 31, 2022, but whose effective date comes after March 31, 2022

93

KANDENKO

Resolution

Class of shares

Total dividends

Source ofdividend funds

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on June29, 2022

Common shares¥2,860 million$23,442 thousand

Retained earnings

¥14.0
$0.11

March 31, 2022

June 30, 2022

Integrated Report 2022

94

About Kandenko

NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Financial, Non-financial &Corporate Data

Sustainability

2. Fair value of financial instruments
Carrying amount and fair value of financial instruments, and differences between these values are as follows.
Millions of Yen*1. Relationship between the balance of cash and cash equivalents at the end of the year and the amount on the consolidated balance sheet
Millions of Yen
Cash and deposits

Carrying amount2022¥58,478¥67,614$554,213(5,290)(5,190)(42,540)

Time deposits with maturities of more than three months
Short-term investments with maturities of three months
or less from the purchase dateCash and cash equivalents

Thousands of U.S. Dollars
2022

2021

For the year ended March 31, 2021

3,999

4,999

40,975¥57,187¥67,423$552,647(1) Notes receivable, accounts receivable from completed construction contracts and other
Allowance for doubtful accounts (*2)

(1) Policies on financial instruments
The Companies manage surplus funds by investing in high security
financial instruments, primarily short-term deposits and debt securities
and raise funds through borrowings from banks and other financial
institutions.
Certain consolidated subsidiaries enter into derivative transactions
to hedge interest rate fluctuation risks arising from borrowings andthe Companies do not use derivative transactions for speculative
purposes.

(2) Description of financial instruments and related risks
Notes receivable, accounts receivable from completed construction
contracts and other, trade receivables, are exposed to customer credit
risk. Securities and investment securities, primarily consist of held-tomaturity debt securities and shares of companies with business
relationship, are exposed to market price fluctuation risks.
Notes payable, accounts payable for construction contracts andother, trade payables, are due within one year. Proceeds from shortterm borrowings are mainly used for operational funds and long-termborrowings are mainly used for capital expenditures. Floating rateborrowings are exposed to interest rate fluctuation risks, but theserisks are hedged by using derivative transactions (interest rate swaps).
Derivative transactions are interest rate swaps used as hedging
instruments, in order to hedge interest rate fluctuation risks forborrowings. Details of hedge accounting including hedging
instruments and hedged items, hedging policy and method forevaluating the effectiveness of hedges are described in “SIGNIFICANT
MATTERS PROVIDING THE BASIS FOR THE PREPARATION OF
CONSOLIDATED FINANCIAL STATEMENTS, 4. Significant accounting
policies, (6) Significant hedge accounting method.”(3) Risk management system for financial instruments(4) Supplementary explanation on fair value of financial
instruments–

1) Held-to-maturity securities

4,307

4,307

0

2) Available-for-sale securities

41,952

41,952–¥238,112¥238,112

¥0

7,249

7,225

(23)

Long-term borrowings

Held-to-maturity securities are invested in debt securities
with high credit rating, therefore, exposed to minimum credit
risk.
The Companies enter into derivative transactions withfinancial institutions with high credit rating in order to mitigate
credit risk.
(b) Market risk management (fluctuation risks in market prices
and interest rates)
Interest rate swaps are used to mitigate interest rate fluctuation
risks for borrowings.
As for securities, and investment securities, except for heldto-maturity debt securities, the accounting department regularly
monitors fair values and issuers’ (counterparties’) financial status,
considers the relationships with the counterparties, andcontinuously reviews the Company’s securities holdings.
Derivative transactions are executed and managed inaccordance with the nature and limits approved by the board of
directors of each company. The executed transactions are
periodically reported to the board of directors.
(c) Liquidity risk management associated with financing activities(payment default risks)
The accounting department prepares and updates a monthly
management plan of funds as necessary to manage the liquidity
risk.

191,852(2) Securities and investment securities (*3)

Total liabilities

1. Status of financial instruments

Difference(347)
191,852

Total assets

FINANCIAL INSTRUMENTS

Fair value¥192,200

Derivative transactions (*4)

¥7,249¥7,225¥(23)¥(344)¥(344)¥–(*1)	Information on “Cash and deposits,” “Notes payable, accounts payable for construction contracts and other,” and “Short-term borrowings” is omitted as their fair value approximates the
carrying amount due to them being settled within a short period of time.
(*2) The amount of allowance for doubtful accounts related to notes receivable, accounts receivable from completed construction contracts and other is deducted.
(*3)	Since no quoted market price is available, and it is deemed extremely difficult to determine their fair value, these financial instruments are not included in “(2) Securities and investment
securities.” The carrying amount of these financial instruments is as follows:

Millions of Yen
2021
Unlisted stocks, etc.

¥5,722(*4) The value of assets and liabilities arising from derivative transactions is shown at net value and with the amount in parenthesis indicating the net liability position.

Millions of Yen
For the year ended March 31, 2022
Carrying amount(1) Notes receivable, accounts receivable from completed construction contracts and other
Allowance for doubtful accounts (*2)

Fair value

Difference¥185,675(548)
185,127

185,127

–

5,299

5,300

0

(2) Securities and investment securities (*3)3) Held-to-maturity securities
4) Available-for-sale securities
Total assets
Long-term borrowings
Total liabilities
Derivative transactions (*4)

40,56840,568–¥230,995¥230,996

¥0

6,607

6,563

(44)

¥6,607¥6,563¥(44)¥(266)¥(266)¥–

Since fair value of financial instruments is calculated based on certain
assumptions, the fair value might differ if different assumptions areused. In addition, the contract amount of the derivative transactions
described in “DERIVATIVE TRANSACTIONS” does not represent themarket risk of the derivative transactions.

(a) Credit risk management (risks that counterparties may default)
For trade receivables, the sales administration division regularly
monitors major counterparties’ credit status, and performs due
date controls and balance controls for each customer to mitigate
and quickly capture the collectability issues caused bydeterioration in the financial conditions.
95

KANDENKO

Integrated Report 2022

96About Kandenko

Thousands of U.S. Dollars

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Financial, Non-financial &Corporate Data

Sustainability

1. Expected redemption amount of monetary receivables and securities with maturity dates after the consolidated year-end dateMillions of Yen

For the year ended March 31, 2022
Carrying amount(1) Notes receivable, accounts receivable from completed construction contracts and other
Allowance for doubtful accounts (*2)

Fair value

For the year ended March 31, 2021

Difference(4,491)
1,517,434–

5) Held-to-maturity securities

43,43443,44206) Available-for-sale securities

332,524

332,524–$1,893,401$1,893,409$054,15553,795(360)$54,155$53,795$(360)$(2,180)$(2,180)$–(2) Securities and investment securities (*3)

Long-term borrowings
Total liabilities
Derivative transactions (*4)

Due after five years
through ten years

Due after ten years¥58,478

¥–

¥–

¥–

191,902298––

Held-to-maturity securities (corporate bonds)

1,000

300

–

–

Held-to-maturity securities (other)

3,000

–

–

–

Available-for-sale securities with maturities (other)

1,000

–

–

–

¥255,381

¥598

¥–

¥–

$1,521,926
1,517,434

Total assets

Due after one year
Due within one year
through five years
Cash and deposits
Notes receivable, accounts receivable from completed
construction contracts and other
Securities and investment securities

Total(*1)	Information on “Cash and deposits,” “Notes payable, accounts payable for construction contracts and other,” and “Short-term borrowings” is omitted as their fair value approximates the
carrying amount due to them being settled within a short period of time.
(*2) The amount of allowance for doubtful accounts related to notes receivable, accounts receivable from completed construction contracts and other is deducted.
(*3) Shares with no quoted market price, etc. are not included in “(2) Securities and investment securities.” The carrying amount of these financial instruments is as follows:

Millions of Yen
Unlisted stocks, etc.

Millions of Yen
For the year ended March 31, 2022
Due after one year
Due within one year
through five years

Due after five years
through ten years

Due after ten years¥67,614

¥–

¥–

¥–

185,229445––

Held-to-maturity securities (corporate bonds)

1,000

300

–

–

Held-to-maturity securities (other)

4,000

–

–

–

–

–

–

–

¥257,844

¥745

¥–

¥–

Thousands of U.S. Dollars

2022

2022

¥7,405$60,696(*4) The value of assets and liabilities arising from derivative transactions is shown at net value and with the amount in parenthesis indicating the net liability position.

Cash and deposits
Notes receivable, accounts receivable from completed
construction contracts and other
Securities and investment securities

Available-for-sale securities with maturities (other)
Total

Thousands of U.S. Dollars
For the year ended March 31, 2022
Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years$554,213

$–

$–

$–

1,518,270

3,647

–

–

Held-to-maturity securities (corporate bonds)

8,196

2,459

–

–

Held-to-maturity securities (other)

32,786–––

Cash and deposits
Notes receivable, accounts receivable from completed
construction contracts and other
Securities and investment securities

Available-for-sale securities with maturities (other)
Total

97

KANDENKO

–

–

–

–

$2,113,475$6,106$–$–Integrated Report 2022

98About Kandenko

2. Scheduled amount of repayment of short-term borrowings and long-term borrowings after the consolidated year-end dateMillions of Yen
For the year ended March 31, 2021
Due within
one year

Due after
Due after
Due after
Due after
one year through two years through three years through four years throughtwo years
three years
four years
five years

Due after
five years

Short-term borrowings¥7,402

¥–

¥–

¥–

¥–

¥–

Long-term borrowings

–

642

1,339

619

618

4,028

¥7,402¥642¥1,339

¥619

¥618

¥4,028

Total

Millions of Yen

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Financial, Non-financial &Corporate Data

Sustainability

3. Categorization of financial instruments by level within the fair value hierarchy, etc.
Fair values of financial instruments are classified into the following three levels of the hierarchy based on the observability and significance of
the input used in the fair value measurement.
Level 1 fair value:	Fair value determined based on the quoted price formed in an active market for the asset or liability of which thefair value is measured, among observable inputs for fair value measurement
Level 2 fair value:	Fair value determined using inputs related to the measurement of the fair value other than inputs of Level 1, amongobservable inputs for fair value measurement
Level 3 fair value: Fair value determined using unobservable inputs for fair value measurement
If multiple inputs that have a significant impact on the fair value measurement are used, the fair value is classified to the lowest priority
level of fair value measurement to which each input belongs.

For the year ended March 31, 2022
Due within
one year

Due after
Due after
Due after
Due after
one year through two years through three years through four years throughtwo years
three years
four years
five years

Due after
five years

Short-term borrowings¥6,792

¥–

¥–

¥–

¥–

¥–

Long-term borrowings

–

1,339

619

617

616

3,413

¥6,792¥1,339

¥619

¥617

¥616

¥3,413

Total(1) Financial instruments recorded at fair value on the consolidated balance sheet
Millions of Yen
For the year ended March 31, 2022

Fair value
Level 1

Level 2

Level 3

Total

Stocks¥40,568¥–¥–¥40,568

Total assets¥40,568¥–¥–¥40,568

Securities and investment securities
Available-for-sale securities

Thousands of U.S. Dollars
For the year ended March 31, 2022
Due within
one year

Due after
Due after
Due after
Due after
one year through two years through three years through four years throughtwo years
three years
four years
five years

Due after
five years

Short-term borrowings$55,672

$–

$–

$–

$–

$–

Long-term borrowings–

10,975

5,073

5,057

5,049

27,975$55,672$10,975$5,073$5,057$5,049$27,975

Total

Derivative transactions
–

266

–

266

¥–

¥266

¥–

¥266

Interest rate-related
Total liabilities

Thousands of U.S. Dollars
For the year ended March 31, 2022

Fair value
Level 1

Level 2

Level 3

Total

Securities and investment securities
Available-for-sale securities
Stocks$332,524

$–

$–

$332,524

Total assets

332,524$–$–332,524

–

2,180

–

2,180

$–

$2,180$–$2,180

Derivative transactions
Interest rate-related
Total liabilities

99

KANDENKO

Integrated Report 2022

100About Kandenko(2) Financial instruments other than those recorded at fair value on the consolidated balance sheet
Millions of Yen
For the year ended March 31, 2022
Level 1

Level 2

Level 3

Total

¥–

¥185,127¥–¥185,127

Securities and investment securities
Held-to-maturity securities–

Corporate bonds

1,300

–

4,000

¥–

4,000

¥190,427¥–¥190,427

–

6,563

–

6,563

¥–

¥6,563¥–¥6,563

Long-term borrowings
Total liabilities

–

¥–

Other
Total assets

1,300

Thousands of U.S. Dollars
For the year ended March 31, 2022
Level 1

Level 2

Level 3

Total

$–

$1,517,434$–$1,517,434

Securities and investment securities
Held-to-maturity securities
Corporate bonds–

10,655–

10,655

Other–

32,786$–32,786$–$1,560,877$–$1,560,877–

53,795–53,795

Total assets
Long-term borrowings
Total liabilities$–$53,795$–Financial, Non-financial &Corporate Data

Sustainability

SECURITIESMillions of Yen
For the year ended March 31, 2021
Carrying amount

Fair value

Difference

¥–
300
–

¥–
300
–

¥–
0
–

¥300

¥300

¥0

Government/municipal bonds
Corporate bonds
Other

¥–
999
3,007

¥–
999
3,007

¥–
–
–

Subtotal¥4,007¥4,307¥4,007¥4,307¥–¥0Securities whose fair value exceeds their carrying amount:
Government/municipal bonds
Corporate bonds
Other
Subtotal
Securities whose fair value does not exceed their carrying
amount:Total

Fair value
Notes receivable, accounts receivable from completed
construction contracts and other

Strengthening Foundations
for Realizing Value Creation

1. Held-to-maturity securities

Fair value
Notes receivable, accounts receivable from completed
construction contracts and other

Value Creation Story$53,795

Note: Explanation of the valuation technique used to determine fair value and inputs for fair value measurement
Securities and investment securities
Listed shares are assessed using the quoted price. Because listed shares are traded in an active market, their fair value is classified as Level
1 fair value. On the other hand, since corporate bonds and negotiable certificates of deposit held by the Company are traded infrequently ina market and their price is not deemed as a quoted price in an active market, their fair value is classified as Level 2 fair value.
Derivative transactions
Their fair value is determined based on quoted prices presented by the counterparty financial institutions, etc., and is classified as Level 2
fair value.
Notes receivable, accounts receivable from completed construction contracts and other
Their fair value is determined based on the present value discounted by taking into account credit risk for each receivable divided according
to a certain period of time, and is classified as Level 2 fair value.
Long-term borrowings
Fair value of long-term borrowings is determined based on the present value calculated by discounting the total amount of the principal andinterest using the interest rate that is assumed to be used for a similar new loan, and is classified as Level 2 fair value.

Millions of Yen
For the year ended March 31, 2022
Carrying amount

Fair value

Difference

¥–
300
–

¥–
300
–

¥–
0
–

¥300

¥300

¥0

Government/municipal bonds
Corporate bonds
Other

¥–
999
4,000

¥–
999
4,000

¥–
–
–

Subtotal¥4,999¥5,299¥4,999¥5,300¥–¥0Securities whose fair value exceeds their carrying amount:
Government/municipal bonds
Corporate bonds
Other
Subtotal
Securities whose fair value does not exceed their carrying
amount:Total

Thousands of U.S. Dollars
For the year ended March 31, 2022
Carrying amount

Fair value

Difference

$–
2,459
–

$–

$–

2,459
–

0
–

$2,459$2,459$0

Government/municipal bonds
Corporate bonds
Other

$–
8,188
32,786

$–

$–

8,188
32,786––

Subtotal$40,975$43,434$40,975$43,442$–$0Securities whose fair value exceeds their carrying amount:
Government/municipal bonds
Corporate bonds
Other
Subtotal
Securities whose fair value does not exceed their carrying
amount:

Total

101

KANDENKO

Integrated Report 2022

102About Kandenko

2. Available-for-sale securities

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Financial, Non-financial &Corporate Data

Sustainability

3. Available-for-sale securities sold during the year
Millions of Yen

Millions of Yen

For the year ended March 31, 2021
Carrying amount
Securities whose carrying amount exceeds their acquisition cost:
Stocks
Bonds
Other
Subtotal

For the year ended March 31, 2021

Acquisition cost

Difference¥37,939––¥16,286––¥21,653––¥37,939¥16,286¥21,653

Sales amount

Total gain on sales

Total loss on sales

Stocks
Bonds
Other¥1,443
–
–

¥846
–
–

¥–
–
–

Total

¥1,443

¥846

¥–

Securities whose carrying amount does not exceed theiracquisition cost:

Millions of Yen

StocksBonds
Other¥3,012–1,000¥3,393–
1,000¥(381)––

Subtotal
Total¥4,012¥41,952¥4,393¥20,680¥(381)¥21,271

For the year ended March 31, 2022
Sales amount

Total gain on sales

Total loss on sales

Stocks
Bonds
Other

¥366
–
–

¥256
–
–

¥–
–
–

Total

¥366

¥256

¥–

Millions of Yen
Thousands of U.S. Dollars

For the year ended March 31, 2022
Carrying amount
Securities whose carrying amount exceeds their acquisition cost:
StocksBonds
Other

Acquisition cost

For the year ended March 31, 2022

Difference¥39,818––¥18,977––¥20,841––

Stocks
Bonds
Other¥39,818¥18,977¥20,841

Total

Stocks
Bonds
Other

¥749
–
–

¥854
–
–

¥(104)––

Subtotal
Total

¥749
¥40,568¥854¥19,831¥(104)¥20,737

Subtotal
Securities whose carrying amount does not exceed theiracquisition cost:Thousands of U.S. Dollars
For the year ended March 31, 2022

Sales amount

Total gain on sales

Total loss on sales$3,000––$2,098
–
–

$–
–
–

$3,000$2,098$–

4.Impairment loss on securities
For the year ended March 31, 2021

For the year ended March 31, 2022

Disclosure is omitted due to immateriality.

Disclosure is omitted due to immateriality.

DERIVATIVE TRANSACTIONS
Derivative transactions to which hedge accounting is applied
Interest rate-related

Carrying amount

Acquisition cost

Difference$326,377––$155,549––$170,827––$326,377$155,549$170,827

Stocks
Bonds
Other$6,139––$7,000––$(852)––Hedge accounting
methodType of transactions

Primary hedged items

Subtotal
Total$6,139$332,524$7,000$162,549$(852)$169,975

Deferral hedge

Interest rate swaps:
fixed payment, floating Long-term borrowings
receipt

Securities whose carrying amount exceeds their acquisition cost:
Stocks
Bonds
Other
Subtotal

For the year ended March 31, 2021
Hedge accounting
methodType of transactions

Primary hedged items

Contract amountContract amount due
after one year

Fair value

Deferral hedge

Interest rate swaps:
fixed payment, floatingreceipt

Long-term borrowings¥3,703 million¥3,406 million¥(344) million

Contract amountContract amount due
after one year

Fair value¥ 3,406 million$27,918 thousand¥ 3,099 million$25,401 thousand¥  (266) million$(2,180) thousand

Securities whose carrying amount does not exceed theiracquisition cost:

103

KANDENKO

For the year ended March 31, 2022

Integrated Report 2022

104

About Kandenko

RETIREMENT BENEFITS

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Millions of Yen

The Companies have funded and unfunded defined benefit plans and defined contribution plans to prepare for retirement benefits to employees.
Defined benefit pension plans (funded plans) offer retirement lump-sum payments or pensions according to the salary and service period of theeligible employees. Retirement lump-sum payment plans (unfunded plans) offer retirement lump-sum payments according to the salary and service
period of the eligible employees. When employees retire, the Companies may provide them with additional retirement benefits, etc.
The Company revised defined benefit pension plans and retirement lump-sum payment plans in association with the extension of theretirement age from 60 years old to 65 years old in the year ended March 31, 2022, and will introduce the revised plans in April 2022. In relation
to this revision of the plans, defined benefit obligations decreased by ¥4,207 million ($34,483 thousand), and past service cost occurred at thesame amount.
Certain consolidated subsidiaries participate in multi-employer corporate pension fund, which is accounted for in the same manner as defined
contribution plans because it is impracticable to reasonably estimate an amount of plan assets for the contributions made by the subsidiaries. In
addition, regarding the multi-employer corporate pension fund, note on the multi-employer plan is omitted due to immateriality.
Certain consolidated subsidiaries use the simplified method in calculating retirement benefit liability and asset, and retirement benefit
expenses.

2. Defined benefit plans(1) Changes in defined benefit obligations
Millions of Yen

Thousands of U.S. Dollars
2022

2021

2022

¥64,571¥62,900$515,573

2,545

2,234

18,311

Current service cost
Interest cost

547

529

4,336

Actuarial gains and losses

(318)

4,171

34,188(4,327)(3,929)(32,204)(118)(4,207)(34,483)¥62,900¥61,699$505,729

Benefit paid
Past service cost
Balance at end of year

(2) Changes in plan assets
Millions of Yen

Thousands of U.S. Dollars

2021

2022

2022

¥41,931¥47,064$385,770

Expected return on plan assets

622

699

5,729

Actuarial gains and losses

3,919

(253)

(2,073)Contributions by the employer

3,597

3,333

27,319Balance at beginning of year

Benefits paid
Other
Balance at end of year

Financial, Non-financial &Corporate Data

(3) Reconciliation between ending balances of defined benefit obligations and plan assets and the retirement benefit liability
and retirement benefit asset reported on the consolidated balance sheet

1. Overview of retirement benefit plans

Balance at beginning of year

Sustainability(3,021)(2,967)15

10(24,319)81¥47,064¥47,885$392,500

Funded defined benefit obligations

Thousands of U.S. Dollars
2022

2021

2022

¥42,414¥40,714(47,064)(47,885)(392,500)¥(4,649)¥(7,171)$(58,778)

Plan assets

Unfunded defined benefit obligations$333,721

20,48520,984

172,000

Net amount of liabilities and assets recognized inconsolidated balance sheet¥15,836¥13,813$113,221

Retirement benefit liability¥15,836¥13,813$113,221

Net amount of liabilities and assets recognized inconsolidated balance sheet¥15,836¥13,813$113,221(4) Breakdown of retirement benefit expenses
Millions of Yen

Current service cost
Interest cost
Expected return on plan assets
Actuarial gains and losses recognized in the year
Past service cost recognized in the year
Other
Total

Thousands of U.S. Dollars

2021

2022

2022

¥2,545
547
(622)
154
(23)
275

¥2,234
529
(699)
(724)
(163)
204

$18,311
4,336(5,729)(5,934)(1,336)
1,672¥2,876¥1,381$11,319(5) Remeasurements of defined benefit plans
Remeasurements of defined benefit plans (before tax effect) consist of the following:
Millions of Yen

Thousands of U.S. Dollars

2021

2022

2022

Past service cost
Actuarial gains and losses¥(94)(4,392)¥(4,043)
5,149$(33,139)
42,204Total¥(4,487)¥1,105$9,057(6) Accumulated remeasurements of defined benefit plans
Accumulated remeasurements of defined benefit plans (before tax effect) consist of the following:
Millions of Yen

Thousands of U.S. Dollars

2021

2022

2022

Unrecognized past service cost
Unrecognized actuarial gains and losses¥(94)(2,975)¥(4,138)
2,174$(33,918)
17,819Total¥(3,069)¥(1,963)$(16,090)(7) Plan assets(a) Breakdown of plan assets
The ratio of each major category to total plan assets is as follows:
2022

2021

105

KANDENKO

General account
Bonds
Equities
Other

39%
35%
25%
1%

39%
38%
21%
2%

Total

100%

100%

Integrated Report 2022

106About Kandenko(b) Method of determining the long-term expected rates of return on plan assets
Expected return rate on plan assets is determined by considering the current and anticipated future portfolio of plan assets and current
and anticipated future long-term performance of individual asset classes that comprise the funds’ asset mix.

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Major assumptions used in actuarial calculations
Discount rate
Expected return rate on plan assets

2021

2022

mainly 0.9%
mainly 1.5%

mainly 0.4%
mainly 1.5%

3. Defined contribution plans

Effective tax rate after adopting tax effect accounting

The required amount of contribution to the defined contribution plans (including the multi-employer corporate pension fund accounted for in thesame manner) of the Companies was ¥1,749 million and ¥1,783 million ($14,614 thousand) for the years ended March 31, 2021 and 2022,
respectively.

INVESTMENT AND RENTAL PROPERTIES

1. Breakdown of major factors that caused deferred tax assets and liabilities
Millions of Yen

Thousands of U.S. Dollars

2021

2022

2022

¥4,918¥4,300$35,245

Depreciation

3,933

3,965

32,500Accrued bonuses

3,493

3,601

29,516

Provision for loss on construction contracts

1,702

3,041

24,926

Loss on valuation of assets

1,304

1,300

10,655

Allowance for doubtful accounts

544

537

4,401

Loss carry-forward

166

187

1,532

OthersSubtotal
Total

30.6%

0.9%
(0.3)%
0.8%(1.9)%
1.1%

1.1%(0.2)%
0.8%(0.5)%
0.6%

31.2%

32.5%

Millions of Yen

1,940

2,155

17,66318,00419,090156,475(2,303)(2,307)(18,909)¥15,700¥16,783$137,565¥(6,487)¥(6,335)$(51,926)(1,152)(1,099)(9,008)

(48)

(42)

(344)

Valuation allowance

30.6%

The Company and certain consolidated subsidiaries own real estate for rent in Tokyo and other areas. Rental income associated with real estate
for rent in the year ended March 31, 2021 was ¥812 million (major earnings from rent are included under net sales of completed construction
contracts, while significant rental expenses are posted under cost of sales of completed construction contracts). Rental income associated withreal estate for rent in the year ended March 31, 2022 was ¥817 million ($6,696 thousand) (major earnings from rent are included under net salesof completed construction contracts, while significant rental expenses are posted under cost of sales of completed construction contracts).
The amount of real estate for rent posted in the consolidated balance sheets, the change during the year, and the fair value were as follows:

Deferred tax assets:
Retirement benefit liability

2022

2021

Expenses not deductible permanently for tax purposes
Income not taxable permanently
Per capita levy of inhabitant taxes
Special credit of corporate tax
Others

DEFERRED TAX ACCOUNTING

Financial, Non-financial &Corporate Data

2.	Breakdown of items which caused the difference between the statutory tax rate and the effective tax rate
after adopting tax effect accounting
Statutory tax rate
(Adjustments)(8) Assumptions used in actuarial calculations

Sustainability

Thousands of U.S. Dollars
2022

2021

2022

Amount posted in the consolidated balance sheets¥22,442¥22,100$181,147

(341)

500

4,098

Balance at the end of fiscal year¥22,100¥22,601$185,254

Fair value at the end of fiscal year¥26,923¥27,662$226,737

Balance at the beginning of year
Change during the year

Notes:
1. Amounts posted in the consolidated balance sheets represent the acquisition cost after the deduction of accumulated depreciation and accumulated impairment loss.
2.	In regard to the major components of changes in the year ended March 31, 2021, the main decrease was depreciation (¥420 million). In regard to the major components of changes in the year
ended March 31, 2022, the main increase was new acquisitions (¥882 million) ($7,229 thousand).
3.	Fair value at the end of the fiscal year is based on real estate appraisals performed by external appraisers for major real estate, and is measured with amounts calculated primarily based on themarket value of standard sites and the assessed value of inheritance tax by roadside land prices for other properties.

Deferred tax liabilities:
Valuation difference on available-for-sale securities
Reserve for tax purpose reduction entry of non-current
assetsReserve for special depreciation
Others

(143)

(127)

(1,040)Total¥(7,832)¥(7,604)$(62,327)¥7,868¥9,178$75,229

Net deferred tax assets

Note: Except for above, deferred tax liabilities for land revaluation are recorded as follows:

Millions of Yen
Deferred tax liabilities for land revaluation

107

KANDENKO

Thousands of U.S. Dollars

2021

2022

2022

¥6,573¥6,560$53,770

Integrated Report 2022

108About Kandenko

REVENUE RECOGNITION

Value Creation Story

Strengthening Foundations
for Realizing Value Creation

Millions of Yen(1) Balances of contract assets and contract liabilities, etc.
Millions of Yen

For the year ended March 31, 2022
Engineering

Other(Note 1)

Receivables from contracts with customers (Balance at beginning of year)

Total

Breakdown by client¥328,921¥4,448¥333,370

Public office

28,416

4

28,420Tokyo Electric Power Company Group

129,040

2,770

131,811

Revenue from contracts with customers

486,378

7,223

493,602

–

1,964

1,964

486,378

9,188

495,567

Private companies

Other revenue (Note 2)
Customers
Timing of revenue recognition
A point in time

173,923

6,729

180,653

A certain period of time

312,454494

312,949

Revenue from contracts with customers

486,378

7,223

493,602

–

1,964

1,964

¥486,378¥9,188¥495,567

Other revenue (Note 2)
Customers

Financial, Non-financial &Corporate Data

3.	Information on relation between satisfaction of performance obligations under contracts with customers andcash flows arising from the contracts, and amount and timing of revenue expected to be recognized infollowing fiscal years from contracts with customers existing at March 31, 2022.

1. Information on disaggregation of revenue from contracts with customers

Reportable segments

Sustainability

Thousands of U.S. Dollars

2022

2022

¥131,552$1,078,295

Receivables from contracts with customers (Balance at end of year)

121,717997,680

Contract assets (Balance at beginning of year)

60,628496,950

Contract assets (Balance at end of year)

63,926523,983

Contract liabilities (Balance at beginning of year)

12,660103,770¥12,365$101,352

Contract liabilities (Balance at end of year)

Contract assets are rights to consideration related to performance obligations that were satisfied over a certain period of time mainly inconstruction contracts, and reclassified to receivables from contracts with customers when the rights to payment become unconditional.
Contract liabilities represent advance consideration received before the performance under the contract.
Of revenue recognized in the year ended March 31, 2022, the amount included in contract liabilities as at the beginning of the year was¥11,958 million ($98,016 thousand).
In addition, revenue recognized in relation to performance obligations that were satisfied (or partially satisfied) in past periods is not
significant.

(2) Transaction price allocated to remaining performance obligations
The total amount of transaction prices allocated to remaining performance obligations as of March 31, 2022 was ¥477,115 million ($3,910,778
thousand). These transaction prices are expected to be recognized as revenue within a maximum of seven years.

Thousands of U.S. Dollars
For the year ended March 31, 2022
Reportable segments

SEGMENT INFORMATION, ETC.

Engineering

Other(Note 1)

Total

$2,696,073$36,459$2,732,540

Public office232,91832

232,950

Tokyo Electric Power Company Group

1,057,704

22,704

1,080,418

Revenue from contracts with customers

3,986,704

59,204

4,045,918

Breakdown by client
Private companies–

16,09816,0983,986,704

75,311

4,062,024

A point in time

1,425,598

55,155

1,480,762

A certain period of time

2,561,098

4,049

2,565,155

Revenue from contracts with customers

3,986,704

59,204

4,045,918–

16,09816,098$3,986,704$75,311$4,062,024

Other revenue (Note 2)
Customers
Timing of revenue recognition

Other revenue (Note 2)
Customers

Notes:
1.	The “Other” segment is a business segment which is not included in the reportable segment and includes electrical equipment sales business, real estate business, lease business and power
generation business.
2. “Other revenue” represents income from lease based on the accounting standard for lease transactions, etc.

2. Information providing the basis for understanding revenue from contracts with customers
The information has been provided in “SIGNIFICANT MATTERS PROVIDING THE BASIS FOR THE PREPARATION OF CONSOLIDATED FINANCIAL
STATEMENTS, 4. Significant accounting policies, (5) Accounting policies for significant revenues and expenses.”

109

KANDENKO(Segment information)
1. Outline of reportable segment information
Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments arecomponents of an entity about which separate financial information is available and such information is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing performance.
The Companies engage in facility installation work, sales of electrical equipment, rental of real estate, leasing, sales of electrical power andothers. “Engineering” is determined to be the reportable segment.
“Engineering” includes business related to electrical work, plumbing work and various other work on facilities.

2.	Method of measurement for the amounts of net sales, profit or loss, assets and other items by reportablesegment
The accounting treatment regarding the reportable business segments is the same as recorded in “SIGNIFICANT MATTERS PROVIDING THE BASISFOR THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS.” The profit of reportable segments is based on operating profit. Theintersegment profit and transfers are based on trading prices in the market.
As stated in “CHANGES IN ACCOUNTING POLICIES,” the Accounting Standard for Revenue Recognition, etc. has been applied from the
beginning of the year ended March 31, 2022 and the method of accounting for revenue recognition was changed. Accordingly, the method of
measuring profit or loss of reportable business segments was changed likewise.
As a result of this change, net sales of “Engineering” for the year ended March 31, 2022 decreased by ¥42,881 million ($351,483 thousand),and net sales of “Other” decreased by ¥1,583 million ($12,975 thousand) compared to the previous method. However, there is no effect on
segment profit.

Integrated Report 2022

110About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Financial, Non-financial &Corporate Data

Sustainability

3. Net sales, profit or loss, assets and other items by reportable segments

Thousands of U.S. Dollars
For the year ended March 31, 2022

Millions of Yen
Engineering

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated total(Note 3)

$3,986,704$75,311$4,062,024$–$4,062,024

For the year ended March 31, 2021
Engineering

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated total(Note 3)Customers

Net sales:
Customers
Inter-segment

Net sales:¥544,968¥11,077¥556,045¥–¥556,045

1,926

222,598

224,532(224,532)

–

Total

$3,988,639$297,918$4,286,557$(224,532)$4,062,024

Inter-segment

221

38,881

39,102(39,102)–

Total¥545,189¥49,958¥595,148¥(39,102)¥556,045

Segment profit$238,688$12,639$251,336$(155)$251,172

Segment profit¥28,025¥1,964¥29,989¥51¥30,041

Segment assets$3,453,811$625,680$4,079,491$(219,106)$3,860,385¥456,999

Other items:$46,934$15,606$62,549$(1,598)$60,942

62,024

14,204

76,237(1,442)

74,795

Segment assets¥408,136¥74,683¥482,820¥(25,820)

Depreciation

Other items:
Depreciation
Increase in property, plant and equipment
and intangible assets¥5,527¥1,968¥7,496¥(249)¥7,246

5,775

2,026

7,801

(483)

7,317

Notes:
1.	The “Other” segment is a business segment which is not included in the reportable segment and includes electrical equipment sales business, real estate business, lease business and power
generation business.
2. Adjustments in segment profit, segment assets and other items are elimination of internal transactions between segments.
3. Segment profit is adjusted with operating profit presented in the consolidated statement of income.

Millions of Yen
For the year ended March 31, 2022
Engineering

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated total(Note 3)

Net sales:

Increase in property, plant and equipment
and intangible assets

Notes:
1.	The “Other” segment is a business segment which is not included in the reportable segment and includes electrical equipment sales business, real estate business, lease business and power
generation business.
2. Adjustments in segment profit, segment assets and other items are elimination of internal transactions between segments.
3. Segment profit is adjusted with operating profit presented in the consolidated statement of income.

(Related information)
For the year ended March 31, 2021
1. Information about products and services

For the year ended March 31, 2022
1. Information about products and services

Information is omitted as similar information is described in thesegment information.

Information is omitted as similar information is described in thesegment information.

¥486,378¥9,188¥495,567¥–¥495,567

235

27,15727,393(27,393)–

Total¥486,614¥36,346¥522,960¥(27,393)¥495,567

2. Information about geographical region

2. Information about geographical region

Segment profit¥29,120¥1,542¥30,663¥(19)¥30,643(1) Net sales(1) Net sales

Segment assets¥421,365¥76,333¥497,698¥(26,731)¥470,967¥5,726¥1,904¥7,631¥(195)¥7,435

7,567

1,733

9,301

(176)

9,125

Customers
Inter-segment

Other items:
Depreciation
Increase in property, plant and equipment
and intangible assets

Information is omitted as net sales to external customers inJapan accounted for more than 90% of net sales reported in the
consolidated statement of income.

(2) Property, plant and equipment
Details of property, plant and equipment are omitted as amounts
of property, plant and equipment located in Japan accounted formore than 90% of all property, plant and equipment reported on
the consolidated balance sheet.

Tokyo Electric Power
Company Group111

KANDENKO

Net sales¥183,620 million(2) Property, plant and equipment
Details of property, plant and equipment are omitted as amounts
of property, plant and equipment located in Japan accounted formore than 90% of all property, plant and equipment reported on
the consolidated balance sheet.

3. Information about major customers

3. Information about major customers
Customer Name

Information is omitted as net sales to external customers inJapan accounted for more than 90% of net sales reported in the
consolidated statement of income.

Related segment

Customer Name

Net sales

Related segment

Engineering

Tokyo Electric Power
Company Group¥  131,840 million$1,080,655 thousand

Engineering

Integrated Report 2022

112

About Kandenko(Information about impairment loss in non-current assets of each reportable segment)
For the year ended March 31, 2021
For the year ended March 31, 2022
Disclosure is omitted due to immateriality.

Type(Information about amortization and unamortized balance of goodwill of each reportable segment)
For the year ended March 31, 2022
For the year ended March 31, 2021

(Information about gain on bargain purchase of each reportable segment)
For the year ended March 31, 2021
For the year ended March 31, 2022

Other affiliates
TEPCO Power Grid,
Incorporated

Type

Not applicable.

Name

Location

Share capital

Description ofbusiness

RELATED PARTY TRANSACTIONSNameTokyo Electric Power
Company Holdings,
Incorporated

General powertransmission and¥    80,000 million
Chiyoda-ku, Tokyo$   655,737 thousand distribution
business

Nature oftransaction

Installation ofelectric work

Amount of transaction¥   5,518 million$ 45,229 thousand

Transactions between related parties
Transactions between the Company and related parties
The parent company and major shareholders (limited to companies) of the Company
For the year ended March 31, 2021
Type

Name
Tokyo Electric Power
Company Holdings,
Incorporated

Location
Chiyoda-ku, Tokyo¥1,400,975 million

Electric powerbusiness¥   80,000 million

General powertransmission anddistribution
business

Other affiliates
TEPCO Power Grid,
Incorporated

Type

Name

Tokyo Electric Power
Company Holdings,
Incorporated

Chiyoda-ku, Tokyo

Nature oftransaction

Installation ofelectric work

TEPCO Power Grid,
Incorporated

Purchase of
raw materials

Ratio of voting
rights held
(Held)
Direct–%Indirect47.2%(Held)
Direct46.4%
Indirect0.3%

Electric work
contract
Electric work
contract

Account

Balance at end of year

¥ 6,288 million¥  8,084 million

Notes receivable, accounts
receivable from completed
construction contracts andother
Advances received on
construction contracts inprogress¥   215 million

Notes receivable, accounts
receivable from completed
construction contracts andother¥27,756 million

Advances received on
construction contracts inprogress¥   125 million

Notes payable, accounts
payable for construction
contracts and other¥ 2,166 million¥150,099 million¥ 34,003 million

Installation ofelectric work

Relation to therelated party

Amount of transaction

Other affiliates
Installation ofelectric work

Other affiliates

Description ofbusiness

Share capital

Ratio of voting
rights held

Tokyo Electric Power
¥ 1,400,975 million
Electric power
Company Holdings, Chiyoda-ku, Tokyo$11,483,401 thousand businessIncorporated

Disclosure is omitted due to immateriality.

Not applicable.

Financial, Non-financial &Corporate Data

Sustainability

For the year ended March 31, 2022

Disclosure is omitted due to immateriality.

Disclosure is omitted due to immateriality.

Strengthening Foundations
for Realizing Value Creation

Value Creation Story¥ 104,752 million$ 858,622 thousand

TEPCO Power Grid,
Incorporated
Purchase of
raw materials
supplied for value¥ 42,578 million$ 349,000 thousand

Relation to therelated party(Held)
Direct–%Indirect47.2%

Electric work
contract(Held)
Direct46.4%
Indirect0.3%

Electric work
contract

Account

Balance at end of year

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥  3,477 million$ 28,500 thousand

Advances received on
construction contracts inprogress¥     43 million$ 352 thousand

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 20,654 million$169,295 thousand

Advances received on
construction contracts inprogress¥    155 million$ 1,270 thousand

Current assets“Other”¥  9,288 million$ 76,131 thousand

Current liabilities“Other”¥  3,257 million$ 26,696 thousand

Notes:
1. Above transaction amounts do not include consumption taxes, while above balances at the end of the year include consumption taxes.
2.	Terms and conditions of the transactions and its policies
Terms and conditions for construction orders and purchase of raw materials supplied for value are determined on arm’s length basis through negotiations considering market price, etc.

Notes:
1. Above transaction amounts do not include consumption taxes, while above balances at the end of the year include consumption taxes.
2.	Terms and conditions of the transactions and its policies
Terms and conditions for construction orders and purchase of raw materials are determined on arm’s length basis through negotiations considering market price, etc.

113

KANDENKO

Integrated Report 2022

114

About Kandenko

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Financial, Non-financial &Corporate Data

Sustainability

CONSOLIDATED SUPPLEMENTAL SCHEDULESPER SHARE INFORMATION(Schedule of bonds)
Not applicable.
Yen

U.S. Dollars

Net assets per share
Earnings per share¥

1,323.90
98.64(Schedule of loans)

2022

2022

¥1,389.96
99.45$11.39
0.81

2021

Short-term borrowings

Notes:
1. Diluted earnings per share has not been presented since there is no dilutive shares.
2. The basis of calculating earnings per share is as follows:

Millions of Yen
Earnings per share
Profit attributable to owners of parent
Amount not attributable to common shareholders
Profit attributable to owners of parent applicable tocommon shares

Thousands of U.S. Dollars

Current portion of lease liabilities

2021

2022

2022

¥20,147–¥20,315––

20,147

20,315

166,516$

166,516Weighted average number of common shares during the year

2022
204,287

204,258
Millions of Yen

Thousands of U.S. Dollars

2021

2022

¥279,459
9,042[9,042]
270,417¥293,514
9,538[9,538]283,975

As of March 31, 2022

¥ 6,770 million$ 55,491 thousand
632 million¥$ 5,180 thousand
595 million¥$ 4,877 thousand¥ 6,150 million$ 50,409 thousand
642 million¥$ 5,262 thousand
711 million¥$ 5,827 thousand¥ 6,607 million$ 54,155 thousand¥ 7,249 million$ 59,418 thousand¥ 1,385 million$ 11,352 thousand–¥ 16,632 million$136,327 thousand

Average interest rate(%)

¥ 1,694 million$ 13,885 thousand–¥ 15,804 million$129,540 thousand

Due

0.7

–

1.5

–

–

–

1.6

2023 to 2033–

2023 to 2029

–

–

–

–

Notes:
1.	Interest rates and balances at the end of the year are used to calculate average interest rate. The average interest rate of lease liabilities has not been presented since lease liabilities before
deducting the amount equivalent to interest expense included in total lease payments are recorded on the consolidated balance sheet.
2. The repayment schedule of long-term borrowings and lease liabilities (excluding current portion) for five years subsequent to March 31, 2022 is summarized as follows:

3. The basis of calculating net assets per share is as follows:

Total net assets
Amount deducted from total net assets[Non-controlling interests included in the above]
Total net assets related to common shares

Long-term borrowings (excluding current portion of
long-term borrowings)
Lease liabilities (excluding current portion of leaseliabilities)
Other interest-bearing debt
Total

Thousands of Shares
2021

Current portion of long-term borrowings

As of April 1, 2021

2022
$

2,405,852
78,180[78,180]
2,327,663

Long-term borrowings
Lease liabilities

Due after one year
through two years¥ 1,339 million$ 10,975 thousand¥
614 million$ 5,032 thousand

Due after two years
through three years
619 million¥$ 5,073 thousand¥
486 million$ 3,983 thousand

Due after three years
through four years
617 million¥$ 5,057 thousand¥
355 million$ 2,909 thousand

Due after four years
through five years
616 million¥$ 5,049 thousand¥
155 million$ 1,270 thousand(Schedule of Asset Retirement Obligations)Thousands of Shares
2022

2021
Number of common shares outstanding at end of year

SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

204,257

The amounts of asset retirement obligations as of April 1, 2021 and March 31, 2022 are less than 1% of the total liabilities and net assets as ofApril 1, 2021 and March 31, 2022. Therefore, the disclosure is omitted.

204,305

OTHERS
Quarterly information for the year ended March 31, 2022
Cumulative period
Net sales
Profit before income taxes
Profit attributable to owners of parent
Earnings per share

Each quarter
Earnings per share
115

KANDENKOFirst quarter

Second quarter

Third quarter

Fourth quarter¥ 108,077 million¥ 220,331 million¥ 343,784 million¥ 495,567 million$ 885,877 thousand $1,805,991 thousand $2,817,901 thousand $4,062,024 thousand¥¥ 13,748 million¥ 21,542 million¥ 30,978 million
7,438 million$ 60,967 thousand $ 112,688 thousand $ 176,573 thousand $ 253,918 thousand
4,764 million
8,861 million¥¥¥ 13,950 million¥ 20,315 million$ 39,049 thousand $ 72,631 thousand $ 114,344 thousand $ 166,516 thousand¥23.33 ¥43.38 ¥68.29 ¥99.45$0.19 $0.35 $0.55 $0.81
First quarter
Second quarter
Third quarter
Fourth quarter¥23.33 ¥20.06 ¥24.91 ¥31.15$0.19 $0.16 $0.20 $0.25
Integrated Report 2022

116About Kandenko

Non-financial Information

Unit
OverallMale

Average age

6,976

7,202

7,350

7,497

7,619

Persons

6,589

6,760

6,892

7,007

7,123

Fiscal 201910,003Fiscal 2020
10,154

Fiscal 2021
10,264

387

442

458

490

496

Overall

41.4

41.5

41.6

41.7

41.9

41.5

41.5

41.6

41.6

41.8

40.2

41.4

41.7

42.1

42.6

19.3

19.1

19.1

19.0

19.1

19.5

19.3

19.2

19.2

19.3

Age

Overall
Male

Years

Female

17.5

16

16.3

16.5

16.4

Overall

1.3

1.9

2.0

2.1

1.8

1.3

1.9

2.0

2.1

1.8

Male

%

0.8

1.1

1.5

1.2

1.6

Age

40

41

40

40

39

Number of men in managerial positions

Persons

1,677

1,720

1,764

1,792

1,864

Number of women in managerial positions

Persons

14

17

18

22

23

Percentage of female employees in managerial positions

%

3.5

3.7

3.9

4.5

4.6

Employment rate

%

2.3

2.2

2.2

2.3

2.7

331

331

333

305

314

317

313

317

289

303

FemaleEarliest age
Promotion to managerial positions

Fiscal 2018
9,818

FemaleMale

Turnover rate

Actual Results

Persons

FemaleYears of service

Financial, Non-financial &Corporate Data

Fiscal 2017
9,571

Overall
Number of employees

Sustainability(As of March 31, 2022)

Item
Number of employees (consolidated)

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

Employment of persons with disabilities

Overall
Number of regular hires

Male

Number of mid-career hires

Persons

Female

14

18

16

16

11

Overall

100

156

74

106

79

78

104

72

93

67

22

52

2

13

12

1.4

2.1

1.0

1.4

1.0

1.2

1.5

1.0

1.3

0.9

Female

5.6

11.4

0.4

2.7

2.4

Overall

1

3

4

3

5
3

Male

Persons

FemaleOverall
Percentage of mid-career hires of full-time workers

Male

1

1

3

2

Female

0

2

1

1

2

Overall

8.9

5.7

6.2

13.1

11.2

Male

Number of users of the nursing care leave program

Percentage of employees using the childcare leave
program%

Male

Persons%

Female

0.7

0.0

0.7

6.3

5.6

100.0

100.0

100.0

100.0

100.0

Percentage of employees using the spouse childbirth leave program

%

63.9

58.8

70.6

60.6

58.8

Foreign employees

Persons

14

13

11

15

14

Female technical and engineering staff

Persons

62

81

84

94

105

Percentage of employees rehired after mandatory retirement age

%

89.1

87.3

81.8

86.8

89.8

7,351

7,562

7,752

7,689

7,547

7,490

7,723

7,918

7,841

7,694

Overall
Average annual salary

Male
FemaleRatio of women’s wages to men’s wages

Thousands of
Yen

5,125

5,222

5,335

5,496

5,486

%

68.4

67.6

67.4

70.1

71.3

60.7

Paid leave usage rate

Overall%

Average total working hours per person/month

Overall

Hours

49.3

56.5

59.9

66.9

183.6

184.4

178.1

175.4

Number of employee training hours* (Company-wide joint training, etc.)

Total hours

36,28334,35935,813

22,862

25,681

Number of employee training days* (Company-wide joint training, etc.)

Total days

4,838

4,581

4,775

3,048

3,424

Number of participants in training* (company-wide joint training, etc.)

Total number of persons

957

1,218

1,910

1,618

1,918
*Training provided by Education & Training Center

117

KANDENKO

Integrated Report 2022

118About Kandenko| Company Profile | (As of March 31, 2022)
Company outline

The Company’s website

are listed on the First Section of the Tokyo

Established

September 1, 1944

Head office

4-8-33 Shibaura, Minato-ku, Tokyo, Japan

Paid in capital¥10,264 million

the 10 largest shareholders appearing on the

Total number ofshares issued

205,288,338 sharesregister at that date.

Employees

10,264 persons (consolidated),
7,619 persons (non-consolidated)

Stock Exchange.
13,707 shareholders. The following table lists

Head Office

4-8-33 Shibaura, Minato-ku, Tokyo, JapanTokyo Branch

4-8-33 Shibaura, Minato-ku, Tokyo, Japan

https://www.kandenko.co.jp/

Chiba Branch

2-1-24 Shinjuku, Chuo-ku, Chiba-shi, Chiba, Japan

Saitama Branch

Omiya Center Building 9th Floor, 1-9-6 Sakuragicho,
Omiya-ku, Saitama-shi, Saitama, Japan

Ibaraki Branch

2-7-14 Jonan, Mito-shi, Ibaraki, Japan

Tochigi Branch

91-1 Imaizumicho, Utsunomiya-shi, Tochigi, Japan

Gunma Branch(in Japanese)

To shareholders and investors:
Treasury stock
0.47%(0.50%)(0.50%)

Yamanashi Branch 4-12-25 Chuo, Kofu-shi, Yamanashi, Japan
8-12 Yoneyamacho, Numazu-shi, Shizuoka, Japan

Tama Branch

2-24-6 Myojincho, Hachioji-shi, Tokyo, Japan

Kansai Branch

Nakanoshima Festival Tower 20th Floor, 2-3-18
Nakanoshima, Kita-ku, Osaka, Japan

Nagoya Branch

Nagoya Toho Building 6th Floor, 1-2-7 Sakae, Naka-ku, Nagoya-shi, Aichi, Japan

Kyushu Branch

Yakuin Business Garden 4th Floor, 1-1-1 Yakuin,
Chuo-ku, Fukuoka, Japan

Hokkaido Branch

J&S Resona Building 3rd Floor, 4-1-2 Kitaichijo Nishi,
Chuo-ku, Sapporo-shi, Hokkaido, Japan

Tohoku Branch

Sendai Daiichi Seimei Tower Building, 4-6-1 Ichibancho, Aoba-ku, Sendai-shi, Miyagi, Japan

Nagano Branch

1629-32 Midoricho, Nagano-shi, Nagano, Japan

1 TEPCO Power Grid, Inc.

94,75346.37

2 The Master Trust Bank of Japan, Ltd. (Trust Account)

16,228

7.94

3 Custody Bank of Japan, Ltd. (Trust Account)

7,267

3.55

4 Kandenko Group Employees Shareholding Association

6,273

3.07

5 Mizuho Bank, Ltd.

4,061

1.98

6 STATE STREET BANK AND TRUST COMPANY 505001

2,592

1.26

7 THE BANK OF NEW YORK, TREATY JASDEC ACCOUNT

2,437

1.19

8 JP MORGAN CHASE BANK 385781

1,430

0.70

9 STATE STREET BANK WEST CLIENT-TREATY 505234

1,405

0.68

10 Takasago Thermal Engineering Co., Ltd.

1,318

0.64

Individuals, other14.32%
Number of Shares Held by Type of Shareholder (As of March
31, 2022)

Foreigncompanies, etc.
16.21% stock
Treasury(16.92%)0.47%

215-6 Furuichimachi, Maebashi-shi, Gunma, Japan

Shizuoka Branch

Number of
Shares held as ashares held percentage of total(in thousands) outstanding shares

Name

On March 31, 2022, there were a total of

The Company sees its website as one of theimportant sources of information. Please visit our
website where we post IR information, an
introduction on our technologies and services, andthe latest news.

Kanagawa Branch 1-1-8 Hiranuma, Nishi-ku, Yokohama-shi, Kanagawa,Japan

Principal Shareholders

The shares of common stock of the Company

Kandenko Co., Ltd.

Domestic Offices

Financial, Non-financial &Corporate Data

Sustainability| Stock Information | (As of March 31, 2022)

Company name

Network

Strengthening Foundations
for Realizing Value Creation

Value Creation Story

https://www.kandenko.co.jp/ir

Foreigncompanies, etc.
16.21%(16.92%)(in Japanese)

Overseas Offices

Domestic Offices(13.91%)

Total number ofshares issued
205,288,338 shares
Total number ofshares issued
205,288,338 shares

Individuals, other
Financial14.32%
institutions(13.91%)18.72%(18.41%)

Note: Figures in parentheses show data as of March 31, 2021.

Financial
Japanese institutions
companies
18.72%
50.28%(18.41%)(50.26%)

Note: Figures in parentheses show data as of March 31, 2021.

Japanese companies
50.28%(50.26%)

Monthly Stock Price

Stock-Related Information
Fiscal year-end

March 31

Ordinary general
meeting of shareholders

June

Record dates for
dividend payments

March 31 for the fiscal year-end dividend.
September 30 for the interim dividend.

Record date

The date on which shares must be owned
for shareholders to exercise voting rights at
the general meeting of shareholders is March
31. If other votes are required, the record
date will be set and announced in advance.

Method of public
notification

Notification will be given electronically.
However, if we cannot issue an electronic
notification, we will place a notice in the Nihon
Keizai Shimbun, published in Tokyo. Kandenko’s
URL for public notices is as follows.
https://www.kandenko.co.jp/

Transfer agent

Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku, Tokyo
100-8233, Japan

Transfer agent
contact point

Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Department
2-8-4 Izumi, Suginami-ku, Tokyo 168-0063,
Japan
Tel: 0120-782-031 (toll-free)(Unit: Yen)

1,200

Overseas Offices

1,000Singapore Branch 2 Leng Kee Road #05-08 Thye Hong Centre, Singapore
159086800
1,200

Taiwan Branch

6F-1, No. 45, Section 1, Minchuan Eastern Road, Taipei,
Taiwan600
1,000

Yangon Branch

Room1(A), University Paradise Condo, No.441, New
University Avenue Road, Bahan Township, Yangon,
Myanmar(Unit: Yen)(inquiries about stockrelated matters)

8000
Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
600

2021

2022

0
Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

119

KANDENKO

2021

2022

Integrated Report 2022

120