Financial Strategy and
New Management Targets for FY 2025

JERA Co., Inc.
May, 2022© 2022 JERA Co., Inc. All Rights Reserved.

Financial Strategy

Page 1© 2022 JERA Co., Inc. All Rights Reserved.

Financial Strategy◼
◼
◼

Promote growth investments while maintaining financial soundness.
Aim for a net debt-to-equity ratio (DER) of 1.0 or less to maintain financial soundness.
Hold capital at a level that exceeds the amount of integrated risk.

Optimal capital
structure
Balance sheet
management

Current

FY 2025

Safety-Net DER
1.0 times or lessAbility to repay debt

-Net Debt/EBITDA
4.5 years or less

Credit ratings

A rating

A rating

Risk capital-

At a level that exceeds the amountof integrated risk

Allocation of funds-

Promote investments forsustainable growth

Capitalallocation
Ensure sufficient operating cash flow

Discipline

Page 2© 2022 JERA Co., Inc. All Rights Reserved.

Financial Strategy: Balance Sheet Management◼ Implement balance sheet management to maintain A credit rating◼ Maintain net assets exceeding the amount of integrated risk
FY 2025 (Projected)
EBITDANet Debt/EBITDA: 4.5 years or lessinterest-bearing
debt:
Approximately
2.5 trillion yen

Liabilities
Net DER: 1.0 or lessAssetsTotal assets:
Approximately
7 trillion yen*Risk buffer
Net assets:
Approximately
2.3 trillion yen

Amount ofintegrated risk

* Including 300 billion yen in cash and deposits.
Page 3© 2022 JERA Co., Inc. All Rights Reserved.

Balance Between Risk Capital and Integrated Risk◼
◼
◼

JERA defines three categories of risk: market risk, credit risk, and operational risk. The amount of integratedrisk is quantified based on market risk and credit risk.
The difference between the amount of integrated risk and risk capital is defined as a "risk buffer."
JERA has a policy of maintaining a certain level of risk buffer in consideration of operational risk.

Integrated Risk Management

Uncertainties forwhich the probabilityof occurrence
cannot becalculated

Operational risk
Risk buffer

Risk capital(equity capital)

Market risk
Risk for which theprobability ofoccurrence can becalculated statisticallyIntegrated risk
Credit risk

Page 4© 2022 JERA Co., Inc. All Rights Reserved.

Financial Strategy: Capital Allocation◼
◼

Based on approximately 1.6 trillion yen of cash-in, mainly operating cash flow, from FY 2022 to FY 2025, JERA will
allocate cash to growth investments with the aim of sustainable growth.
Of its growth investments, JERA plans to allocate approximately 650 billion yen to decarbonization-related business andapproximately 600 billion yen to areas related to stable supply.

Capital Allocation
Cash-in
Debt finance-repayment:
Approximately 20 billion yen

Cash-out
Shareholder return:Approximately
200 billion yen

Capital Investment

Decarbonization-related business:
Approximately 650 billion yen

Operating CF:
Approximately
1.58 trillion yen

CAPEX:
Approximately
1.4 trillion yen

Overseas power generation and fuel-related
business:
Approximately 250 billion
Domestic
thermal powergeneration
business:
Approximately
500 billion yen

Page 5

Replacement:
Approximately 350 billion yen

Growth investments:
Approximately
1.2 trillion yen

Stable supply-related:
Approximately
600 billion yen

Function maintenance:
Approximately 150 billion yen© 2022 JERA Co., Inc. All Rights Reserved.

Rigorous investment evaluation process◼

◼

For business investment, after formulating investment strategies for each sector,we evaluate and manage risks
appropriately through screening by the Investment Assessment Committee, which includes members who haveexperienced investment screening at financial institutions, etc., periodic monitoring, and establishment of exit
criteria.
In risk and return analysis, we use exceeding 200 guideline rates calculated for each country and business in which
we invest, as targets to ensure the creation of corporate value.

[Investment Evaluation Process]Primary
examination

Secondary
examination

ContinueSaleExit

Monitoring (Quarter)

Page 6Investment execution

Items to be examined• Risk-return analysis• Company-wide financial
impactBoard of Directors

Leadership Panel

Investment Assesment
Committee

Leadership Panel

Investment Assesment
Committee

Investment strategies foreach sector

Items to be examined• Consistency with thestrategy• Management resource
constraint• Risk-return analysis• Negotiating policy

Exitcriteria

Main monitoring items• Rate of return and cash flow
• Risk parameter© 2022 JERA Co., Inc. All Rights Reserved.

New Management Targets

Page 7© 2022 JERA Co., Inc. All Rights Reserved.

Income and Expenditure Levels through FY 2025◼

JERA continues to aim for consolidated net income*1 of 200 billion yen in FY 2025.

Consolidated Net Income (Billion Yen)
200160140120*2Undecided*3

Average from FY2019 to FY2021

FY2022

FY2023

FY2024FY2025*1 The effect of the time lag in fuel cost adjustment system is excluded.
*2 One-time gains of approximately 120 billion yen from trading business in FY2021 are excluded.

*3 Undecided because it is not possible to reasonably calculate performance.
*4 The exchange rate presumed for calculation is approximately 110 JPY/USD on average from FY2023 to FY2025.
Page 8© 2022 JERA Co., Inc. All Rights Reserved.

Income and Expenditure Levels by Segment◼

Of the 200 billion yen in planned profits for FY 2025, approximately 80% will come from existing investments.
◼ Domestic thermal power generation and gas supply business: The volume adjustment process for LNG has been
completed, and profits are expected from highly efficient replacement power plants.
◼ Fuel-related business: Expect to continue to earn profits from trading, upstream business, etc.
◼ Overseas power generation business: The restructuring of low-competitiveness projects has been completed andprofits are expected from the promotion of investment for transition in Asia.

Consolidated Net Income by Segment* (Billion Yen)
Domestic thermal power generation and gas supply
Fuel-related
Overseas power generation
Decarbonization-related

200160140

FY2023

FY2024FY2025*The effect of the time lag in fuel cost adjustment system is excluded.
Page 9© 2022 JERA Co., Inc. All Rights Reserved.

New Management Targets◼
◼

Establish management indicators for profitability, capital efficiency, growth potential, and financial soundness.
Maximize corporate value by actively investing for growth while maintaining financial discipline.
Implement management that is conscious of ROIC exceeding the cost of capital.

Profitability

Capital efficiency

Growth potential

Financial soundness

Management indicator

Average from FY2019 toFY2021

Target value for FY 2025

Net income*120 billion yen

200 billion yen

EBITDA*350 billion yen

500 billion yen

ROIC*

Approximately 3.5%

Approximately 4.5%

WACC

Approximately 3.0%

Approximately 3.5%

Investment CF

Cumulative total from FY2019 toFY2021: Approximately 1.2 trillion yen

Cumulative total from FY2022 toFY2025: Approximately 1.4 trillion yen

Net DER

Approximately 1.0 times

1.0 times or less

Net Debt / EBITDA*

Approximately 4.0 years

4.5 years or less

Decarbonization
investments

Cumulative total from FY2019 toFY2021: Approximately 80 billion yen

Cumulative total from FY2022 to
FY2025: Approximately 650 billion yen

Ammonia co-firing－20% co-firing demonstration testcompleted

Hydrogen co-firing－30% co-firing demonstration testcompletedROE*

Approximately 7.0%

Approximately 9.0%

Reference* The effect of the time lag in fuel cost adjustment system is excluded. One-time gains of approximately 120 billion yen from trading business in fiscal 2021 are excluded.
Page 10© 2022 JERA Co., Inc. All Rights Reserved.

Reference:
Review of the Business Plan Announced in April
2019

Page 11© 2022 JERA Co., Inc. All Rights Reserved.

Review of the Business Plan: Income and Expenditure Level◼

Consolidated net income*: Although the target was not achieved in FY 2019, it has since been exceeded.

◼

Synergy effects: Steady progress toward the goal of creating synergies of at least 100 billion yen per year within 5years from integration.

Consolidated Net Income (Billion Yen)

Plan
PlannedSynergy Effects (Billion Yen)

Results
ActualCreation of new profit sources

280

Improved cost competitiveness in domestic thermal power generation

105
85

100

90

100

110

110

4525

FY2019FY2020FY2019FY2021

FY2020

FY2021

FY2023*The effect of the time lag in fuel cost adjustment system is excluded.
Page 12© 2022 JERA Co., Inc. All Rights Reserved.

Review of the Business Plan: Status of Balance Sheet■Total Assets

8,700*■Interest-bearing Debt

2,600
2,200

4,000
3,800

4,100
4,000

FY2019FY2020

1,700
1,500

4,300

FY2021FY2019

1,900
1,600

FY2020

FY2021■Net Assets

1,600
1,400

FY2019

1,800
1,500

FY2020

Unit: billion yen
Legend:Planned

2,000

Actual1,600

FY2021*Includes an increase of approximately 3 trillion yen due to “derivative securities” and “derivative obligations” at fuel trading subsidiary JERAGM.
Page 13© 2022 JERA Co., Inc. All Rights Reserved.

Review of the Business Plan: Cash Flows■Operating Cash Flow

■Investing Cash Flow

550300660250340

550300450450310FY2019

FY2020270

FY2021(340)*FY2019FY2020

FY2021■Free Cash Flow
FY2019240(150)

FY2020

FY2021
Unit: billion yen
Legend:Planned70(200)Actual(250)(1,000)*Includes temporary factors of approximately -650 billion yen such as a time-lag loss and an increase in margin requirements at JERAGM.
Page 14© 2022 JERA Co., Inc. All Rights Reserved.

Review of the Business Plan: Progress on 2025 Targets◼

Steady progress has been made in efforts to achieve the 2025 targets.

Progress through FY 2021

⚫ Develop domestic replacement: 7–9 GW (5 to 7sites)⚫ LNG fleet: Around 25 vessels⚫ Equity output of renewable energy: 5 GW

Optimisation

Businessdevelopment

Plan⚫ LNG transaction volume: Around 35 MTPA
⚫ Optimization that takes advantage of LNG vessels⚫ Profit through trading

O&M⚫ Operation/maintenance of power plants: equivalent
to 80GW globally⚫ Reduce O&M cost by 20% (vs. pre-integration
TEPCO/Chubu)⚫ Shorten the time needed for regularinspection: -50%Page 15⚫ Develop domestic replacement: Progress
toward development of approximately 7 GW(5 sites)⚫ LNG fleet: Around 20 vessels⚫ Equity output of renewable energy: 1.7 GW⚫

LNG transaction volume in FY 2021: Around37 MTPA⚫

Earned profits from use of LNG vessels andJERAGM's coal and LNG trading(JERAGM’s LNG sales volume: Around 19MTPA)⚫

Operation/maintenance of 70 GW worth ofpower plants worldwide⚫

Efforts are underway to accelerate cost
reduction by 20% (2023).

⚫

Successful shortening of the regular inspection
period through kaizen, etc.
© 2022 JERA Co., Inc. All Rights Reserved.

Forward-Looking Statements
The information in this presentation may contain forward-looking statements. Forward-looking
statements include statements relating to: (i) plans; (ii) business and management strategies;and (iii) performance forecasts, and are based on then-current data at the time of issuance of thisdocument. Forward-looking statements involve risks and uncertainties including but not limited toeconomic conditions, competitive landscape, government laws and regulations, exchange rate and soon that could significantly affect the expected results, and are based on certain key assumptions.
Many factors could cause actual results to differ materially from those projected or implied herein.
Due to such uncertainties and risks, readers are cautioned not to place undue reliance on suchforward-looking statements.

© 2022 JERA Co., Inc. All Rights Reserved.