FY2017 1H Consolidated Financial Results...1. Overview of First Half and Full-Year Business...

August 21, 2017

EPCO CO., LTD.

FY2017 1H

Consolidated Financial Results

The results for the first six months of FY2017 remained strong, exceeding the forecasts.

The Company aims to achieve results exceeding the full-year forecasts by further improving

its performance during the second half of the fiscal year.

1. Overview of First Half and Full-Year Business Performance During

Fiscal Year Ending December 2017

2. EPCO Group: Medium-Term Business Plan (2017 – 2021)

3. Company profile and business strategies of TEPCO HomeTech

Changes in the external environment provide opportunities to create new markets.

EPCO + TEPCO HomeTech

Aim for infrastructure-like business growth through the synergy of the two companies.

Provides total household energy-saving services using the combined strengths of EPCO

and TEPCO.

Will gradually expand the business into the energy solution market in view of the

development of an energy-efficient society.

Key Points of the Presentation 1

Overview of First Half and Full-Year Business

Performance During Fiscal Year Ending

December 2017

2

計画比

+15

■ Achieved higher profit than both the forecast and the result in the first half of FY2016

Consolidated

Financial Results

FY2016 1H

Result

FY2017 1H

Forecast Result Vs. Forecast Vs. FY2016 1H

Change Change (%) Change Change (%)

Net Sales 1,600 1,630 1,649 +19 +1.2% +49 +3.1%

Operating Income -200 244 262 +17 +7.2% +463 –

Ordinary Income 118 242 255 +12 +5.2% +136 +115.0%

Net Income 98 162 172 +10 +6.6% +74 +74.9%

Ordinary Income

Margin (%) 7.4% 14.9% 15.5% +0.6P – +8.1P –

(Millions of yen)

The above forecasts are revisions of the financial forecasts as of May 12, 2017.

Consolidated Results for FY2017 1H 3

118

337

117

-220

-116

255

333

115

-68-125

-300

-200

-100

0

100

200

300

400

(Millions of yen)

Design

Consulting

Customer

Support

Energy Administrative

expenses

■ FY2016 1H Result

■ FY2017 1H Result

Ordinary

Income

(Consolidated)

Breakdown by segment

+136M

+15.0%

-4M

-1.1%

-2M

-2.1%

+151M

–

-9M

–

Profit growth achieved through increased earnings in the Energy Business

• A decrease in expenses after the end of

subsidized projects +56M

• A decrease in expenses due to the selection and

concentration of projects +94M

Factors contributing to

improvement

Year-on-Year Changes in Ordinary Income by Segment 4

-300

-200

-100

100

200

300

400

118

255

337 333

117 115

-220

-68

-116 -125

657 712 717

2,172 2,233 2,321

0

300

600

900

0

1,000

2,000

15/12期

実績

16/12期

実績

17/12期

計画

経常利益売上高 (Millions of yen)

[(1) Design Consulting Business]

• Core segment since business establishment

(new houses and plumbing)

• Rich experience of serving major housing

companies

• Contracts for approx. 100,000 projects/year

(14% market share)

• Expanding business into the energy and

construction design market

236 248 235

802 843 845

0

200

400

600

0

400

800

1,200

15/12期

実績

16/12期

実績

17/12期

計画

経常利益売上高

-582

-323-165

157 194 239

-600

-300

0

300

600

-600

-300

0

300

600

15/12期

実績

16/12期

実績

17/12期

計画

経常利益売上高

(Millions of yen)

(Millions of yen)

[(2) Customer Support (CS) Business]

• Steady growth as the second core segment

• Contracts for call center operation for existing

houses

• Customers in approx. one million households

under management

• Growing demand for maintenance due to

housing enhancement

[(3) Smart Energy Business]

• Developing as the third core segment

• Creation of new market based on electricity

deregulation

• Business experience built through “Determineed

prior investment”

• Future focus on energy-saving home improvement

business

EPCO Group: Businesses 5

FY2015

Result

FY2016

Result

FY2017

Forecast

Net Sales Ordinary

Income

Net Sales Ordinary

Income

Net Sales Ordinary

Income

FY2015

Result

FY2016

Result

FY2017

Forecast

FY2015

Result

FY2016

Result

FY2017

Forecast

EPCO

Platform Company Corporate Smart Energy Company

Combined with TEPCO

HomeTech (EPCO’s equity-

method company) and dissolved

for future development

[Before reorganization]

In-house company system

Design

Businesses CS Business

EPCO

Platform Business Division Corporate Division

[After reorganization]

Function-based organization

Sales Management

Division

Design

Division

CS

Division

Information System

Division

Reorganized the Company to implement the medium-term business plan

New Organization of the EPCO Group (as of July 1, 2017) 6

50%

48%

50%

48%

0% 25% 50% 75% 100%

当期純利益

経常利益

営業利益

売上高 16.5億円 34.1億円

5.3億円

5.3億円

3.4億円

2.6億円

2.6億円

1.7億円

(Millions of yen)

Aiming to achieve results exceeding the full-year forecasts by further improving

performance during the second half of the fiscal year.

Full-Year Financial Forecasts and Business Progress in the First Half of FY2017 7

YoY Change

Up 4.2%

YoY Change

Up 470.8%

YoY Change

Up 31.8%

YoY Change

Up 11.6%

Net Sales

Operating

Income

Ordinary

Income

Net Income

3.41 billion yen

0.53 billion yen

0.53 billion yen

0.34 billion yen

1.65 billion yen

0.26 billion yen

0.26 billion yen

0.17 billion yen

48%

50%

50%

48%

0% 25% 50% 75% 100%

EPCO Group: Medium-Term Business Plan

(2017 – 2021)

8

Background of

Development

1. Changes in the external environment (declining birthrate, aging population, and

global warming) provide opportunities to create new markets

2.“Determined prior investment” in response to the above changes is gradually paying off.

Market Environment

1. The home improvement market is expected to grow from 7 trillion yen to 12

trillion yen (*2025 target)

2. Higher energy efficiency of houses and lower carbon emissions will increase

(see p.15)

Sales Strategy

EPCO + TEPCO HomeTech

Aim for infrastructure-like business growth through the

synergy of the two companies

Forecasts

[Targets for FY2021]

Ordinary income: 2,150 million yen (CAGR: 39.9%)

Net income per share: 388.24 yen (CAGR: 41.2%)

Business Vision

[EPCO]

Aims to be an infrastructure developer that supports people’s lifestyles from home design

to after-sales maintenance

[TEPCO HomeTech]

Provides total household energy-saving services with the aim of making all homes

energy-efficient

* Taken from the result indicators in the Basic Plans for Housing for People (National Plan) dated March 18, 2016 announced by the Ministry of Land,

Infrastructure Transport, and Tourism (MLIT).

Overview of Medium-Term Business Plan 9

1 and 2:

Decrease in new houses constructed

1 and 2:

Difficulty retaining human resources

4: Increased cost of design

Positive Factors Negative Factors

Impact on

Business

Basic Policy

for the

Medium-Term

Business Plan

External

Environment

1. Declining birthrate and 2. aging population promotion of work style reforms

3. Global warming promotion of energy saving and renewable energy

4. China’s growth into a developed country continuous increase in wages

1 and 2: Growing demand for BPO

2: Growth of home improvement market

3: Increased energy efficiency of homes

• Design Consulting Business BPO design service for housing and energy saving

• Customer Support Business call center service for housing and energy saving

• Increased labor productivity design using AI, greater efficiency of CS operation

Basic Policy for the Medium-Term Business Plan 10

Call center service for energy saving

Housing design (ZEH, structure, and

marketing)

Housing maintenance service (existing)

Housing Solution Market Targeted by the EPCO Group

Synergy of various services

Housing

companies

Housing

companies

Customer Service

[BPO design service] Market:

new houses

Growth factor:

labor shortage

[Call center service] Market: existing houses

Growth factor:

increase in home improvement

[TEPCO HomeTech] Market:

new and existing houses

Growth factor:

household energy saving

Equipment design (existing)

Aim for infrastructure-like business growth through the three core businesses

[BPO design for housing and energy saving]

[Call center for housing and energy saving]

[TEPCO HomeTech]

Energy-saving design (PV, EV, and storage

batteries)

TEPCO

HomeTech

TEPCO

HomeTech

Housing

companies

End users Energy-saving equipment installation

(existing and new houses)

Markets Targeted by the EPCO Group 11

Fiscal Year

Item Results for FY2016

(Jan. 2016 – Dec.

2016)

Forecasts for

FY2017

(Jan. 2017 – Dec.

2017)

Targets for FY2021

(Jan. 2021 – Dec.

2021)

Avg. Yearly

Growth

Rate

Contribution to Profit

Net Sales 3,270 3,406 5,500 +11.0% EPCO

(Design and CS

Businesses) Operating Income 92 527 1,200 +67.1%

Ordinary Income 401 529 2,150 +39.9% TEPCO HomeTech

Operating Income Margin 2.8% 15.5% 21.8% ‒

Ordinary Income Margin 12.3% 15.5% 39.1% ‒

Profit Attributable to

Owners of Parent 308 344 1,730 +41.2%

Net Income per Share 69.14 yen 77.21 yen 388.24 yen +41.2%

[Sales]

1. Design Consulting Business: increase of 600 million yen in BPO design for housing and energy saving (ZEH, structure, marketing

design, etc.)

2. Customer Support Business: increase of 1,700 million yen in call center for housing and energy saving (maintenance, outbound

marketing, etc.)

[Ordinary income]

1. Increase of 950 million yen thanks to the contribution of TEPCO HomeTech to profit (EPCO’s equity method company)

2. Increase of 2% in operating margin thanks to the contribution of higher operation efficiency through the use of AI

Medium-Term Business Plan: Key Points of Quantitative Targets

Medium-Term Business Plan: Quantitative Targets 12

BPO Design Service for Housing and Energy Saving

Call Center Service for Housing and Energy Saving

Sales Forecast Results for

FY2016

Forecasts for

2021 Change

Equipment design (existing and new houses) 1,828 1,650 - 178

Housing design (ZEH, structure, and marketing) 265 750 +485

Energy-saving design (PV, EV, and storage batteries) 140 500 +360

Total sales 2,233 2,900 +667

(Millions of yen)

Sales Forecast Results for

FY2016

Forecasts for

2021 Change

Housing maintenance (existing and new houses) 714 1,700 +986

Energy saving, inbound and outbound 65 700 +635

Cloud service for energy-saving systems 64 200 +136

Total sales 843 2,600 +1,757

(Millions of yen)

Medium-Term Business Plan: Breakdown of Quantitative Targets 13

© TEPCO HomeTech, Inc. All Rights Reserved.

TEPCO HomeTech, Inc.

Company Profile

August 9, 2017


14

TEPCO Group



Government Policy for Household Energy Saving and low Carbonization 15

Environment of

Electrical Power

Market

Low carbonization of

houses

(New Houses)

Promotion of Home

Improvement Market

(Existing Houses)

Next-generation

Vehicle

2017: Deregulation of gas retailing

2019: Feed-in tariff (FIT) of houses begins to expire

2020: Separation of electrical power production from power distribution

and transmission

Aim to build “net-zero-energy houses (ZEH)” as standard new houses by

2020 and as average new houses by 2030. *1

Support insulation repairs using high-performance windows, heat

insulators, etc. and upgrade to high-efficiency water heaters, etc. to

drastically increase energy-saving home improvement. *2

Aim to increase the percentage of next-generation vehicles among the

number of new vehicles sold to 50%-70% by 2030. ※1

*1: Extracted from the Basic Energy Plan (Cabinet resolution on April 11, 2014)

*2: Extracted from Japan Revitalization Strategy 2016 (Cabinet resolution on June 2, 2016)


Strengths of TEPCO and EPCO

Total Household Energy-Saving Service Using the Strengths of Both Companies

16

Data on power usage of customers in

approx. 20 million households

Knowledge and technologies for

energy saving

Products such as electrical power and

gas charge system

Expertise in housing equipment design

from the housing equipment design of

more than one million households

Function of after-sales

house maintenance

Development capability for housing

and energy-related systems

Reliability and brand for

stable power supply

Nationwide networks with

equipment installation contractors and

material distributers


Company Profile

Company Name TEPCO HomeTech, Inc.

Origin of

Company Name

Named TEPCO HomeTech due to being an engineering company of

TEPCO and EPCO

Business

Philosophy

● Contributes to people’s homes and lifestyles

● Contributes to the environment

● Contributes to people

● Contributes to Fukushima

● Contributes to Japan

Date of

Establishment August 9, 2017

Location 12th Floor, Olinas Tower, 4-1-3 Taihei, Sumida-ku, Tokyo

Representative Yoshiyuki Iwasaki, President

Capital 250 million yen (total capital contribution of 500 million yen)

Capital Contribution

Ratio

TEPCO Energy Partner, Inc.: 51%

EPCO Co., Ltd.: 49%

17


Offense-Defense Hybrid Business Model of TEPCO EP and TEPCO HomeTech

Gradually expanding the business into the energy solution market in view of the

development of an energy-efficient society

TEPCO EP’s power retail and TEPCO HomeTech’s energy-saving business

establish an offense-defense hybrid business model.

Expand revenue base other than power retail

Maintain power supply contracts

Develop the success model in the Kanto region horizontally throughout

Japan (overseas markets)

18

TEPCO Energy Partner (TEPCO EP) TEPCO HomeTech

Energy Retail Energy Saving

Energy Generation Energy Storage

EV

Homes

Me

ters

Electrical

Power


Markets Targeted by TEPCO HomeTech

Energy Solution Market Targeted by TEPCO HomeTech

IoT Smart Home Service

ESCO service for houses

ZEH facility installation (new houses)

Energy retail (gas and electricity)

Extracted from information provided by ZEH Roadmap. Examination Committee,

the Ministry of Economy, Trade and Industry

Concept of Zero-energy House (ZEH)

Ind

ivid

ua

l

ho

me

ow

ners

C

on

do

min

ium

s

Ka

nto

regio

n

Th

rou

gh

out

Ja

pa

n

Customers Service

Ove

rsea

s

Energy-saving equipment installation (all-electric housing, EV)

Energy generator installation (solar power panels)

Energy storage installation (storage batteries)

19

Solar power generation

Solar radiation shield

Planting

HEMS

Storage battery system

Highly heat insulating window

High-efficiency lighting equipment (LED, etc.)

High-efficiency air-conditioning

equipment Energy-saving ventilation equipment

High-efficiency water heater

High heat- insulation cover

Summer

Winter

Heat

Cool breeze

Discharge


Total Energy-saving Services Provided by TEPCO HomeTech

One-stop Services from Proposals, Design, Installation or Construction,

to the Guarantee of Energy-saving Effects

Energy-saving

Inspection

Energy-saving

Proposal

Energy-saving Equipment Installation

Payment Plan Proposal

Reliable Warranty

TEPCO HomeTech’s energy-saving

planners visit customers’ homes and

perform energy-saving inspections

Suggests optimal energy-saving

equipment

Reliable installation by TEPCO HomeTech Offers money-saving plans

Offers new warranty services such as

energy-saving warranty and

maintenance

20


Framework of Total Energy-saving Services 21

Power supply

contracts

Approx. 20 million

households TEPCO EP

TEPCO HomeTech

1. Marketing

2. Energy-saving diagnosis

5. Power and gas supply

contracts

3.

Installation

contracts

4.

Energy-saving

equipment

installation

2. Energy-saving diagnosis

4. Energy-saving equipment

installation

TEPCO EP, TEPCO HomeTech, and partners build an operation network and provide

total energy-saving services to customers in each household that is likely to be capable of

increasing its energy efficiency.

Direct-selling Model

Skilled employees

Equipment installation

contractors

Partnership model

Home improvement

providers

etc.


Business Plan 22

Forecasts for Sales and Orders Received

* Estimation conditions: • estimated the amount of energy reduced by replacing a total of 65,000 LP gas (conventional gas) water heaters of general households (as of 2021) with energy-saving appliances (Eco Cute and IH Cooking

Heater), • used TEPCO EP's estimation tools for annual consumption, • estimated the annual consumption of households using LP gas (conventional gas) water heaters to be 85,054 MJ and the annual consumption of all-electric

households (using Eco Cute water heaters) to be 77,406 MJ, and • estimated the energy consumption of general households to be 45,349 MJ (source: 2011 Commercial and Residential Sector Energy Data Survey, Ministry of

Economy, Trade and Industry)

Energy-saving Effect

0

1

2

3

4

5

6

7

0

100

200

300

400

500

600

700

2017 2018 2019 2020 2021

Orders received

Sales

100 millions of yen In 10,000 orders

Fiscal

Year

Cumulative total of approx. 130,000 orders

by FY2021

Approx.

50 billion yen

Yearly energy-saving effect as of 2021 (providing

customers with energy-saving services for a cumulative

total of approx. 130,000 orders)

Reduces energy consumption

equivalent to the consumption of

11,000 households*


Aspiring to save energy in all homes

23

TEPCO Group


24

Caution

The forward-looking statements in this document, including forecasts, are based on information that the Company has obtained and certain assumptions that the Company considers reasonable. Actual results may differ significantly due to a number of factors. The Company does not guarantee their certainty.

FY2017 1H Consolidated Financial Results...1. Overview of First Half and Full-Year Business...

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