Risks that might affect the operating results and financial position of the Shizuoka Gas Group are discussed below.
Forward-looking statements in the text are judgments made by the Company based on information available as of the end of the current consolidated fiscal year.

All of the LNG purchased by Shizuoka Gas is imported from other countries. There is a possibility the gas supply of the Shizuoka Gas Group will be negatively affected by the occurrence of raw materials procurement contingencies, including problems at the LNG import sources and LNG carrier operational difficulties.

There is a possibility the operating results of the Shizuoka Gas Group will be negatively affected if facilities of the Group and its customers suffer large-scale damage as the result of an earthquake, typhoon or other natural disaster.

There is a possibility the gas supply of the Shizuoka Gas Group will be negatively affected, and the Group will suffer losses as well as be responsible for compensatioｎ to society at large, if difficulties occur in the manufacture of city gas by Shimizu LNG Company Ltd., a consolidated subsidiary, or a leak, explosion or other large-scale accident occurs in conjunction with the supply of city gas by the Shizuoka Gas Group.

Shizuoka Gas must obtain new LNG in response to increases in the demand for gas and LNG, and procures LNG through the use of short and long-term contracts and spot purchases. There is a possibility operating results will be negatively affected if the price of LNG procured by Shizuoka Gas differs from the level of the raw material price used when setting gas rates because of these new procurement prices or changes in the pricing system for existing long-term contracts.

Gas rates are set based on the gas rate adjustment system, a system for revising gas rates in response to changes in the raw material price. When deciding gas rates based on the gas rate adjustment system, the prices of the LNG and LPG used as raw materials have an effect. Although the LNG price and LPG price are subject to changes in the price of crude oil and fluctuations in exchange rates, these effects are offset and limited because the changes in raw materials prices are reflected in gas rates, based on the gas rate adjustment system. However, changes in raw materials prices might affect operating results if raw materials price changes are reflected in gas rates for a different accounting period because of a time lag until the changes can be reflected in rates.

The gas sales volume of Shizuoka Gas might be reduced by factors such as cutbacks in facilities operations by large-lot customers because of business conditions and the development of energy conservation activities. In addition, there is a possibility that gas rates for large-lot customers will be subject to competition with other gas suppliers because the rates are decided through separate negotiations. Consequently there is a possibility the gas sales volume and gas sales of Shizuoka Gas will be negatively affected by trends at large-lot customers.

There is a possibility the operating results of the Shizuoka Gas Group will be negatively affected by gas sales, the main business of the Shizuoka Gas Group, because such sales are subject to warm weather and changes in water temperatures. Moreover, the earnings of the Shizuoka Gas Group tend to be concentrated in the first half of the year because gas sales volume and sales tend to increase in winter and decline during the summer.

There is a possibility the operating results of the Shizuoka Gas Group will be negatively affected by growing competition with alternative energy providers such as power utilities and increasingly severe competition with new entrants into the gas business.

There is a possibility the operating results of the Shizuoka Gas Group will be negatively affected by changes in interest rate circumstances when the Company seeks to obtain new financing. However, the effect on the Shizuoka Gas Group is limited through the use of fixed interest rates for long-term debt, which accounts for a relatively large percentage of the Shizuoka Gas Group’s interest-bearing liabilities, and by hedging interest volatility risk through the use of interest swap transactions.

There is a possibility operating results will be negatively affected by the Shizuoka Gas Group’s response, and a loss of trust in the Group, if customers’ personal information administered by the Shizuoka Gas Group is leaked outside the Group.

There is a possibility the operating results of the Shizuoka Gas Group will be negatively affected if core IT systems related to gas manufacturing and supply, customer service and rates experience problems such as a disruption or malfunction of operations.