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 liquefied natural gas (LNG) purchased by Shizuoka Gas is imported from other countries. The gas supply of the Shizuoka Gas Group could be affected negatively by the occurrence of raw materials procurement contingencies, including issues at the LNG import sources or LNG carrier operational difficulties.

The operating results of the Shizuoka Gas Group could be affected negatively if the facilities of the Group and/or its customers suffer large-scale damage as the result of an earthquake, typhoon, or other natural disaster.

The gas supply of the Shizuoka Gas Group could be affected negatively, and the Group could suffer related damages and the obligation to compensate society at large, if difficulties occur in the manufacture of city gas by Shimizu LNG Company Ltd., a consolidated subsidiary. Any leaks, explosions, or other large-scale accidents in connection with the supply of city gas by the Shizuoka Gas Group could likewise result in the negative impact on gas supply, related damages, or obligation to compensate society at large.

Shizuoka Gas must obtain new LNG in response to increases in the demand for gas and LNG. The Group procures LNG using short- and long-term contracts, as well as spot purchases. Operating results could be affected negatively if the price of LNG procured differs from the raw material prices used when setting gas rates.

Gas rates are set based on the gas rate adjustment system, a system for revising gas rates in response to changes in raw materials prices. LNG and LPG (raw materials) prices have an impact on gas rate decisions made under the gas rate adjustment. While LNG and LPG prices are affected by changes in the price of crude oil and fluctuations in exchange rates, these changes are offset and limited by the ability to reflect changes in raw materials prices in gas rates under the gas rate adjustment system. However, changes in raw materials prices could affect operating results if raw materials price changes are reflected in gas rates for a subsequent accounting period due to the time lag between changes in prices and gas rates.

Shizuoka Gas gas sales volume could decline due to factors that include cutbacks in operations by large-lot customers in response to business conditions and/or energy conservation activities. In addition, gas rates for large-lot customers could be subject to competition with other gas suppliers, since rates are determined according to separate negotiations. Consequently, Shizuoka Gas gas sales volume and gas sales could be affected negatively by trends at large-lot customers.

The operating results of the Shizuoka Gas Group could be affected negatively due to fluctuations in sales of gas, the main business of the Shizuoka Gas Group. Sales could be affected by warm weather and/or changes in water temperatures. Moreover, the earnings of the Shizuoka Gas Group tend to concentrate in the first half of the fiscal year, since gas sales volume and sales tend to increase in the winter and decline in the summer.

The operating results of the Shizuoka Gas Group could be affected negatively by growing competition From alternative energy providers, including electric power companies, and increasingly severe competition from new entrants into the gas business.

The operating results of the Shizuoka Gas Group could be affected negatively by changes in interest rates when the Company seeks new financing. However, the Shizuoka Gas Group limits the impact of interest rate fluctuations through the use of fixed interest rates for long-term debt (which accounts for a large share of Shizuoka Gas Group interest-bearing debt) and interest swap transactions used to hedge interest volatility risk.

The operating results of the Shizuoka Gas Group could be affected negatively by the Group’s response to information leakage, as well as the loss of trust in the Group, in the event that customer personal information managed by the Shizuoka Gas Group is leaked.

The operating results of the Shizuoka Gas Group could be affected negatively if core IT systems related to gas manufacturing and supply, customer service, and/or rates experience problems caused by a disruption or malfunction in operations.