Chubu Electric Power Incorporate : Conclusion of Basic Agreement on Integration of Existing Thermal Power Generation Businesses~Aiming to Build a New Business Model in Response toChanges in the Business Environment~

TEPCO Fuel & Power, Inc. ('TEPCO Fuel & Power'), a 100% subsidiary of Tokyo Electric Power Company Holdings, Inc. ('TEPCO Holdings'), and Chubu Electric Power Co., Inc. ('Chubu Electric') today concluded a basic agreement with the aim of integrating their fuel receipt/storage and gas transportation businesses, and existing thermal power generation business ('the integration') into JERA Co., Inc. ('JERA'), in relation to their comprehensive alliance covering the fuel and thermal power generation business ('the alliance').
Based on a relationship that has an equal and complementary spirit, TEPCO Holdings, TEPCO Fuel & Power and Chubu Electric will engage in detailed study in the lead-up to the integration, and aim to conclude a joint-venture agreement concerning the integration in the first half of FY 2017. The TEPCO Group is also fully committed to the revitalization of Fukushima through the integration.

1. Background to and Purpose of Business Integration

Since JERA's establishment in April 2015, TEPCO Fuel & Power and Chubu Electric have gradually integrated operations covering the entire supply chain, from fuel upstream/procurement through to power generation. Leveraging economies of scale to further develop business, integration effects are being realized in each business domain.

In addition to facing sluggish growth in domestic energy demand and growth of renewable energy use, the domestic energy market environment is expected to change dramatically with the creation of a new electricity transaction market and further liberalization of electricity retailing. Together with responding flexibly to changes in the business environment such as these, TEPCO Fuel & Power and Chubu Electric have agreed to commence detailed discussions concerning the integration in order to maximize the effects of the alliance.

2. JERA's Vision

The integration will see the completion of a series of value chains, from fuel upstream/procurement through to power generation and electricity/gas wholesaling.

Its aim is not only to reorganize TEPCO Fuel & Power and Chubu Electric's respective domestic thermal power generation businesses - through the achievement of a synergistic effect with the already integrated fuel and overseas power generation/energy infrastructure businesses, each business area will see growth accelerated and the entire value chain will be optimized.

Such business development will enable JERA to grow into a global energy company that can compete on an equal footing with rivals in the international energy market. In addition to delivering a stable supply of globally competitive energy in the form of electricity and gas, etc., we aim to improve the corporate value of both the TEPCO and Chubu Electric Power groups.

3. Expected Integration Effects

Via a streamling of domestic thermal power plants operation and an integrated/strategic demolish and build approach to power plants, we plan to build an optimized energy portfolio that includes renewable energy. With active use of IoT technology and other external resources in addition to TEPCO Fuel & Power and Chubu Electric's know-how and business foundations, we will also establish a globally-competitive Operation & Maintenance ('O&M') services model. Through such efforts, we aim to improve the competitiveness of the domestic thermal power generation business and mitigate its environmental burden.

By applying the know-how cultivated through participation in the overseas energy trading business in a domestic business, we look to engage in market dealings to enhance profitability in addition to contributing to the future sound formation of the electricity transaction market in Japan.

Furthermore, we will actively participate in new business areas, such as expanding our gas wholesale and global O&M businesses.

From now, together with quantifying the integration effects while moving ahead with detailed investigations study, we will pursue measures to generate further integration effects.

In order for JERA to maintain an independent corporate culture and a strong, healthy management/financial structure to win the market reliability, and to ensure it has a management setup capable of self-sustained business operation and quick decision-making, TEPCO Holdings, TEPCO Fuel & Power and Chubu Electric will continue to support JERA's business activities and, through these, strive to fulfill their utilities responsibilities and enhance corporate value by achieving an economic and stable supply of energy.

【Future Schedule】

（Note）Subject to changes depending on future conditions.