Tohoku Electric Power : Financial Results for the Third Quarter of Fiscal 2016

TOHOKU ELECTRIC POWER CO., INC.

January 31, 2017

Tohoku Electric Power Co., Inc. (the "Company") today submitted a summary of its financial statements for the third quarter (from April 1, 2016 to December 31, 2016) on the Tokyo Stock Exchange.

【Consolidated financial results】

In terms of revenue, consolidated operating revenue decreased to ¥1,401.7 billion (a year-on-year decrease of ¥120.4 billion, or a 7.9% decrease), and ordinary revenue to ¥1,405.1 billion (a year-on-year decrease of ¥125.2 billion, or an 8.2% decrease), mainly due to a decline in revenue from electricity sales because of decreases in the volume of electricity sales and fuel cost adjustment charges, despite an increase in the grant under Act on Purchase of Renewable Energy Sourced Electricity*.

With respect to expenses, despite an increase in retirement benefit expenses due to a decrease in discount rate for actuarial calculation, consolidated ordinary expenses decreased to ¥1,323.0 billion (a year-on-year decrease of ¥89.4 billion, or a 6.3% decrease), thanks to a decrease in fuel costs because of a fall in fuel prices and appreciation of yen as well as our thorough streamlining efforts.

As a result, consolidated ordinary income was ¥82.1 billion, a decrease of ¥35.7 billion (or a 30.3% decrease) year-on-year.

Net income attributable to owners of parent was ¥53.3 billion, a decrease of ¥25.7 billion (or a 32.6% decrease) year-on-year.

* The grant is based on "Feed-In-Tariff scheme for renewable energy". It is offset by purchase costs of renewable energy; therefore its effect on our income is immaterial.

【Electric power sold by Tohoku EPCO】

A decrease in contract demand surpassed increases in cooling and heating demand caused by the hot days in the latter half of summer and cold days in winter. As a result, the electricity sales were down to 53.3TWh, a 0.7% decrease year-on-year.

【Financial forecast for fiscal 2016】

Concerning the financial forecast for FY2016, the Company revised the previous forecast disclosed on

October 27, 2016, taking into consideration the recent outlook of supply and demand.

Consolidated ordinary income is expected to be approximately ¥105.0 billion, a 5.0% increase compared to the previous forecast. The Company expects the cost reduction by thorough streamlining efforts will surpass the expected fuel cost increase caused by a weak yen trend and a rise in crude oil CIF price.

Net income attributable to owners of parent is expected to be approximately ¥70.0 billion, a 4.5% increase compared to the previous forecast.

Consolidated (Billions of yen)

Non-consolidated (Billions of yen)

【Dividends】

Our basic dividend policy is to distribute stable dividends, taking into consideration the Company's business performance of the relevant fiscal year and the medium- to long-term financial prospects.

While the situation for resumption of our nuclear power units remains unclear, the Company is facing business landscape transformations: severe competition caused by ongoing Electricity System Reform and weak growth in power demand. It is prerequisite for the Company to build solid business foundation to grow not to mention to be prepared for existing business risks such as natural disasters.

In spite of such operating environment, the Company is expecting to secure certain level of profits for this period, resulting from our continuous thorough streamlining efforts. The profit level is expected to be lower than that of the last year, because last year, the Company had gained significant benefit from the time lag effect between fuel cost and fuel cost adjustment charges. Tohoku EPCO Group will continue to take firm steps to strengthen our earnings base under our new formulated "Tohoku EPCO Group Mid-Term Management Policies (FY2017 to FY2020)."

Comprehensively deliberating the facts described above, the Company has decided to pay the year-end dividend of 20 yen per share for FY2016.

Additionally, please note that the year-end dividend will be officially determined and implemented subject to the approval of the 93rd General Shareholders' Meeting scheduled to be held in June 2017.

【Additional Information】

On October 1, 2016, the "Act for Partial Revision of the Spent Nuclear Fuel Reprocessing Implementation Act" and the "Ordinance for Partial Revision of the Ordinance on Accounting at Electricity Utility and Other Provisions" were enforced, and along with them the Accounting Rules of Electric Utility Industry were revised.

The Company, before the enforcement of the act, had reserved the expenses necessary for spent fuel reprocessing, which were figured in accordance with the volume of spent fuel generated from operation of its nuclear power stations. After the enforcement, the Company pays an amount corresponding to the volume of spent fuel generated from operation of its nuclear power stations to the Nuclear Reprocessing Organization of Japan as a contribution, and records it as electric utility operating expenses. Through the contribution payment, the Company fulfills its responsibilities to bear the expenses as a nuclear operator. On the other hand, in proportion to the contributions received, the Organization reprocesses the irradiated nuclear fuel.

According to these revisions, in the third quarter of FY2016, the Company reversed 63,131 million yen of reserve fund for reprocessing of irradiated nuclear fuel, 68,667 million yen of provision for reprocessing of irradiated nuclear fuel, and 15,518 million yen of provision for preparation of reprocessing of irradiated nuclear fuel. The Company also posted current portion of non-current liabilities of 15,553 million yen, other non-current liabilities of 4,155 million yen and other current liabilities of 1,345 million yen.