Kyushu Electric Power Incorporated : Corporate Governance Report

TRANSLATION

This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail .

Corporate Governance Report

Last Update: January 4, 2022

Kyushu Electric Power Co., Inc.

Representative: Kazuhiro Ikebe, President & Chief Executive Officer

Contact: Corporate Legal Affairs Group, District Symbiosis Division. Tel: +81-92-761-3031 Securities Code: 9508 https://www.kyuden.co.jp/

The corporate governance of Kyushu Electric Power Co., Inc. (the "Company") is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and

Other Basic Information

1. Basic Views

The Company aims to generate sustainable value for all stakeholders in keeping with the Kyuden Group's Mission by engaging in operations that are socially meaningful from a long-term perspective. The Company strives to develop and strengthen the corporate governance system, as its top management priority, to ensure that the Company conducts its business activities appropriately.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code]

The Company complies with every principle (including details for the Prime Market) based on Japan's Corporate Governance Code revised in June 2021.

[Disclosure Based on the Principles of the Corporate Governance Code]

[Principle 1.4 Cross-Shareholdings]

• Policy regarding cross-shareholdings

With respect to individual cross-shareholdings, the Company has its Board of Directors confirm the significance of owning such holdings on an annual basis. This involves comprehensively taking into account the notion of how such holdings are relevant particularly in terms of ensuring stable procurement of funds, materials and equipment, contributing to regional development and other elements of business strategy, and achieving symbiosis with communities. It also involves assessing profitability, future prospects and other such considerations upon having taken into account cost of capital and other factors. The Company consequently maintains holdings of shares deemed as contributing to the Company's stable and ongoing business operations and shares held on the basis of underlying economic rationale, while striving to reduce holdings of shares whose grounds for ownership are deemed insignificant.

• Standards on exercise of voting rights of shares held as cross-shareholdings

When exercising voting rights, the Company decides whether to vote for or against individual proposals based on comprehensive factors from the perspective of increasing medium- to long-term value of the Company and enterprises whose shares the Company owns. When it comes to proposals that threaten to erode shareholder value in particular, the Company appropriately exercises its voting rights upon having gathered sufficient information from the enterprise whose shares the Company owns and upon having shared details on managerial risks and other such matters.

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(Reference)

As of the end of fiscal 2020, the Company maintains 134 equity holdings of unlisted shares valued at ¥64,682 million, among its holdings of investment shares held for purposes other than that of pure investment as stipulated by Cabinet Office Order on Disclosure of Corporate Affairs and other such matters. (With respect to shares other than unlisted shares, 28 equity holdings overall valued at ¥36,100 million have been contributed to retirement benefit trust, and accordingly constitute deemed shareholdings. On April 1, 2020, the Company concluded an agreement to modify the retirement benefit trust granting Kyushu Electric Power Transmission and Distribution Co., Inc. joint authority. Accordingly, the Company comprehensively administers and manages the retirement benefit trust, including holdings of Kyushu Electric Power Transmission and Distribution Co., Inc.)

The unlisted shareholdings include ¥52,957 million in shares of Japan Nuclear Fuel Limited, held for the purpose of contributing to the Company's stable and ongoing business operations. Japan Nuclear Fuel Limited plays an important role in Japan's nuclear fuel cycle particularly given that its reprocessing of spent fuel discharged by nuclear power stations is a necessary aspect of ensuring stable operations and energy consistency with respect to nuclear power stations. As such, the Company invests in Japan Nuclear Fuel Limited for the purpose of helping to ensure stability of its business operations.

[Principle 1.7 Related Party Transactions]

When a Director of the Company who concurrently serves in a position such as Representative Director of a subsidiary of the Company or other such entity (excluding a wholly owned subsidiary) acts as a counterparty to a transaction with the Company, details of potentially competing transactions and transactions entailing conflict of interest involving Directors are subject to prior approval of the Board of Directors, and results of such transactions are to be reported to the Board of Directors. In addition, the aforementioned procedures are applied to transactions with major shareholders, etc. who maintain substantial holdings amounting to at least one-tenth of the Company's total voting rights.

[Supplementary Principle 2.4.1 Ensuring Diversity of Human Resources]

• Policies for human resource development and internal environment development to ensure diversity, as

well as the status of their implementation

The Company aims to create an environment and workplace culture in which diverse human resources can maximize their individuality and abilities and work while experiencing growth and job satisfaction.

In order to achieve this, the Company has set forth the development of "professional human resources who promote diversity and have an open mindset" in our training policy, and the Company is developing comprehensive initiatives to secure diverse human resources and support their active participation.

Specifically, the Company has established a variety of programs including various training programs to support the career development of women; "open recruitment" to recruit human resources with experience at other companies; "KYUDEN i-PROJECT," a project that aims to create new services and foster entrepreneurial human resources through innovation; and a program for second work and internal side jobs for the purpose of acquiring knowledge through external work experience and creating value through collaboration of diverse human resources, thereby promoting active participation of human resources with diverse experience.

• Ensuring diversity in the promotion to core human resources

When promoting employees to managerial positions, the Company works to ensure diversity of core human resources by appointing diverse human resources from among those who have managerial capabilities, regardless of gender, nationality, hiring classification, etc.

[Women]

The Company has established an action plan with respect to the Act on the Promotion of Female Participation and Career Advancement in the Workplace, under which it aims to increase the number of newly promoted female managers and the number of appointments to organizational head posts in the five years from fiscal 2019 to fiscal 2023 to at least three times the numbers in the five years prior to the introduction of the action plan (fiscal 2009 to fiscal 2013) (54 new promotions and 21 appointments to organizational head posts). For reference, from fiscal 2019 to fiscal 2020, there have been 18 new promotions and 15 appointments to organizational head posts.

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[Foreign nationals]

As an initiative related to the recruitment of foreign nationals, the Company is actively recruiting international exchange students (eight people from three countries hired since fiscal 2016). However, the Company has yet to appoint any of them to managerial positions because it has only been a few years since hiring them as new graduates. Although the Company has not set quantitative targets for the promotion of foreign nationals to managerial positions, they will be promoted according to their capabilities based on the professional grade qualification system, in the same manner as all other employees regardless of nationality.

[Mid-career hires]

Mid-career hires account for about 10% of hires every year, and since the introduction of the mid-career hiring system in 2008, the Company has hired 191 people and 43 have been promoted to managerial positions. Although the Company has not set quantitative targets for the promotion of mid-career hires to managerial positions, they are promoted according to their capabilities based on the professional grade qualification system, regardless of being new graduate hires or mid-career hires.

[Principle 2.6 Roles of Corporate Pension Funds as Asset Owners]

Accounting Department that handles functions of finance takes charge of managing corporate pension funds, and regularly reports matters such as operational status in that regard to the Board of Directors.

In terms of personnel affairs, the Company systematically assigns professionals equipped with practical financial knowledge, including those with experience in pension management or financial affairs.

In terms of management, the Company rigorously strives to manage corporate pension funds in a manner that is mindful of its fiduciary responsibilities and conflicts of interest as stipulated under basic policy for managing pension assets pursuant to laws and regulations relevant to Defined-Benefit Corporate Pension Act, etc. The Company strives to fulfill its functions serving as asset owner by checking on developments with respect to asset managers of corporate pension funds exercising voting rights and regularly monitoring such asset managers.

[Principle 3.1 Full Disclosure]

1. Company objectives (e.g., corporate philosophy), management strategies, and management plans
   In April 2007, the Company drew up Kyushu Electric Power's Mission "Enlighten Our Future," which serves as its brand message.
   In January 2018, the name was changed to Kyuden Group's Mission in order to embrace the Company's desire to serve its stakeholders with the entire Kyuden Group more integrated.
   Further details are disclosed on the Company's website. (Kyuden Group's Mission)

https://www.kyuden.co.jp/english_company_mission_index.html

In addition, "Kyuden Group Management Vision 2030," which was formulated in June 2019, and "Kyuden Group Carbon Neutral Vision 2050," which was released in April 2021, are also disclosed on the Company's website.

(Kyuden Group Management Vision 2030) https://www.kyuden.co.jp/english_company_news_2019_h190607b-1.html

(Kyuden Group Carbon Neutral Vision 2050) https://www.kyuden.co.jp/english_company_news_2021_h210428c-1.html

1. Basic views and policies on corporate governance based on each of the principles of the Corporate Governance Code
   For the Company's basic views on corporate governance, please refer to "1. Basic Views, I. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information" of this report.
2. Policies and procedures implemented by the Board of Directors in determining the remuneration of senior management and Directors
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For the policies and procedures implemented by the Company's Board of Directors in determining the remuneration of senior management and Directors, please refer to "[Director Remuneration], 1. Organizational Composition and Operation, II. Business Management Organization and Other Corporate Governance Systems regarding Decision-making, Execution of Business, and Oversight in Management" of this report.

1. Policies and procedures implemented by the Board of Directors in the election/dismissal of senior management and the nomination of candidates for Director
   [Policies and procedures for selecting candidates for Director, etc.] ｏ Policies

Candidates for Inside Director, etc. are selected by comprehensively taking into account their personal character, insight, ethics, career background (extensive practical experience, knowledge, etc.), and capabilities (management capabilities that will contribute to achieving the sustainable growth of the Group and maximizing its corporate value over the medium to long term).

Candidates for Outside Director are selected from those who meet the decision criteria for the independence and have abundant experience and insight in corporate management and fields of specialization.

• Procedures

The Board of Directors decides on candidates for Director (including appointment of Senior Directors and Representative Directors) as well as Senior Executive Officers, subsequent to deliberations having been undertaken by the Personnel Advisory Committee chaired by an Outside Director and the majority of whose members are Outside Directors, assigned thereto for the purpose of heightening transparency and objectivity. The Audit and Supervisory Committee is to furnish prior consent with respect to candidates for Directors who are Audit and Supervisory Committee Members.

In addition, the Audit and Supervisory Committee Member takes part in meetings of the Personnel Advisory Committee as observer and confirm that deliberations of the Committee are carried out to ensure that the function of supervising the execution of duties of Directors is effectively executed.

[Policies and procedures for discharge and dismissal of Directors, etc.]

The Board of Directors decides matters with respect to discharge of Senior Directors and Representative Directors and matters with respect to dismissal of Senior Executive Officers, subsequent to deliberations having been undertaken by the Personnel Advisory Committee should circumstances arise that call eligibility into question.

1. Explanation with respect to the individual elections/dismissals of senior management and the nomination of candidates for Director by the Board of Directors based on iv) above
   The reasons for the nomination of each candidate for Director shall be disclosed individually in the Reference Documents for the General Meeting of Shareholders.
   (Notice of Convocation of the 97th Ordinary General Meeting of Shareholders) * In Japanese only http://www.kyuden.co.jp/var/rev0/0291/7550/h2qigi6l.pdf
   If the Board of Directors makes decisions with respect to discharge of Senior Directors and Representative Directors or dismissal of the President & Chief Executive Officer or other Executive Officers concurrently serving as Director, the reasons for each discharge and dismissal are to be publicly disclosed.

[Supplementary Principle 3.1.3 Initiatives on Sustainability]

• Promoting sustainability

In the "Kyuden Group Management Vision 2030," which was formulated and announced in June 2019, the Company has established three strategies for achieving its vision. Strategies I, II, and III correspond with the environment (E), society (S), and governance (G), respectively, and the Company promotes sustainability initiatives including ESG.

(Kyuden Group Management Vision 2030)

https://www.kyuden.co.jp/var/rev0/0206/9138/q947arem.pdf

Seeing the trend toward carbon neutrality as an opportunity for corporate growth, the Company formulated and announced the "Kyuden Group Carbon Neutral Vision 2050" in April 2021, which shows the direction of its initiatives to achieve carbon neutrality.

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Further, in order to greatly contribute to the realization of a carbon neutral society, the Kyuden Group has clarified its goals for 2050 and revised management targets (environmental goals) for 2030 upward, and formulated and published an action plan that includes concrete steps for achieving these goals.

(Kyuden Group Carbon Neutral Vision 2050) https://www.kyuden.co.jp/var/rev0/0288/8338/mtxb3aeq.pdf

(Kyuden Group Action Plan for Achieving Carbon Neutrality) * In Japanese only

http://www.kyuden.co.jp/var/rev0/0316/1198/g87ty23s.pdf

Also, in July, the Company established the Sustainability Promotion Committee (Chairperson: President,

Vice-chairperson: Director in charge of ESG, Committee members: Outside Directors, relevant officers, etc.) under the supervision of the Board of Directors to promote ESG initiatives, including carbon neutral, and it is formulating strategies and policies related to sustainability and monitoring the status of internal initiatives. In order to realize the above vision, the Company has summarized its important issues and disclosed in the Integrated Report its Value Creation Process, which shows the connections between its medium- to long-term strategies, input such as human and intellectual capital, and output through its business activities.

(Kyuden Group Integrated Report 2021) https://www.kyuden.co.jp/library/pdf/en/ir/integratedreport/2021/en_integratedreport_2021.pdf

• Investing in human capital and intellectual property

Based on management strategies and management issues toward the realization of "Kyuden Group Management Vision 2030," the Company formulated a management plan that shows the future allocation of management resources, including investments in human capital and intellectual property, and its business portfolio, which is disclosed in "Financial Targets to Achieve Kyuden Group Management Vision 2030 and Overview of FY2021 Medium-Term Management Plan."

(Financial Targets to Achieve Kyuden Group Management Vision 2030 and Overview of FY2021 Medium- Term Management Plan)

https://www.kyuden.co.jp/var/rev0/0288/8341/gm7yiv6z.pdf

The Company makes investments in human capital for the active participation of diverse human resources, workstyle reforms, and the creation of a workplace environment that prioritizes safety and health, in order to strengthen its management base.

To encourage active participation of diverse human resources, the Company is working to secure and develop human resources who can promote transformation of the energy service business and create new businesses through open recruitment for hiring human resources with experience at other companies and rank-based training such as the Management Leader School program for training executives. In addition, the Company is promoting diversity and creating a workplace culture that respects and accepts diverse opinions and values, leveraging them to produce results.

To advance workstyle reforms, the Company is carrying out operation reforms for improving efficiency and productivity through digital transformation and other means, and working on initiatives to enable flexible workstyles, such as improving work systems and implemented environments (satellite offices, etc.).

In order to create a workplace environment that prioritizes safety and health, the Company is conducting safety training that incorporates virtual reality (VR) for fostering safety awareness, and practicing health and productivity management that leads to the maintenance and promotion of employee health.

With regard to investments in intellectual property, the Company is promoting technological development to realize the "Kyuden Group Management Vision 2030," and the Company holds 178 patents in Japan and 70 patents overseas.

As a technology development policy, the Company is promoting both the strengthening of the business foundation in existing business domains and the expansion of profits in growing business domains, and the Company is also actively taking on the challenge of developing advanced technologies that support sustainable growth. In addition, specific technology development initiatives that contribute to the promotion of low carbon, decarbonization and electrification, such as the development of new biomass mixed fuel, distributed energy integrated management systems, and large-capacity chargers/dischargers for electric buses, are disclosed in the Research Institute Annual Report published annually.

(Research Institute Annual Report 2020) * In Japanese only http://www.kyuden.co.jp/var/rev0/0288/9438/wdo1n3z2.pdf

• Addressing climate change

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