Interim Evaluation of the Third Phase of the Restructure Plan and Review of Business Goals

March 30, 2004
Electric Power Development Co., Ltd.

Electric Power Development Co., Ltd. ("J-POWER") has, since fiscal 2001, been implementing a 5-year plan entitled "The Third Phase of the Restructure Plan" for the purpose of "organization-wide strengthening of competitiveness in the wholesale electricity supply business."

As the year ended March 31, 2004 represents the plan's midway point, we conducted an interim evaluation thereof, and reviewed our business goals based on the progress toward implementation of the plan.

1. Review of Group Management Framework

(1) Review of Organizations

The Third Phase of the Restructure Plan aims to (a) introduce the business department system, (b) streamline the headquarter organizations, and (c) reorganize the group companies, etc., the progress of each of which is as follows:

(a) Introduction of the Business Department System
Starting after April 2002, J-POWER introduced the Business Department System in order to promote more independent and expeditious business operations.

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• The 6 Business Departments (Hydropower & Power Network Department, Thermal Power Department, Nuclear Power Department, New Business Development Department, International Activities Department and Engineering Department) were established and the "Executive Officer Department Directors" having executive responsibilities were appointed.
• The regional organizations were restructured into 4 branches which are directly controlled by the Hydropower & Power Network Department, and 7 thermal power plants which are directly controlled by the Thermal Power Department.

(b) Streamlining of the Headquarter Organizations
In conjunction with the introduction of the Business Department System, by largely transferring functions such as budget management, public relations concerning sites and environments as well as procurement, from the Corporate Organization to each department, the administrative organizations have been streamlined

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• The Corporate Organization was reorganized into 6 Departments and 1 Center (formerly, 8 Departments and 2 Offices).

(c) Reorganization of Group Companies
In order to further strengthen our group-wide strategies for highly specialized activities and cost saving, 6 out of the 9 principal companies will be consolidated to 3 companies in April 2004. As the result, the number of the principal companies of our group will be 6.

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(see Attachment "Outline of Reorganization of Subsidiaries of J-POWER Group")

• Corresponding to J-POWER's Business Department System, 6 business companies will be consolidated into 3 companies: a " hydro-transportation and transformation business company (JPHYTEC Co., Ltd.)", a "thermal power business company (JPec Co., Ltd.)" and a "service company (JP Business Service Corporation)"
• The intermediate holding company which was managing the subsidiaries will be merged by absorption into J-POWER.

(2) Reduction in the Number of Directors

The Third Phase of the Restructure Plan foresees a reduction in the number of directors by 40% (from 20 directors to 12 directors), and as of June 2003, the number has already been reduced to 13.

2. Progress in Reduction of Costs and Improvement of Financial Position; Review of Practical Business Goals

(1) Dramatic Reduction of Employees and Costs

(a) Reduction of Employees
Our goal is to reduce the number of employees of the group from 8,000 in the year ended March 31, 2001 to 6,000 at the end of the year ending March 31, 2006.

As of the end of September 2003, the number of employees had already been reduced to 6,700 due to curtailment of new recruitment and expansion of incentives for early retirement. (For changes in the number of employees of the group, see Exhibit.)

(b) Reduction of Costs
J-POWER aims to reduce controllable costs by more than 20% by the end of the year ending March 31, 2006, and as of the midpoint of the year ended March 31, 2004, an approximately 10% reduction had been achieved mainly in labor costs and maintenance and repairs, etc.

(2) Improvement of Financial Position

In addition to accumulating profits through cost reduction, as the result of a capital increase through third party allocation, liquidation of commercial equipment, reduction of capital expenditure and interest-bearing debt, the consolidated return on equity improved up to 16.8% as of the end of December 2003, compared to 5.7% as of the end of fiscal 2000 (before commencement of the Third Phase of the Restructure Plan).

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• Capital Increase by Third Party Allocation:
  Capital increase of 163.7 billion yen in December 2003 (allocated to J-POWER Privatization Fund Co., Ltd.)
• Liquidation of Commercial Equipment:
  The headquarter building was securitized in the year ended March 31, 2002.
• Reduction of Capital Expenditure:
  Consolidated capital expenditure of 191.5 billion yen in the year ended March 31, 2001 was reduced to 53.4 billion yen in the year ended March 31, 2003.
• Reduction of Interest-Bearing Debt(*):
  Reduction from 2129.4 billion yen at the end of the year ended March 31, 2001 to 1895.7 billion yen at the end of the year ended March 31, 2003 (a decrease of 233.7 billion yen)

2-(2) Active Measures

• We have already commenced specific projects to improve the organization of our International Activities Department and Business Development Department, and while attempting to inject more human resources into these fields, we will start up a system of inn
• In addition, we will strengthen our business partnership strategy by promoting business in each domain through alliances.
• In order to expand new fields of business outside the wholesale electricity business, we have decided to invest capital selectively, and in combination with our overseas electric power business, we intend to realize a scale of investment of approximately

* The total amount of interest-bearing debt consists of consolidated BS bonds, long-term borrowings, fixed liabilities due within 1 year, short-term borrowings and commercial paper.

(3) Review of Practical Business Goals

Taking into consideration the fact that the results for the year ended March 31, 2004 were somewhat improved by, in addition to the progress of the aforesaid reduction in employees and costs, the steady development of new business both within and outside Japan, as well as the financial situation after the capital increase, J-POWER has reviewed its goals of "consolidated ordinary profit of 40 billion yen and consolidated return on equity of 20% in the year ending March 31, 2006" set forth in the year ended March 31, 2002, and revised the same to "consolidated ordinary income of 45 billion yen (three-year average from the year ending March 31, 2005 to the year ending March 31, 2007) and consolidated return on equity of 20% (as of the end of the year ending March 31, 2007).

End of announcement