ANNUAL REPORT 2007 - 東北電力 · ANNUAL REPORT 2007 Tohoku Electric Power Co., Inc. (Japan)...

For the year ended March 31, 2007

ANNUAL REPORT 2007

Tohoku Electric Power Co., Inc. (Japan)

Sendai Tanabata Tanabata is a festival where people make wishes to the stars. Originally this was done by decorating bamboo trees with five different colored “Threads of Wishes”, and later by hanging on bamboo small strips of colored paper on which they write their wishes for improvement in learning and craftwork skills. This festival is based on a legend about the stars Vega (Orihime) and Altair (Hikoboshi) that shine on opposite sides of the Milky Way. Orihime, the daughter of the celestial king, was a most skillful weaver and worked hard to weave cloth. The king made Orihime marry Hikoboshi who was a diligent cowherder. Orihime and Hikoboshi were so happily married that they often neglected their duties. The king got angry and sent them to the opposite sides of the Milky Way and allowed them to meet only once a year on July 7th. This romantic legend was combined with customs for star worship that even-tually led to the beginnings of the Tanabata Festival. It was in the Edo period that the Tanabata Festival spread among the common people. The Sendai Tanabata Festival began in the days of the feudal lord Date Masamune and grew in popularity over the years so that it has become one of the three major summer festivals in Tohoku. Taking place for three days on August 6th, 7th and 8th, the Sendai Tanabata Festival has a reputation as the most gorgeous and largest of all the Tanabata festivals held throughout Japan. Paper ornamental balls (kusudama) are very prominent among the graceful combinations of beautifully crafted creations made from washi (Japanese pa-per) that sway elegantly on bamboo poles. Modeled after dahlia flowering in the garden, the kusudama was first invented around 1946. As the highlight of Tanabata adornments, kusudama create a festive atmosphere along the streets together with fancy and colorful paper streamers.

AN

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Toh

oku

Electric Po

wer C

o., In

c. (Japan

)

1-7-1 Honcho, Aoba-ku, Sendai, Miyagi 980-8550, JapanTelephone: +81-(0)22-225-2111Facsimile: +81-(0)22-225-2550URL: http://www.tohoku-epco.co.jp

This report was printed in an eco-friendly manner, employing waterless printing and using soybean-oil-based ink.

アニュアルレポートh1h4 CMYK

Tohoku Electric Power Co., Inc., was established in 1951 and supplies electricity to approximately 7.7 million customers throughout the seven prefectures of the Tohoku region, upholding its business philosophy of prospering together with the regional community and creating new corporate value while efficiently operating facilities under an integrated structure of generation, transmission, and distribution.　　The Company’s electric power sales in FY 2006 amounted to 80,950 million kWh, equivalent to that of Belgium, ranking it fifth among the ten Japanese electric power companies.　　Tohoku Electric Power’s service territory covers the Tohoku region, which is an area of approximately 80,000 square kilometers ---roughly the size of Austria or South Carolina, U.S. --- and the largest of any of the service territories of the other electric power companies. The region has a population of about 12 million, or 10% of the national total, and a regional GDP of around $390 billion, which is more than twice that of Finland.　　Industrial features in the Tohoku region include a larger share of electrical machinery, newer

manufacturing plants and facilities, and more plant constructions when compared to other regions. These characteristics work as an industrial advantage for the region.　　The Company has firmly established itself on a base of trust with communities in the Tohoku region for more than half a century. Upon such a foundation, it strives each and every day to be the preferred choice for customers as a multi-energy services corporation.

Financial and Operating Highlights

Working Together with the Community

Higashi Niigata Power Plant

To Our Shareholders and Investors

Message from President Hiroaki Takahashi

Financial Section

Addendum -A Brief Backgrounder on Tohoku Region and Related Corporate Data-

Topics in FY2006Customer Consulting and Support Services

Profile

Hokkaido EPCo.

Tokyo EPCo.

Hokuriku EPCo.

Chugoku EPCo.

Kyushu EPCo.

Okinawa EPCo.

Shikoku EPCo.

Kansai EPCo.

Chubu EPCo.

Tokyo

Tohoku EPCo.

Sendai

Annual Report 2007

Annual Report 2007

Contents

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9

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45

Note: Regarding Forward-Looking StatementsThis Annual Report contains plans, strategies, estimates, and other forward-looking statements made by Tohoku Electric Power Co., Inc. These statements, except for historical facts, are based on assumptions derived from information available to the Company at the time of writing (June 28, 2007). Issuing statements forecasting matters, such as performance, involves an element of risk and uncertainty, and it is possible for the Company’s expectations to differ from the future reality. The reader is thus requested to refrain from depending solely upon the reliability of the forward-looking statements herein.

Medium Term Environmental Action Plan

1

Financial and Operating Highlights (Consolidated Basis)

Tohoku Electric Power Co., Inc. and Consolidated SubsidiariesYears ended March 31, 2007 and 2006

Annual Report 2007

Note: All dollar amounts in this annual report represent U.S. dollars translated from yen, for convenience only, at the rate of￥118.09=US$1.00, theapproximate rate of exchange on March 31, 2007. Billion is used in the American sense of one thousand million.

Electric Power Sales Operating Revenues

Net IncomeTotal Assets,Total Net Assetsand Equity Ratio

Total Assets

Total Net Assets

Equity Ratio

For the year

Millions of yenThousands ofU.S. dollars

2007 20072006

Operating revenues Operating income Net income

Per share of common stockNet income Total net assetsCash dividends

At year-endTotal assets Total net assets

¥1,728,296133,935

53,173

$14,635,4131,134,177

450,275

¥1,660,04599,84854,171

¥ 106.571,971.69

60.00

$ 0.90216.696

0.508

¥ 107.901,929.02

55.00

4,069,3311,032,681

34,459,5738,744,864

4,113,7751,009,206

Yen U.S. dollars2007 20072006

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・�・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・�

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・�

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・�・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・�・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・�

・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・�・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・�

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20072006200520042003

(billions of kWh)

20072006200520042003

(¥ billions)

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(¥ billions)

0

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20072006200520042003

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200720062005200420030

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In November 2006, the Japanese economy surpassed the Izanagi Boom (which lasted for 57 months from Jan. 1965 - Jul. 1970) as the longest period of economic expansion since the end of the Second World War and is now at a major turning point as it successfully overcomes deflation. Although there are growing concerns about the rapid rise in the prices of crude oil and other raw materials and the slowdown in the Chinese and American economies, consumer spending and capital investment is in an expanding cycle domestically so we expect this period of economic growth to continue. With the present economic upswing evident throughout the Japanese economy, the Tohoku region, in spite of its late start in economic recovery, is showing gradual signs of improvement, especially with the increase in production in the manufacturing industries as well as an increase in plant and equipment investments. In the electric power industry, there has been increasing public concern about safety and security issues in nuclear energy as well as greater demand for a stable supply of electric power. Other major changes include implementation of measures to resolve global environmental issues and the steep hikes in energy prices. Another issue of concern is the possible expansion of deregulation to residential customers. As we face new challenges in the business environment, we at Tohoku Electric Power plan to continue promoting stable procurement of energy while ensuring that safety is our top priority through taking appropriate measures to improve and maintain conditions at our facilities and respond in a timely and expeditious manner to natural disasters, thus fulfilling our corporate and social responsibilities.

Fundamental Goals of Management

Review of Operations

2

Management Philosophy: Prospering Together with the Community and Creating New Corporate Value

To Our Shareholders and Investors

(right) Keiichi Makuta, Chairman of the Board(left) Hiroaki Takahashi, President

VISION 2010 Change, Innovation, and Success

In FY 2006, electricity sales totaled 80,950 GWh, a 1.6% increase over the previous year and set a new record for our fourth consecutive year of growth. In spite of the record-breaking mild winter with a decrease in heating demand, the growth in all-electric housing sales and use by large-scale industrial customers, especially in the stable production and growth in the semiconductors and automotive parts industries, contributed to the increase in power sales.

Therefore, although there was a slight effect from the reduction in electricity rates in July 2006, consolidated sales reached ￥1,728.2 billion, an increase of 4.1% over the previous fiscal year. Although retirement payments and personnel expenditures decreased, the higher energy costs resulting from the steep rise in crude oil as well as the increase in purchased power raised overall expenditures.Nevertheless, consolidated operating income rose to ￥133.9 billion, an increase of 34.1% over the previous year.

With steady growth from the increase in all-electric housing sales and industrial demand, electricity sales are expected to reach approximately 82,500 GWh, an increase of 1.9% over FY 2006. However, with the reduction in electricity rates in July 2006 and decrease in revenue from power sold to other utilities, consolidated sales are expected to total ￥1,715 billion, a slight decrease of 0.8% over the previous year. At the same time, even with the increase in repair and maintenance expenses to ensure a safe and reliable electrical supply, consolidated operating expenses are expected to decrease over the previous year because of the lower fuel expenses for thermal power resulting from a higher nuclear power capacity ratio. Therefore, consolidated operating income is expected to rise to ￥140 billion, an increase of 4.5% over FY 2006.

Performance Outlook

In the Medium-Term Business Plan for FY 2007, the Corporate Group will unite in its efforts to provide a safe, stable and efficient electric supply. We have established two management goals based on the following strategies:1) With safety as our first priority, allocation and 　　�　 adjustment of management resources in a flexible　 and expeditious manner will be necessary to ensure 　 a stable power supply and successfully compete with 　 other power producers and suppliers.2) Total commitment by the Corporate Group will be 　 �　 essential to achieve our goals. Our consolidated financial goals are to achieve 4% for ROA (return on assets) as a measure of profitability and an equity ratio of higher than 30% to express 　 financial health. We have continued to adhere firmly to a policy of stable dividend payments to our shareholders and plan to avoid a reduction in dividends on the basis of a single year’s decline in revenues. Conditions that determine whether the dividend rate will be raised include the smooth operation of cost-effective nuclear power plants to achieve a high nuclear capacity ratio, modest or no reduction in electricity rates, and “cost-manageable” environmental policies.

After reviewing these conditions for FY 2006, the dividend rate for end-of-year payment was set at ￥30 per share and when added to the interim dividend, increased by ￥5 over the previous year for a total of ￥60 per share.

Management Goals and Dividend Policy

3

Annual Report 2007

Keiichi Makuta

Hiroaki Takahashi

1.0

2.0

3.0

4.0

5.0

6.0

7.0

(%)

201120052004 200620032002200120001999

Return on Assets (ROA) (consolidated)

4% (target)

30% and above (target)

6.2

16.6

18.9 20.021.3

22.6

5.5

4.8 4.74.3

4.0

2.4

3.3

(FY)

(FY)15

20

25

30

40

201120052004 200620032002200120001999

Equity Ratio (consolidated)(%)

Consolidated net income was ￥53.1 billion, a decrease of 1.8% over the previous year due to the decrease in retirement benefit obligation recorded as extraordinary gain.

Tohoku Denryoku Big Swan Stadium(Niigata city）�

23.4 24.2

18.0

To maintain continuity in business development, the FY 2007 Medium-Term Business Plan has been altered from the previous three-year plan to a five-year plan so that it will cover the period from FY 2007 to FY 2011.

1. Medium-Term 　　Business Plan

On the basic premise that businesses can exist and prosper only in a relationship of trust, we are striving to become “Tohoku EPCO Group: Corporate Group that has gained the trust of society” by focusing on measures to provide a stable supply of electricity with procurement of safety as our highest priority. As an active member of society, we are totally committed to fulfilling our “corporate social responsibility” (CSR). Specific actions include implementing a thorough system of quality control at nuclear power plants as well taking appropriate measures to improve and maintain conditions at our facilities and responding quickly to natural disasters. We plan to promote the principles of “cooperation with the community to support revitalization of the local communities,”“commitment to corporate ethics and compliance” and “commitment to protection of the global environment” in accordance with our CSR policies.

TRUST

4

CORPORATE Group’s GOALS


FY 2007 MEDIUM-TERM BUSINESS PLAN

From Society’s Perspective: TRUSTFrom the Customer’s Perspective: QUALITY and AFFORDABILITYFrom the Corporate Group’s Perspective: PROFESSIONALISM

5

Annual Report 2007

Medium-Term Business Plan

To become “Tohoku EPCO Group: a company that provides quality and affordability to customers,” we need to respond to the increasingly diverse needs of our customers by strengthening our competitiveness. We will strive to provide optimum energy services at affordable rates through attractive cost-efficient products and services that meet our customers’ diverse needs. Also, we will endeavor to utilize the entire Group’s resources and technology to the fullest degree and work in a united effort so that our customers will choose us as their first choice of energy provider.

QUALITY and AFFORDABILITY

Together with the goals of becoming “a Corporate Group trusted by society”and “a company that provides quality and affordability to our customers,” we need to be “true professionals offering the ultimate in energy services.” To achieve this goal, all of us at Tohoku EPCO Group must take pride in our jobs so that we can provide the highest quality of service. We need to enhance management and training of personnel, pass on the knowledge and technical skills gained from our past experience and improve on them, and encourage frank and open dialogue among our employees.

PROFESSIONALISM

Group Management Principles : [Prospering Together with the Community] [Creating New Corporate Value]

Corporate Group’s Goals Financial Goals (Consolidated)

Major Policies

From Society’s Perspective: TRUST From the Customer’s Perspective:QUALITY and AFFORDABILITYFrom the Corporate Group’s Perspective: PROFESSIONALISM

3. To provide quality service as professionals

① Each employee shall have pride and confidence in their job and work in a responsible manner toward improving the quality of service

② The Company shall create a climate of active and open communication among employees, especially between management and lower level staff

2. To be preferred by customers

① We shall provide optimum energy services and strive to reduce costs

② The Group shall make a united effort to strengthen competitiveness

Return-on-Assets (ROA) 4%

Equity Ratio 30%+

1. To enhance public confidence

① In all our business activities, we shall work　 toward providing a safe, stable energy supply

② We shall endeavor to fulfill our corporate social responsibility (CSR)

(by FY 2011)

6


Strategies

2. Energy Supply Plan

Even with the decline in population and greater awareness of energy conservation, we expect that customer demand will grow steadily with the increase in health and welfare facilities brought on by the graying of society and the high demand for all-electric housing. For industrial demand, there has been steady growth in manufacturing at machinery-related industries, especially for digital electronic products and automotive parts.

(1) Power Demand Forecast

①��② ��③�

Ensure a Stable Energy Supply with Safety as Our First PriorityBecause of the suspension in services resulting from accidents and natural disasters in recent years, we plan to concentrate on efficient allocation of management resources to ensure a safe, stable energy supply and continue to promote greater efficiency in construction and maintenance of facilities.

Development of High-Efficiency Combined Cycle Power PlantsWe are promoting the use of high-efficiency combined cycle facilities at the Sendai Thermal Power Plant and the Shin Sendai Thermal Power Plant to increase competitiveness and protect the environment.

Closure/Suspension of Operations at Aging Thermal Power PlantsWe will revise plans for closure or suspension of operations at aging thermal power plants in a flexible manner in response to increases or changes in power demand.

0

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2016(FY)

2015201420132012201120102009200820072006(Estimated Performance)

2005

(Actual Performance)

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Power Demand Forecast

Electric Sales(Hundred millions of kWh)

System Peak Load(Ten thousands of kWh)

797 813 825 828 832 835 841 848 854 860 866 873

1,429 1,413

(1,375) (1,395) 1,423 1,433 1,441 1,447 1,460 1,472 1,484 1,496 1,508 1,519

Electric Power Sales

System Peak Load

System Peak Loadafter temperature correction

Electric Power Sales Average Annual Growth Rate 0.8%

(after temperature correction 0.9%)

FY 2007 MEDIUM-TERM BUSINESS PLAN

System Peak Load Average Annual Growth Rate 0.6%

(after temperature correction 0.9%)

(¥ Hundred million)

Others

Distribution

Power Sources

0

1,000

2,000

3,000

4,000

2008 (FY)2007200620052004200320022001200019991998(Plan) (Plan)

3,786

3,041

2,550 2,559

2,1951,885

2,2481,872 1,796

2,2272,050

371

281

341 308

414

286

287

334 250

392268

1,848

1,476

1,2431,038

1,002920

912

977 1,1671,342 1,314

1,5671,284

9661,213

779 6791,049

561379 493 468

7

Annual Report 2007

Based on estimated demand and electric power development, we plan to maintain a stable energy supply with a reserve margin of 10%+ over the medium to long term for system peak load for August.

(3) Energy Supply and Demand

②Power Transmission and Substations　Planning is underway for construction of the Towada and Kitakami 500 kV Trunk Lines and the following transmission lines and substations will either be newly built or uprated.

With safety as our top priority, we plan to expend the necessary funds for plant and equipment expenditures to ensure a stable energy supply. Therefore, we have increased spending for FY 2007 over the previous year by￥430 billion. After careful review, we will decide when to begin construction of facilities to further improve efficiency.　　Also, because plant and equipment expenditures

are expected to come out of the Company’s own funds for FY 2007, corporate bonds of ￥150 billion will be issued as capital for redemption of existing bonds.

(4) Plant and Equipment Expenditures

①Power Resource Development　While striving to maintain an efficient and more 　�　streamlined structure for facilities in keeping with our 　policy for greater competitiveness, we plan to ensure a 　stable energy supply and implement measures for 　environmental protection.

(2) Facilities Planning

System Peak Load for AugustDemand and Supply Plan

Supply Capacity, Demand,Reserve Capacity(Ten thousands of kW)

Reserve Margin(%)

Reserve Capacity

Demand

Reserve Margin

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20162015201420132012201120102009200820072

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(FY)

182 169 206 228 190 170 165 154183 172

12.811.8

14.315.8 13.0

11.611.1

10.3

12.111.3

1,423 1,433 1,441 1,447 1,460 1,472 1,484 1,496 1,508 1,519

Plant and Equipment Expenditures Planning

Name(Trunk Lines)Towada Trunk LineKitakami Trunk Line

Mutsu Trunk Line(trunk line uprating)

Aoba Trunk Line(trunk line uprating)

(Substation)

Kamikita Substation(substation uprating)

Miyagi Substation(substation uprating)

Miyagi Chuo Substation

Iwate Substation(substation uprating)

Specification

500 kV,114 km,2 lines500 kV,184 km,2 lines

500 kV(←275 kV),51 km,2 lines

500 kV(←275 kV),57 km,2 lines

500/275 kV;1,300,000 kVA×2

500/275 kV;1,000,000 kVA×1

500/275 kV;1,500,000 kVA×1

500/275 kV;1,000,000 kVA×1

Start of Construction Start of Operation

Aug. 2006Aug. 2006

Jan. 2009

Feb. 2009

Aug. 2005

Feb. 2007

Feb. 2007

Aug. 2007

Oct. 2010Dec. 2010

May. 2009

Dec. 2009

Oct. 2010

Dec. 2010

Dec. 2009

Dec. 2010

Name of Power Resource(Hydroelectric) Surikamigawa Moriyoshi Tsugaru(Thermal) Sendai Unit No.4 Asuka Unit No.8

Shin Sendai No.3

Joetsu No.1 Noshiro No.3(Nuclear) Namie/Odaka Higashidori No.2

Name of Thermal Sendai No.1 Sendai No.2Shin Sendai No.1Shin Sendai No.2Niigata No.4Higashi Niigata Minato No.1

Higashi NiigataMinato No.2

Start of Construction

Aug. 2004Aug. 2007

FY 2010

Dec. 2007Apr. 2008

Sep. 2010

FY 2019After FY 2022


A: Oct. 2003, B: Sep. 2007A: Mar. 2005, B: Sep. 2007A: Dec. 2006, Restart Jul. 2007, B: FY 2011B: FY 2011A: Nov. 2007, Restart FY 2008

A: May 2007

A: Dec. 2007, Restart FY 2008

Start of Operation

May 2007May 2011

FY 2016

Jul. 2010Jun. 2008

Jul. 2013 (half)Jul. 2015 (full)



10 thousands of kW

0.31.10.85

44.60.02

95

14460

82.5138.5

10 thousands of kW17.517.5356025

35

35

Power Resource Development Plan

Power Transmission Lines and Substations Planning

Long-term Suspension of Operations (A) and Closure of Thermal Power Plants (B)

※�

※�

※Projected capacity

8

Topics in 2006CUSTOMER CONSULTING AND SUPPORT SERVICES

MEDIUM-TERM ENVIRONMENTAL ACTION PLAN

WORKING TOGETHER WITH THE COMMUNITYMEASURES FOR PREVENTION OF GLOBAL WARMING

HIGASHI NIIGATA POWER PLANT

9

With the goal of providing optimal energy services to our customers,we are offering a variety of attractive products and services to respond to the diverse needs of our customers.

Topics in FY 2006 Annual Report 2007

CUSTOMER CONSULTING AND SUPPORT SERVICES

By encouraging our customers to make greater utilization of cost-effective nighttime power, they can enjoy a more pleasant, safe and comfortable lifestyle at significantly lower electricity rates. At the same time, as nighttime electric usage grows, electric facilities can run more efficiently by reducing the difference between daytime and nighttime utilization.

1. Purpose of customer consulting and support services

2. Sales Target

In the FY 2004 Medium Term Business Plan, we set a target of 1,000 GWh of electric power sales in five years.In the three-year period from FY 2004-2006, power sales rose to 780 GWh, mainly due to brisk sales of all-electric housing units and we expect to reach our goal in FY 2007, a year ahead of the original target.

(1) Sales Performance for FY 2004 Medium Term Business Plan

In view of the excellent performance in electric systems sales, we revised our sales target for FY 2007-2011 to 2,000 GWh in the FY 2007 Business Plan, which is twice the initial estimated target in the FY 2004 Business Plan. With this new numerical target of 2,000 GWh, we have added a new product,“semi-electric housing” into our target.

*Semi-electric housing refers to residences with kitchens and hot-water systems that utilize electricity but exclude heating systems.

(2) Sales Target for FY 2007 Business Plan

1,000 GWh by FY 2008 All-electric housing: 70,000 units IH cooking heaters: 130,000 unitsCommercial kitchens: 140,000 kWThermal storage air-conditioning systems: 60,000 kW

780 GWhapprox. 52,000 unitsapprox. 75,000 unitsapprox. 81,000 kW

approx. 59,000 kW

Target Performance for FY 2004-2006

All electric housing: 120,000 unitsSemi-electric housing: 100,000 unitsCommercial kitchens: 150,000 kWThermal storage air-conditioning systems: 240,000 kW

Targets to Achieve 2,000 GWh by FY 2011

10

Topics in FY 2006

3. Strategies

In addition in providing all electric systems for new houses, we offer “semi-electric systems” for existing residences.

(1) Residential Consulting Services

To resolve various energy-related issues of our customers, we plan to collaborate with all the group’s subsidiaries to offer more efficient energy utilization.

(3) Supportive consulting services

Our Company’s “energy partners” (EP, or personnel with specialized knowledge in energy usage) provide business owners with improved services that include thermal storage air-conditioning systems or electric cooking equipment to be used in the food service industry.

(2) Commercial Consulting Services

*In FY 2006, 600 proposals were implemented.

The major supportive services include:i)ii)iii)iv)

Consultation on energy-saving measures and cost reductionRenewal/new construction of incoming electric power transfer facilitiesInstallation of equipment to handle momentary voltage dropContractual services for thermal storage air-conditioning systems

CUSTOMER CONSULTING AND SUPPORT SERVICES

11

Annual Report 2007

MEDIUM-TERM ENVIRONMENTAL ACTION PLAN

Note: The“Sustainable Tree”concept was devised by the Tohoku 　　　EPCO Group to express our vision for the environment.

Our Vision for the EnvironmentThrough environment-friendly management, the Tohoku Electric Power Group will, in cooperation with the community, endeavor to create a social and economic structure capable of achieving sustainable development.

Environment PolicyBased on the management principles of “prospering together with the Community”and “creating new corporate value, ”Tohoku EPCO aspires to become a company that has society’s trust, is the first choice of customers and offers the highest quality of service through reducing the burden on the environment and carrying out activities for protecting and creating a better environment. Furthermore, through partnership with the local community, we plan to achieve an ideal balance between the environment and the economy so that we can work together to achieve sustainable growth.

To implement our environment strategy, we have formulated a three-year plan termed the “Medium Term Environmental Action Plan.” From FY 2007, the following three strategies will be the foundation on which our environmental activities will be based. They are: “Effective Development of Environmental Management,”“Promotion of Environmental Protection and Creating a Better Environment,”and “Working Together With the Community to Support Environmental Activities.” Also, the Group’s vision for realization of its environmental activities is expressed in the features on its“Sustainable Tree.” This tree is comparable to the Tohoku EPCO Group growing together with the local community to foster sustainable growth.

Medium-Term Environmental Action Plan

1

2

4

3

5

SUSTAINABLE TREE

TOHOKU REGION

① Effective Development EnvironmentalManagement

[trunk & branches]

Prevent Global Warming Sustainable

GrowthCreate a

Recycling-orientedSociety

PreserveLocal

EcologiesUtilize/Create

Resource

Prevent Pollution

② Promotion of Environmental Protection and Creating a Better Environment [fruit]

③ Enhanced Communication with the Community to Promote Awareness of Environmental Activities [roots,earth]

Circulation

3. International Activities

We have participated in the World Bank’s Prototype Carbon Fund (PCF), Japan GHG Reduction Fund (JGRF) as well as taken an active role in the following Clean Development Mechanism (CDM) projects.

① Biomass electric power generation project in　 Honduras② Hydroelectric power generation project in China③ Project in China for modification and decomposition of 　CFCs and development of alternatives

1. Supply-side Measures

To reduce utilization of fossil fuels and lower CO2

emissions, we will make the greatest possible use of LNG combined cycle power plants and maintain thermal efficiency at 40% or higher at thermal power plants. As another major source of “clean energy,” we are promoting utilization of nuclear power while implementing rigorous safety measures to raise the efficiency of our facilities. We will continue to reduce electric power loss from transmission lines and power distribution facilities.We have already achieved a power loss rate of 5.5%, a reduction of over 20% since FY 1990.

2. Use-side Measures

To make the most efficient use of electric power from power facilities by reducing the gap between daytime and nighttime usage of electricity (load leveling), we offer a variety of electricity rates to our customers that take into consideration their lifestyles, encourage energy conservation and reflect the unique features of each community, and actively advocate energy-efficient all-electric housing for a more comfortable living environment.

12

Topics in FY 2006

MEASURES FOR PREVENTION OF GLOBAL WARMING

In FY 2006, our Company's CO2 emissions totaled 35.7 million tons and has decreased the previous fiscal year. As a result, the amount of CO2 emitted per customer was 0.441 kg-CO2/kWh, decreased by 0.069 kg-CO2/kWhcompared with the rate for FY 2005. We are promoting a number of supply-side, use-side and international measures to reduce CO2 emissions.

(FY)

800

600

400

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

809

0.441

1980 1985 1990 1995 2000 2005

Electric power salesCO2 emissions intensity

Electric power sales(100 millions of kWh)

CO2 emissions intensity(kg-CO2/kWh)

CO2 Emissions Intensity and Electric Power Sales

Onagawa Nuclear Power Station

1. Clean-up Project

In the city of Goshogawara, we are helping to clean traffic signals and remove illegal notices on utility poles during the Spring Traffic Safety Week and when the school year starts.

2. Dancing in the Morioka Sansa Odori 　　Festival

The Sansa Odori Festival is one of the highlights of the summer season in Morioka. In FY 2006, about 300 employees and their families joined other dancers in the festivities.

4. Volunteer Food Delivery Service

At the Odate Sales Office, volunteers participate in a food delivery service for elderly persons living at home sponsored by the local Social Welfare Council and deliver meals to the elderly.

3.“Inochi no mori” Tree Planting Project

At the Nagaoka Sales Office and Nagaoka Technical Center, workers have been cooperating with the NPO “The Conserve Native Forest Organization” in tree-planting activities. About 100 employees and people from the local community have taken part and planted about 700 saplings of beech and Japanese oak trees.

13

Annual Report 2007

WORKING TOGETHER WITH THE COMMUNITY

Based on our philosophy of “Cooperation with the Community,” we are working together with residents to carry out activities for environmental conservation and public welfare. “Cooperation with the Community” means that the Company and each of its employees is aware of their role as a member of the community so that they can work and live together with our customers in the community and gain a relationship of trust through mutual understanding.We firmly believe that every employee should adhere to

the management principle of “prospering together with the community” in all aspects of their lives both at work and at home so that it can be passed on to future generations.With “Tohoku Electric Power as a company trusted by the community” as our basic strategy for FY 2007, each branch and sales office will strive to provide services that take into consideration the unique aspects of each community and this is a reflection of the high value we place on our relationship with our customers.

Main Projects

n

14

HIGASHI NIIGATA POWER PLANT

The Higashi Niigata Thermal Power Plant began operations in 1972 with a total power output of 0.35 GW. In March 1984, after the two oil shocks of the 1970s, all the units were switched to LNG fuel from exclusive use of heavy oil or in combination with natural gas. In December 1984, the nation’s first combined

cycle generator using LNG commenced operations with a capacity of 1.09 GW. Unit 3 achieved a heat efficiency rate of 44%, the highest rate for thermal power in the world at the time. Unit 4-1 went online in 1999 as an LNG combined cycle generation unit and achieved a thermal efficiency rate of 50%. Since then, it has continued to run smoothly and in the first half of FY 2006, achieved a power plant availability factor of 71% with a thermal efficiency rate at generation end of 49.17%. Unit 4-2 commenced operations this year and reflects the knowledge gained from Unit 4-1. It employs the latest technology that include lowering levels of NOx produced in the combustion chamber, reducing exhaust loss from the steam turbine and improving reliability with the development of high-temperature component cooling technologies. Because LNG does not emit ash dust or sulfur oxide, it is much more environment-friendly when compared to heavy oil, and with the high combustion efficiency of its combined cycle, contributes greatly to

reducing CO2 emissions. Compared to standard generators, it is expected to reduce emissions by 22% (company data). Also, because of its high efficiency rate, the amount

of fuel consumed is estimated to be reduced by 370,000 tons, leading to better cost efficiency. Unit 4-2 is superior in terms of easy maintenance

because its structure combines small capacity equipment with flexibility in its power system operations which enables it to respond speedily to start up or shut down operations.

“Tape-cutting ceremony to commemorate starting up of gas turbine”

Higashi Niigata Power Plant

Topics in FY 2006 Annual Report 2007

F I N A N C I A L S E C T I O N

Financial Review (Consolidated basis)

Five-Year Summary (Consolidated basis)

Five-Year Summary (Non-Consolidated basis)

Consolidated Financial Statements

Balance Sheets

Statements of Income

Statements of Changes in Net Assets

Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Auditors

Non-Consolidated Financial Statements

Balance Sheets

Statements of Income

Statements of Changes in Net Assets

Notes to Non-Consolidated Financial Statements

Report of Independent Auditors

16

18

20

22

24

25

26

27

35

36

38

39

40

44

Contents

16

Financial Review (Consolidated basis)


Operating ResultsThe corporate group’s operating revenues in fiscal2006 increased 4.1% from the prior year to ¥1,728.2billion (US$14,635 million). Despite the ratereduction started in July 2006, power sales growthcontributed to the revenue increase.

Operating expenses rose by 2.2% from theprevious year to ¥1,594.3 billion (US$13,501 million)despite reduced personnel expenses. The rise isattributable to increases of fuel expense due tosurging crude oil prices, purchased power expensebrought by purchased power growth andmaintenance expense because of regular inspectionwork of power plants.

Operating income increased 34.1% to ¥133.9billion (US$1,134 million), and ordinary profit rose94.2% to ¥99.1 billion (US$839 million) comparedwith the previous year, respectively. Net income was¥53.1 billion (US$450 million), down 1.8 % from thepreceding year when we posted ¥47.7 billion asextraordinary profit due to the reduction ofretirement benefit obligation.

Earning per share declined to ¥106.57 (US$0.902)in fiscal 2006 from ¥107.90 in fiscal 2005. FY2006results by business segment are as follows:

[Electric power business]

Operating revenues in the electric power businessincreased to ¥1,541.5 billion (US$13,053 million), up3.2% from the preceding fiscal year mainly due to agrowth of electricity sales. Operating expenses rose1.2% from the previous year to ¥1,431.7 billion(US$12,123 million) due to increases in fuel expenseand purchased power expense. As a result, operatingincome increased 38.4% to ¥109.8 billion (US$930

million) compared with the preceding year.

[Construction business]

Operating revenues in the construction businessrose by 7.5% from the previous year to ¥250.4 billion(US$2,121 million) due to a sales growth mainlybrought by increased contracts of electric facilityconstruction. Operating expenses were ¥241.0 billion(US$2,040 million), up 7.2% from the previous yearchiefly due to addition of outsourcing expensesrelated to the increase in contracted works. As aresult, operating income was ¥9.4 billion (US$80million), up 16.0% compared with the precedingyear.

[Other businesses]

Operating revenues in this segment climbed to¥200.7 billion (US$1,699 million), a 7.6 % year-on-year increase due to sales growth in themanufacturing business. Operating expensesincreased 7.3% from the previous year to ¥186.6billion (US$1,580 million) due to a rise in purchasedraw materials with the sales growth. This resulted inoperating income of ¥14.0 billion (US$118 million),up 11.0% from the preceding year.

Capital ExpendituresThe corporate group’s capital expenditures for fiscal2006 decreased 1.3% to ¥210.5 billion, or US$1,783million (not subject to adjustment) compared withthe previous year. By segment, the electric powerbusiness accounted for ¥183.2 billion (US$1,551million), the construction business for ¥3.0 billion(US$25 million) while other businesses represented

(Consolidated basis)Capital Expenditures

(Consolidated basis)Capital Expenditures in Electric Power Segment

Electricpower

¥210.5billion

¥183.2billion

Electric power¥183.2 billion

Other¥24.3billion

Construction¥3.0 billion

¥41.4billion

New construction andexpansion of powergenerating units

¥129.7billion

New construction andexpansion of powertransmission, distributiontransformers, and theirrelated facilities

¥11.9billion

Nuclear fuel

17

¥24.3 billion (US$205 million).In the core electric power business, we invested

in plants and equipment necessary for the buildup ofefficient facility to respond to long-term supply anddemand trends. Out of capital outlays in thisbusiness segment, ¥41.4 billion (US$350 million) or22.7% was spent on new construction and expansionof generation units while ¥129.7 billion (US$1,098million) or 70.8% was invested in new construction andexpansion of transmission, transformation, distributionand other facilities. An investment of ¥11.9 billion(US$100 million) or 6.5% was made in nuclear fuel.

Financial PositionThe valuation of total assets at the end of fiscal 2006amounted to ¥4,069.3 billion (US$34,459 million), a1.1% decrease compared with the previous year,mainly due to increasing accumulated depreciation.

Net assets at the end of fiscal 2006 were ¥1,032.6billion (US$8,744 million). As a result, equity ratiowent up to 24.2% from 23.4% of the preceding year.

Cash FlowsThe balance of cash and cash equivalents as of theend of fiscal 2006 was ¥119.0 billion (US$1,008million), up 5.7% compared to the balance at theprevious fiscal year-end.

Cash flows by activity and factors contributing tochange are as follows:

[Cash flows from operating activities]

Net cash provided by operating activities were¥276.1 billion (US$2,338 million), up 21.7% from the

previous fiscal year. The increase resulted mainlyfrom a growth of power sales, despite increases infuel expense with rising oil prices and in purchasedpower expense caused by purchased power growth.

[Cash flows from investing activities]

Net cash used in investing activities was ¥197.5billion (US$1,673 million), a 14% decrease from theprevious year, chiefly due to reduced expenditure onfixed asset acquisition.

[Cash flows from financial activities]

Net cash provided by financial activities turned in anegative balance of ¥73 billion (US$618 million)compared with the positive ¥9.4 billion for the prioryear. The decline resulted in particular from theexpenditure increase due to the redemption ofcommercial papers.

Credit RatingAs of June 28, 2007, the credit ratings for long-termcorporate bonds issued by the company were asfollows:

Moody’s Investors Service ............................Aa2Standard & Poor’s ..........................................AAFitch Ratings ...................................................A+Rating and Investment Information..............AA+Japan Credit Rating Agency..........................AAAp

-300 -200 -100 0 100 200 300 400 500

(A) FY 2006 term-end balance

(iii) Cash flows fromfinancing activities

(ii) Cash flows frominvesting activities

(i) Cash flows fromoperating activities

(B) FY 2005 term-endbalance

Cash Flows (Consolidated basis)

(¥ billions)

(A) 119.0

(iii) -73.0

(ii) -197.5

(i) 276.1

(B) 112.6

(A=B+i+ii+iii)

18

Five-Year Summary (Consolidated basis)


Tohoku Electric Power Co., Inc. and Consolidated Subsidiaries Years ended March 31

Operating results

Operating revenues………………………………………………………Operating expenses ……………………………………………………

Operating income…………………………………………………………Interest expense …………………………………………………………Other expenses, net ……………………………………………………Income before special item, income taxes and minority interests…Special item…………………………………………………………………Income before income taxes and minority interests…………Income taxes, current …………………………………………………Income taxes, deferred…………………………………………………Minority interests in (losses) earnings of consolidated subsidiaries…Net income …………………………………………………………………

Sources and application of funds

Sources:Internal funds ……………………………………………………………External funds:Bonds ……………………………………………………………………

Borrowings………………………………………………………………

Total …………………………………………………………………

Applications:Capital expenditures …………………………………………………Debt redemption………………………………………………………

Total …………………………………………………………………

Assets and capital

Total assets…………………………………………………………………Property, plant and equipment, net ………………………………Common stock ……………………………………………………………Total net assets……………………………………………………………

¥1,728,296)

1,594,361)

133,935)

46,934)

(12,121)

99,121)

(4,276)

94,845)

36,452)

1,850)

3,368)

53,173)

¥ 252,418)

119,599)

887,088)

1,006,687)

1,259,105)

210,559)

1,048,546)

1,259,105)

¥4,069,331)

3,125,446)

251,441)

1,032,681)

2007 2006 2005

Millions of yen

2004 2003

¥1,660,045)1,560,197)

99,848)47,101)

(43,108)95,854)(2,332)93,521)23,053)13,514)2,781)

54,171)

¥ 177,854)

139,475)879,940)

1,019,415)1,197,270)

213,226)984,044)

1,197,270)

¥4,113,775)3,226,852)

251,441)1,009,206)

¥1,611,461)1,447,511)

163,950)52,813)21,240)89,895)(2,212)87,683)42,899)

(14,956)2,780)

56,960)

¥ 424,913)

39,853)760,707)800,560)

1,225,474)

253,505)971,968)

1,225,474)

¥4,122,476)3,341,614)

251,441)929,771)

¥1,562,752)1,383,790)

178,962)69,823)21,785)87,353)(3,634)83,719)35,833)(4,554)1,361)

51,079)

¥ 335,390)

139,435)918,618)

1,058,053)1,393,444)

202,547)1,190,896)1,393,444)

¥4,095,444)3,348,988)

251,441)870,852)

¥1,593,832)1,393,887)

199,945)83,858)18,474)97,612)

286)97,898)44,201)(7,204)

(999)61,901)

¥ 379,758)

159,339)377,523)536,862)916,621)

244,330)672,290)916,621)

¥4,209,171)3,462,408)

251,441)842,440)

0

20

40

60

80

100

200720062005200420030

40

80

120

160

200

Net Income & Net Income per Share

(¥)(¥ billions)

Net Income (left scale)

Net Income Per Share (right scale)

0

400

800

1,200

1,600

2,000

20072006200520042003

(¥ billions)

Operating Revenues

19

Cash flows

Operating activities:Net cash provided by operating activities ……………………

Investing activities:Net cash used in investing activities ……………………………

Financing activities:Net cash (used in) provided by financing activities…………

Effect of exchange rate changes on cash and cash equivalentsIncrease in cash and cash equivalents upon inclusion of

additional subsidiaries in consolidation…………………………Cash and cash equivalents at end of the year …………………

Plant data

Generating capacity (MW)(Number of plants):

Hydroelectric ……………………………………………………………

Thermal ……………………………………………………………………

Nuclear ……………………………………………………………………

Total …………………………………………………………………

Substation capacity (MVA) ……………………………………………Transmission lines (km) ………………………………………………Distribution lines (km) …………………………………………………

Other data

Number of employees …………………………………………………

¥276,182)

(197,591)

(73,004)

10)

853)

119,073)

2,537)

(228)

12,176)

(19)

3,274)

(2)

17,987)

(249)

63,684)

14,736)

141,834)

22,422)

2007 2006 2005

Millions of yen

2004 2003

¥226,869)

(229,754)

9,430)

1)

–)112,622)

2,538)(228)

11,643)(19)

3,274)(2)

17,455)(249)

61,835)14,682)

140,981)

22,417)

¥374,381)

(188,863)

(197,679)

0)

23,157)106,075)

2,531)(224)

11,649)(19)

2,174)(1)

16,354)(244)

60,945)14,709)

140,139)

22,627)

¥336,415)

(151,034)

(169,783)

–)

–)95,079)

2,491)(221)

11,626)(18)

2,174)(1)

16,290)(240)

58,661)14,787)

139,330)

18,289)

¥364,010)

(223,765)

(161,583)

–)

3,458)79,480)

2,493)(222)

12,151)(18)

2,174)(1)

16,817)(241)

57,667)14,737)

138,323)

18,678)

2007 2006 2005 2004 2003

0

1,000

2,000

3,000

4,000

5,000

20072006200520042003

(¥ billions)

Total Assets

16

18

20

22

24

26

20072006200520042003

Equity Ratio

(%)

20

Five-Year Summary (Non-Consolidated basis)


Tohoku Electric Power Co., Inc.Years ended March 31

Operating results

Operating revenues………………………………………………………Operating expenses ……………………………………………………

Operating income…………………………………………………………Interest expense …………………………………………………………Other (income) expenses, net ………………………………………Income before special item and income taxes…………………Special item…………………………………………………………………Income before income taxes…………………………………………Income taxes, current …………………………………………………Income taxes, deferred…………………………………………………Net income …………………………………………………………………

Sources and application of funds

Sources:Internal funds ……………………………………………………………External funds:Bonds ……………………………………………………………………

Borrowings………………………………………………………………

Total …………………………………………………………………

Applications:Capital expenditures …………………………………………………

Debt redemption ………………………………………………………Total …………………………………………………………………

Assets and capital

Total assets…………………………………………………………………Property, plant and equipment, net ………………………………Common stock ……………………………………………………………Total net assets……………………………………………………………

Common stock data:Number of Shareholders ……………………………………………

Number of Share issued (thousands)……………………………Price range★(yen):

High…………………………………………………………………………Low …………………………………………………………………………

¥1,546,745)

1,438,434)

108,311)

45,329)

(13,781)

76,762)

(4,275)

72,487)

28,490)

(783)

44,780)

¥ 212,325)

119,583)

851,280)

970,863)

1,183,188)

182,295)

1,000,892)

1,183,188)

¥3,709,377)

2,893,715)

251,441)

874,540)

238,655)

502,883)

¥ 3,500)

2,300)

2007 2006 2005

Millions of yen

2004 2003

¥1,498,759)1,420,819)

77,940)44,468)

(52,409)85,881)(2,333)83,547)15,945)14,060)53,542)

¥ 122,912)

139,517)855,280)994,797)

1,117,709)

188,476)929,233)

1,117,709)

¥3,759,037)2,982,319)

251,441)862,977)

245,131)502,883)

¥ 2,785)1,942)

¥1,455,336)1,310,326)

145,009)49,997)21,728)73,284)(2,204)71,079)36,132)

(10,775)45,721)

¥ 363,408)

39,853)748,200)788,053)

1,151,462)

225,313)926,149)

1,151,462)

¥3,757,983)3,091,733)

251,441)839,452)

261,638)502,883)

¥ 2,010)1,750)

¥1,447,607)1,280,539)

167,068)67,036)25,287)74,744)(3,631)71,113)32,768)(9,712)48,056)

¥ 301,216)

139,435)904,020)

1,043,455)1,344,671)

188,594)1,156,077)1,344,671)

¥3,814,323)3,161,758)

251,441)820,494)

257,075)502,883)

¥ 1,942)1,714)

¥1,479,052)1,294,355)

184,696)80,633)10,567)93,495)

293)93,788)40,738)(6,664)59,715)

¥ 328,418)

159,339)361,000)520,339)848,757)

219,543)629,213)848,757)

¥3,897,981)3,258,601)

251,441)790,054)

253,117)502,883)

¥ 1,808)1,525)

★Tokyo Stock Exchange

0

20

40

60

80

100

200720062005200420030

40

80

120

160

200

Net Income & Net Income per Share

(¥)(¥ billions)

Net Income (left scale) Net Income Per Share (right scale)

0

400

800

1,200

1,600

2,000

20072006200520042003

(¥ billions)

Operating Revenues

20072006200520042003

(¥ billions)

Capital Expenditures

0

100

200

300

400

500

21

Electric power sales (millions of kWh)

Residential …………………………………………………………………Commercial and industrial:

Commercial ………………………………………………………………Small-scale industrial …………………………………………………Large-scale industrial …………………………………………………Other ………………………………………………………………………

Total★1………………………………………………………………

Deregulated segment★2………………………………………………

Total electric power sales ……………………………

Peak load (MW)

Plant data

Generating capacity (MW)(Number of plants):

Hydroelectric ……………………………………………………………

Thermal ……………………………………………………………………

Nuclear ……………………………………………………………………

Total…………………………………………………………………

Substation capacity (MVA) ……………………………………………Transmission lines (km) ………………………………………………Distribution lines (km) …………………………………………………

Other data

Number of customers (Excluding the deregulated segment):Residential ………………………………………………………………Commercial and industrial …………………………………………

Total …………………………………………………………………Number of employees★ ………………………………………………

24,291)

–)

3,257)

–)

1,045)

4,302)

28,593)

52,357)

80,950)

14,761)

2,414)

(210)

11,453)

(17)

3,274)

(2)

17,141)

(229)

63,684)

14,736)

141,834)

6,712,975)

952,118)

7,665,083)

11,344)

2007 2006 2005 2004 2003

24,355)

–)3,511)

–)1,213)4,724)

29,079)50,585)79,664)

15,200)

2,415)(210)

10,919)(17)

3,274)(2)

16,609)(229)

61,835)14,682)

140,981)

6,676,463)965,552)

7,642,015)11,423)

23,612)

11,108)11,611)

–)1,531)

24,250)47,862)29,467)77,329)

14,552)

2,415)(210)

10,926)(17)

2,174)(1)

15,514)(228)

60,945)14,709)

140,139)

6,627,228)1,045,739)7,672,967)

11,662)

22,793)

13,909)11,407)

7,585)1,609)

34,510)57,303)17,244)74,547)

13,535)

2,414)(210)

10,926)(17)

2,174)(1)

15,514)(228)

58,661)14,787)

139,330)

6,580,162)1,066,438)7,646,600)

11,840)

22,914)

13,814)11,539)7,521)1,678)

34,552)57,466)16,789)74,255)

14,489)

2,423)(211)

11,451)(17)

2,174)(1)

16,048)(229)

57,667)14,737)

138,323)

6,526,632)1,079,776)7,606,408)

12,077)

★1 Excluding the deregulated segment.★2 Deregulated segment is constituted by customers who use a supply system with a contracted demand of 2,000 kW or above from 2002 to 2004, 500 kW

or above in 2005, and 50kW or above after 2006.

★Not including on loan or leave.

0

1,000

2,000

3,000

4,000

5,000

20072006200520042003

(¥ billions)

Total Assets Equity Ratio

(%)

16

18

20

22

24

26

20072006200520042003

Electric Power Sales

0

20

40

60

80

100

20072006200520042003

(billions of kWh)

Deregulatedsegment

Other

Industrial

Residential

Commercial

22

Consolidated Balance SheetsF I N A N C I A L S E C T I O N

Tohoku Electric Power Co., Inc. and Consolidated SubsidiariesMarch 31, 2007 and 2006

Assets

Property, plant and equipment (Note 4)…………………………………………………Less accumulated depreciation……………………………………………………………

Property, plant and equipment, net (Note 7) …………………………………

Nuclear fuel:

Loaded nuclear fuel …………………………………………………………………………Nuclear fuel under processing ……………………………………………………………

Total nuclear fuel …………………………………………………………………………………

Long-term investments (Notes 5 and 7)…………………………………………………

Fund for reprocessing costs of irradiated nuclear fuel ……………………………

Deferred income taxes (Note 9)……………………………………………………………

Other assets (Note 7) …………………………………………………………………………

Current assets:

Cash and cash equivalents (Note 7) ……………………………………………………Trade notes receivable and amounts due from customers, less allowance for uncollectible receivables (Notes 6 and 7) …………………

Deferred income taxes (Note 9) …………………………………………………………Inventories (Note 7)……………………………………………………………………………Other current assets (Notes 7 and 8)……………………………………………………

Total current assets …………………………………………………………………

Total assets ……………………………………………………………………………

¥ 8,198,125)

(5,072,679)

3,125,446)

37,234)

104,277)

141,511)

90,879)

104,522)

155,473)

95,618)

119,073)

128,513)

16,642)

60,326)

31,322)

355,879)

¥ 4,069,331)

2007 20072006

Millions of yen

Thousands ofU.S. dollars

(Note 3)

¥ 8,114,473)(4,887,621)3,226,852)

39,809)101,194)141,003)

97,757)

61,466)

156,418)

94,041)

112,622)

122,960)15,520)51,089)34,042)

336,235)

¥ 4,113,775)

$ 69,422,686)

(42,956,042)

26,466,644)

315,301)

883,029)

1,198,331)

769,574)

885,104)

1,316,563)

809,704)

1,008,324)

1,088,263)

140,926)

510,847)

265,238)

3,013,625)

$ 34,459,573)

See notes to consolidated financial statements.

23

Liabilities and net assets

Long-term debt (Note 7) ………………………………………………………………………

Accrued retirement benefits (Note 8)………………………………………………………

Reserve for reprocessing costs of irradiated nuclear fuel …………………………

Pre-reserve for reprocessing costs of irradiated nuclear fuel ……………………

Reserve for decommissioning costs of nuclear power units ………………………

Deferred income taxes (Note 9)………………………………………………………………

Deferred income taxes on revaluation adjustments …………………………………

Current liabilities:

Short-term borrowings (Note 7) ……………………………………………………………Current portion of long-term debt (Note 7)………………………………………………Trade notes and accounts payable…………………………………………………………Accrued income taxes …………………………………………………………………………Other current liabilities …………………………………………………………………………

Total current liabilities…………………………………………………………………

Reserve for fluctuation in water levels ……………………………………………………

Contingent liabilities (Note 14)

Net assets (Note 15):Shareholders’ equity (Note 10):

Common stock, without par value:Authorized – 1,000,000,000 sharesIssued – 502,882,585 shares……………………………………………………

Capital surplus …………………………………………………………………………………

Retained earnings (Note 18) ………………………………………………………………Treasury stock, at cost; 4,003,069 shares in 2007 and 3,862,846 shares in 2006…

Valuation, translation adjustments and other:Net unrealized holding gain on securities (Note 5)…………………………………Revaluation adjustments ……………………………………………………………………Foreign currency translation adjustments ……………………………………………

Minority interests in consolidated subsidiaries ………………………………………

Total net assets…………………………………………………………………………

Total liabilities, and net assets ……………………………………………………

¥1,966,347)

204,599)

113,269)

3,126)

38,426)

424)

2,921)

55,985)

292,357)

116,526)

22,037)

201,364)

688,272)

19,262)

251,441)

26,678)

701,309)

(7,498)

11,827)

(1,074)

950)

49,046)

1,032,681)

¥4,069,331)

2007 20072006

Millions of yen


(Note 3)

¥2,063,812)

217,502)

105,973)

–)

36,151)

–)

3,007)

55,922)242,409)112,929)10,303)

241,569)663,134)

14,986)

251,441)26,655)

678,359)(7,058)

14,503)(1,043)

80)46,266)

1,009,206)

¥4,113,775)

$16,651,257)

1,732,568)

959,175)

26,471)

325,395)

3,590)

24,735)

474,087)

2,475,713)

986,755)

186,611)

1,705,174)

5,828,368)

163,112)

2,129,231)

225,912)

5,938,767)

(63,493)

100,152)

(9,094)

8,044)

415,327)

8,744,864)

$34,459,573)


24

Consolidated Statements of IncomeF I N A N C I A L S E C T I O N


Operating revenues:

Electric power……………………………………………………………………………………Other ………………………………………………………………………………………………

Operating expenses (Note 12):

Electric power (Note 11) ……………………………………………………………………Other ………………………………………………………………………………………………

Operating income ………………………………………………………………………

Other expenses (income):

Interest and dividend income………………………………………………………………Interest expense ………………………………………………………………………………Gain on reversal of prior service liability of retirement benefit obligation …Loss on discontinued operation of subsidiary ………………………………………

Other, net…………………………………………………………………………………………

Income before special item, income taxes and minority interests ……

Special item:

Provision for reserve for fluctuation in water levels ………………………………Income before income taxes and minority interests ………………………

Income taxes (Note 9):Current ……………………………………………………………………………………………Deferred …………………………………………………………………………………………

Minority interests in earnings of consolidated subsidiaries ……………………

Net income (Note 15) …………………………………………………………………………

¥1,539,130)

189,166)

1,728,296)

1,417,639)

176,721)

1,594,361)

133,935)

(2,140)

46,934)

–)

–)

(9,981)

34,813)

99,121)

4,276)

94,845)

36,452)

1,850)

38,303)

3,368)

¥ 53,173)

2007 20072006

Millions of yen


(Note 3)

¥1,491,698)168,347)

1,660,045)

1,402,196)158,000)

1,560,197)99,848)

(897)47,101)

(47,782)2,970)2,601)3,993)

95,854)

2,332)93,521)

23,053)13,514)36,567)

2,781)

¥ 54,171)

$13,033,533)

1,601,879)

14,635,413)

12,004,733)

1,496,494)

13,501,236)

1,134,177)

(18,121)

397,442)

–)

–)

(84,520)

294,800)

839,368)

36,209)

803,158)

308,679)

15,666)

324,354)

28,520)

$ 450,275)


25

Consolidated Statements of Changes in Net AssetsF I N A N C I A L S E C T I O N


Number ofshares ofcommon

stock

Balance at March 31, 2005…

Cash dividends paid………Bonuses to directors and

corporate auditors………Net income …………………

Purchases of treasury stock…Reversal of revaluation

adjustments ………………Net change during the year…


Cash dividends paid………Bonuses to directors and

corporate auditors………Net income …………………

Purchases of treasury stock…Disposal of treasury stock…Reversal of revaluation

adjustments ………………Net change during the year…


502,882,585

502,882,585

502,882,585

Shareholders’ equity

Commonstock

¥251,441

251,441

¥251,441

Capitalsurplus

¥26,655

26,655

23

¥26,678

Retainedearnings

¥649,329)(24,954)

(349)54,171)

162)

678,359)(29,937)

(318)53,173)

31)

¥701,309)

Treasurystock, at cost

¥(6,572)

(485)

(7,058)

(476)35)

¥(7,498)

Netunrealized

holding gainon securities

¥ 9,844)

4,659)14,503)

(2,676)¥11,827)

Revaluationadjustments

¥(1,005)

(37)

(1,043)

(31)

¥(1,074)

Foreigncurrency

translationadjustments

¥ 79

180

870¥950

Minorityinterests in

consolidatedsubsidiaries

¥45,567

69946,266

2,779¥49,046

Total netassets

¥ 975,339)(24,954)

(349)54,171)

(485)

124)5,359)

1,009,206)(29,937)

(318)53,173)

(476)59)

–)973)

¥1,032,681)

Valuation, translation adjustments and other

Balance at March 31, 2006………………

Cash dividends paid ……………………Bonuses to directors and

corporate auditors ……………………Net income…………………………………Purchases of treasury stock …………Disposal of treasury stock ……………Reversal of revaluation

adjustments ……………………………Net change during the year …………

Balance at March 31, 2007………………


Commonstock

$2,129,231

$2,129,231

Capitalsurplus

$225,717

194

$225,912

Retainedearnings

$5,744,423)(253,510)

(2,692)450,275)

262)

$5,938,767)

Treasurystock, at cost

$(59,767)

(4,030)296)

$(63,493)

Netunrealized

holding gainon securities

$122,813)

(22,660)$100,152)

Revaluationadjustments

$(8,832)

(262)

$(9,094)

Foreigncurrency

translationadjustments

$ 677

7,367$8,044

Minorityinterests in

consolidatedsubsidiaries

$391,785

23,532$415,327

Total netassets

$8,546,075)(253,510)

(2,692)450,275)

(4,030)499)

–)8,239)

$8,744,864)

Valuation, translation adjustments and other


Millions of yen

Thousands of U.S. dollars (Note 3)

26

Consolidated Statements of Cash FlowsF I N A N C I A L S E C T I O N


Operating activities

Income before income taxes and minority interests……………………Adjustments to reconcile income before income taxes and

minority interests to net cash provided by operating activities:Depreciation and amortization ………………………………………………

Provision for accrued retirement benefits ………………………………

Loss on sales and disposal of property, plant and equipment ……Provision for reserve for reprocessing costs of irradiated

nuclear fuel ………………………………………………………………………Provision for pre-reserve for reprocessing costs of irradiated

nuclear fuel ………………………………………………………………………Provision for reserve for decommissioning costs of

nuclear power units ……………………………………………………………Provision for reserve for fluctuation in water levels …………………Interest and dividend income…………………………………………………Interest expense …………………………………………………………………

Fund for reprocessing costs of irradiated nuclear fuel ………………Changes in operating assets and liabilities:

Amounts due from customers ……………………………………………

Accounts payable ………………………………………………………………Other operating assets and liabilities ……………………………………

Subtotal ………………………………………………………………………Interest and dividends received ……………………………………………

Interest paid…………………………………………………………………………Income taxes paid ………………………………………………………………

Net cash provided by operating activities…………………………

Investing activities

Acquisitions of property, plant and equipment……………………………Contributions received in aid of construction ……………………………

Increase in investments and advances………………………………………Changes in other assets and liabilities ………………………………………

Net cash used in investing activities ………………………………

Financing activities

Proceeds from long-term loans and issuance of bonds ………………Repayment or redemption of long-term loans or bonds ………………(Decrease) increase in short-term borrowings andcommercial paper …………………………………………………………………

Purchases of treasury stock ……………………………………………………

Cash dividends ………………………………………………………………………Cash dividends to minority shareholders……………………………………Other ……………………………………………………………………………………

Net cash (used in) provided by financing activities ……………

Effect of exchange rate changes on cash and cash equivalents ……

Net increase in cash and cash equivalents …………………………………

Cash and cash equivalents at beginning of the year………………………Increase in cash and cash equivalents upon inclusion of

additional subsidiaries in consolidation………………………………………Cash and cash equivalents at end of the year………………………………

¥ 94,845)

278,157)

(12,984)

15,442)

7,295)

3,126)

2,275)

4,276)

(2,140)

46,934)

(43,056)

(51,260)

2,644)

(3,880)

341,676)

1,643)

(42,366)

(24,769)

276,182)

(199,853)

3,302)

(1,346)

306)

(197,591)

203,695)

(196,607)

(48,946)

(476)

(29,924)

(717)

(26)

(73,004)

10)

5,597)

112,622)

853)

¥ 119,073)

2007

$ 803,158)

2,355,466)

(109,950)

130,764)

61,774)

26,471)

19,264)

36,209)

(18,121)

397,442)

(364,603)

(434,075)

22,389)

(32,856)

2,893,352)

13,913)

(358,760)

(209,746)

2,338,741)

(1,692,378)

27,961)

(11,398)

2,591)

(1,673,223)

1,724,913)

(1,664,891)

(414,480)

(4,030)

(253,399)

(6,071)

(220)

(618,206)

84)

47,396)

953,696)

7,223)

$1,008,324)

20072006Millions of yen

¥ 93,521)

285,291)(42,048)16,020)

4,682)

–)

3,406)2,332)(897)

47,101)(61,466)

(48,140)14,043)(8,184)

305,663)895)

(43,190)(36,498)226,869)

(239,794)3,029)(802)

7,813)(229,754)

235,233)(248,676)

48,883)(324)

(24,934)(716)(35)

9,430)

1)6,546)

106,075)

–)¥ 112,622)


(Note 3)


27

Notes to Consolidated Financial StatementsF I N A N C I A L S E C T I O N

Tohoku Electric Power Co., Inc. and Consolidated SubsidiariesMarch 31, 2007

1. Summary of Significant Accounting Policies

(a) Basis of preparationThe accompanying consolidated financial statements ofTohoku Electric Power Company, Incorporated (the“Company”) and its consolidated subsidiaries have beencompiled from the consolidated financial statementsprepared by the Company as required by the Securitiesand Exchange Law of Japan and are prepared on the basisof accounting principles generally accepted in Japan,which are different in certain respects as to theapplication and disclosure requirements of InternationalFinancial Reporting Standards.

As permitted by the Securities and Exchange Law,amounts of less than one million yen have been omitted.As a result, the totals shown in the accompanyingconsolidated financial statements (both in yen and U.S.dollars) do not necessarily agree with the sum of theindividual amounts.

Certain amounts previously reported have beenreclassified to conform to the current year’s presentation.

(b) Principles of consolidation and accounting forinvestments in unconsolidated subsidiaries and affiliatesThe accompanying consolidated financial statementsinclude the accounts of the Company and all companiescontrolled directly or indirectly by the Company.Companies over which the Company exercises significantinfluence in terms of their operating and financial policieshave been included in the consolidated financial statementson an equity basis. All significant intercompany balancesand transactions have been eliminated in consolidation.

The differences between the cost and the underlyingnet equity of investments in consolidated subsidiaries atthe dates of acquisition are, as a rule, amortized over aperiod of five years.

(c) Property, plant and equipmentProperty, plant and equipment are generally stated at cost.

Depreciation of property, plant and equipment iscomputed by the declining-balance method over theestimated useful lives of the respective assets. Significantrenewals and additions are capitalized at cost. Maintenanceand repairs are charged to income when incurred.

Amortization of easements is computed by thestraight-line method based on the estimated useful livesof the power transmission lines.

(d) Nuclear fuelNuclear fuel is stated at cost less accumulatedamortization. The amortization of loaded nuclear fuel iscomputed based on the proportion of heat productionfor current year to the total heat production estimatedover the life of the nuclear fuel.

(e) Marketable and investment securitiesMarketable and investment securities are classified intothree categories depending on the holding purpose: i)

trading securities, which are held for the purpose of earningcapital gains in the short-term, ii) held-to-maturity debtsecurities, which a company has the positive intent to holduntil maturity, and iii) other securities, which are notclassified as either of the aforementioned categories.

Held-to-maturity debt securities are carried at amortizedcost. Marketable securities classified as other securitiesare carried at fair value with any changes in unrealizedholding gain or loss, net of the applicable income taxes,included directly in net assets. Non-marketable securitiesclassified as other securities are carried at cost. Cost ofsecurities sold is determined by the moving average method.

(f) Fuel and suppliesFuel (oil, gas and coal) and supplies are stated at costdetermined by the average method.

(g) Cash equivalentsAll highly liquid investments with a maturity of three monthsor less when purchased are considered cash equivalents.

(h) Employees’ retirement benefitsAccrued retirement benefits for employees have beenprovided mainly at an amount calculated based on theretirement benefit obligation and the fair value of thepension plan assets at the year end, as adjusted for theunrecognized actuarial gain or loss and unrecognizedprior service cost.

The retirement benefit obligation is attributed to eachperiod by the straight-line method over the estimatedremaining years of service of the eligible employees.

Actuarial gain or loss is amortized in the yearfollowing the year in which the gain or loss isrecognized primarily by the straight-line method overperiods (principally 1 year through 15 years) which areshorter than the average remaining years of service ofthe employees participating in the plan.

Prior service cost is primarily charged or credited toincome when incurred.

(i) Reserve for reprocessing costs of irradiated nuclear fuelThe reserve is stated at the present value of the amountthat would be required to reprocess only the irradiatednuclear fuel actually planned to be reprocessed. Thecumulative effect of the adoption of the revisedaccounting standard of ¥45,015 million ($381,192thousand) as of April 1, 2005 is being amortized overfifteen years starting from the year ended March 31,2006. The balance of the unrecognized costs at March31, 2007 is ¥39,013 million ($330,366 thousand).

The unrecognized estimation loss of ¥7,503 million($63,536 thousand) at March 31, 2007 resulting from thedifference in discount rate will be recognized over aperiod for which irradiated fuel actually planned to bereprocessed are generated.

(j) Pre-reserve for reprocessing costs of irradiated nuclear fuelThe pre-reserve is stated at the present value of the

28


amount that would be required to reprocess the irradiatednuclear fuel without a definite plan for reprocessing.

The costs needed to reprocess irradiated nuclear fuelwithout a definite plan for reprocessing attribute to theyear eneded March 31, 2006 are recorded as operatingexpenses for the year ended March 31, 2007.

(k) Reserve for decommissioning costs of nuclear power unitsThe Company, as required by a regulatory authoritywhich is an advisory body to the Ministry of Economy,Trade and Industry, records a reserve fordecommissioning costs of nuclear power units. Provisionis made for the cost of future disposition of nuclearpower units in proportion to the ratio of their currentgeneration of electric power to the estimated totalgeneration of electric power over the life of each unit.

( l ) Reserve for fluctuation in water levelsTo offset fluctuation in income caused by varying waterlevels, the Company and its consolidated subsidiariesare required under the Electric Utility Law to record areserve for fluctuation in water levels.

(m) LeasesThe Company and its consolidated subsidiaries leasecertain equipment under noncancelable lease agreementsreferred to as finance leases. Finance leases other thanthose which transfer the ownership of the leased propertyto the lessee are accounted for as operating leases.

(n) Income taxesDeferred tax assets and liabilities have been recognizedin the consolidated financial statements with respect tothe differences between financial reporting and the taxbases of the assets and liabilities, and were measuredusing the enacted tax rates and laws which will be ineffect when the differences are expected to reverse.

(o) Foreign currency translationAll monetary assets and liabilities, both short-term and long-term, denominated in foreign currencies are translated intoyen at the exchange rates prevailing at the balance sheetdates, and the resulting gain or loss is included in income.

The revenue and expense accounts of foreignsubsidiaries are translated into yen at the average ratesof exchange prevailing during the year. The balancesheet accounts are translated into yen at the rates ofexchange in effect at the balance sheet date, except forthe components of shareholders’ equity which aretranslated at their historical exchange rates.Adjustments resulting from this translation process areaccumulated in a separate component of net assets.

(p) Derivatives and hedging transactionsThe Company has entered into various derivativestransactions in order to manage certain risk arising fromadverse fluctuation in foreign currency exchange ratesand interest rates. Derivatives are carried at fair value

with any changes in unrealized gain or loss charged orcredited to operations, except for those which meet thecriteria for deferral hedge accounting or specialtreatment as permitted by the accounting standard forfinancial instruments. Receivables and payableshedged by qualified derivatives are translated at thecorresponding foreign exchange contract rates.

(q) Appropriation of retained earningsUnder the Corporation Law of Japan, the appropriation ofretained earnings with respect to a given financial year ismade by resolution of the shareholders at a generalmeeting to be held subsequent to the close of the financialyear. The accounts for that year do not, therefore, reflectsuch appropriations. See Notes 10 and 18.

2. Accounting Change

(a) Amortization of easementsPrior to April 1, 2005, the Company treated easementsrelated to lands below transmission lines as unamortizableassets. Effective April 1, 2005, the Company began toamortize such easements to determine transmission anddistribution costs more adequately in accordance with therevision of the Japanese Electric Utility Law requiringelectric utility providers to account for revenues andexpenses of transmission and distribution. The effect ofthis change was to increase operating expenses and todecrease income before income taxes and minority interestsby ¥5,354 million for the year ended March 31, 2006.

(b) Reserve for reprocessing costs of irradiated nuclear fuelPrior to April 1, 2005, the annual provision for the costsof reprocessing irradiated nuclear fuel was calculated tostate the related reserve at 60% of the amount thatwould be required to reprocess all of the irradiatednuclear fuel in accordance with the regulatory authority.

Effective April 1, 2005, the Company adopted a revisedaccounting standard for reserve for reprocessing costs ofirradiated nuclear fuel. In accordance with the changes inthe accounting rules applicable to electric utility providersin Japan, the reserve is stated at present value of theamount that would be required to reprocess the irradiatednuclear fuel with definite plan for reprocessing.

The effect of this change was to increase operatingexpenses and to decrease income before income taxesand minority interests by ¥4,397 million for the yearended March 31, 2006.

3. U.S. Dollar Amounts

Amounts in U.S. dollars are included solely for the convenienceof the reader. The rate of ¥118.09 = U.S.$1.00, the approximaterate of exchange in effect on March 31, 2007, has been usedin translation. The inclusion of such amounts is not intendedto imply that yen have been or could be readily converted,

29

realized or settled in U.S. dollars at that or any other rate.

4. Property, Plant and Equipment

Property, plant and equipment at March 31, 2007 and 2006are summarized as follows:

Contributions in aid of construction, which were deductedfrom the cost of property, plant and equipment at March 31,2007 and 2006, were as follows:

Hydro power plant………Thermal power plant …Nuclear power plant……Transmission plant ……Transformation plant …Distribution plant ………General plant ……………Other ………………………

Construction work in progress ……………

Total ……………

¥ 529,497)

1,798,184)

1,283,882)

1,384,535)

732,237)

1,208,521)

339,600)

760,504)

8,036,963)

161,162)

¥8,198,125)

¥ 526,984)1,751,206)1,284,329)1,355,789)

722,850)1,185,813)

341,342)755,680)

7,923,996)

190,476)¥8,114,473)

$ 4,483,842)

15,227,233)

10,872,063)

11,724,405)

6,200,668)

10,233,897)

2,875,772)

6,440,037)

68,057,947)

1,364,738)

$69,422,686)

2007 20072006


¥195,087) ¥190,498) $1,652,019)

2007 20072006


Year ended March 31, 2007

Securities whose market valueexceeds their carrying value:

Other …………………………Securities whose carrying valueexceeds their market value:

Other …………………………Total …………………

¥4,499)

2,000)

¥6,499)

¥4,604)

1,658)

¥6,263)

¥104)

(341)

¥(236)

Millions of yen

Carryingvalue

Unrealizedgain (loss)

Marketvalue


Securities whose market valueexceeds their carrying value:

Other …………………………Securities whose carrying valueexceeds their market value:

Other …………………………Total …………………

$38,098)

16,936)

$55,034)

$38,987)

14,040)

$53,035)

$880)

(2,887)

$(1,998)

Thousands of U.S. dollars

Carryingvalue


Marketvalue

Other securities for which market prices were available atMarch 31, 2007 and 2006 were as follows:


Securities whose carrying valueexceeds their acquisition cost:Stock ……………………………

Securities whose acquisition costexceeds their carrying value:

Stock …………………………Total …………………

¥14,766)

1,112)

¥15,879)

¥33,753)

1,024)

¥34,778)

¥18,986)

(87)

¥18,898)

Millions of yen

Acquisitioncost


Carryingvalue


Securities whose carrying valueexceeds their acquisition cost:

Stock …………………………Securities whose acquisition costexceeds their carrying value:

Stock …………………………Total …………………

¥15,859)

13)¥15,872)

¥39,037)

11)¥39,048)

¥23,178)

(2)¥23,176)

Millions of yen

Acquisitioncost


Carryingvalue

5. Marketable Securities and Investment Securities

Held-to-maturity debt securities for which market priceswere available at March 31, 2007 were as follows:


Securities whose carrying valueexceeds their acquisition cost:

Stock …………………………Securities whose acquisition costexceeds their carrying value:

Stock …………………………Total …………………

$125,040)

9,416)

$134,465)

$285,824)

8,671)

$294,504)

$160,775)

(736)

$160,030)


Acquisitioncost


Carryingvalue

Sales of securities classified as other securities amountedto ¥53 million ($448 thousand) with an aggregate gain of¥39 million ($330 thousand) and loss of ¥0 million ($0thousand) for the year ended March 31, 2007.

Sales of securities classified as other securities amountedto ¥9,386 million with an aggregate gain of ¥7,642 millionand loss of ¥0 million for the year ended March 31, 2006.

Investment securities stated at cost at March 31, 2007and 2006 were as follows:

30


Held-to-maturity:Unlisted foreign bonds……Municipal bonds……………Other …………………………

Other securities:Unlisted stocks ……………

Subscription certificate …

Capital subscribed…………

¥ –)

1,051)

10)

34,054)

1,180)

875)

¥ 5,000)1,124)

10)

34,069)1,180)

746)

$ –)

8,899)

84)

288,373)

9,992)

7,409)

2007 20072006


The redemption schedule for other securities with maturitydates and held-to-maturity debt securities at March 31, 2007and 2006 is summarized as follows:

At March 31, 2007

Municipal bonds …Other…………………

Total………

¥173)

500)

¥674)

¥287)

10)

¥297)

¥331)

–)

¥331)

¥258)

6,000)

¥6,258)

Due afterfive years

through tenyears

Due afterone yearthrough

five yearsDue in oneyear or less

Due afterten years

Millions of yen

At March 31, 2006

Unlisted foreign bonds…Municipal bonds …Other…………………

Total………

¥-)73)10)

¥84)

¥-)391)-)

¥391)

¥-)338)-)

¥338)

¥5,000)321)-)

¥5,321)

Due afterfive years

through tenyears

Due afterone yearthrough


Due afterten years

Millions of yen

6. Trade Notes Receivable and Amounts Due from Customers

Trade notes receivable and amounts due from customers atMarch 31, 2007 and 2006 consisted of the following:

7. Short-Term Borrowings and Long-Term Debt

Short-term borrowings are principally secured. The relatedweighted-average interest rates for the years ended March31, 2007 and 2006 were approximately 0.769% and 0.297%,respectively.

At March 31, 2007 and 2006, long-term debt consisted ofthe following:

At March 31, 2007

Municipal bonds …Other…………………

Total………

$1,464)

4,234)

$5,707)

$2,430)

84)

$2,515)

$2,802)

-)

$2,802)

$2,184)

50,808)

$52,993)

Due afterfive yearsthrough

ten years

Due after one yearthrough


Due afterten years


Trade notes receivable andamounts due from customers…

Less allowance for uncollectiblereceivables ……………………

Total……………………

¥129,494)

(980)

¥128,513)

¥124,126)

(1,165)¥122,960)

$1,096,570)

(8,298)

$1,088,263)

2007 20072006


Long-term debt payments fall due subsequent to March 31,2007 are as follows:

Bonds in yen duethrough 2018 ……………

Loans from banks and otherfinancial institutions due through 2022 ……………

Other…………………………Subtotal …………………

Less current portion ……

Total ………………

¥1,320,067)

705,100)

233,537)

2,258,705)

(292,357)

¥1,966,347)

¥1,268,085)

749,611)288,525)

2,306,222)(242,409)

¥2,063,812)

$11,178,482)

5,970,869)

1,977,618)

19,126,979)

(2,475,713)

$16,651,257)

2007 20072006


2008…………………………………………2009…………………………………………2010…………………………………………2011 and thereafter ……………………

Total ……………………………

¥ 292,357

216,477

197,154

1,552,716

¥2,258,705

$ 2,475,713

1,833,152

1,669,523

13,148,581

$19,126,979

Millions ofyenYear ending March 31,


All assets of the Company are subject to certain statutorypreferential rights established to secure the bonds andloans from The Development Bank of Japan.

Certain of the agreements relating to long-term debtstipulate that the Company is required to submit proposalsfor the appropriation of retained earnings and to reportother significant matters, if requested by the lenders, fortheir review and approval prior to presentation to theshareholders. No such requests have ever been made.

Secured long-term debt at March 31, 2007 was as follows:

The assets of certain consolidated subsidiaries pledged ascollateral for the above long-term debt at March 31, 2007were as follows:

Land ………………………………………

Buildings …………………………………Machinery and equipment …………Other ………………………………………

Total ……………………………

¥12,535

40,783

23,905

10,157

¥87,382

$106,147

345,355

202,430

86,010

$739,961

Millions ofyen


Bonds………………………………………Long-term loans ………………………

¥1,320,221

300,100

$11,179,786

2,541,282

Millions ofyen


31

8. Retirement Benefit Plans

The Company and certain of its subsidiaries have definedbenefit plans, such as defined benefit pension plans, fundednon-contributory tax-qualified retirement pension plans anda lump-sum retirement benefits plan, which together coversubstantially all full-time employees who meet certaineligibility requirements. Certain subsidiaries have definedcontribution plans.

The following table sets forth the funded and accrued statusof the plans, and the amounts recognized in the consolidatedbalance sheets at March 31, 2007 and 2006 for the Company’sand the consolidated subsidiaries’ defined benefit plans:

Retirement benefit obligation …

Plan assets at fair value …………Unfunded retirement benefit

obligation ………………………

Unrecognized actuarial gain ……Unrecognized prior

service cost………………………Prepaid pension cost ……………Accrued retirement benefits ……

¥(480,381)

304,094)

(176,286)

(26,669)

(286)

(1,357)

¥(204,599)

¥(471,897)296,858)

(175,039)(41,353)

(322)(788)

¥(217,502)

$(4,067,922)

2,575,103)

(1,492,810)

(225,836)

(2,421)

(11,491)

$(1,732,568)

2007 20072006


The components of retirement benefit expenses for the yearsended March 31, 2007 and 2006 are outlined as follows:

The principal assumptions used in determining the retirementbenefit obligation and other components of the Company’sand the consolidated subsidiaries’ plans are shown below:

9. Income Taxes

The Company and consolidated subsidiaries are subject toseveral taxes based on earnings, which, in the aggregate,resulted in a statutory tax rate of approximately 36% forboth 2007 and 2006. Other major consolidated subsidiariesare subject to several taxes based on earnings, which, inthe aggregate, resulted in statutory tax rate ofapproximately 40% for both 2007 and 2006.

The significant components of deferred tax assets andliabilities at March 31, 2007 and 2006 were as follows:

Discount rates ………………………………Expected rates of return on plan

assets ………………………………………Period for amortization of

unrecognized prior service cost ……Period for amortization of

unrecognized actuarial gain or loss…Method of allocation of estimated

retirement benefits………………………

2.0% – 2.5%

0.0% – 4.2%

1year – 15 years

1year – 15 years

Equally over

the period

2.0% – 2.5%

0.0% – 2.53%

1year – 15 years

1year – 15 years

Equally over the period

2007 2006

Service cost…………………………Interest cost…………………………Expected return on

plan assets ………………………Amortization of unrecognized

actuarial (gain) loss ……………Amortization of unrecognized

prior service cost ………………Contributions paid for defined

contribution plans………………Total …………………………

¥17,148)

9,335)

(7,227)

(14,288)

(35)

762)

¥ 5,694)

¥21,273)10,005)

(329)

7,237)

(47,763)

737)¥ (8,840)

$145,211)

79,049)

(61,199)

(120,992)

(296)

6,452)

$ 48,217)

2007 20072006


Deferred tax assets:Accrued retirement

benefits……………………Deferred charges…………Intercompany profits……Other ………………………

Valuation allowance ……Total deferred tax assets…Deferred tax liabilities:

Unrealized holding gainon other securities ……

Other ………………………Total deferred tax

liabilities……………………Net deferred tax assets ……

2007 20072006


¥ 74,662)

17,189)

35,261)

60,544)

187,658)

(7,652)

180,006)

(6,928)

(1,385)

(8,314)

¥171,692)

¥ 79,444)18,773)35,831)53,231)

187,281)(5,255)

182,026)

(8,459)(1,628)

(10,087)¥171,938)

$ 632,246)

145,558)

298,594)

512,693)

1,589,110)

(64,798)

1,524,311)

(58,667)

(11,728)

(70,403)

$1,453,908)

Statutory tax rate ………………………………………………Effect of:

Equity in loss of affiliated companies…………………Intercompany profits………………………………………Other, net ……………………………………………………

Effective tax rate ………………………………………………

35.98%)

1.37%)0.83%)0.92%)

39.10%)

2006

The effective tax rates reflected in the accompanyingconsolidated statements of income for the years endedMarch 31, 2007 and 2006 differ from the statutory tax ratefor the following reasons:

Statutory tax rateEffect of:

Valuation allowance ………………………………………Difference of tax rate in consolidated subsidiariesPermanently non-deductible expenses for tax

purposes such as entertainment expenses ………

Intercompany profits………………………………………Tax credit for research and development costs, IT

investments and others …………………………………Other, net ……………………………………………………


35.98%)

2.83%)

1.06%)

1.01%)

0.99%)

(1.15)%

(0.34)%

40.38%)

2007

32


10. Shareholders’ Equity

The new Corporation Law of Japan (the “Law”), whichsuperseded most of the provisions of the Commercial Codeof Japan, went into effect on May 1, 2006. The Lawprovides that an amount equal to 10% of the amount to bedistributed as distributions of capital surplus (other than thecapital reserve) and retained earnings (other than the legalreserve) be transferred to the capital reserve and the legalreserve, respectively, until the sum of the capital reserveand the legal reserve equals 25% of the common stockaccount. Such distributions can be made at any time byresolution of the shareholders, or by the Board of Directorsif certain conditions are met, but neither the capital reservenor the legal reserve is available for distributions.

The legal reserve of ¥62,860 million ($532,305 thousand)was included in retained earnings in the accompanyingconsolidated financial statements for the year ended March31, 2007.

11. Operating Expenses

Operating expenses in the electricity business for the yearsended March 31, 2007 and 2006 were as follows:

Personnel …………………Fuel …………………………Purchased power…………Maintenance ………………Depreciation ………………Taxes other than income

taxes………………………Subcontracting fees ……

Other…………………………Total ………………

¥ 136,499

328,119

260,633

176,606

236,914

92,534

44,521

141,811

¥1,417,639

¥ 168,406309,205249,907161,019242,173

92,17147,683

131,630¥1,402,196

$ 1,155,889

2,778,550

2,207,070

1,495,520

2,006,215

783,588

377,009

1,200,872

$12,004,733

2007 20072006


12. Research and Development Costs

Research and development costs for the years ended March31, 2007 and 2006 were ¥9,036 million ($76,517 thousand)and ¥9,450 million, respectively.

13. Leases

(a) Lessees’ accountingThe following pro forma amounts represent the acquisitioncosts, accumulated depreciation and net book value of theleased machinery and equipment at March 31, 2007 and2006, which would have been reflected in the balancesheets if finance lease accounting had been applied to thefinance leases currently accounted for as operating leases:

Acquisition costs ……………Accumulated depreciation…Net book value ………………

¥4,048)

1,194)

¥2,854)

¥3,517)2,081)

¥1,436)

$34,278)

10,110)

$24,168)

2007 20072006


For the years ended March 31, 2007 and 2006, leasepayments relating to finance leases accounted for asoperating leases amounted to ¥631 million ($5,343thousand) and ¥1,310 million, respectively, which equaledthe depreciation expense of the leased assets computedby the straight-line method over the respective leaseterms with no residual value.

Future minimum lease payments (including theinterest portion thereon) subsequent to March 31, 2007for finance leases accounted for as operating leases aresummarized as follows:

2008 ………………………………………2009 and thereafter……………………

Total ……………………………

¥ 630)

2,482)

¥ 3,113)

$ 5,334)

21,017)

$26,361)



Future minimum lease payments subsequent to March31, 2007 for noncancelable operating leases aresummarized as follows:

(b) Lessors’ accountingThe following amounts represent the acquisition costs,accumulated depreciation and net book value of theleased assets relating to finance leases accounted for asoperating leases at March 31, 2007 and 2006:

For the years ended March 31, 2007 and 2006, leaseincome relating to finance leases accounted for asoperating leases amounted to ¥770 million ($6,520thousand) and ¥697 million, respectively.

For the years ended March 31, 2007 and 2006,depreciation of assets leased under finance leasesaccounted for as operating leases amounted to ¥753million ($6,376 thousand) and ¥683 million, respectively.

Future minimum lease income (including the interestportion thereon) subsequent to March 31, 2007 forfinance leases accounted for as operating leases issummarized as follows:

Acquisition costs ……………Accumulated depreciation…Net book value ………………

¥5,091)

1,935)

¥3,155)

¥5,162)2,383)

¥2,778)

$43,111)

16,385)

$26,716)

2007 20072006


2008 ………………………………………

2009 and thereafter ……………………Total ……………………………

¥ 85)

258)

¥ 343)

$ 719)

2,184)

$2,904)



33

14. Contingent Liabilities

At March 31, 2007, the Company and its consolidatedsubsidiaries were contingently liable as co-guarantors ofloans of other companies, primarily in connection with theprocurement of fuel, in the amount of ¥106,141 million($898,814 thousand), and as guarantors of employees’ housingloans in the amount of ¥1,175 million ($9,950 thousand).

At March 31, 2007, the Company assigned to banks itsobligation to make payments of its bonds amounting to ¥20,000million ($169,362 thousand) in the aggregate plus interest onthe principal of its bonds due through 2014 at a rate of 4.65%.In this connection, the Company made deposits with the banksin fulfillment of the related obligation. The deposits and thebonds have thus been excluded from the accompanyingconsolidated balance sheet at March 31, 2007.

15. Amounts Per Share

Basic net income per share is computed based on the netincome available for distribution to shareholders of commonstock and the weighted-average number of shares of commonstock outstanding during the year. Diluted net income pershare is computed based on the net income available fordistribution to the shareholders and the weighted-averagenumber of shares of common stock outstanding during theyear assuming full conversion of the convertible bonds.Net assets per share are computed based on the net assetsavailable for distribution to the shareholders and the numberof shares of common stock outstanding at the year end.

The amounts per share for the years ended March 31,2007 and 2006 were as follows:

2008…………………………………………2009 and thereafter ……………………

Total ……………………………

¥ 824)

1,957)

¥ 2,782)

$ 6,977)

16,572)

$23,558)



Net income:Basic………………………Diluted……………………

Cash dividendsapplicable to the year …

¥ 106.57)

–)

60.00)

¥ 107.90)–)

55.00)

$0.902)

–)

$0.508)

2007 20072006

Yen

Year ended March 31,

U.S. dollars

Net assets ………………… ¥1,971.69) ¥1,929.02) $16.696)

2007 20072006

Yen

At March 31,

U.S. dollars

16. Derivatives

The Company utilizes forward foreign exchange contractssolely in order to hedge against the risk of fluctuation inforeign currency exchange rates and to stabilize its futurecash flows relating to debts denominated in foreigncurrencies relating to its operations.

The Company also utilizes interest-rate swaps to hedgeits exposure to adverse fluctuation in interest rates and tomanage its future cash flows relating to the principal andinterest payments on bonds.

The Company has entered into various derivativestransactions solely in order to hedge against certain risks incompliance with its internal policies. The Company doesnot utilize derivatives for speculative trading purposes.

The Company is exposed to the risk of credit loss in theevent of nonperformance by the counterparties to thesederivatives positions, but considers the risk of any such lossto be minimal because the Company enters into derivativestransactions only with financial institutions which have highcredit ratings.

The Company enters into, monitors and manages itsderivatives positions based on its own internal policies.

The notional amounts and the estimated fair value ofthe derivatives positions at March 31, 2007 were as follows:

Since either the Company or its consolidated subsidiary didnot have potentially dilutive securities at March 31, 2007and 2006, diluted net income per share was not disclosed.

At March 31, 2007

Currency swaps:U.S. dollars …………… ¥50,759) ¥5,396) ¥5,396)

Millions of yen

Notionalamounts

Gain fromvaluationFair value

At March 31, 2007

Currency swaps:U.S. dollars…………… $429,833) $45,693) $45,693)


Notionalamounts


34


¥ 1,728,296)

–)

1,728,296)

1,594,361)

¥ 133,935)

¥ 4,069,331)

¥ 278,157)

¥ 202,946)

Net sales:

(1) Net sales to outside customers …………

(2) Net intersegment sales……………………

Total ………………………………………

Operating expenses………………………………

Operating income…………………………………

Total assets…………………………………………

Depreciation ………………………………………

Capital expenditures ……………………………

¥ 116,663)

133,831)

250,495)

241,016)

¥ 9,478)

¥ 245,198)

¥ 3,398)

¥ 3,018)

¥ 1,539,130)

2,415)

1,541,546)

1,431,721)

¥ 109,824)

¥ 3,697,080)

¥ 253,506)

¥ 183,217)

¥ 72,502)

128,207)

200,710)

186,664)

¥ 14,046)

¥ 381,027)

¥ 28,930)

¥ 24,323)

¥ 1,728,296)

264,454)

1,992,751)

1,859,401)

¥ 133,349)

¥ 4,323,306)

¥ 285,835)

¥ 210,559)

¥ –)

(264,454)

(264,454)

(265,040)

¥ 585)

¥ (253,974)

¥ (7,678)

¥ (7,612)

17. Segment Information

The segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2007 and 2006 issummarized as follows:

18. Subsequent Event

The following appropriations of retained earnings, which have not been reflected in the accompanying consolidated financialstatements, were approved at a meeting of the shareholders of the Company held on June 28, 2007:

Year-end cash dividends(¥30 = U.S.$0.254 per share)………………………………………………………………………………………………… ¥14,966) $126,733)

Millions ofyen


Year ended March 31, 2007Consolidated

total

Eliminations ofintersegmenttransactionsor corporateTotalOther

Constructionbusiness

Electricutility

business

Millions of yen

Net sales:

(1) Net sales to outside customers …………


Total ………………………………………



Total assets…………………………………………



¥ 106,967)

126,045)

233,013)

224,841)

¥ 8,171)

¥ 237,789)

¥ 3,696)

¥ 3,782)

¥ 1,491,698)

2,299)

1,493,998)

1,414,671)

¥ 79,327)

¥ 3,753,794)

¥ 258,960)

¥ 189,105)

¥ 61,379)

125,191)

186,571)

173,922)

¥ 12,649)

¥ 384,619)

¥ 30,146)

¥ 20,338)

¥1,660,045)

253,536)

1,913,582)

1,813,435)

¥ 100,147)

¥4,376,204)

¥ 292,803)

¥ 213,226)

¥ –)

(253,536)

(253,536)

(253,237)

¥ (299)

¥ (262,429)

¥ (7,512)

¥ (7,905)

¥ 1,660,045)

–)

1,660,045)

1,560,197)

¥ 99,848)

¥ 4,113,775)

¥ 285,291)

¥ 205,321)


total



Electricutility

business

Millions of yen

Net sales:

(1) Net sales to outside customers


Total ………………………………………



Total assets…………………………………………



$ 987,915)

1,133,296)

2,121,221)

2,040,951)

$ 80,260)

$2,076,365)

$ 28,774)

$ 25,556)

$ 13,033,533)

20,450)

13,053,992)

12,123,981)

$ 930,002)

$ 31,307,307)

$ 2,146,718)

$ 1,551,503)

$ 613,955)

1,085,671)

1,699,635)

1,580,692)

$ 118,943)

$ 3,226,581)

$ 244,982)

$ 205,970)

$14,635,413)

2,239,427)

16,874,849)

15,745,626)

$ 1,129,215)

$36,610,263)

$ 2,420,484)

$ 1,783,038)

$ –)

(2,239,427)

(2,239,427)

(2,244,389)

$ 4,953)

$(2,150,681)

$ (65,018)

$ (64,459)

$14,635,413)

–)

14,635,413)

13,501,236)

$ 1,134,177)

$34,459,573)

$ 2,355,466)

$ 1,718,570)


total



Electricutility

business


35

Report of Independent AuditorsF I N A N C I A L S E C T I O N

36

Non-Consolidated Balance SheetsF I N A N C I A L S E C T I O N

Tohoku Electric Power Co., Inc.March 31, 2007 and 2006

Assets

Property, plant and equipment (Note 4) ………………………………………………Less accumulated depreciation ……………………………………………………………

Property, plant and equipment, net (Note 6)……………………………………

Nuclear fuel:

Loaded nuclear fuel ……………………………………………………………………………Nuclear fuel under processing………………………………………………………………

Total nuclear fuel …………………………………………………………………………

Investments in and advances to:

Subsidiaries and affiliates (Notes 6 and 7)Other (Note 6) ……………………………………………………………………………………

Total investments and advances ……………………………………………………

Fund for reprocessing costs of irradiated nuclear fuel…………………………………

Deferred income taxes (Note 8) ……………………………………………………………

Other assets (Note 6) ……………………………………………………………………………

Current assets:

Cash (Note 6)………………………………………………………………………………………Amounts due from customers, less allowance

for uncollectible receivables (Notes 5 and 6) ……………………………………Fuel and supplies (Note 6)……………………………………………………………………Deferred income taxes (Note 8)……………………………………………………………Other current assets (Note 6) ………………………………………………………………

Total current assets ………………………………………………………………………

Total assets …………………………………………………………………………………

¥ 7,441,984)

(4,548,268)

2,893,715)

37,234)

104,277)

141,511)

183,531)

77,730)

261,262)

104,522)

101,879)

3,383)

55,003)

78,347)

35,257)

11,727)

22,766)

203,102)

¥ 3,709,377)

2007 20072006

Millions of yen


(Note 3)

¥ 7,352,109)(4,369,790)2,982,319)

39,809)101,194)141,003)

183,043)85,613)

268,656)

61,466)

101,453)

3,147)

55,890)

76,677)28,528)9,850)

30,043)200,990)

¥ 3,759,037)

$ 63,019,595)

(38,515,268)

24,504,318)

315,301)

883,029)

1,198,331)

1,554,162)

658,226)

2,212,397)

885,104)

862,723)

28,647)

465,771)

663,451)

298,560)

99,305)

192,785)

1,719,891)

$31,411,440)

See notes to non-consolidated financial statements.

37

Liabilities and net assets

Long-term debt (Note 6) …………………………………………………………………………

Accrued retirement benefits …………………………………………………………………

Reserve for reprocessing costs of irradiated nuclear fuel ………………………

Pre-reserve for reprocessing costs of irradiated nuclear fuel …………………

Reserve for decommissioning costs of nuclear power units……………………

Current liabilities:

Short-term borrowings …………………………………………………………………………

Current portion of long-term debt (Note 6) ………………………………………………Commercial paper…………………………………………………………………………………Accounts payable …………………………………………………………………………………Accrued income taxes……………………………………………………………………………Accrued expenses…………………………………………………………………………………Other current liabilities …………………………………………………………………………

Total current liabilities………………………………………………………………………

Reserve for fluctuation in water levels……………………………………………………

Contingent liabilities (Note 13)

Net assets (Note 14):Shareholders’ equity (Note 10):

Common stock, without par value:Authorized – 1,000,000,000 sharesIssued – 502,882,585 shares ………………………………………………

Capital surplus……………………………………………………………………………………Legal reserve ……………………………………………………………………………………

Retained earnings (Notes 9 and 16)………………………………………………………Treasury stock, at cost; 4,003,069 shares in 2007 and 3,833,254 shares in 2006…

Valuation, translation adjustments and other:Net unrealized holding gain on securities………………………………………………

Total net assets ………………………………………………………………………………

Total liabilities and net assets……………………………………………………………

¥1,897,517)

160,561)

113,269)

3,126)

38,426)

54,440)

272,291)

82,000)

74,559)

16,020)

40,074)

63,371)

602,758)

19,176)

251,441)

26,657)

62,860)

530,521)

(7,580)

10,640)

874,540)

¥3,709,377)

2007 20072006

Millions of yen


(Note 3)

¥1,980,762)

173,274)

105,973)

–)

36,151)

54,440)214,497)131,000)

75,726)5,351)

43,901)60,080)

584,998)

14,900)

251,441)26,657)62,860)

515,778)(7,104)

13,343)862,977)

¥3,759,037)

$16,068,396)

1,359,649)

959,175)

26,471)

325,395)

461,004)

2,305,792)

694,385)

631,374)

135,659)

339,351)

536,633)

5,104,225)

162,384)

2,129,231)

225,734)

532,305)

4,492,514)

(64,188)

90,100)

7,405,707)

$31,411,440)


38

Non-Consolidated Statements of IncomeF I N A N C I A L S E C T I O N

Tohoku Electric Power Co., Inc.Years ended March 31, 2007 and 2006

Operating revenues

Operating expenses (Note 11):Personnel expenses ……………………………………………………………………………Fuel …………………………………………………………………………………………………Purchased power ………………………………………………………………………………Maintenance………………………………………………………………………………………Depreciation ………………………………………………………………………………………Taxes other than income taxes ……………………………………………………………Subcontracting fees ……………………………………………………………………………Other…………………………………………………………………………………………………

Operating income …………………………………………………………………………

Other expenses (income):

Interest and dividend income ………………………………………………………………Interest expense…………………………………………………………………………………Gain on reversal of prior service liability of retirement benefit obligation……Other, net …………………………………………………………………………………………

Income before special item and income taxes ………………………………………

Special item:

Provision for reserve for fluctuation in water levels…………………………………Income before income taxes …………………………………………………………

Income taxes (Note 8):Current………………………………………………………………………………………………Deferred ……………………………………………………………………………………………

Net income (Note 14)……………………………………………………………………………

¥1,546,745)

134,695)320,792)293,911)173,376)239,424)86,350)47,100)

142,782)1,438,434)

108,311)

(2,420)

45,329)–)

(11,360)

31,548)76,762)

4,275)72,487)

28,490)(783)

27,706)¥ 44,780)

2007 20072006

Millions of yen


(Note 3)

¥1,498,759)

166,540)302,488)277,038)163,260)243,595)86,148)50,605)

131,141)1,420,819)

77,940)

(1,263)44,468)

(47,782)(3,363)(7,940)85,881)

2,333)83,547)

15,945)14,060)30,005)

¥ 53,542)

$13,098,018

1,140,613)2,716,504)2,488,872)1,468,168)2,027,470)

731,221)398,848)

1,209,094)12,180,828)

917,190)

(20,492)

383,851)–)

(96,197)

267,152)650,029)

36,201)613,828)

241,256)(6,630)

234,617)$ 379,202)


39

Non-Consolidated Statements of Changes in Net AssetsF I N A N C I A L S E C T I O N

Tohoku Electric Power Co., Inc.Years ended March 31, 2007 and 2006

Number ofshares ofcommon

stockCommon

stock

Balance at March 31, 2005 ……

Cash dividends paid……………Bonuses to directors and

corporate auditors……………Accumulated deficit succeeded from

the merged consolidated subsidiary…Net income ………………………Purchases of treasury stock…Net change during the year…


Cash dividends paid……………Bonuses to directors and

corporate auditors……………Net income ………………………Purchases of treasury stock…Net change during the year…


502,882,585)

502,882,585)

502,882,585)

¥251,441)

251,441)

¥251,441)

Millions of yen

Capitalsurplus

¥26,657)

26,657)

¥26,657)

Legalreserve

¥62,860)

62,860)

¥62,860)

Retainedearnings

¥491,208)(24,957)

(120)

(3,894)53,542)

515,778)(29,940)

(97)44,780)

¥530,521)

Treasurystock, at

cost

¥ (1,041)

(6,063)

(7,104)

(476)

¥(7,580)

Net unrealizedholding gainon securities

¥ 8,325)

5,017)13,343)

(2,702)¥10,640)

Total netassets

¥839,452)(24,957)

(120)

(3,894)53,542)(6,063)5,017)

862,977)(29,940)

(97)44,780)

(476)(2,702)

¥874,540)


Valuation, translationadjustments

and other

Commonstock

Balance at March 31, 2006…………………………

Cash dividends paid ………………………………

Bonuses to directors and corporate auditors…Net income……………………………………………Purchases of treasury stock ……………………Net change duringthe year………………………

Balance at March 31, 2007…………………………

$2,129,231)

$2,129,231)

Thousands of U.S. dollars (Note 3)

Capitalsurplus

$225,734)

$225,734)

Legalreserve

$532,305)

$532,305)

Retainedearnings

$4,367,668)(253,535)

(821)379,202)

$4,492,514)

Treasurystock, at

cost

$(60,157)

(4,030)

$(64,188)

Net unrealizedholding gainon securities

$112,990)

(22,880)$ 90,100)

Total netassets

$7,307,790)(253,535)

(821)379,202)

(4,030)(22,880)

$7,405,707)


Valuation, translationadjustments

and other


40

Notes to Non-Consolidated Financial StatementsF I N A N C I A L S E C T I O N

Tohoku Electric Power Co., Inc.March 31, 2007

nuclear fuel with definite plan for reprocessing.The effect of this change was to increase operating

expenses and to decrease income before income taxesby ¥4,397 million for the year ended March 31, 2006.

3. U.S. Dollar Amounts

Amounts in U.S. dollars are included solely for the convenienceof the reader. The rate of ¥118.09= U.S.$1.00, the approximaterate of exchange in effect on March 31, 2007, has been usedin translation. The inclusion of such amounts is not intendedto imply that yen have been or could be readily converted,realized or settled in U.S. dollars at that or any other rate.

4. Property, Plant and Equipment

Property, plant and equipment at March 31, 2007 and 2006are summarized as follows:

1. Summary of Significant Accounting Policies

The accompanying non-consolidated financial statements ofTohoku Electric Power Company, Incorporated (the“Company”) have been compiled from the non-consolidatedfinancial statements prepared by the Company as required bythe Securities and Exchange Law of Japan and are preparedon the basis of accounting principles generally accepted inJapan, which are different in certain respects as to theapplication and disclosure requirements of InternationalFinancial Reporting Standards.

As permitted by the Securities and Exchange Law, amountsof less than one million yen have been omitted. As a result,the totals shown in the accompanying non-consolidatedfinancial statements (both in yen and U.S. dollars) do notnecessarily agree with the sum of the individual amounts.

Certain amounts previously reported have beenreclassified to conform to the current year’s presentation.

The accompanying non-consolidated financial statementshave been prepared on the same basis as the accountingpolicies discussed in Note 1 to the consolidated financialstatements except that these financial statements relate tothe Company only, with investments in subsidiaries andaffiliates being stated substantially at cost.

2. Accounting Change

(a) Amortization of easementsPrior to April 1, 2005, the Company treated easementsrelated to lands below transmission lines as unamortizableassets. Effective April 1, 2005, the Company began toamortize such easements to determine transmission anddistribution costs more adequately in accordance with therevision of the Japanese Electric Utility Law requiringelectric utility providers to account for revenues andexpenses of transmission and distribution. The effect ofthis change was to increase operating expenses and todecrease income before income taxes by ¥5,354 millionfor the year ended March 31, 2006.

(b) Reserve for reprocessing costs of irradiated nuclear fuelPrior to April 1, 2005, the annual provision for the costs ofreprocessing irradiated nuclear fuel was calculated to statethe related reserve at 60% of the amount that would berequired to reprocess all of the irradiated nuclear fuel inaccordance with the regulatory authority.

Effective April 1, 2005, the Company adopted a revisedaccounting standard for reserve for reprocessing costs ofirradiated nuclear fuel. In accordance with the changes inthe accounting rules applicable to electric utility providersin Japan, the reserve is stated at present value of theamount that would be required to reprocess the irradiated

Contributions in aid of construction, which were deductedfrom the cost of property, plant and equipment at March 31,2007 and 2006, were as follows:

Hydro power plant ……Thermal power plant …Nuclear power plant …Internal combustion

power plant……………Transmission plant ……Transformation plant …Distribution plant ………General plant ……………Property leased

to others ………………Other………………………

Construction work in progress ……………

Total ……………

¥ 478,887)

1,617,222)

1,288,638)

25,939)

1,419,302)

762,121)

1,306,513)

366,120)

501)

18,966)

7,284,214)

157,769)

¥7,441,984)

¥ 476,318)1,571,861)1,286,822)

26,080)1,389,013)

751,915)1,279,954)

366,377)

501)15,377)

7,164,223)

187,886)¥7,352,109)

$ 4,055,271)

13,694,825)

10,912,338)

219,654)

12,018,816)

6,453,730)

11,063,705)

3,100,347)

4,242)

160,606)

61,683,580)

1,336,006)

$63,019,595)

2007 20072006


¥182,860) ¥180,544) $1,548,479)

2007 20072006


5. Amounts Due from Customers

Amounts due from customers, less allowance for uncollectiblereceivables at March 31, 2007 and 2006 consisted of thefollowing:

41

Amounts due from customers ………………

Less allowance foruncollectible receivables…

Total………………

¥78,758)

(410)

¥78,347)

¥77,085)

(408)¥76,677)

$666,932)

(3,471)

$663,451)

2007 20072006


6. Assets Pledged as Collateral

All assets of the Company are subject to certain statutorypreferential rights established to secure the bonds andloans from The Development Bank of Japan.

Secured long-term debt at March 31, 2007 was as follows:

Carrying value ……………Market value ………………Unrealized gain……………

¥ 5,978)

23,659)

¥17,680)

¥ 5,978)26,085)

¥20,106)

$ 50,622)

200,347)

$149,716)

2007 20072006


Bonds ………………………………………Long-term loans …………………………

¥1,320,521)

257,838)

$11,182,327)

2,183,402)

Millions ofyen


Deferred tax assets:Accrued retirement

benefits………………………Deferred charges……………Other …………………………

Valuation allowance ………Total deferred tax assets …

Deferred tax liabilities:Unrealized holding gain on securities ………………

Other …………………………

Total deferred tax liabilities…Net deferred tax assets ……

¥ 57,769)

17,079)

50,493)

125,342)

(5,726)

119,616)

(6,009)

–)

(6,009)

¥113,606)

¥ 62,344)18,652)41,505)

122,501)(3,692)

118,808)

(7,500)(4)

(7,504)¥111,304)

$ 489,194)

144,626)

427,580)

1,061,410)

(48,488)

1,012,922)

(50,884)

–)

(50,884)

$ 962,028)

2007 20072006


The effective tax rate reflected in the accompanyingconsolidated statement of income for the year ended March31, 2007 differs from the statutory tax rate for the followingreasons:

7. Securities

The carrying and market value of the common stock of YurtecCorp., a subsidiary, included in investments in and advances tosubsidiaries and affiliates at March 31, 2007 and 2006 aresummarized as follows:

8. Income Taxes

The Company is subject to corporation and inhabitants’ taxesbased on earnings, which, in the aggregate, resulted in astatutory tax rate of approximately 36% for both 2007 and2006.

The significant components of the Company’s deferredtax assets and liabilities at March 31, 2007 and 2006 wereas follows:

9. Tax Deferral Purpose Reserves

Retained earnings appropriated for tax deferral purposereserves, which are subaccounts within retained earnings,are stated in accordance with the Special Taxation MeasuresLaw and the Commercial Code. The reserves are deductedfrom taxable income when provided and reversed to taxableincome in subsequent years, which results in a deferral ofincome tax payment. See Note 10.

10. Shareholders’ Equity

The new Corporation Law of Japan (the “Law”), whichsuperseded most of the provisions of the Commercial Code ofJapan, went into effect on May 1, 2006. The Law providesthat an amount equal to 10% of the amount to be distributed

Statutory tax rateEffect of:

Valuation allowance ………………………………………Permanently non-deductible expenses for tax

purposes such as entertainment expenses ………Tax credit for research and development costs……Tax credit for IT investments……………………………Other, net ……………………………………………………


35.98%)

2.80%)

0.77%)

(0.80)%

(0.63)%

0.10%)

38.22%)

2007

The difference between the effective tax rate reflected in theaccompanying statement of income for the year endedMarch 31, 2006, and the statutory tax rate was immaterial.

42


as distribution of capital surplus (other than the capitalreserve) and retained earnings (other than the legal reserve)be transferred to the capital reserve and the legal reserve,respectively, until the sum of the capital reserve and the legalreserve equals 25% of the common stock account. Suchdistributions can be made at any time by resolution of theshareholders, or by the Board of Directors if certain conditionsare met, but neither the capital reserve nor the legal reserveis available for distributions.

Retained earnings at March 31, 2007 and 2006 consistedof the following:

Appropriated retained earnings:Reserve for loss on overseas investments (see Note 9) ……

Reserve for cost fluctuation adjustments………………………

Reserve for depreciation of Higashi Niigata ThermalPower Station Unit 4-2 Series…

Reserve for general purposes…Unappropriated retainedearnings …………………………

Total ……………………

¥ –)

103,000)

10,000)

306,400)

111,121)

¥530,521)

¥ 8)

103,000)

–)306,400)

106,370)¥515,778)

$ –)

872,216)

84,681)

2,594,631)

940,985)

$4,492,514)

2007 20072006


11. Research and Development Costs

Research and development costs for the years ended March31, 2007 and 2006 were ¥8,096 million ($68,557 thousand)and ¥8,675 million, respectively.

12. Leases

The following pro forma amounts represent the acquisitioncosts, accumulated depreciation and net book value of theleased machinery and equipment at March 31, 2007 and2006, which would have been reflected in the balancesheets if finance lease accounting had been applied to thefinance leases currently accounted for as operating leases:

Acquisition costs……………Accumulated depreciation…Net book value………………

¥16,521)

7,133)

¥ 9,387)

¥16,394)6,975)

¥ 9,418)

$139,901)

60,403)

$ 79,490)

2007 20072006


For the years ended March 31, 2007 and 2006, lease paymentsrelating to finance leases accounted for as operating leasesamounted to ¥3,016 million ($25,539 thousand) and ¥3,418million, respectively, which equaled the depreciation expenseof the leased assets computed by the straight-line method

over the respective lease terms with no residual value.Future minimum lease payments (including the interest

portion thereon) subsequent to March 31, 2007 for financeleases accounted for as operating leases are summarizedas follows:

13. Contingent Liabilities

At March 31, 2007, the Company was contingently liable as aco-guarantor of loans of other companies, primarily inconnection with the procurement of fuel, in the amount of¥116,554 million ($986,992 thousand), and as guarantor ofemployees’ housing loans in the amount of ¥1,137 million($9,628 thousand).

At March 31, 2007, the Company assigned to banks itsobligation to make payments of its bonds amounting to¥20,000 million ($169,362 thousand) in the aggregate plusinterest on the principal of its bonds due through 2014 at arate of 4.65%. In this connection, the Company made depositswith the banks in fulfillment of the related obligation. Thedeposit and the bonds have thus been excluded from theaccompanying non-consolidated balance sheet at March 31,2007.

14. Amounts Per Share

Basic net income per share is computed based on the netincome available for distribution to shareholders of commonstock and the weighted-average number of shares of commonstock outstanding during the year. Diluted net income pershare is computed based on the net income available fordistribution to the shareholders and the weighted-averagenumber of shares of common stock outstanding during theyear assuming full conversion of the convertible bonds.Net assets per share are computed based on the net assetsavailable for distribution to the shareholders and the numberof shares of common stock outstanding at the year end.

The amounts per share for the years ended March 31,2007 and 2006 were as follows:

2008…………………………………………2009 and thereafter ……………………

Total ……………………………

¥ 2,751)

6,636)

¥ 9,387)

$23,295)

56,194)

$79,490)



Net income:Basic………………………Diluted……………………

Cash dividends applicable to the year…

¥89.75)

–)

60.00)

¥107.08)–)

55.00)

$ 0.760)

–)

0.508)

2007 20072006

Yen

Year ended March 31,

U.S. dollars

43

Since the Company did not have potentially dilutive securitiesat March 31, 2007 and 2006, diluted net income per share wasnot disclosed.

15. Derivatives

The Company utilizes forward foreign exchange contractssolely in order to hedge against the risk of fluctuation inforeign currency exchange rates and to stabilize its futurecash flows relating to debts denominated in foreigncurrencies relating to its operations.

The Company also utilizes interest-rate swaps to hedgeits exposure to adverse fluctuation in interest rates and tomanage its future cash flows relating to the principal andinterest payments on bonds.

The Company has entered into various derivativestransactions solely in order to hedge against certain risks incompliance with its internal policies. The Company doesnot utilize derivatives for speculative trading purposes.

The Company is exposed to the risk of credit loss in theevent of nonperformance by the counterparties to thesederivatives positions, but considers the risk of any such lossto be minimal because the Company enters into derivativestransactions only with financial institutions which have highcredit ratings.

The Company enters into, monitors and manages itsderivatives positions based on its own internal policies.

The notional amounts and the estimated fair value ofthe derivatives positions at March 31, 2007 were as follows:

Net assets ………………… ¥1,753.01) ¥1,729.05) $14.844)

2007 20072006

Yen

At March 31,

U.S. dollars

At March 31, 2007

Currency swaps:U.S. dollars …………… ¥50,759) ¥5,396) ¥5,396)

Millions of yen

Notionalamounts


At March 31, 2007

Currency swaps:U.S. dollars …………… $429,833) $45,693) $45,693)


Notionalamounts


16. Subsequent Event

The following appropriations of retained earnings, which havenot been reflected in the accompanying non-consolidatedfinancial statements, were approved at a meeting of theshareholders of the Company held on June 28, 2007:

Year-end cash dividends(¥30 = U.S.$0.254 per share) ………… ¥14,966) $126,733)

Millionsof yen


44

Report of Independent AuditorsF I N A N C I A L S E C T I O N

A D D E N D U MA Brief Backgrounder on the Tohoku Region and Related Corporate Data

Characteristics of the Tohoku Region

Tohoku Electric Power in Comparison with

10 Japanese Electric Power Companies

Facts and Figures about

Main Subsidiaries

Board of Directors

Non-Consolidated Corporate Data

Directory

Power Supply Network

46

48

48

49

50

50

51

Contents

The Tohoku region, which is the service area of Tohoku Electric Power Co., Inc., represents 21% of the total area of Japan. It is an expansive region full of development potential. As for demand from large-scale industrial customers, the materials production industry’s share fell to 36.3% in FY2006 from 77.5% in FY1973, while the processing/assembly industry’s share rose to 63.7% in FY2006 from 22.5% in FY1973. These shifts were caused not only by changes in the Japanese industrial structure in the aftermath of the oil crisis but also by Tohoku’s resources (such as land, water, and labor) that served as a magnet for advanced industries, including the electrical machinery industry. Turning to the current industrial structure of the Tohoku region, the electrical machinery industry accounts for about 30% of industrial sales, well exceeding an equivalent share in the nationwide total. In addition, the proportion of plant construction in the Tohoku region to the national total constantly averages around 15%, uniquely including many of the most advanced plants. Therefore, the stock vintage (the average age of plants and equipment) of manufacturing industries in the Tohoku region is young and new compared to the national average, which constitutes a comparative regional advantages in productivity and stronger resistance against cyclical changes or an economic slowdown.

46

Addendum

Characteristics of the Tohoku Region

Socioeconomic Aspects

Electrical machineryTransportation machineryGeneral machineryFood productsChemicalsMetal productsNonferrous metalsOthers

Value of Manufactured Goods Shipments by Sector (Tohoku/Japan) for 2005

16.7% 18.2% 10.5% 7.7% 8.4% 4.7% 31.5%

29.5% 6.3% 8.8% 11.0% 5.8% 5.6% 30.7%

2.3%

2.3%

0% 20% 40% 60% 80% 100%

Japan

Tohoku

The share of electrical machinery in the Tohoku region amounts to about 30%and is uniquely larger than that in the entire Japan.

The surface area of the Tohoku region isapprox. 80,000km2, occupying one fifth ofJapan. It is almost the size of Austria.

The regional population of approx. 12million represents one tenth of thenational total, exceeding the totalpopulation of Greece.

The regional gross output is ¥42.2 trillion($357 billion), which is more than twicethat of Finland.

The value of manufactured goodsshipments of the Tohoku region is ¥21.6trillion ($182 billion) and accounts for7.3% of the national total.

Surface Area Population Gross OutputValue of Manufactured

Goods Shipments

Total surface area377,907 km2

Tohoku21.0%

Tohoku9.4%

Total population127.76 million

Tohoku8.3%

Total gross output¥508.4 trillion

Tohoku7.3%

Total value ofmanufactured goods

shipments

47

Annual Report 2007

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Japan

Tohoku

Electric Power Sales to Large-Scale Industrial Customers by Segment (FY2006)A large share occupied by the machinery and equipment manufacturing industry and nonferrousmetal industry is a feature unique to Tohoku EPCo.

MiningFood productsTextilesPulp/PaperChemicalsCeramicsSteelNonferrous metalsMachinery and equipment manufacturingRailwayOthers

5.1% 18.4%5.1%32.4%11.3%11.8%3.0%7.7%4.3%

0.5%0.4%

22.2%6.5%27.5%5.3%13.5%4.1%10.2%3.7%

1.1%0.4%

5.6%

0%

20%

40%

60%

80%

100%

20062005200420032002

Plant Construction by Region (Site space of 1,000 m2 or more)

KyusyuShikokuChugokuKinkiHokurikuTokaiKantoHokkaidoTohoku

16.6

4.4

22.7

15.0

4.0

15.1

4.84.3

13.1 13.1 13.2

15.2

3.9

24.9

16.1 16.1

4.0

14.9

4.03.9

14.4

3.7

24.4

5.6

13.6

6.42.6

17.3

4.1

23.4

12.9

4.7

12.5

6.4

4.4

14.3

The ratio of plant construction in the Tohoku region continues to stand at 15% level,with its unique feature of a large presence of highly advanced plants.

11.1

15.0

16.0

3.5

26.0

5.4

14.4

5.72.9

2006(FY)2005200420031993198319730

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Changes in Composition Ratios of the Processing/AssemblyIndustry and the Intermediate Products Industry in Large Industrial Customers in the Tohoku Region

As for the Company's Large-scale Industrial customers, the share of the intermediate productsindustry fell in FY 2006 to 36.3% from 77.5% of the FY 1973 level, while the share of theprocessing/assembly industry in FY 2006 rose to 63.7% from 22.5% in FY 1973.

(11.6)

27.9

60.5

The processing and assembly industry: B+C (C=Machines)

The intermediate products industry: A

(28.5)

37.7

33.8

35.9

(30.8)

33.3

35.8

(31.5)

32.7

36.3

(31.7)

32.0

36.3A

(32.4)C

31.3B

77.5

(3.7)

18.822.5

39.5

62.3 64.1 64.2 63.7 63.7

48

Addendum

Tohoku Electric Power in Comparison with 10 Japanese Electric Power Companies

Company

Tousei Kougyo Co., Inc.

Sakata Kyodo Power Co., Ltd.

Tohoku Natural Energy Development Co., Ltd.

Tohoku Hydropower & Geothermal Energy Co., Inc.

Joban Joint Power Co., Ltd.※

Arakawa Hydro-Electric Power Co., Ltd.※

Soma Kyodo Power Co., Ltd.※

Date of Establishment

Paid-inCapital

(Millions of yen)

EquityOwnership

(%)

100.0

100.0

74.7

75.0

49.1

50.0

50.0

47.9

100.0

100.0

60.7

81.7

100.0

100.0

100.0

42.3

5,270

25,500

300

2,000

56,000

350

112,800

7,803

1,000

50

135

100

650

10,000

96

12,000

(as of March, 2007)

※ Equity Method Applied Affiliates

1.Electric Power Business : Generation and supply of electricity

Tohoku Intelligent Telecommunication Co., Inc.

Tohoku Information Systems Co., Inc.

4.Information Processing, Telecommunication Business : Telecommunication businesses through the use of Tohoku EPCO’s communication equipments and technologies

Yurtec Corp.

Tohoku Electric Power Engineering & Construction Co., Inc.

Tohoku Ryokka Kankyohozen Co., Ltd.

2.Construction Business : Upgrading and expanding of facilities, Construction for equipment maintenance

Kitanihon Electric Cable Co., Ltd.

Tsuken Electric Ind Co., Ltd.

Higashi Nihon Kougyou Co., Inc.

5.Other Business

Nihonkai LNG Co., Ltd.

3.Gas Business : Supply of LNG to generate power

Facts and Figures about Main Subsidiaries

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

OkinawaKyusyuShikokuChugokuKansaiHokurikuChubuTokyoTohokuHokkaido

3.5

9.1

32.3

14.9

3.2

16.6

6.9

3.2

9.5

0.8

(Electric Power Company)

(%)

Percentage Shares ofElectric Power Sales by EPCO(10 Japanese EPCOs’ total for FY 2006=100%)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0


3.5

10.7

32.8

13.8

3.0

16.1

6.7

3.6

8.8

1.0


(%)

Percentage Shares ofConsolidated Operating Revenues by EPCO(10 Japanese EPCOs’ total for FY 2006=100%)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0


3.6

9.8

32.5

13.7

3.6

16.4

6.4

3.4

9.7

0.9


(%)

Percentage Shares ofConsolidated Total Assets by EPCO(10 Japanese EPCOs’ total for FY 2006=100%)

Jan.

Apr.

Feb.

Oct.

Dec.

Apr.

Jun.

26,

2,

28,

12,

23,

22,

1,

1953

1973

2000

1984

1955

1960

1981

Oct.

Feb.

Apr.

10,

1,

1,

1944

1959

1972

Jul.

Nov.

Nov.

11,

19,

2,

1946

1946

1953

Oct.

Jul.

27,

1,

1992

2001

Aug. 26, 1978

48 49

Addendum Annual Report 2007

(as of June, 2007)Tohoku Electric Power in Comparison with 10 Japanese Electric Power Companies

Chairman of the Board

Keiichi Makuta

President

Hiroaki Takahashi

Tsuneo Saito Takeo Nishi Masayuki Oyama Shigeo Saito

Executive vice presidents

Managing directors

Fumiaki Maekawa Mitsuru Suzuki Yukio Endo Harumasa Kodama Kazunori Watanabe

Board of Directors

Kyonosuke Sasaki

Toshiya Kishi

Nobuaki Abe

Eiji Hayasaka

Yasuo Yahagi

Yutaka Suto

Isao Ishikawa

Sakuya Fujiwara

Ikuo Uno

Toshiaki OuchiDirectorsStandingauditors Auditors

Company

Tousei Kougyo Co., Inc.

Sakata Kyodo Power Co., Ltd.

Tohoku Natural Energy Development Co., Ltd.

Tohoku Hydropower & Geothermal Energy Co., Inc.

Joban Joint Power Co., Ltd.※

Arakawa Hydro-Electric Power Co., Ltd.※

Soma Kyodo Power Co., Ltd.※

Date of Establishment

Paid-inCapital

(Millions of yen)

EquityOwnership

(%)

100.0

100.0

74.7

75.0

49.1

50.0

50.0

47.9

100.0

100.0

60.7

81.7

100.0

100.0

100.0

42.3

5,270

25,500

300

2,000

56,000

350

112,800

7,803

1,000

50

135

100

650

10,000

96

12,000

(as of March, 2007)

※ Equity Method Applied Affiliates

1.Electric Power Business : Generation and supply of electricity

Tohoku Intelligent Telecommunication Co., Inc.

Tohoku Information Systems Co., Inc.

4.Information Processing, Telecommunication Business : Telecommunication businesses through the use of Tohoku EPCO’s communication equipments and technologies

Yurtec Corp.

Tohoku Electric Power Engineering & Construction Co., Inc.

Tohoku Ryokka Kankyohozen Co., Ltd.

2.Construction Business : Upgrading and expanding of facilities, Construction for equipment maintenance

Kitanihon Electric Cable Co., Ltd.

Tsuken Electric Ind Co., Ltd.

Higashi Nihon Kougyou Co., Inc.

5.Other Business

Nihonkai LNG Co., Ltd.

3.Gas Business : Supply of LNG to generate power

Facts and Figures about Main Subsidiaries

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0


3.5

9.1

32.3

14.9

3.2

16.6

6.9

3.2

9.5

0.8


(%)

Percentage Shares ofElectric Power Sales by EPCO(10 Japanese EPCOs’ total for FY 2006=100%)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0


3.5

10.7

32.8

13.8

3.0

16.1

6.7

3.6

8.8

1.0


(%)

Percentage Shares ofConsolidated Operating Revenues by EPCO(10 Japanese EPCOs’ total for FY 2006=100%)

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0


3.6

9.8

32.5

13.7

3.6

16.4

6.4

3.4

9.7

0.9


(%)

Percentage Shares ofConsolidated Total Assets by EPCO(10 Japanese EPCOs’ total for FY 2006=100%)

Jan.

Apr.

Feb.

Oct.

Dec.

Apr.

Jun.

26,

2,

28,

12,

23,

22,

1,

1953

1973

2000

1984

1955

1960

1981

Oct.

Feb.

Apr.

10,

1,

1,

1944

1959

1972

Jul.

Nov.

Nov.

11,

19,

2,

1946

1946

1953

Oct.

Jul.

27,

1,

1992

2001

Aug. 26, 1978

50

Addendum

Non-Consolidated Corporate Data

Tohoku Electric Power Co., Inc.

Registered Head Office

Date Established

1-7-1 Honcho, Aoba-ku, Sendai, Miyagi 980-8550, Japan

URL: http://www.tohoku-epco.co.jp

May 1, 1951

Paid-in Capital ¥251,441 million

Cash Dividends

Number of Shareholders 238,655

Number of Employees 11,344 (Not including on loan or leave.)

Service Area 79,531 square kilometers

Transfer Agent Mitsubishi UFJ Trust and Banking Corporation

1-4-5, Marunouchi, Chiyoda-ku, Tokyo 100-8212, Japan

Number of Customers

(Excluding the deregulated segment)7,665,093

Interim

Year-end

Total

Common Stock Authorized: 1,000,000,000 shares

Issued: 502,882,585 shares

Common Stock Price Range

(Tokyo Stock Exchange)

First quarter

Second quarter

Third quarter

Fourth quarter

High

FY 2006

FY 2006 FY 2005

¥30.00 ¥25.00

¥30.00 ¥30.00

¥60.00 ¥55.00

¥2,770

¥2,695

¥3,020

¥3,500

Low

¥2,300

¥2,375

¥2,580

¥2,885

High

FY 2005

¥2,375

¥2,565

¥2,530

¥2,785

Low

¥1,942

¥2,270

¥2,210

¥2,380

Head Office 1-7-1 Honcho, Aoba-ku, Sendai, Miyagi 980-8550, Japan

Telephone: +81-(0)22-225-2111 or +81-(0)22-799-6086 Facsimile: +81-(0)22-225-2550

Aomori Branch 2-12-19 Minatomachi, Aomori, Aomori 030-8560, Japan

Telephone: +81-(0)17-742-2191 Facsimile:+81-(0)17-744-2140

Iwate Branch 1-25 Konyacho, Morioka, Iwate 020-8521, Japan


Akita Branch 5-15-6 Sanno, Akita, Akita 010-0951, Japan


Yamagata Branch 2-1-9 Honcho, Yamagata, Yamagata 990-8691, Japan


Fukushima Branch 2-35 Okitamacho, Fukushima, Fukushima 960-8522, Japan


Niigata Branch 84 Gobancho, Kamiokawamae-dori, Niigata, Niigata 951-8633, Japan


Tokyo Branch 5th Floor, Daini-Tekko Bldg., 1-8-2 Marunouchi,

Chiyoda-ku, Tokyo 100-0005, Japan


Miyagi Branch 5th Floor, Sumitomo Seimei Sendai-Chuo Bldg., 4-6-1 Chuo,

Aoba-ku, Sendai, Miyagi 980-6005, Japan


Directory

(as of March, 2007)

51

Annual Report 2007

Major FacilitiesPower Stations (Total) 229 17.14 GW

Hydro 210 2.41 GW

Thermal 17 11.45 GW(including geothermal and internal combustion)

Nuclear 2 3.27 GW

Transmission Facilities

Line Length 14,736km

Circuit Length 23,741km

Supports 58,636

Substations 605 63.68 GVA

Distribution Facilities

Line Length 141,834km

Circuit Length 567,990km

Supports 2,985,140

Major hydroelectric power station

Thermal, geothermal or nuclear power station

Other company’s power station

Major substation

Other company’s major substation

Other company’s AC/DC converter station

Major switching station

Other company’s major switching station

Transmission line (500 kV)



Other company’s transmission line

Shimokita

Higashidori Nuclear

Hachinohe

Gonohe

Noshiro

Noshiro

SumikawaGeothermal

Kakkonda Geothermal

IwateAkita

Akita Shizukuishi

TobishimaUgo

UenotaiGeothermal

Miyagi

Miyagi-Chuo

MizusawaOfunato

Yakuwa

Shinjo

HondojiAwashima

Higashi-Niigata

Kita-Niigata

Sendai

Higashi-Sendai

Nishi-Sendai

Okitama

Ishinomaki

OnagawaNuclear

Sendai

Shin-Sendai

Yonezawa

Minami-Soma

Niigata

Niigata

Echigo

Shinchi

Yanaizu-NishiyamaGeothermal

Numazawa No.2

Minami-Uonuma

Miyashita

Yanaizu

UedaHonna

Honna

Chuetsu

Higashi-Joetsu

IwakiIzumizaki

Sukagawa

Haramachi

Ryotsu

SadoAikawa

Kariwa

Ishizone

Nishi-Yamagata

Miyako

Kamikita

Aomori

Kita-Tsugaru

(as of March 31, 2007)

The Japan Sea

The Pacific Ocean

Kitahon HVDC Link

Power Supply Network

Fukushima HigashiFukushima

For the year ended March 31, 2007

ANNUAL REPORT 2007

Tohoku Electric Power Co., Inc. (Japan)

Sendai Tanabata Tanabata is a festival where people make wishes to the stars. Originally this was done by decorating bamboo trees with five different colored “Threads of Wishes”, and later by hanging on bamboo small strips of colored paper on which they write their wishes for improvement in learning and craftwork skills. This festival is based on a legend about the stars Vega (Orihime) and Altair (Hikoboshi) that shine on opposite sides of the Milky Way. Orihime, the daughter of the celestial king, was a most skillful weaver and worked hard to weave cloth. The king made Orihime marry Hikoboshi who was a diligent cowherder. Orihime and Hikoboshi were so happily married that they often neglected their duties. The king got angry and sent them to the opposite sides of the Milky Way and allowed them to meet only once a year on July 7th. This romantic legend was combined with customs for star worship that even-tually led to the beginnings of the Tanabata Festival. It was in the Edo period that the Tanabata Festival spread among the common people. The Sendai Tanabata Festival began in the days of the feudal lord Date Masamune and grew in popularity over the years so that it has become one of the three major summer festivals in Tohoku. Taking place for three days on August 6th, 7th and 8th, the Sendai Tanabata Festival has a reputation as the most gorgeous and largest of all the Tanabata festivals held throughout Japan. Paper ornamental balls (kusudama) are very prominent among the graceful combinations of beautifully crafted creations made from washi (Japanese pa-per) that sway elegantly on bamboo poles. Modeled after dahlia flowering in the garden, the kusudama was first invented around 1946. As the highlight of Tanabata adornments, kusudama create a festive atmosphere along the streets together with fancy and colorful paper streamers.

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Electric Po

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1-7-1 Honcho, Aoba-ku, Sendai, Miyagi 980-8550, JapanTelephone: +81-(0)22-225-2111Facsimile: +81-(0)22-225-2550URL: http://www.tohoku-epco.co.jp

This report was printed in an eco-friendly manner, employing waterless printing and using soybean-oil-based ink.

アニュアルレポートh1h4 CMYK

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