Elliott Management Unleashes Bold Demands on Kansai Electric Power for Urgent Value Creation

Elliott Management, a prominent global investment firm and a significant shareholder in The Kansai Electric Power Company, Inc. (KEPCO), has intensified its demands for fundamental changes at the Japanese utility giant. After engaging with KEPCO's management for more than five years, Elliott has released a powerful statement, expressing deep dissatisfaction with the company's governance and its persistent failure to address a monumental issue of capital misallocation.

The core of Elliott’s critique centers on KEPCO's substantial excess capital, estimated at over JPY 1.5 trillion.

This staggering amount, Elliott argues, represents a severe long-term capital misallocation problem that has not only hampered KEPCO’s stock performance but also deprived shareholders of fair returns. Despite years of discussions and numerous proposals from Elliott, KEPCO's leadership has, according to Elliott, demonstrated a disappointing lack of urgency and commitment to rectifying this imbalance.

In its strongly worded statement, Elliott highlighted KEPCO’s consistent undervaluation compared to its global peers, a direct consequence, it asserts, of this inefficient capital structure.

The firm believes that KEPCO's current approach—or lack thereof—is unsustainable and fails to unlock the true potential value for its shareholders.

To address these critical issues, Elliott has put forward a concrete and actionable plan designed to enhance corporate value immediately. This includes two key proposals:

• A substantial JPY 500 billion (approximately USD 3.2 billion) share buyback program to be executed over the next 12 months.

  Elliott asserts that KEPCO's robust balance sheet can comfortably accommodate this, significantly boosting earnings per share and signaling a commitment to shareholder returns.

• The adoption of a target payout ratio of 50% for future earnings. This move would align KEPCO with best practices among leading utilities globally and provide shareholders with a more predictable and generous return on their investment.

Elliott firmly believes that these proposed measures are not only financially sound and feasible but are also crucial for KEPCO's long-term health and investor confidence.

The firm emphasized that such a program would not compromise KEPCO’s credit ratings, financial stability, or its ability to deliver reliable power and invest in its operations. Instead, it would demonstrate a proactive stance towards capital management and a genuine commitment to creating value for all stakeholders.

The statement concludes with a fervent call for KEPCO’s board and management to take "decisive action" and immediately adopt these proposals.

Elliott urges KEPCO to cease its prolonged deliberations and instead embrace a strategy that will finally unlock the significant value currently trapped within the company, thereby benefiting all shareholders who have patiently waited for meaningful change.