NTT, Inc. (9432) Earnings Call Transcript & Summary

[Interpreted] Thank you very much for joining us today at NTT IR Day 2023 despite your busy schedules. My name is Nakamura from NTT, and I will be the moderator for today. Thank you very much for joining us today, both at this venue and online. Many of you have joined, thank you. Today, we will have presentations on topics of high interest for you investors as well as a Q&A session. Today's program is as shown on the slide in front of you. We hope you will be able to stay with us until the end of the session. The session is scheduled to end around 5:10 p.m., Japan time. Today's session is being streamed live. Please be advised that we plan to stream the presentation on demand via the Internet at a later date, so we seek your understanding on this matter. Today's presentation materials are also available on our IR website. Please take a moment to read the notes on the first page of the presentation material. Without further ado, we would like to proceed with the program. Prior to the opening of the meeting, Mr. Hiroi, Senior Executive Vice President of NTT would like to give a few words of greetings. Mr. Hiroi, please.

[Interpreted] Thank you for your kind introduction. My name is Hiroi. I'm the Senior Executive Vice President of NTT. Thank you so much for joining us at IR Day for NTT. We appreciate your kind attendance. At NTT, recently, back in May, we announced the new medium-term management strategy of the company. We will be investing JPY 1 trillion in growth areas. Growth areas, by the way, mean, for example, data-driven and IOWN-based virtualization, also delivery of circulative economy. Now today, in the context of our day, we would like to focus thoroughly on 2 aspects in the context of our medium-term management strategy. Let me highlight them for you. First relation -- is in relation to the issue of disclosure. We want to make sure that we're able to show update in the progress in terms of medium-term management strategy. We believe that we need to show our progress in a more clear way. For example, we want to show -- for example, ICT business communication, Regional Communication, Global Solutions, the categories [indiscernible] categorizations are familiar to many of you. But as we are trying to create value based on data-driven basis, and we are to invest in energy, for example, what impact would that have on our profit and our revenue. We're not able to provide an organized categorization for you. So that being the case, we hope to be able to provide a more straightforward and more concrete categorization for you -- going forward for you. We hope that we'll be able to demonstrate more quantitative data down the road. The second point, as far as the second point is concerned, where we announced our medium-term management strategy, we're very much focused on strengthening our enterprise value. We also want to make sure that we're able to improve our stock price. That has -- that is the inherent purpose behind these strategies. So that indicates we decided to focus on growth of EBITDA. We're committed to the growth of EBITDA in our new medium-term management strategy. Up until now, we focus primarily on EPS. That can be driven by profit as well as by shareholder return and also share repurchase. We'll be able to realize that through those methodologies. But when it comes to the growth of EBITDA, you might think that this is not very generous to the shareholders because we're only showing you our commitment to the EBITDA growth. But then if I may share with you my feelings, our business model up until now was primarily on fixed-line telephony and that has some impact on our stock price. But going forward, in the medium-term management strategy, we want to focus on growth areas, such as solutions, digital consumer business. These are the areas where we hope to realize our growth in the future. So we hope to show you a new business model in relation to these new growth areas. And also, we want to show you data where we'll be able to better understand our profit growth down the line. So we hope we'll be able to give you a lot of information for you to digest. So as a result of that, we believe [ RPA ] will also improve. If that can be realized, that will be the best way forward for us. And as a result, we'll be able to fulfill our original purpose. So that is the thought behind the announcement of the most recent medium-term management strategy. So these are the thoughts behind our presentation today. This is the first step towards that. And so in the context of IR Day, we hope to focus on 2 focus areas. Now after hearing the presentation today, we hope that we'll be able to sort of see very candid views and candid comments from many of you. Your feedback really helps us to build and brush up our strategy. This also encourages us to realize enterprise growth. So we very much appreciate your feedback and your thoughts in relation to the presentation today. Thank you so much for joining us this despite your busy schedule, and we'll be focusing on 2 major topics in the course of the presentation today. We hope that you will also bear our thoughts in mind as you listen to the presentation. So that is all for my opening remarks. Thank you for your kind attention, and please enjoy the day.

[Interpreted] Mr. Hiroi, thank you very much. Now we would like to move on to the first presentation titled Growth Strategy of NTT Global Data Centers. The presenters are Mr. Ken Katsuyama, Senior Vice President, Head of Global Business, NTT; Mr. Douglas Adams, CEO and President, NTT Global Data Centers and Submarine Cable; Mr. Will Innes, Senior VP and Global Investment Officer, NTT Global Data Centers. These 3 will be giving the presentation. So without further ado, Mr. Katsuyama, Doug, Will please come up on stage.

[Interpreted] Good afternoon, ladies and gentlemen. Thank you for joining us at the NTT IR Day despite your very busy and demanding schedule. We appreciate your attendance. My name is Ken Katsuyama, I'm responsible for Global Business at NTT Holding Company. Today, I will talk about -- and our team would like to talk about how we intend to grow NTT Global Centers going forward. We're joined by Doug, who is the Head of the Global Data Center, and also -- and Will, who is responsible for our Global Investment. We want to talk about the growth strategy of NTT Global Data Centers with this team. Now at the onset, I would like to start by talking -- or giving you some introduction, if I may. Earlier, Mr. Hiroi already talked about this matter. But back in May, NTT Group announced its medium-term management strategy that was back in May of this year. And in that context, they also identified the growth areas. And here in the growth area over a 5-year period, we will be investing roughly JPY 8 trillion in this growth area. And as a result, EBITDA will be expanding by JPY 600 billion and will reach JPY 1.9 trillion. This increase represents 1.4-fold against fiscal year 2020 -- 2022 rather. So therefore, 1.4-fold increase in EBITDA from -- in a 5-year period from 2022 up to fiscal year 2027. Now the data center is one of the pillars of the growth business. So over the 5-year period, we'll be investing in roughly JPY 1.5 trillion in data center business. So EBITDA in fiscal year 2027 will be JPY 180 billion. So in fiscal year 2022, the EBITDA in data center business is JPY 80 billion, but this will be growing by about 2.3-fold in 2027. Now I'll be asking Doug and Will to give you the specifics as how we intend to realize these goals. So we'll show you how we interpret the market today, and it could [indiscernible] market recognition, we want to provide you with various explanation. So without further ado Doug, the floor is yours. Please take the floor.

[Foreign Language]. Again, my name is Doug Adams, and I'm the CEO of NTT Global Data Centers. Over the next 20 minutes, I'd like to take a look, deep dive into the data center industry and give you an overview of some of the strategies and some of the things that we're doing at GDC to capitalize on that. As for the DC market, the fundamentals are very strong. We're seeing extensive growth, demand for co-location continues to dwarf supply, and we're seeing vacancy rates at an all-time low as well as these prices increasing. The insatiable appetite of hyperscalers and AI providers is giving a strong tailwind to our industry. As for GDC, our business is growing at almost twice the rate of the industry, and we're experiencing unprecedented levels of pre-leasing. Our portfolio at GDC is global, which is very important to our clients. We have services through our brothers and sister companies. We also have marine cable -- submarine cable, excuse me, which is very important to our portfolio. And we are deploying things like [ water ] to the chip and other technologies, such as immersive cooling, which is attracting AI clients. In fact, we've landed over 100 megawatts of AI clients over the last 2 months, very strong growth in that area. NTT's commitment to sustainability is key. All of our partners and all of our clients are looking for leadership in this area, and NTT is providing strong leadership. As for our positioning, NTT Global Data centers is the only global data center provider that provides tailored co-location, services through our brother and sister companies across all 3 major verticals of retail, enterprise and hyperscale. This, combined with our interconnection business, offers a very strong value position for our customers. We have 4 main areas of concentration or priorities within GDC. The first is accelerate revenue. We have effectively done pre-leasing, which has accelerated that, and also derisked our profile. We deployed full-stack solutions with other brother and sister NTT companies, which increases our profit overall as NTT. And we're driving our kinds of scale to a new level by acting as 1 large business unit instead of 4 separate regions. We're doing purchasing as a global business unit. We're standardizing our product. We're standardizing our product, and these are all driving costs out of our system. The second major priority is the transformation I just referenced. Instead of acting as 4 separate regional companies, we're acting as 1 large company, which gives us the economies of scale I described a moment ago. It also -- we're also deploying third-party capital for the first time to rebalance our balance sheet and ensure that we change our debt-to-equity ratios. And we've built very strong relationships in the process with our clients. The third key area is go-to-market for AI. AI is predicted to be as big or bigger than what we're seeing with hyperscalers today. The requirements for AI are very demanding. You can't just take a standard data center and do AI in most cases. Our data centers tend to be newer and larger than our competitive set. And many of them are AI capable today, which is why we've been able to secure such large deployments within our existing portfolio. The fourth area is employee engagement. This is a very key piece to us. We're in a competitive industry, and we want to make sure that our employees have a good place to work, they're treated with respect, they have good pay, they have good benefits. We do employ research -- resource programs. We do extensive training, and we encourage diversity and inclusion within our portfolio of companies. Looking at the overall portfolio. We're the third largest providers as I said earlier. We have 98 sites and 148 buildings in 20 countries. We have 1.2 gigawatts of IT load currently operating, and we've got 772 megawatts of deployments happening -- excuse me, developments happening over the next year. As far as our global ranking, we are #3. And IDC has recently recognized us as a leader because of our broad services, the fact that we're global is key to that. This is just a quick snapshot that shows our over 30 current projects under development. These are either existing properties or new properties, and many of them are already presold, which substantially derisks our portfolio and adds to greater risk-adjusted return. Speaking of expansion, we have a very rigorous process for how we decide, how we expand into new markets. The start of that process often is our relationships with our clients. As I said earlier, we had durable relationships with all of the hyperscalers as well as many of the major new AI players. This allows us to understand their road maps where they're moving to and allows us to derisk our projects and has contributed greatly to our preselling of unbilled inventory. We grow our portfolio in 3 ways: one, organic growth within existing sites and markets; two, land banking, and this is very key to land bank in the right markets, which is why having those relationships with the hyperscalers and the AI providers is very important to understand those right markets; and then three, M&A. In M&A we use for markets that have higher-than-usual barriers to entry, places like Latin America. From a regional standpoint, in the Americas, we're exploring how to enter into Latin America as well as Canada, and we're doing land banking for a hyperscaler and for our AI clients. The AI wave is already hit in the U.S., and it's very strong. We're expecting that AI wave to hit within Europe, India and Asia over the next 18 months. And in India, we're actually already going to see that wave start. So when you look at priorities for India, it's about focusing on maintaining our #1 position and ensuring that we are land banking for future expansion with hyperscaler and AI. In EMEA, we're concentrating on FLAP. And what I mean by FLAP is that's an acronym that's commonly used to describe Frankfurt, London, Amsterdam and Paris, which are the 4 major markets within Europe. So we're ensuring that we have continuous inventory in those markets and preparing for the AI wave that we believe is coming in the next 18 months. And then with Asia Pac, within Asia Pac, we're focusing on maintaining our dominance in the key markets of Japan, which is very important to our portfolio. We're also looking at large pieces of property so we can build at scale buildings, which are attractive to hyperscalers and AI providers. Sustainability is paramount to the data center industry. NTT established a green bond and since 2021, it's reached over $7.8 billion, which is a huge commitment to sustainability. We've committed over a million man hours of our employees' time for volunteering to make -- on sustainability projects. And as a Data Center Group, we've committed to being 100% renewable by 2030. We're making significant progress in this area. Our business is growing so fast. It makes it harder, of course, but we are committed and will achieve 100% renewable energy by 2030. As for the market, the market is growing at 13.5% CAGR. Our portfolio is growing at 26%. So we're almost double the market growth. When you look at the key macroeconomic indicators for our industry, you're really talking about vacancy rates, lease rates and absorption. This is just a snapshot of 3 of the top markets that we play in, Frankfurt, Tokyo and Northern Virginia. And all 3 of these markets are growing, lease rates are increasing, and vacancies are decreasing, strong economic tailwinds. Speaking of tailwinds, in the last 20 years that I've been in this business, there's been 3 major waves. There was the first wave of moving from customer self-constructing to multi-tenant data centers. And about 5 years ago, we started to see the emergence of the hyperscalers, and the newest wave is AI. Within the last 6 months, we've seen significant AI traction. We believe at NTT and the analysts, by the way, say that somewhere between 17% and 44% will be accretive to the overall data center market just from AI. We believe our viewpoint is that the data center market will see about 20% increase over the current projections driven by AI. So it is a very large, very sustainable opportunity for the data center industry. When you look at AI, it's a game changer. There are 4 key characteristics that data center providers have to provide for AI. One is very, very high-density power. If you look at the current demands for hyperscalers, they're driving about 15 kW rack. AI, the starting point is about 70 kW rack. So you have to be able to provide very high-power density. Number two, there's mass storage involved in AI. If you look at the data sets required between today and 2028, so 5 years out, we believe that the data will grow 100x for words for large language learning models and 400x for images. So there's going to be a lot of data stored in a lot of data centers across the globe. That storage and the heat produced by the densities requires us to change the technology and how we cool data centers. We're going to see the strong adoption of liquid to the chip and liquid immersion. The good news is that NTT is very progressive. And we already have large at scale deployments of liquid to the chip and immersing technology in many of our data centers. This proof of concept and the fact that we're doing it is why we've landed 100 megawatts of AI business over the last 2 months. The fourth piece is latency. Believe it or not, in most cases, AI is actually less latency sensitive, especially for training. When you look at some of the inference, it's actually more latency sensitive, but far less than enterprise applications. So you need to have a balance within your data center portfolio. You need to be in the major metros and you also need to be near the customers. But the major metros are really the dominant areas where we're seeing AI deployments. Looking at our competitive differentiators, there's really 4 main areas. One is our client relationships. As I said earlier, they've been very key to our deployments across the globe and driving those durable relationships is the reason -- one of the reasons why we are prebooking so many unbuilt data centers, which, again, derisk our business and increases our risk-adjusted returns. The second piece is flexible data center solutions. It's very important today that you're able to accommodate retail, hyperscale, AI enterprise customers. Our data centers are designed to be flexible, and they're able to accommodate those customers. The third piece is our global solution. We have a true global platform. We're one of only a few companies that can say they have a global platform. We also have submarine cables at a very sophisticated interconnectivity products that combine those data centers together. And then the last piece is our strong commitment to sustainability. All customers expect this today. I've got some examples in here of case studies. I'm not going to go into detail because you have this in your book. This first page shows some joint solutions that we sold with our brother and sister companies. They include data centers. They include submarine cable. They include managed services. It's a combination between us limited and data for each of these 3 opportunities. I also wanted to point out that the submarine cable that I spoke to earlier is very strategic to us. The landing stations are important, and they help us with the traction of new customers. A perfect example of how we've done that is in Mumbai. Mumbai does not actually have the capable station established yet, but it will soon. We just ran it to Chennai. And in that market, we've had extreme success, huge growth. And the reason for that is we've got the submarine cable coming in, which is important to clients. We have 3 deployments so that we can operate in all 3 availability zones for the major hyperscalers. And we also have a massive campus approach in how we manage our Mumbai business. And that guarantees the ability of our customers to continue to grow with us, which is very important to customers. And then the last piece I'll point out is Jakarta 2. Jakarta 2 is a much smaller data center. We don't have a massive campus there. But what we do have is the APRICOT landing station. And we also partnered with NTT Data to create a bit of an ecosystem. We have 50 clients in that data center, and many of those clients enjoy the connectivity to hyperscalers and they enjoy the managed services that NTT data is able to bring to them. So it adds high value to our customers, which is the name of the game in the data center business. With that, I'd like to turn over the turn to Will Innes, who is our Senior VP and Global Investment Officer. Forgive me. But before we do that, we have a quick video to show. Thank you. So with that, please roll the video. It talks a little bit about AI, the importance in our business and what's necessary for AI. [Presentation]

Good afternoon. I'm Will Innes. I lead Corporate Development and Investment for NTT's Global Data Center business. And it's my pleasure to be here with you today. I'll take you through a brief snapshot of NTT GDCs financial performance. Please note, these figures exclude our Hong Kong and Japan assets, which form part of the GDC platform that are held by NTT Communications. First, looking at revenue. This rose to $1.58 billion in FY '22, a robust 21% year-on-year increase on FY '21 equating to a 26% CAGR over the period from FY '20 to FY '22. In FY '23, we are forecasting annual revenues to steadily increase to over $1.75 billion, underpinned by healthy growth of in-place revenue sources as well as new lease commencements. EBITDA growth has also been strong with an annual EBITDA of 638 million recorded in FY '22, including a one-off booking of $62 million in connection with a build-to-suit transaction. Adjusting down for nonrecurring items, this delivered a 17% CAGR over the period from FY '20 to FY '22. We are forecasting an FY '23 EBITDA of $628 million, representing a healthy increase on last year's adjusted EBITDA of $576 million. We note that the growth in EBITDA margin has tapered off as we enter a significant expansion phase in response to this compelling market opportunity, given the increased exposure to assets, which were either in development or ramp-up stage, front-end operating costs and SG&A create a temporary drag on operating profits in the period prior to asset stabilization. CapEx has increased significantly over the reported period as NTT underscores its commitment to the data center sector. CapEx of USD 2 billion was booked in FY '22 and this is anticipated to rise to $2.8 billion in FY '23. Much of this will be to deliver against NTT's significant bookings backlog with the associated revenues being locked in. With this increased rate of capital investment, we anticipate a sharper rise in revenues and corresponding EBITDA going forward towards our goal of doubling EBITDA by 2027. Bookings continues to grow at an impressive rate with over 42% annualized growth from FY '20 to FY '22. Bookings have steadily overtaken installed capacity by some margin as the intensity of customer demand coupled with the scarcity of supply have prompted customers to pre-lease increased quantums of capacity further ahead of development completion. This serves to derisk the lease-up of these data centers and locks in future revenue streams. Total booked capacity was 916 megawatts in FY '22 with total incremental bookings in that year of 325 megawatts. For FY '23, total bookings is anticipated to increase to 1.2 gigawatts underpinned by a robust bookings backlog amounting to 230 megawatts as at FY '22 year-end. This is driving industry-leading occupancy levels across the portfolio. We have posted another strong half year of leasing with year-to-date bookings of circa 150 megawatts. So far, the standout region has been North America, accounting for the majority of these bookings, which are attributable to a combination of hyperscale and AI-driven enterprise customers. Currently, NTT GDCs revenue base is split 55%, 45%, respectively, between hyperscale and enterprise customers, which represents a balanced portfolio and is in line with the top-tier operators in the space. Whilst net new leasing in FY '22 was more heavily weighted towards hyperscale customers, NTT continues to look to serve a diverse range of enterprise customers, specifically where it can deliver value add across its broader service portfolio. Furthermore, with the emergence of AI use cases, we expect to see significant demand and larger deployments from the enterprise segment going forward. In terms of geographic distribution, existing revenues are heavily weighted towards EMEA at 49% in total, which is our largest region by operational capacity, 31% in the U.S., 12% in India and 8% in APAC. Once again, this does not include our Hong Kong and Japan assets. Going forward, we expect this to become more evenly distributed as the significant booking backlog in the U.S. converts to revenue generating capacity. And as APAC, which is just at the cusp of its growth phase, bears the fruits of our significant planned investment in this region over the midterm. We continue to examine ways to bolster our capital resources in order to maintain NTT's growth trajectory. Given the capital intensity of the data center business, those with access to abundant and diversified sources of capital will be best positioned to capitalize on the market opportunity. NTT's committed investment of JPY 1.5 trillion into data centers provides significant balance sheet capacity and will enable us to remain agile in order to respond quickly to opportunities in an increasingly dynamic market environment. To date, NTT has already taken steps to broaden its capital base, having private institutional capital in the form of 4 existing joint venture partnerships established in Asia, India and Europe. These have encompassed a mix of strategies, but importantly have allowed NTT to recycle capital proceeds on derisked nonstrategic assets and have provided additional off-balance sheet funding resources allowing us to extend our operational footprint. As well as these joint ventures, we are actively examining other funding mechanisms, including a variety of private and public structures as part of our long-term strategy to harvest investment proceeds, recycle capital and increase the efficiency of our balance sheet. Given the tumultuous capital markets environment of late, we are continuing to closely monitor a number of potential options before executing on the structure that best suits our needs in the context of prevailing market conditions. It is likely that similar to our peers in the sector, we will need to deploy a number of funding tools in order to deliver on our financial strategy and to fulfill our capital needs of the data center business. I'll now hand back to Katsuyama-san to round out the presentation.

[Interpreted] Then from me, I would like to add some comments regarding our capital strategy. First of all, as you can see here is to reduce the financial expenses. Over here, we are -- I would like to share with you 2 initiatives. First is the yen carrying transaction. As you know, the yen interest rate is low. So we wanted to take advantage of that. As a domestic company, that company will fund yen that will be converted into foreign currency. And that foreign currency will be supplied to the overseas data center business. And the second point is to a partial fixing of the interest rate. As you know, within advanced nations, foreign currency, there is the reverse liquidity that is occurring. So we would like to utilize that, meaning that the part of the debt interest rate, we would like to fix that and to replace that with the current debt. That is what we would like to do. It is already partially implemented, but we would like to implement it further. And this will be the last slide. This is explaining the ROIC and the value of the data center. Please let me explain. First of all, for ROIC, the chart that you see in front of you, on the left-hand side, you see the line chart. What this is showing is that in our side, the younger data centers, around 2020 constructed data centers, ROIC projection is shown here. As you can see, from 2023 is the start of this chart. And within 10 years, the ROIC is slightly struggling. First, the initial stage, it is under 5%. However, in the tenth year, you will see a rapid growth. And at the end, it will largely exceed 10% in terms of ROIC is how we project. And in relation to this, if I may add, on the left-hand side, you see a bar chart on the left upper hand of this chart. What this is showing is the fixed asset comparison between NTT and [ Peer 1 ] and how much of it is depreciated. For NTT, we do have a rather young-aged asset. So depreciation, relatively speaking, is not progressing that much. This is just a section view, ROIC level. When you compare it with the peers, this may become a disadvantaged factor. However, if you look at the levels, we are at par in terms of ROIC with our competitors. And as I've mentioned before, in the long-term perspective, it will be a full capacity. The data centers will be full. And the asset expense is going to be smaller, which will bring down the ROIC. And we have the proactive utilization of the third-party capital as Will has explained. So by doing such a thing, the overall businesses profitability, we would like to effectively control that. And lastly, the line chart on the right-hand side. This is showing the [ Peer 5 ] companies of the data center business as a multiple. This is the enterprise value divided by EBITDA. If you look at the historical trend, it's about 20 times and recently, it is over the above multiple of 20. So when you look at this chart or by looking at this chart and look at our competitive edge of our data centers, as you've seen, we have the cutting-edge technology, and we are grasping the growth of the market, and we're continuing growth. And furthermore, towards the strong growing market, we will be making investments. So we are being able to achieve the level of the peers. And lastly, speaking, as the 3 of us have been explaining, this is something that I have explained in the last year's IR Day for the data center business, we are stably, steadily progressing and moving it forward. How are we looking at the data center business? What is the situation? What kind of initiatives are we thinking? And we are trying to make the thorough investment towards this business. This is what we hope we were able to convey to you. And therefore, I hope that your expectations towards our data center growth, I'm hoping that your expectations will be converted into the sureness -- confidence. And lastly, thank you very much for your kind attention. Thank you very much for your kind attention.

[Interpreted] So we'd like to go on to the Q&A session. [Operator Instructions] So we'll start with questions, for those of you in the audience. The gentleman with the black glass. Please go ahead. Yes, please go ahead, sir.

[Interpreted] My name is Masuno from Nomura Securities. I would like to ask 2 questions. First about the medium-term financial target for the data center. Medium-term financial target for the data center, $1.4 billion of EBITDA by fiscal 2027. Now at that juncture, what will be -- how profitable will the business be? What about the EBITDA margin you expect? Also with the JPY 20 billion investment, you gave over JPY 4 billion EBITDA. So I think it will be 11% vis-a-vis your investment, right? So fiscal 2027, I think still you have a lot of new data centers available. So how profitable will your data centers be at fiscal year 2027? That's my first question.

So I think the question is on the profitability of our data centers per our midterm projection. So we are -- at this stage, we're not going to disclose an EBITDA margin or a specific return on investment. We can say that we are extrapolating based on conservative return on investment income based return on investment for our existing data center investments. We are seeing some upward movement in that profitability that we're not expressly forecasting. And so whilst the way in which you have assessed the profitability based on a sort of 11% ROI, I think, is one way that you can look at it. We also would see a lag in revenues and EBITDA coming through given the development cycle of data centers. So for every dollar you invest today, obviously, there is a lag of maybe 24, in some cases, 36 months to full stabilize revenue-generating potential of that data center.

[Interpreted] My second question, after listening to your presentation, I think EBITDA, you're using the data center business -- you use the EBITDA rather to control the data center business. So you have -- the NTT data does not have a clear EBITDA goal, but NTT Holding company does have an EBITDA goal. So how do you maintain consistency among the financial targets among different group companies with an NTT?

[Interpreted] Yes, that is true. Yes, putting EBITDA as the major pillar has been set. You asked about the consistency of the EBITDA goals among the group companies. If we take a look at the whole growth business for the NTT Group, I think EBITDA is the most important indicator, if you will, for the group as a whole. And also, the data center business is one of the portfolios of our company. If you take a look at the group on a horizontal basis, I think it is important that we have a very good measurement or yard that cuts across horizontally. So I think, in principle, EBITDA will be one principle, one major principle to capture the profitability of the group companies.

[Interpreted] Tokai Tokyo Research Center. My name is Ishino. I have 2 questions. The first question is regarding Page 9 of the material, NTTs, GDCs, the footprint, expanding the footprint. And within this market or when you're expanding your footprint, the AI, the contribution of generative AI is 772 megawatts as you increase this much. How much of that will be the contribution from AI? Meaning that in this market, 1% of the data center will be a generative AI server is what is said. So moving forward within near future plans, how much of generative AI is going to be contributing? That's my first question.

That is a very good but very difficult question to answer. Right now, I can tell you that in the last 6 months, the majority of our pipeline, a majority of our closed bookings has either been hyperscale or AI business. This is driven by the fact that we don't have a lot of physical inventory in many places of the world, and that AI and hyperscalers will forward by unbuilt infrastructure. I can also tell you that within the last 60 days, we've landed 100 megawatts of new bookings. 100% of that was AI. So it's difficult to predict. But I would guess that probably 50% of what we see over the next year will be AI, 50% will be hyperscale. And then, of course, there's a retail and enterprise component to that. So maybe that's 20%, and it's 40 and 40 for a total of 100%. But very, very good questions. I think you will see that AI is dominant moving forward.

[Interpreted] I have one more question. Of course, what troubles the data center is the power consumption or electricity consumption. Recently, the NTT innovative device has started its business. So NTT innovative device with the optical engine with that, they are going to progress more of IOWN to reduce the power consumption. I believe that is your plan. But these optical devices contribution -- what is the timing when it is going to contribute to your data center base? Or when is the timing that you will need a full-scale investment in this technology? That is my second question.

[Interpreted] Okay. Then I will answer that question. First of all, specifically speaking, from what year, at this point, I will not be able to state that. However, specifically speaking, the [ PLC ] has already started domestically and in overseas. So at least, the long-term promising -- as a means to further enhance our competitiveness in the long term, we'd like to consider that technology.

If that is so, the newly increasing data centers promising weapon will become the world of IOWN. With the innovative device using the optical device, you are thinking as one of the major weapons? Is that correct?

[Interpreted] Well, the All-Photonics Network, APN, as one of our means, I think this is something that will be able to differentiate ourselves. So of course, we would like to accelerate the consideration of using it. Thank you very much. Is that okay?

[Interpreted] Kikuchi from SMBC Nikko Securities. I'd like to ask 2 questions, if I may. You talked about at the end the funding-related activities. You talked about funding at the end of your presentation. With ROIC over the 10-year period was supposed to be 5% or 6%. So if you do the dollar funding, then there would be no -- there have been no return. I think that's the assumption we can make, if that is the case. Now you're going to use yen carry trade for new investments going forward? Would that be the case? Is my interpretation correct? And what about the existing portfolio? Are you going to fix rates or are you going to balance for the existing portfolio? And as a result of that the financing costs, would it change? I think right now in Japanese yen terms, this is about JPY 700 billion of financing cost on per annum basis. Are you really going to be able to reduce financing costs? Or will you be able to -- to maintain financing costs, even though with the increase in the capital increase?

[Interpreted] Okay, let me respond to your first question about yen carrying. To what extent are you going to do the yen carry trading? I think that was the gist of your question. Actually, as far as the funding is concerned, we are not yet at a stage where we're going to do 100% yen carry trading for the new financing. And that is not the plan at this juncture because we have to consider the currency risk. So that's how we can at the [ Yen carry ] trading 100%. So yes, certain portion will be done based on Yen carry trading, but a certain portion of that will not be based on Yen carry trading. So you just have to start. And we have just wait to see what will happen going forward. Now to what extent can we really reduce financing costs? How can we really make sure that we -- our business is profitable. I think that was the gist of your second question. As far as that is concerned, naturally, we're always monitoring the interest rate situation naturally. And we try to do a simulation regarding the bottom line based on such interest rate simulation and we had to consider how we're going to monetize as soon as possible. So we are constantly updating our strategy. No possible options is, as I mentioned earlier, is to use joint venture. We can also -- and also one matter, which is on the agenda, what REIT. So we'll be incorporating various elements and make sure that we'll be able to ensure the resilience of our balance sheet. So that's how we are doing. That's how we want to respond.

Okay. Let me ask a second question. This is a related question to the first question. Mr. Now -- in response to Mr. Masuno's question earlier, you mentioned about EBITDA -- now EBITDA is the indicator based on which you have formulated your strategy. But you talked about ROI being less than 5%, which means that the contribution of EBITDA might be there. But at the net profit level, I think using a situation where there's very little growth. That's how we can interpret the balance sheet. I know that you're going to be using different schemes. But when it comes to net profit and pretax income unless you set certain targets for these indicators as well. I think you can say that, okay, as far as the EBITDA is growing, everything is fine. But then if your financing cost is very high, then actually, there could be a negative growth investment. Even though you said the EBITDA growth is maintained. The other indicators need to be prioritized. So within the next decade or 2 when AI were to spread, then maybe the value of the current deficit portfolio could decline as a result of the evolution of AI. So you're asking us about 10, 10 years, 20 years before the profit of this business, that makes us a bit uncertain. So what about net profit level and the pretax level income is the target for those elements as well, if you can show us what's the number we would feel this would feel assured.

Okay. We'll take note of your question, then we will consider this matter. I will take note of your question. But as far as we consider we're working on a project level. And so in terms of IRR and where average of cost of capital, we're always considering that and monitoring them as we work on a project level. And on top of that, there should be opportunities then particularly if you consider the maturity of the assets in question. But when we take a look at certain potential assets, we might actually great joint ventures in certain cases, we may also consider the divestments. And also, we can consider REIT as a different scheme. So we can combine various options. So make sure that on each single project level, we are to interest rate or [indiscernible] who will monitor that, make sure that we'll be able to ensure returns which exceeds the walk and then ensure that profitability. Also, as far as the business in totality is concerned, naturally, you'll be focused on the profitability of the overall business is concerned, mature also monitoring the balance sheet for our business level as well. So we will carry out -- this in a robust manner. So what we can say at this juncture is that we cannot share any concrete numbers right now. As far as our practice is concerned, we will make sure that we do a very good job of monitoring the profitability of the business. We hope that you understand. One just follow-up. What about the weighted average cost of capital about WACC?

It varies from country to country, so we cannot give you an across-the-board number. So we -- till we get the situation based on data center business level. So Japan and India are totally different in terms of WACC. So it varies from country to country. But we're following the appropriate WACC methodology, we can assure you.

The current level, meaning that it has exceeded your company's target WACC? Or -- regarding the investment towards the current situation towards the WACC that you have as a target, what is it?

Well, in that way, we have determined criteria when we select the projects and set the data when it has to be all occupied, and we look at the situation to prelease. And looking at the indices of the WACC IRR is thoroughly simulated when we make the decision of investment and make sure if a certain spread is secured or not. And we do that work for each individual project.

And the second row, please go ahead.

Mitsubishi UFJ Morgan Stanley Securities. My name is Tanaka. Utilizing the third-party capital is my question. Specifically speaking, when you conduct the businesses for those third parties, as a partner, several companies exist. And when each project comes up, do you have a discussion regarding the partnership with them at that time? So specifically speaking, how are you going to be utilizing this third-party capital? What's going to be the specific cases with that I want to know? It's a business that you can have EBITDA that exceeds the WACC? And if it's profitable, why don't you do it on your own is what I think. So specifically speaking, what kind of activities do you conduct?

Well, if there's any additional comments, Doug, please jump in any time. But if I may explain from my side, regarding the third-party capital utilization, how are we creating these partnerships is probably what you wanted to ask. This part, I have announced this in the IR Day last year. And as I have explained last year as well, for example, with the collaboration with Tokyo Century, we have agenda. And also other than that one, us on the Japan side, we explore the partnership or we receive an inquiry for such partnerships as well. And furthermore, so CEO Doug's connection channels or we have a channel in India for collaboration and receive various inquiries through that. And also as a partner, we have a communication with NTT DATA headquarters and also we communicate with holding companies and have a thorough discussion and decide on our partners.

And just to second that, I think or just to add to that, another channel is running a structured process where you can identify a number of partners and achieve best terms and pricing. But we consider all of those different avenues, and we pick what is appropriate given the situation. I think the other question you asked is how we identify assets that we divest. And so it's really a marriage of our financial strategy or our financial requirements but also we have a framework within which we view our asset base. And it's fair to say that the assets that we would divest are less core to our business or less strategic. Financial characteristics are an aspect of that, but it's also depending on market, customer base, customer ecosystem connectivity and a range of other attributes. And then we will identify the assets that we look to divest.

And then I'll add one more piece to that. And by the way, Will runs our global third-party investment program. So he is the expert. The only piece I'll add to that is that from our perspective, in the industry, recycling of capital is done on a very regular basis. Almost all of our competitive set has multiple tools for that recycling of the capital. We are through Will looking at different types and different mechanisms for that recycling. It could be in things from individual asset sales, individual JVs and partnerships, more structured JV partnerships to S REITs, U.S. REITs, whatever, different types of REIT vehicles. So there's a gamut of vehicles available to us. And I think we're looking at the different tools now to decide what makes sense and how we do that. But that recycling capital is an important concept. It allows us to harvest the value we've created in the form of building those assets to create a larger portfolio. And so I think you'll see us moving forward with different strategies over the next few years.

Is that all right? Did that answer your question? Next question yes, the gentleman in the third row, please.

Thank you for your presentation. Appreciate it. I would like to ask one question, if I may. So my question is basically, you've given out some pretty hard financial targets, but your growth strategy also includes M&A as a component. The question is, is M&A -- how does it fit into those financial targets? Would it be incremental? Or do you have assumptions on money you're going to invest.

I think in short, it's incremental. Our business plan is primarily based on our organic expansion as M&A tends to be sort of case by case, and we an opportunity driven, so we can't control the timing, the quantum and the nature of those deployments. But again, to the point made earlier by [indiscernible], we have WACC targets that would give us some guardrails as to the return on investment -- minimum return on investment required when we undertake M&A. I think when we look at M&A, we are relatively sort of opportunistic. The bar is relatively high in terms of the threshold, and we typically use it to unlock new market entry or where there are demonstrable synergies.

So as a follow-up, can I assume then that that's not a major component, but it's a tool that you can use if you see something that makes sense.

Exactly.

I'd like to take the next question. The gentleman over there.

Thank you. I am [indiscernible] from Citi Securities , I have 2 questions. The first question is the generative AI. 20% incremental growth increase is what was explained to us. So it's about 13%, 14%, that's going to be 33% or 34%. And within that growth, your company -- don't know, you had a 13% growth, and you're having a double growth is what you're going to seek for. My question is the JPY 180 billion EBITDA target or the current investment with this ChatGPT -- how much of that have you considered to be ChatGPT or how much of that is going to be ChatGPT? Or is there going to be -- are you going to -- is there a possibility that you're going to accelerate investment that exceeds the market growth rate to further accelerate your growth? How should we look at your plans?

I want to clarify just one quick thing. The CAGR of the market is 13.5%. Our CAGR has been 26%. And yes, we do see a large incremental quantum drive towards AI, it's a huge opportunity. And we see that above the market CAGR of 13.5%. So you could assume that we'll capture a larger than 26% portion of that. A lot of that growth is predicated on our ability to have CapEx to expand the business, which is one of the reasons we're looking at recycling net capital and harvesting net value so we can do incremental type activities. But I think it is a large opportunity for us and for our industry. And Ken, I don't know if you want to comment on a bit.

Understood very well. Then this leads to my second question. At the very last slide, you shown JPY 180 billion, 20 multiple, so JPY 3.6 trillion. That's including both debt and equity. That is the value that you are going to aim for. So how much of a debt equity ratio or the components of debt and equity percentage, how -- what's the target for that? And you had explained the public structure and private structure is what you are thinking. And the talks about REIT started to come out. So private structure and public structure, the pros and cons comparison. Can you share that with me? Or how much of a financing? Because I want to understand how much finance capacity you have. What is the possibility? How much of a possibility is there to create a REIT? I want to understand that at this venue.

So there was quite a lot in that question. I will tackle maybe the different types of tools that we're examining. I think in terms of private structures that the predominant vehicle is some form of joint venture, which can contained within it either a single asset or a number of assets. In terms of the benefits, I would say that being private is relatively aligned to the investment profile of the data center asset, which is a multiyear relatively long-term horizon and finding a like-minded partner often those can be successful as we've proven in the past. In terms of the associated debt levels there, within private structures, typically, debt levels are relatively higher than in public structures. And so that can comfortably be above 50-50 debt-to-equity ratios and in certain situations where there are customer contracts in place and the asset is derisked and you can push above that level. In terms of the drawbacks, obviously, you have a partner and another seat at the table and another potential decision-maker, which is why compatibility and relationship with the partner is key. And then obviously, more for the partner's perspective, that additional liquidity that you get with public versus private, I think, is potentially a consideration. On the public side, I think the last 12 to 18 months has been a case in point. In benign conditions, it's relatively conducive to raising at the money equity from existing stockholders. However, as there is a period of sort of volatility that we've seen, sometimes that can be quite difficult. There is quite a heavy porting burden and do our mark-to-market on a daily basis. So I think they both have benefits in terms of the public market benefits. You have a sort of evergreen source of capital and a relatively liquid structure. And they both have their place?

To be clear, the statement I made earlier was we're examining all options, not that we're leaning towards any particular option. So I don't want to have anyone think that we're committing to doing one option or the other, looking at all of them.

And if I may add from the holding company perspective, the data center business is one of the pillar businesses. But at the very end, regarding the ratio of debt and equity, it boils down to that the NTT Group consolidated basis, what is the optimal level or as a data group, what is the optimal level? That type of decisions will be made. And based on that, what kind of a debt financing or what kind of financing are we going to do will be determined. So looking at all these situations, utilizing the third-party capital from outside, it will be equity. And if the debt financing is a different meaning. So we're going to continue to consider the pros and cons of all of the options with a [indiscernible] rule moving forward.

Currently, we don't have any questions. [Operator Instructions] Okay. Next question from the audience.

[ Corey ] from Capital International. And my question is, you said that having a full stack solutions, managed services via your partner, NTT Data is a key differentiator. Could you provide some data around what percentage of customers today are using those managed services and what the target is in 5 years? And a follow-up to that, what the impact on margin is when data center customer using only connectivity or only colocation goes and buy some kind of managed service from you?

Very good question, Corey. And I don't have definitive data to share with you. I will tell you that at GDC, we have dedicated employees who work with our brother and sister companies to harvest value from them in the form of joint venture selling -- joint selling, excuse me. And that we, on a regular basis, land joint acquisitions with them, our pipeline has -- I'd characterize globally as millions of dollars of opportunities. And we have landed quite a few complex opportunities with them within the past. We don't publish, and I don't have the exact data at hand for how many opportunities and what the dollar value opportunities are. But I will tell you that data center infrastructure is extraordinarily profitable in itself. But when you start to add managed services and scale and repeatability for managed services is the key piece. When you start to add those pieces on you can get multiples of differentiation within the profitability between an opportunity versus just a standard call opportunity. And again, the standard call opportunity is very profitable. But yes, those services is dramatically more profitable. And it also is attractive to clients that we have that capability. They like the fact that we can add that value and it becomes very sticky because the customer now has their infrastructure within our data centers, and we're managing that infrastructure for them. So we do quite a bit of it in the U.S. with state entities and federal entities and cities, and that's part of the reason why I can't discuss client names or exact sizes of opportunities. A lot of it is state-driven infrastructure.

Is that okay? We are exceeding the time allocated for this session. Therefore, we kindly like to ask you that the next question will be the last question. So the gentleman raising your hand over there.

My name is Ando from Daiwa Securities. I have one question. With AI, you will perform -- outperform the market more is probably what you're saying. But excuse me, for Slide 22, what kind of components are strong? Is what you have explained? And one of these components become very strong. And because of that, are you saying that you are a strong player, a strong player in the market? Or are you looking at the comprehensive capabilities or you have the strong access to the necessary technology or access the development is quick or you have a high level of financing capabilities? My question is that with AI, what kind of advantage are you expecting? I would like you to elaborate on that because I would like to have a bit of more clear image in my mind.

And unfortunately, I don't have a crystal ball, so I can't predict too far in the future, but what I can say and please understand, AI is about 6 months old within our industry, right? We're just starting to see the evolution of AI. We have a very flexible and progressive design and our data center portfolio tends to be newer and I'll explain why that's important. Newer means that we have larger facilities and AI deployments are not only denser, but they're much larger. So when AI customers look for deployments, they're looking for 50, 60, 100-megawatt style deployments. And so because we have campuses and because we have newer facilities as compared to the average age of our Tier 1 competitors, that gives us an edge. We also have been pretty progressive in how we've designed our chilled water plants, and we have taken the strategic viewpoint that cooling to the chip would be a future technology. And so we inserted all of the valving work within our data centers so that we could easily deploy that technology when it came mainstream. We started that about 3 years ago. Frankly, we did not enjoy a lot of it until the last 6 months, but that's paying off the spades now because we have that pre-installed piping work put in place and we can easily meet liquid cooling the chip. There's 2 examples for you. I think the drivers are large campuses, large buildings, infrastructure that flexibly allows you to enable cooling of the chip and liquid immersion. And we generally embrace that. Fast forward 3 years, I'd like to believe that we're going to be the leader in data center installs for AI. I can tell you in the last 60 days, we've landed a significant amount of AI customers, and they're some of the best brands and logos you could have in that AI space. And so not all customers are created equal, and we expect to use those relationships with those Tier 1 AI providers to expand our AI footprint to other parts of the globe. The AI talked about the 100 megawatts was in the U.S. Actually, 60 megawatts and 18 megawatts was in the U.S. And then there was another 12 megawatts that was in Europe. So is it predominantly in those 2 markets. And we expect to take our -- that success and leverage those customers into Asia and India. Hopefully, I answered your questions.

I just want to slightly deep dive. For example, the cooling technology, you have assured us with the various technologies. But for example, your company is the main competitor, when you compare yourself to them, which part are you more advanced or some kind of a comparison once the AI progresses moving forward. Do I want to know if you have some kind of advantage that you'll be able to form your competitors in terms of AI. If there's something that you can show, I'd like to know.

We have today is our experience and our strong relationships with the some of the largest AI providers. And I think that the credibility gain from that with other AI providers and the experiences that we've learned with this brand-new emerging technology. It's only 6 months old in the day's industry is a very strong differentiator that I think we don't want to undervalue. I would also say our design tends to be more flexible, and that flexibility allows us to accommodate what those new technologies are. We don't have any patented technology or something of that knowledge, something of that type to lock out our competitive set. But I will say that within a space where supply is worked by demand, the ability to have forward buys on our supply chain and the guaranteed componentry is a very key piece. And we have strategic frameworks where the infrastructure that is able to accommodate AI players. We've always bought and have agreements with the manufacturers that extend out into the future, which is another strategic differentiator for us because some of the other providers don't have that capability, they don't operate at that level. I hope that was enough, and I'd love to chat with you after this, if I can provide more details. It is a very exciting space, and I think NTT has a big opportunity in this space.

Thank you very much for your response. Appreciate it. And with this, we will have to conclude this session on growth strategy of NTT Global Data centers. We'd like to end the session here. Thank you very much for your participation.

It is time to resume. So we would like to move on to the next session. Titled Smart Energy business of NTT Group will be the theme for the next session. The presenters will be Mr. Teruyuki Kishimoto, NTT Anode Energy Corporation, President and CEO and Mr. Nobundo Koumura, Green Power Investment Corporation Vice President, the 2 will be presenting. So Mr. Kishimoto Mr. Koumura, please go ahead.

Ladies and gentlemen, my name is Kishimoto from NTT Anode Energy Corporation. Thank you for taking time to join us at NTT Group's NTT IR Day 2023. The NTT Anode Energy was established in 2019 as an operating company to promote the smart energy business utilizing NTT Group's assets, ICT technology, human resources and other resources and is now in its fifth year. Today, I would like to talk about NTT Group's contribution to carbon neutrality and the Smart Energy business that we are promoting at our company. Furthermore, I would like to talk about the development of green solutions in collaboration with other NTT group companies and also specific examples. I appreciate this opportunity. First, please watch the video that summarizes the outline of our company. So please watch this video. [Presentation]

So these are the topics for discussion today. I will talk about 3 major themes. First, the current status of our energy business. I would like to talk about NTT Green Innovation toward 2040 goals, the prospects for acquiring renewable energy to achieve them and also our company's business as the core company in this area. Next, promoting NTT Group's Green Solutions. I would like to introduce the Green Solutions that Anode Energy Group and NTT Group companies are working on and also cite some specific examples as well. Finally, furthering the growth of energy business in this section, the Vice President of Green Power Investment GPI, Mr. Koumura, who recently joined our group will be speaking on the medium-term growth of the Smart Energy business and its business strategy, including that of GPI. Now let me talk about the current status of the Energy business. Please take look at the slide. As you are aware, in 2021, NTT Group announced its new Environmental Energy Vision entitled NTT Green Innovation towards 2040. In response to Scope 1 and 2 of the greenhouse gas protocol, NTT Group is committed to reducing greenhouse gas emissions by 80% by 2030 becoming carbon neutral in the mobile and data center domains and achieving group carbon neutrality by 2040 through the initiatives such as expansion of renewable energy use and reduction of electricity consumption through Ion and also energy contribution as well. So these are the comments on the part of NTT Group. Now the previous page was a diagram of the greenhouse gas emissions. This page shows the translation into actual electricity consumption. Incidentally, you might be familiar with this already, but the amount of electricity consumed by NTT Group through its business operation is said to be about 1% of the total electricity consumption in Japan as a whole. Therefore the NTT Group, which consumes such a huge amount of electricity to achieve carbon neutrality, it will be necessary to introduce renewable energy equivalent to about 8 billion-kilowatt hour per year by 2030. Also, in addition, NTT Group's new medium-term management strategy for entitled New Value Creation and sustainability 2027 powered by ion, which was announced in May of this year. We must go a step further from NTT Green Innovation toward 2040, which as mentioned earlier. And with the goal of expanding scope 3 by 2040 with the aim of achieving carbon neutrality throughout the entire supply chain. Now this shows the status of acquiring renewable energy sources to meet the 8 billion-kilowatt our renewable energy requirement for the NTT Group to achieve carbon neutrality. After the announcement of NTT Green Innovation toward 2040, in 2021, Anode Energy has been working on a core and various renewable energy sources, such as wind, geothermal and biomass as well as solar power. And as of the end of June of this fiscal year, we had already acquired 2.69 million kilowatt hour of power sources including projects under development. This shows -- this is occurring to the par consumption of [indiscernible] on an annual basis. Also in August of 2023 Anode Energy Group acquired one of Japan's top wind power as a company called GPI, Green Power investment. And as a result, we were able to bring its total renewable energy sources to approximately 8 million-kilowatt and putting it on track to achieve its 2030 target. Now, 8 billion-kilowatt is equivalent to the power assumption of Yokohama city as a whole. Next, let's talk about 4 businesses of the Anode Energy Group and their status. The Anode Energy Group consists of 4 businesses, including the construction and maintenance operations business, which is integrated from NTT Facilities Company back in July of 2022. So of this, roughly 70% to 80% of sales are composed of the consumer energy business, which sells electricity to customers. Although the operating margin is not all that high, the company has a very large customer base through more than 20 years of business development by its subsidiary from Anode among others. So we have a very strong and very valuable corporate base. Also, in addition, green power generation business, which develops and generates reasonable energy sources has a smaller sales scale than the consumer energy business. But the government's feed-in tariff, FIT system for renewal energy have secured very high profitability as a result. In addition, the construction and the maintenance operation business integrated from NTT Facilities has become a very stable business due to NTT Group's contracted construction and maintenance of telecommunications for our facilities. We aim to achieve further growth in the Smart Energy business by investing in these business of [indiscernible] businesses, which supports GX initiatives being developed by the public and the private sector throughout Japan. And in the construction and elaboration of energy distribution platforms, which will be indispensable for the spread of renewable energy in the future. We'll be able to bring about further growth in the Smart Energy business through these activities. The -- from here -- from this point onwards, I'll like to introduce green solution initiatives provided by Anode Energy Group in collaboration with its group companies and also cite some specific examples. NTT Group is working together to develop solutions that support our customers' carbon neutrality by leveraging our respective strength and customer contact. By providing Anode energy to renewable energy as a total solution in combination with the ICT services and other services of the group as a whole, we're contributing to the realization of carbon neutrality from communities and companies. So we believe that this data-driven technologies is also driving these services. For enterprise customers, we provide total group solutions for all phases of corporate carbon neutrality from helping customers formulate plans, to reduce greenhouse gas emissions, providing consulting and visualization platforms to visualize actual emissions and to providing specific energy saving and renewable energy services. And from this slide onwards, I would like to introduce the 3 examples of our enterprise solutions. The first example is Seven & i Holdings. Seven & i Holdings has formulated its environmental declaration called Green Challenge 2050 and has set CO2 emission reduction as one of its priority themes. And they have set a goal of achieving virtually zero CO2 emission by 2050. NTT Anode Energy is supporting this initiative by providing electricity from solar power plants and environmental value to 7-Eleven and Ito-Yokado stores. At this moment, it's primarily in the metropolitan area, but down the road, we hope that we will be able to consult with 7-Eleven and expand Japan nationwide. Next is the example, in the case study for NEC platform, we started our scope 3 initiatives through Anode Energy supply of renewable energy to NEC platform factory in Fukushima. By using the renewable energy provided by the Anode Energy to manufacture ion products and other products, we're contributing to the carbon neutrality of NEC platforms, and our group is also promoting its efforts toward a carbon-neutral supply chain. Next relates to NTT Data C-Turtle. NTT Data C-Turtle service has been well received as a service that supports Scope 3 in addition to Scope 1 and Scope 2 and uses a calculation method that makes it easy to consider subsequent reduction actions. So we want to apply that to NTT group internally. And then going forward, we hope to expand that on a global basis. But already -- [indiscernible] companies that are already introducing this example and this technology. Next, for municipalities, we are providing various services as [indiscernible] to promote local energy production for local consumption. You're probably familiar, but Japan's energy self-sufficiency rate is roughly 11%, which is low compared to OECD countries. And we also rely on imports from overseas. We will increase self-sufficiency in energy, which is necessary for all industries and consume it within the region through local production -- for local consumption of energy, we will contribute to the revitalization of local industries and become carbon neutral. In addition, in order to achieve local production for local consumption of energy, it is important to use the generative power wisely. And for that end, we will provide a centralized energy management system that connects renewable energy resources in various businesses in both directions using ICT technology. It means that energy versus ICT. For NTT, this is something -- this is NTT really wants to promote down the line. As this is a case study for local governments, the group has supported 8 of the 62 local governments selected up to the third round of the decarbonization leading Ares program promoted by the Ministry of Environment which is one of the highest shares. They range from Tohoku to [indiscernible]. We believe that our nationwide coverage, which is our strength really is promoting the carbon neutrality programs in the local governments. The -- it's because of the business model, it's important that we set a pattern and also create a pen template and then spread them nationwide. Next is the case of Utsunomiya. The regional power generation company, [indiscernible] Power Company, Inc. procures the local power source generated renewable energy and manages the energy and aims to reach net 0 private sector electricity consumption and CO2 emission by 2030 including the next-generation street car system, LRT, light rail transit. And we would like to align ourselves to their strategy. Next is the case in Fukushima Prefecture. We have installed a solar power generation facility owned by non-energy inside the premise of Fukushima Prefecture facility, Fukushima Prefectural Center for Environmental creation. Electricity from the power generation facility and the environmental value can be experienced at this facility, we are planning to continue this for 20 years. At this venue, they are receiving visitors from the prefecture and from the outside of prefecture as well. Through these efforts, us as the overall NTT Group, the Green Solution target has been set. By 2030, we would like to aim for sales for at least JPY 1 trillion. From here is the smart energy medium-term plan and the business. Next page, please. As I planned in the first section, 2008 March, NTT Anode Energy and JERA acquired the shares of Green Power Investment and GPI became a member of the NTT Anode Energy Group. With this Anode Energy Group has obtained approximately 2 million kilowatts of FIT certified renewable energy source. GPIs renewable energy capacity comprises of solar and wind power. Including the capacity under development, it has a very affluent capacity of 56,000 kilowatts of solar, 1.861 million kilowatts onshore wind and [ 112,000 ] kilowatts offshore wind. All of this capacity and power source is FIT certified at the time of acquiring GPI's shares, we conducted a value assessment of each of the projects and decided that we can expect a high level of profitability, and we have welcomed them to become the member of our group. This is just for your reference. This is showing the profitability of the solar power generation, including the ones under development. In the last several years, the decline of FIT price and hike in raw materials and construction costs, IRR has come down to 3.5% to 4.5% -- between 3.5% and 4.5%. On the other hand, when you compare wind power generation to solar power generation, the profitability of wind power generation remains high. And as for the value assessment, we have conducted at the time of GPIs share acquisition, we expect late single-digit equity IRR and believe it is sufficiently profitable. I'd like to have Mr. Koumura, GPIs President, to take the podium to explain on the strength of GPI and the future strategy and plans.

Once again, as introduced right now, Green Power Investment, Koumura from Green Power Investment. I would like to use about 3 slides to explain the characteristics and strengths of our company. First of all, the first phase is the strength of GPI. In a nutshell, it is the volume and quality is well balanced at a high level, and we are able to conduct business based on that. Regarding the quality, as Mr. Kishimoto already explained, we have 2 million kilowatts that has been FIT certified already. So we do have an affluent background in terms of the capacity. Each one of the projects that we have is quite large in size. We don't see that much in Japan. In the Europe and United States, maybe it might be a standard, but we don't see any of those size in Japan that much. In [indiscernible], which is the largest in Japan, that is the largest 121 megawatts. And this year, the other day, it has completed the construction at Sumita port and that is the largest -- second largest. And the offshore solar in Ishikari City of Hokkaido, we have started the construction and the construction is going as planned. And as planned, the commercial operation will commence by the end of this year. And regarding the quality of the business, well, it is a business. So the business, the profitability, and we have injected the development money and started the development. We are going to have that succeed and complete. So the probability of the success of the project, it is at high level as well. And as you know, together with the implementation, expanding that, there are people that are opposed to these projects to be implemented. And in order to expand the implemented, it will become very important that the society and the community will accept us. And the strength that we have is that the style of development we have is that the development staff members actually are stationed at the local community living together spending time together with the community members and dream about the realization of the power generation plant. And that type of a close netted relationship with the community in the future. It's not only going to make the dreams of GPI come true, but as well as the dreams of the community. That is our Green Power's development stance. And I have mentioned, I don't know. I personally think that it's a phenomenon theory on what it may be a bit of a spiritual theory. But at the very bottom, based on our philosophy we have a development policy that is a visionary principle based on development policy. And we have that 200 of employees and have the visionary principles. And our employees are always pursuing this visionary principles. Our company's philosophy is decarbonization and renewable energy, of course, that is important. But what we say here is that the renewable energy will be Japan made energy, and it is going to be one of the important components of energy security, and that is why our company ahead of others, onshore and offshore, our power source development is what we have been working on from the time of establishment. And then the time has followed us. And the expansion of renewable energy has become one of the policies of the central Japanese government, and that is why this is becoming one of the strengths of our company. What we are showing you here is as already what Mr. Kishimoto has presented, it is quite -- there is an overlap. And maybe I can say there is an overlap. But the 2 companies, the way we think has a high affinity. And we have the wind power generation, not just constructing it or bringing it in. But utilizing that generated renewable energy, how can we change the society? How can we better the community? How can we better the country is the business that we're also conducting as well? The renewable energy generation and the energy itself. Unfortunately, now yet, it is not stable. And it is unstable. And because it's unstable, it cannot be fully utilized. Even though it is generated, there's a surplus generated energy, and it will just become an energy. And there will be a way. So if we don't use it, it's a purely Japan-made energy. So we want to convert that to hydrogen. And that hydrogen at the beginning, it's a small amount but we will thoroughly like to work on that. So the locally generated electricity together with that, we are going to locally produce and locally consume that hydrogen as well. And through that, we will achieve decarbonization. And during the natural disasters, we will secure the energy supply during disaster times. And if I say in other words, the renewable energy development, the energy circulation and economic circulation as the local community can be realized. And that will become a trigger to smoothly expand this business in the future. And that's what we dreamed about for this long time, but there is a large missing piece. That is unstable renewable energy and unstable demand to connect that and to control both of that if the ITC technology that NTT Group has strength in or the AI technology, these 2 factors are indispensable. And now as we become the group -- member of the NTT Group, we would like to use a comprehensive technology capability of the group and fully utilize it so that we will be able to realize this concept that we have. That is not going to be a model. We believe that that's going to become a model to expand the renewable energy usage in Japan and also in the international arena. Next page, please. Lastly speaking, our company -- we have the external [indiscernible] team that is going to promote the local economy revitalization within the renewable energy company. Having a dedicated team, we are the only company as such. And this is the characteristics of our company. And nowadays, it is becoming one of our strengths. And as you can see on the slide, we have the local produced products, sales of promotion or we are actually involved in the local education and the educational institutions. This is not just contributing the community, but this is also working for promoting our company's philosophy and contribute to our business. It was only 3 pages, but -- and it was quite brief, but I was able to introduce our initiatives in our company. Thank you very much for your kind attention. Next page, please. So I did explain that before the FIT business is highly profitable. However, the FIT period is 20 years from the start of operation. Therefore, the FIT period will end in sequence for each of the projects, which we can foresee the profitability declining in the long term. Therefore, in parallel with the FIT business, we will utilize the corporate customer base of our energy business and roll out a non-FIT business as an early stage to shift the business structure to more sustainable business. Furthermore, we will utilize a non-FIT green electricity for expanding the Green Solution business of NTT Group to increase the profitability of the whole NTT Group. Next page, please. As a case of utilizing non-FIT power sources for our corporate customers, with 7-Eleven Holdings and Mitsubishi UFJ Bank, the service is provided by energy as a PPA service. And we like to thoroughly continue to work on such initiatives. On the other hand, there are various challenges remaining towards increasing the penetration of the renewable energy utilization of non-FID power sources. The characteristics of renewable energy sources is that it is an unstable power source that is power generation output is dependent on the time of [indiscernible] weather. Therefore, it is difficult to fulfill the demand for electricity by our customers by only renewal energy furthermore. We need to increase the accuracy of the forecast of the demand of the energy by overcoming these challenges. And in order to have -- in order to spread and expand, we need to overcome the [indiscernible] highly accurate power generation forecast-based data and weather forecast. And -- but overcoming these issues, we will utilize IOWN. And also, we will utilize the storage battery capabilities to have an energy store management, so that we will be able to provide the optimized energy to our customers. This service will provide new values towards the realization of [indiscernible] carbon neutrality by combining NTT Group's ICT technology and our energy-related partners technology. Next page, please. This is one of the examples. This is the storage battery station as [indiscernible]. Through this, we can adjust the gap. And between the renewable energy and storage battery, we can have the connection of the 2. It was a brief but please look forward to NTT Group's endeavors moving forward, realizing the smart energy and realizing the NTT Group's vision. Thank you very much for your kind attention today.