We would now like to start the investor meeting of INPEX Corporation. Thank you very much, everyone, for your attendance today despite your busy schedule. I am Wakita, General Manager of the Corporate Communication Unit, and I will serve as the MC today. Let me introduce the members from INPEX on the stage. We have Mr. Takayuki Ueda, Representative Director, President and CEO. Director, Senior Managing Executive Officer, Senior Vice President, Finance and Accounting, Mr. Daisuke Yamada. Director, Senior Managing Executive Officer, Mr. Toshiaki Takimoto. As for the program today, we will take about 40 minutes for the presentations and about 35 minutes for Q&A, a total of 75 minutes. Today's meeting is held as a hybrid meeting with participation both online and offline, and the session will be interpreted simultaneously. Those attending through Zoom, please choose the language of your choice.
For the presentation material, please select the document using the button at the top of the screen. Mr. Yamada will first explain about the consolidated financial results for the fiscal year ending December 2024, as well as consolidated financial forecasts for the fiscal year ending December 2025. Mr. Ueda will then talk about INPEX Vision 2035, covering the 2025 - 2027 Mid-term Business Plan. Mr. Yamada.
Please allow me to explain the earnings result for last fiscal year. For the fiscal year ending December 2024, we were able to see both revenue and profit increase. The revenue was at JPY 2.2 trillion, operating profit at JPY 1.27 trillion, net income JPY 427.3 billion. We were able to see the revenue increase by more than JPY 100 billion year-on-year.
Our record year was FY 2022, so this is the second highest level in terms of our earnings result. Last year, as you know, we had the production trouble at Ichthys, and we have expensed the exploration conducted in Australia last year. They were negative factors, but w e were helped by weak yen and the income tax. We have optimized this from a strategic perspective. The negatives were offset. That was the earnings result for last year. In terms of oil price, it was around $80, and so a slight decrease. FX at JPY 152 per dollar, and this was an JPY 11 weakening of the yen, which was a tailwind for us. As for our KPIs, ROIC was at 8.4%, and this was in excess of our WACC. As for ROE, we did not quite reach 10%, but we achieved 9.5%.
This was in excess of the cost of equity that we calculate. As for leverage, we were at 0.33x, and so we were within the financial discipline. In terms of the main products. For the crude oil, we were at JPY 1.712 trillion. From JPY 1.6 trillion, we were able to see revenue pick up by around JPY 100 billion. We did have slight increase in sales volume. Brent came down, so the unit price did come down, but FX helped. We were able to register more than JPY 100 billion of revenue increase. As for natural gas, the JPY 525.1 billion, and so this was more or less flat year-on-year. The reason for the increase in revenue was, again, helped by FX.
The unit price came down, but the selling price or the selling volume, we did have the production issue at Ichthys, but Prelude performed quite strongly. We were able to make up for that gap. There wasn't much impact from the sales volume. JPY 321.7 billion to JPY 427.3 billion , an increase of JPY 105.6 billion . What we used to say, the business activity factors and one-off factors have been changed to business activity factors and others. The business activity factors include the income tax, which is part of the normal operating activities. JPY 14.6 billion of increase based on the business activity factors. As for the impairment, the Prelude last year, because of the greenhouse gas-related regulation, we were able to benefit from the rebound and for divestment.
We registered JPY 17 billion of divestment gains from project in Middle East and Indonesia geothermal. We were able to see the revenue increase by JPY 14.6 billion associated with the business activity factors. The revenue increased by JPY 100 billion . The sales volume did not change very much. The unit price did come down, but we were able to make up for this by FX. We were able to register more than JPY 100 billion of revenue increase. Our cost of sales, because of the increase in crude oil, we saw increases in depreciation and royalty for exploration costs. What was capitalized in Australia was now expensed and that caused the revenue to come down by JPY 27 billion . For R&D, hydrogen and CCS. CCS we can't actually capitalize. We actually registered this as R&D expenditure at JPY 38.7 billion .
Equity method, this is downstream Ichthys. This does include production issue at Ichthys to an extent. For others, dividend received as well as abandonment expenses are included. For income tax expenses, JPY +41.5 billion . This was something that I've explained at previous earnings call as well, but this was due to reorganization within the group where we have benefited from the tax burden reduction. The INPEX Oil & Gas Australia was underneath the Japanese entity, which was shifted to being underneath Australian entity. We were able to enjoy greater tax loss and benefit from tax effect. We were able to optimize the income tax to the tune of JPY 41.5 billion . Inclusive divestment and impairment loss, we were able to achieve JPY 105.6 billion of revenue increase to end at JPY 427.3 billion.
I would like to move on to consolidated financial forecast for the new fiscal year ending December 2025. For the profit attributable to owners of parent, we have JPY 330 billion, which is a decline from the previous year. JPY 330 billion as a number is the same as the initial forecast of the previous fiscal year, December 2024. It's a decline of JPY 100 billion. Some people may have a question, but this JPY 330 billion is a remarkable number for our company. This is the top three historical level. If you're able to achieve this number, it will be achieving more than JPY 300 billion for four consecutive years, so it would be one of the higher rank of our company's history. That is the budget. For the ForEx assumption, we have $75 per barrel.
From this, we have an expectation that it will go down further. But in January, it was an average of $78, so we think this is a good projection. For average exchange rate, JPY 153 to dollar. As a result, the ROIC is 6.3%. This is above our WACC based on our calculation. Unfortunately for ROE, 7% is about the level we are expecting. As you know, we have about JPY 4.8 trillion of equity, and then the ForEx translation account, JPY 1 trillion. So ROE is something that we have a difficulty exceeding the cost of equity. JPY 427 billion to JPY 330 billion, so about a decline of JPY 100 billion. First is the market factors. Number one, the biggest is the oil price, $80 to $75. People might say it is too low as an estimate, but there is some lagging effect from overseas gas.
This year, we have more drop in overseas gas. That is why it is leading to a drop of about JPY 40 billion. For the exploration, this is based on the exploration expense we had last year, and that will be reversed. The major impact is from Ichthys, JPY -27.3 billion. To explain in detail, first, the production trouble we had last year is reversed this year, so it is about JPY +46 billion this year. Then the FX gain from paying capital reduction, which is in the FX adjustment account. The gains we have there is coming from IHAPL shift to Japanese corporate, and the cash is recouped, so that is about JPY 26 billion. So a plus impact is about JPY 72 billion. The minus impact, this year we have the shutdown, a major shutdown, which will lead to a shutdown impact of JPY 79.6 billion.
There are two factors. Number one is the drop in unit price, and then the OPEX increase. In the previous comment, I talked about the production trouble being JPY +46 billion, but more than that, we have the shutdown negative impact, which is larger. So that is JPY -79.6 billion. In total, we have the PRRT. We talked about tax effect last year, but we skipped last year. This year we have to book this tax effect, and that is about JPY 19 billion of a tax effect this year. Then the tax impact. Last year we mentioned about the large positive tax impact coming from IOGA, INPEX Oil & Gas Australia. So there will be a drop of JPY 51.4 billion based on our budget. But the income tax is about JPY 900 billion as a company.
Therefore, the tax control, tax management is what we would like to continue to optimize the income tax. Out of that JPY 900 billion, if we can reduce this by 1%, it is about JPY 10 billion of impact. So we have this number of JPY 50 billion. Then we have a divestment, so in total, about JPY 100 billion of decline in profit. As we usually show, we have the sensitivities. For the Brent crude oil price, we have JPY 5.4 billion, and then for exchange rate, we have JPY 2.4 billion of impact on JPY 1 move. Regarding cash flow, on the very right-hand side, the cash flow from operations, JPY 876 billion. If you compare to last year of JPY 899 billion, it is a slight decline, but we have the Ichthys shutdown impact. However, the JPY 876 billion is also quite a large amount.
From our company's viewpoint, it is one of the top three, top four level as a company. We are able to have the cash flow generation capability, although we have shutdown. If you look at the growth investment, we have JPY 602 billion for the growth investment, which is large. In the Mid-term Business Plan period, we will explain this in detail later. But in the three years, we have JPY 1.8 trillion of investment planned during the Mid-term Business Plan. About 1/3 of that each year will be JPY 600 billion of growth investments; about JPY 500 billion for growth investment; for the exploration, JPY 57 billion; for net-zero, JPY 38 billion. That's the breakdown. For the free cash flow, we have JPY 253 billion. We have 50% total payout.
Out of that JPY 330 billion, JPY 165 billion is now 50%, and that will be split between dividend and buyback. The major characteristic is the investment. This time, the breakdown of operating cash flow is 70% for investment. Last year, this was 45%, so quite a lot allocation for the investment. We are shifting our mode from reducing the net interest in bearing debt to making investment, as well as a reward to shareholders. That's how we are going to allocate the cash. For ROIC, with Ichthys went down, and the O&G Overseas also went down. For Ichthys, because of the shutdown impact, return will go down. For the O&G Overseas, the absence of the tax effect will lead to a decline from 15% to 9%.
That's all from me for the results for the fiscal year ended December 2024, and the forecast for fiscal year ending December 2025.
Next, Mr. Ueda will provide explanation.
Thank you everyone for coming late into the day. This is Ueda, the CEO and President. I'd like to explain about INPEX Vision 2035, which is the new vision that we have established with the target set at 2035. This vision and the new three-year Mid-term Business Plan, the new Mid-term Business Plan covers the period from 2025 this year to 2027. How has the business environment changed in creating this vision vis-à-vis the previous vision? There are many things, but I've identified three changes in the environment, which is quite significant for us. First is the expected growth and the significance of natural gas and LNG. As you know, the climate change was very much focused, but today, not only climate change, but energy security or energy affordability.
The issue is how to strike the right balance amongst those factors. Also, the cost of the new energies are still quite high. For the foreseeable future, the gas is expected to be the most appropriate transition fuel. I do believe that this is now a common understanding around the world. Natural gas or LNG, the importance, will continue for quite a long period while we undergo a transition. We felt that we need to think about the strategy for company from that basis. That's the first point. The second is that there is a need to pursue multiple pathway towards net-zero, so renewable energy, hydrogen or CCS. What is likely to be the main player going forward? We don't have conclusion on that right now. We're working on various things around the five net-zero areas.
What we know is that, depending on the region or the level of development, there are diverse low carbon energy. Whether it be renewable energy or it could be hydrogen. We need to have these multiple low carbon solutions that we are able to deploy depending on the situation that we are facing at the various locations. That's the second thing. The third change in the environment is more recent. First is that, how are we going to create the clean energy going forward? There is a role of electrification that is quite significant. We need to make that electricity clean, and the electricity demand is expected to grow at quite a fast speed for foreseeable future. Data center and AI demand, as you well know, they're generating electricity demand.
Until a few years ago, people were saying the electricity demand will come down, but now people are starting to think that it's going to increase, and I think many of you are well aware of this. Significant electricity demand led by AI. How are we to respond to that? Also, the various resources used for this will also undergo increases in demand. How are we to address them? That's the third point. The energy, the supply system strengthening or improving resilience or energy system itself is going to transition to being more electrified. That's the era that we need to respond to, and that's the third challenge that we need to address in coming up with the Vision 2035. Before I talk about the upcoming vision, I'd like to do a review of the last three years.
This is allocation of capital. When we created the previous Mid-term Business Plan, our first priority was to pay down the interest-bearing debt. Our first priority was to return the money that we borrowed for interest. Now, three years on, we were expecting JPY 1.8 trillion of operating cash, but it has increased to JPY 3 trillion. The additional JPY 1.2 trillion, what did we do? JPY 500 billion, and to JPY 1.3 trillion was the increase that we were able to make for repaying debt. We were also able to increase the shareholder return as well to JPY 600 billion from JPY 200 billion. Gross investment has not changed all that much.
What I want to say here is that how we are spending money as a company, the priority was to pay down debt previously, but going forward, as you know, we have been able to make a lot of progress in terms of paying down the debt. So 0.3x is the level of the ratio that we are able to achieve now. Our priority is no longer returning the interest-bearing debt. Thinking about leverage, the debt ratio could be between 0.3x and 0.5x. Refinancing is something that we could also think of. Our next midterm, and also the whole direction of the Vision 2035, from the debt repayment prioritize focus, to shifting to a more investment for growth and the return approaches. These are the major KPIs.
We have net income and others, and we have been able to achieve most of the KPIs that we set for ourselves. Now for towards 2035, what are the pillars upon which that we want to achieve growth, and what do we want to do as INPEX for the next 10 years? That's what I would like to cover in the next part. Here, what is most important is to enable the existing project to operate stably so that we're able to continue to make stable cash. That's the first point. But we need to respond to the changes in the environment. In that regard, we have identified three new pillars for growth, which I will explain right now. First, is expand natural gas and LNG business. That's the first pillar for growth.
I think you're well aware, natural gas is likely to continue to play a significant role as the transition fuel. In that regard, we need to address the natural gas, and that is a matter of course. In that regard, we intend to strengthen liquefaction capacity for Ichthys and for Abadi. We want to achieve FID during the current midterm management period. We want to also strengthen initiative in this area, that include LNG. The second pillar for growth is how are we going to think about the low-carbon solutions. Our growth is to provide low-carbon solutions, leverage CCS and hydrogen. We used to call this five net-zero areas, but as hydrogen or CCS, there will be positioned at the core for us to roll out low-carbon solutions.
We are going to integrate CCS with our natural gas LNG project so that we can reduce the greenhouse gas. Not just the CO2 that we generate, but we also will collect CO2 from a third party so that we're able to geo-sequester that as well. That's the kind of business that we want to roll out more fully. What we are doing in Nagaoka right now, the Blue Hydrogen project, and we want to further develop project like that so that we're able to provide green hydrogen or ammonia projects going forward. The third pillar for growth, and this is to respond to the third challenge that we are facing. What we are saying here is that we are going to drive initiatives in the energy and resources field by leveraging INPEX's distinctive capabilities.
Now, what I mean by this is that the structure for supplying the energy is likely to shift more towards electrified, clean energy-based electrification. What do we need to do? We cannot do electricity business directly ourselves, but our strength, as INPEX, we are able to leverage that capability and enter into area that is related to electricity. We feel that there is certainly a possibility there. For example: renewable energy plus storage battery, s upplying fuel plus a power generation business and CCS could be combined as a further evolution of what we have, or u nderground resources with the iodine or lithium. This type of natural resources could also come into play as well. Lithium or copper. They were originally extracted from the minerals, but because of the technological development, the underground water, f rom underground water, we are able to now extract these mineral resources.
We also have started a project in Chiba Prefecture, where we are actually extracting water from underground, where we are extracting iodine. It could be lithium or other mineral resources. This could potentially be a business that we can roll out, leveraging our know-how in regards to subsurface geology. We will call this the distinctive capabilities. The knowledge and experience about resources underground, offshore wind or in Australia and Abu Dhabi, where we have a strong presence. The reputation that we have in those areas could also be our strength. We want to leverage these strengths fully, so that once the electricity demand expands, then we want to enter into areas that is adjacent to those areas. That is the third areas of our focus.
In terms of pillar for growth. Very simply, the Vision 2035, we have set ourselves this 60/60 target. We call this the 60/60 target. One 60, as you can see on the left, is that we want to grow our business scale by 60% towards 2035. Business scale, we are going to measure this by operating cash flow, and this could be the Ichthys expansion start of Abadi. By 2035, we want to expand our operating cash flow by 60% by 2035. That is the first of the 60s. The another 60%, and here we are talking about greenhouse gas. We want to reduce net carbon intensity by 60% by 2035. Flare reduction and so forth, methane, the discharge reduction. The Ichthys CCS and Abadi CCS, by utilizing these, we will work on a significant reduction in the emission of CO2.
In reducing CO2 emission, there is a small print towards the bottom, as number three. We are going to sequestrate CO2 from our project, but we want to use the CCS capacity so that we are able to geo-sequestrate CO2 produced by others as well. Renewable energy or CCS business, we want to reduce 8.2 million tons of the CO2 reduction for the society at large. This is a numerical target that we want to pursue. A simple target in one sense, but what we refer to as 60/60 internally. I would like to explain each of the pillar for growth more in detail. First is expanding the natural gas and LNG business. As you know, INPEX has been an operator who conducted business from upstream to downstream.
In the first half of the 2030s, we plan to start the operation of Abadi. Also in the first half of the 2030s, we would like to start the Ichthys LNG expansion project with a third train. The second pillar for growth is centered around CCS and hydrogen, in other words, low carbon solutions. As I am showing to the left, towards 2035, we want to further evolve our initiatives and also direction in Kashiwazaki, Niigata. Right now, we have a Blue Hydrogen demonstration plant that we are building. This will be completed by the end of August. The domestic natural gas will be utilized to produce hydrogen, and the CO2 produced in the process will be sequestrated through CCS, and we are going to use hydrogen to generate electricity. Then we are going to create a blue ammonia.
About 700 tons of hydrogen will be produced with this demonstration project. We will do this first, and we will learn how to handle hydrogen. We are going to certainly take learnings from this initiative and overseas. Ichthys CCS and Abadi CCS, we are going to address them. For Ichthys CCS, near Darwin, about 150 km offshore, we are going to sequestrate underground, in the sand, the ground that we are collaborating with Santos and Woodside. We have already drilled two wells to understand the capacity and how much CO2 are we able to actually geo-sequestrate. The results so far are showing pretty good results. We want to be able to start the FEED, the related operation for Ichthys CCS. In the future, we want to sequestrate 2 million tons of CO2 per year.
For Abadi, we are going to introduce CCS from the start. It is going to be a clean LNG project to begin with, so Ichthys and Abadi are two businesses that we are going to promote.
The CO2 reduction for the third party, for example, in the metropolitan area, these are things we would like to do domestically. The third pillar for growth is, as mentioned before, to drive initiative in the energy and resource fields as INPEX. There are many areas. First is for renewable energy. We already have Indonesia, Australia, about 6 megawatts or more renewable energy. In Australia, in Europe, we have Enel, and we have the joint venture called Potentia Energy, and we are doing renewable energy development. On top of the solar and wind, we have this renewable energy, and quite a high profitability business. Through these projects, I would like to have a business of a supply-demand balance adjustments using renewable energy. We would like to work on this in three times of what we have today.
The other is the gas supply, the power generation, and the data center, all combined. These are things we are thinking today. As you know, we have the natural gas. Of course, we do not have the power generation business as a core business, but we will supply the gas. The CO2 will be sequestrated underground. Then with ammonia or with hydrogen, we will create clean power to provide the data center. These are things we are thinking as a business. On top of that, as shown on the left, we have the underground resource development. Iodine is the material for the perovskite power generation, a solar power. That is one prospect. Also with the brine water, we will extract. Then we will challenge ourselves as well. Those are the three pillars for growth.
For 2025, I would like to mention the major KPIs. There are a couple of KPI. The most important is, of course, it has to be zero. Major incidents have to be zero. Then we have a 60% increase for CFFO versus 2024. The net carbon intensity will be reduced by 60% versus 2019. ROE and ROIC, for these, each of them will be 10% or more. Those are the targets we have. That is all for 2035, our INPEX Vision, and a couple of targets we have. Next, for 202- 2027, the Mid-term Business Plan is what I would like to explain. The next three years are what we are going to work on. The first is existing business. We like to work on that steadily.
Because of the time, I would like to skip all the details, but we have 9.3 million tons already. For the next fiscal year, we have the shutdown maintenance. Over the mid- to long -term, we would like to have a steady production. In Abu Dhabi, already production will be expanded, and we will have more full-scale investment. Abu Dhabi has a low greenhouse gas emission, and we would like to work on that production going forward. Outside of that, domestic, we have INPEX JAPAN and expansion of business in Southeast Asia as well. As mentioned before, the growth pillar number one is the Ichthys. For Ichthys, as you can see on the right-hand side, this is the image. The first and second train, we have 9.3 million tons of production and maintaining that well.
To maintain the plateau over the long term, we have the additional gas, securing additional gas. We have the Cash Maple as one example. Also for the future, we have the third train that we would like to develop in the future. For that, we need to secure additional gas source. Those are the things we are thinking. Then, as mentioned, CCS is what we like to work in a more full scale. We have two wells being drilled. In the Mid-term Business Plan period, FID. CCS FID is something we like to achieve within this Mid-term Business Plan period. Next is Abadi. As you already know, for Abadi, 9.5 million tons of LNG is produced, so equivalent to Ichthys level as an operator.
Today, the FEED for basic design is currently being made. From the middle of this year, we will go into the FEED and the basic plan. During the Mid-term Business Plan, we would like to target FID. That is for Abadi. Of course, economics is very important, so 10% or middle. We like to secure mid-10% range IRR for this project. For CCS, we will conduct from the start. For the growth pillar number two, the low-carbon solution. Domestic CCS is something I would like to mention today. The image is on the right-hand side. You can see the diagram. There are a lot of CO2 source for emission in the green belt and the Keiyo belt. We also have the CO2 pipeline to bring to outside of Chiba.
In the outside, we will drill a well, and that is where we will sequestrate CO2, inject CO2. That is the CCS project in the metropolitan area. From METI, this is one of the advanced CCS project that was selected. This year, the basic plan is what we are working on. This year and next year beyond, we have two wells to find out how many capacity there are to inject CO2. We are going to conduct FEED. We are going to have the clean hydrogen in domestic and overseas. As mentioned before, we have the experiment plant. Based on this, I would like to have the commercial plant for hydrogen in the future. Of course, this type of hydrogen and CCS is going to be quite costly, so the government support is very important.
Based on that, I would like to look at those progress and also make the progress in these projects. The third, the so-called using INPEX strength, I would like to work on this growth pillar. As you can see from the top, I would like to provide supply power in a cleanest possible form. We have our participation in CCS combined in ammonia or hydrogen. We would like to combine and also provide those clean energy to data centers. This comprehensive business, we do not think it will be done just by ourselves alone. With other parties, we would like to expand these projects. A few weeks ago, we signed a comprehensive agreement with Hokuriku Electric Power Company, and we have agreed on the same. The detail is still undecided yet today.
Having this in mind, I would like to deepen our collaboration and also utilize our strength of our company. Those are things we would like to work on. We also have the resource and extraction from the brine water. These are projects we are working on today in domestic and overseas. For the balance of cash allocation, as mentioned, we have shifted our gear from paying down our debt to shareholder return and growth investments. In the Mid-term Business Plan period, three years. Based on the oil price, it is at $70 per barrel and JPY 135 to the dollar as an assumption. Based on the commodity price increase of 2.x percentage points each year, that is the assumption. The three-year operating cash flow is about JPY 2.2 trillion.
The breakdown is shareholder return for JPY 400 billion and growth investment JPY 1,800 ,000,000, or JPY 1.8 trillion. As Yamada-san explained earlier, in 2025, the investment is JPY 600 billion, which is quite a large amount. Initially, the investment was around JPY 400 billion or so, and it is a slight increase from that level. For the shareholder returns in detail, you can see the detail. The basic idea for our return is, with the dividend, we would like to add a share buyback effectively on top of that. During the Mid-term Business Plan period, we have JPY 90 per share and a progressive dividend is what we like to introduce. For December 2024, we had JPY 86 per share. In this new fiscal year, JPY 90 per share, so additional JPY 5 per share is the floor for the dividend
That is how we like to strengthen our shareholder returns. For the total payout ratio, this time, 50% or more is the target. In the previous Mid-term Business Plan, we had 40% or more as a target. In fact, we were largely above 40%. This time, instead of hitting 50%, we would like to achieve 50% or more in the same context. One thing to mention is, during the current Mid-term Business Plan, we did not have the full-scale investment for Ichthys and Abadi, so we might have a concern of what to do in the future. To give you some image, it is true from 2025 - 2027, various projects, FEED, FID, and right before FID is something to be achieved in the current Mid-term Business Plan. It is a preparation period for the next large-scale investment.
As mentioned before, D/E ratio is well under control, 0.3x, 0.5x for D/E w hile controlling at that. During the next midterm, 2028 - 2030, that is the time when the full-scale investments will be done, and we need to have a certain amount of cash while keeping the D/E ratio. We would like to also reward our shareholders and then make these investments to go into the future. That is how we would like to reward our shareholders based on this policy. There are a lot of criticism about our company's ROE. But the improving of capital efficiency is also what we are working on. Generally speaking, as you can see, this is comparing ourselves with the U.S. and European oil majors, and we have this compared to super majors. ROE of those companies are larger than us.
For the growth, INPEX has higher growth than other super majors, and we have Ichthys and Abadi we would like to grow further. The mid- to long -term, we can get closer to these U.S. and European peers, and by targeting that, we think we can select the good economics project with good economics. That is how we would like to improve our capital efficiency. For others, because of time, we have HSE and the strengthening our foundation, as well as human resource and R&D. These are areas we would like to continue our efforts. During the Mid-term Business Plan period, the major KPIs are shown on the slide. The major incident, zero. This is what we would like to continue. For the shareholder return, JPY 90 is the floor for dividend. We would like to have progressive annual dividend payout with a total payout ratio of 50% or more.
The three-year cumulative CFFO, JPY 2,200 ,000,000,000. Net carbon intensity, 35% reduction by 2027 versus 2019. ROE, ROIC, each will be aiming for an ROE greater than the cost of equity, as well as aiming for an ROIC greater than WACC. As mentioned, in 2035, ROE, ROIC will be 10% as a target. During the Mid-term Business Plan, realistically, this is the level that we set as a target. That's all for me. Lastly, I'd like to mention about this. Today, with our vision, we have done corporate brand branding. Energy for a Brighter Future is our corporate branding. Whether it's natural gas, hydrogen, wind power, we like to use this to connect to the future, and that is the mission of our company.
Using the power of Earth, we have this slogan: Energy for a Brighter Future. That's how we came up with the brand statement. INPEX, the Earth is very important. The power of Earth, there's an angle of 23 degrees, and that is the degree of the axis of Earth. Therefore, that is important. It might not mean so much, but that is the basic of the branding and the statement. That's all from me. Thank you very much.
I will now like to take questions.
I would like to ask two questions. First question. My questions are both related to Vision 2035 and Mid-term Business Plan. First is page 23, when you talk about shareholder returns. As the CEO has explained, it's more a confirmation. That on page 23, on the right, in other words, during not just the current midterm period, but the future, the image of investment and shareholder returns, and you give a rough image. If we take it as shown, even with the increased investment, you're going to finance through debt. For shareholder returns, and this lighter, the purple portion, it seems that it's not going to narrow. Even when the investment is going to peak, the shareholder returns provided will be equivalent to the current midterm, the level.
Of course, it would depend on the market condition to an extent, but that is what you're trying to show here. In other words, you said you're going to strengthen returns, so we should be able to take it for what the word says. What the market is concerned is that when the investment reaches peak, that the shareholder return policy might change. But you said that you're going to adopt a progressive annual dividend policy, and you also came up with this long-term view, which means that even when the investment reaches a peak, the shareholder returns will not be reduced. I thought that was the kind of message from the management. That was the point that I wanted to confirm. That's the first question. The second question is, investment and also cash flow growth for the future.
As you have explained on page 22, the investment cash flow for the next three years is going to be JPY 1.8 trillion. This will probably be around the FID adjust, and this is prior to the expansion of Ichthys. Still, JPY 600 billion of investment per year is quite high. The breakdown is described on bottom right of page 22. In terms of the individual project, specific project, what are the kind of project that you intend to make investment towards? When we go back to page 23, from the JPY 1.8 trillion over the medium to long term, you are going to be making investment. After the FID for Abadi, of course, the investment will increase furthermore. That is the kind of image that we should have for cash flow going forward.
On that basis, I apologize for explaining a lot as part of my second question, but as part of the long-term vision, you have now declared 60/60. This is a more, I suppose, ambitious target than Shohei Ohtani. Operating cash flow growth, 60%, is it sufficient? An Abadi project scale is probably equivalent to that of Equinor at least. The Ichthys train expansion is also expanded. If that is included in the operating cash flow for 2035, is 60% sufficient? That is just the impression that I got, so 60% growth. Are you expecting to achieve greater than that 60%? If we only look at the illustration, it seems that Ichthys is not really expanding very much despite the expansion on page 26. If you could also talk about the expansion of the operating cash flow? Those are the two que stions.
I will talk about the shareholder return first, and investment, I will ask Yamada-san to respond. I cannot see the slide too well when I am sitting down. Page 24 of this Vision.
What you are asking here is that during the midterm period, it may be okay. But once the investment increases significantly going forward, would our shareholder return be reduced? Our response is exactly what you have indicated. Of course, during the next Mid-term Business Plan period, investment will increase. We need to raise debt to a certain extent. But even with the debt, we want to maintain a D/E ratio to within 0.3x and 0.5x. If we were able to do that, we should be able to maintain the returns while still making investment. In the future, from 2031 onwards, I will start to make repayment of the debt. Of course, what we can commit is the progressive annual development policy as well as the total payout ratio for the current midterm period.
The image going forward is that we are going to maintain our policy, and to not alter from the return policy that we are adopting right now.
In terms of investment, to be more specific, our plan for FY 2025, let me explain, and you will be able to assume the situation for the rest of the three-year period. FY 2025, JPY 600 billion of investment for growth, of which oil and gas would be JPY 540 billion or so, the remaining for net-zero. For oil and gas, the investment for the production increase in the Middle East, vis-à-vis 2024, there is going to be an increase of JPY 150 billion-JPY 160 billion for the oil and gas. More than JPY 100 billion of investment in Middle East increased production. That is quite significant.
Apart from that, as well, we have explained today, until we reach Abadi, what are we going to do in the meantime? Something with a more immediate impact. We want to capture cash flow and profitability that is more fast-acting, if you like. I cannot name names at this point in time, but M&A in the upstream area or a new investment in the upstream area. This would be development investment, but those type of project, we are assuming about JPY 200 billion of investment in that area this fiscal year. For renewable energy and net-zero, essentially, we are going to maintain our cruising speed. For those, that is not going to appear as an investment. For example, CCS, and this is both for the domestic and international CCS. This will be outside investment accounting because this is booked as R&D expenditure.
If we include those, the net-zero-related would also reach about JPY 100 billion. That is the image for the next three years. Also, from 60/60, when we actually calculate the fact from there, the operating cash flow in 2035 will be about JPY 1.5 trillion-JPY 1.6 trillion. That is the kind of image for 2035. As to whether this is too small or too large, it is difficult to say. It does depend on the oil price as well to a certain extent too. But operating cash flow for this year is about JPY 900 billion, and Ichthys is about JPY 450 billion-JPY 460 billion. Same scale as Ichthys. If that is the case, then that is JPY 900 billion plus JPY 500 billion, or about JPY 1.4 trillion. We have the increase, the production investment for other projects that I touched up on a little bit.
Potentia Energy new M&A could be a development project. Of course, there is ins and outs, but 60% in that regard is relatively reasonable level. It is not an excessive stretch, or it is not excessively conservative. That is the kind of image. I hope that is okay.
That was very clear. Thank you very much.
Two questions. Number one, is the ROE target and the Mid-term Business Plan, three-year target. How you came up with the target?
During the Mid-term Business Plan, ROE will be above WACC, and that is natural from the market standpoint. Going above capital efficiency, it is not clear from this page how many percentage you are trying to overshoot. From last year, you started to talk about this capital efficiency. In the first half, I brought this from my office. But if you look at the first half basis last year, it was 8.8% of efficiency or capital cost. Today, if you look at the material, it is down to 8.2% capital cost. Most probably based on your calculation, if you calculate the shareholder return cost, this year is lower.
If it is lower than last year, then if you look at the final year of the Mid-term Business Plan, that means you do not know what the shareholder return will be. That is unfortunate. PBR is 0.5x . Maybe you wanted to increase that to 1 x. Maybe PER or ROE, if you look at those two factors, ROE target, for example, I think if you change how you show this, it might be more leading to a detailed dialogue. Because if this is the target, then it will not lead to the next dialogue. Also for cost of equity is 8.2%, and with the ROE, 7%, and is lower than the target in Mid-term Business Plan. But during the Mid-term Business Plan period, you have these targets set out. Therefore, the 7% ROE plan for this year, that is the target for this year.
After you lower that, the capital cost is 8.2%. Considering all these facts within this fiscal year, the buyback is something you are trying to do to try to go above that 8.2% and t hat will be done within one year? Or, as you are targeting these numbers, you are still working on that. T hat means the target is set, and that does not need to be changed? That is my first question.
Basically, for our capital cost, CAPM, capital asset pricing model, is how we calculate the cost. For the future capital cost, how much that will be depends on the risk-free rate and the WACC performance. It is hard to come up with an accurate number. For 2027 or 2035, we have 8%- 9% of capital cost as a target, or we have that in mind.
For the Mid-term Business Plan, ROE is lower, and that was the comment you made. That's also one area we struggle. Based on the current oil price, and the oil price this time is $75 as an assumption. In 2024, it was about $80 per barrel. Considering that, if you calculate based on oil price, honestly, we come up with this level. To increase ROE, what we have to do is the question. Number one is the Returns, to work on good projects, and then lower the E, equity. That's about returns and buyback. Including all these, we have to do appropriate control of capital. Those are things we like to do, a lso utilize leverage. These are things we like to combine together so that we can work in this fiscal year.
With the current oil price calculation, we come up with these numbers.
Okay, thank you very much. The second question. In the Vision 2035, Abadi is going to be the main driver for the growth. For Abadi, operating cash flow is something you showed us an image before, but regarding the free cash flow, I want to come up to some image of that. As far as you can comment, I don't know how much you can comment today, but the investment size of Abadi, first, on 100% basis, how much is it expected? If you can, give us some color, that'll be great. Also Abadi, for the financing of Abadi, depends on how many percents you have, of course, but based on what you said, you're going to try to fund this. Whether you'll do off-balancing or not, that's another question.
For the investment cash of Abadi, the total amount is something I'd like to ask. Let's say you don't have a percentage image yet, but for the financing, basic idea is borrowing. Is that correct? Those are the two questions.
First, regarding the size, it's hard to say for sure. But there are various numbers, 100%, such as $20 billion . There are many numbers. From this year, the basic plan, the FEED, is to be conducted. The biggest purpose is the design and also how much cost we will have to bear. All of the costs of various projects are increasing, so 1.3x, 1.4 x from the initial stage. That's a normal situation in EPC. The Abadi cost is something depends on the FEED process and something that we'd like to clarify in the FEED process.
Today, we're in the bidding process of FEED . There are four components: LNG plants, the pipeline, FPSO, and the underground facilities. We are doing the bidding process today. From the middle of the year, we are going to work on design and the cost calculation. FEED will take two years or so. After that, FID. Within this process, the cost will be clarified. As mentioned, how much cost increase we will also have is something we have to measure and calculate. These are things we don't know unless we really start. In accurate terms, it's hard to say, but that is how we're going to work on these projects.
For the procurement or for financing, let's say $20 billion. Let's say we set that number. For Abadi, there's both upstream and downstream.
Upstream is the drilling of well, then downstream is other. Let's say 60/40% is the ratio. For the downstream project, this is trustee borrowing, where we have to borrow from a third party. This will be done through bank, the borrowings. For the upstream project, basically, we will use our cash. There are a lot of criticism, and D/E ratio is where there are a lot of criticism, perhaps. For interest-bearing debt, we have some retained fund from Abadi. Let's say several hundreds of billions of yen is required for financing. Within the fossil fuel, it's hard to really do financing all together. With Ichthys, we have done all these projects, and we have about JPY 200 billion of cash, and we would like to accumulate that for Abadi.
For the upstream, we would like to use our own cash on hand. As mentioned, whether we will use leverage or not is another question. That's a very difficult question. As you know, in Indonesia, there is a negative pledge for the upstream project by the local banks, so you cannot have project financing. With the project finance, the vendor will die. That's not achievable. For Indonesia project, we cannot have leverage using project financing. Therefore, for downstream, for LNG, basically, corporate guarantee loan is to be used. For the upstream, we'll use cash on hand. That is the project we have in mind. As mentioned before from our president, the cost is something we'd like to calculate going forward and decide on how we're going to do financing in detail.
Today, for the downstream, there's a lot of heavy investments or heavy procurement or financing. We're doing a lot of soft sounding, and it's still in the future. Based on the LOI, the downstream financing, 1.3x, 1.4 x is the amount we have in calculation. We don't have a clear answer to those who may ask why. For downstream, we have LOI and the financing. For the upstream, we will have our accumulated cash, and that's how we like use those cash for investment. That's how we're thinking for these investments.
Thank you for that clarification.
I have two questions as well. I want to ask two questions related to the investment. First is that, as part of the Mid-term Business Plan on this occasion for the full year, are you saying JPY 600 billion now in this, and what you have been saying, inflation or decreasing the price of materials, how much have you actually included that in the JPY 600 billion? The second question is related to that. If by chance and of the data, if we end up with an overrun for the investment cash flows are based on inflation, for example. Which are you going to prioritize more, the return to the investors or the investment for growth?
The Mid-term Business Plan on this occasion, whether that be material prices or oil price, we have reflected the inflation, which is at 2.3%.
This year, next year, and the year after the investment, the amount does reflect inflation already. We will see increase in the investment going forward. If we end up with an inflationary environment, are we going to prioritize the investment or shareholder returns? We are going to do both. We are going to use leverage then.
That was very clear.
Two questions. They are detailed clarification in number. Number one is in the current Mid-term Business Plan, total payout, 50% or above, and the progressive dividend of JPY 90 per share. What was the basic idea behind that number? That is number one. The second is more detailed. In the results presentation in slide 20 and for December 2024, the project-related revenue is JPY 26.5 billion of up shooting, and that is because of declining corporate tax- related to project. The Y o Y in December 2025, there is a slight positive trend. Perhaps in December 2024, compared to the initial target in December, there was an increase in project-related revenue. Then those are a chunk, which is several tens of billions of yen. Is that because there is some improvement or more favorable conditions or better things in the project? What was the reason behind this increase?
Two questions. Thank you.
For the first question, the Mid-term Business Plan, 50% or more payout ratio and also the progressive dividend. First, for a total payout, we have 40% or more last time, but we had exceeded more than 50%, in fact. For 2024, if you look at the current rate, we have a 55% or so total payout considering all these. Also, if you look at our total company, we are going to shift our gear from repayment to investment and rewarding our shareholders as shown before. From that standpoint, 50% or more is the appropriate level for this KPI. For the progressive dividend, if you consider payout ratio, we have more than 40% today, and we are good to focus on our shareholder returns. For this time, we have high profit.
There are some questions for this year, but from next fiscal year, we are going to shift our gears, and that is what we wanted to show to the market. For the next December 2025, we are going to have a drop in profit by JPY 100 billion, but we will be setting these targets so that we want to show that we will be focusing on investment and the shareholder returns. That is why we have this JPY 90 per share as well as progressive dividend, and that is the target we set for 2025.
Page 20 is your question, is that correct?
Yes.
JPY 380 billion is the projection in November, and then we had JPY 400 billion and some . Project-related revenue, JPY 26.5 billion. In November, increasing accuracy is something we have as a reflection. Of course, a lot of things are included here.
For example, in some project, there is a large depreciation. Because we are not able to put this in other categories, we put it under project-related revenue. Then we also have the corporate tax. We have tax of some projects, a decrease in cost of goods sold and taxes of some projects. The tax expenditure, which was less than expected-- which was larger than what we initially expected. That is included in JPY 26.5 billion of increase. At the point of November, we could have put a more accurate number in. At that point, however, it was hard to reconcile all the numbers. That is why we had this impact ultimately in the fiscal year-end. Thank you.
What you mentioned is because of your company's capability was increasing, that is the reason?
Well, as mentioned, depreciation changed in the project and rather than the actual capacity or capability, we set the final numbers for the fiscal year. There are some administrative reasons, and if the accuracy was increased, then we could have reduced. This is not based on our capability. For the corporate tax, as mentioned, this is our basic revenue. There are more than JPY 10 billion of difference in the corporate tax. That is our basic revenue, and that is based on our capability of our company. Thank you very much.
I have one question. ROE for the midterm period, and you are going to target in Ichthys of cost of capital, and 8%-9% was the image that you have indicated before. For this fiscal year, it is around 7%. How are you going to increase the level from there? There is an Ichthys shutdown maintenance this fiscal year, and so that is likely to help. But FX and also oil price assumptions, they are expected to come down. The net profit direction or the shareholders' equity direction, and if you could also refer to sensitivity as well, to explain how are we going to achieve 8%-9% ROE. If you could give a little bit more explanation on that, please?
That is quite a tough question, and it is not easy to respond. This fiscal year, the budget is JPY 330 billion, and there is about JPY 80 billion of impact from shutdown maintenance. If we did not have that, we would have been able to achieve more than JPY 400 billion of net income. Last year was about JPY 400 billion as well. During the midterm management period, based on earning power or the target, the net profit level has increased slightly, maybe around JPY 400 billion based on our shareholders' equity ratio right now is 8% sufficient or should it be 10%? But if we put that discussion aside, our current cost of equity, for us to be able to exceed that level, and we should be able to do that. That is what we are thinking.
A nother point as pointed out, how we are going to manage our shareholders' equity. Should we do a buyback? We have JPY 4.8 trillion inclusive of the foreign currency translation account, but capital in actual practice is more than JPY 3 trillion, that's 60% of shareholders' equity ratio is very balanced. We need to raise debt going forward. Shall we use leverage? That is something that we always ask ourselves. In our portfolio right now, domestic, that would be in Australia. These are countries of very low country risk. These are countries where we have a lot of capital. So of the JPY 4.8 trillion of our shareholders' equity, this is somewhat large vis-a-vis country risks. When we do Abadi, the Indonesia country risk is not that high. So it is a medium risk country.
If we do Abadi or, I will not say a developing nation per se. But if we do a project in countries like that, then from 2030 - 2035, then JPY 4.8 trillion of our sales equity, to balance that against country risk, then the shareholders' equity is not really considered to be excessive. That is the kind of thing that we have been discussing quite a lot. ROE or the price-to-book ratio, to use the share buyback to reduce the shareholders' equity in a significant way, is that really positive for our sustainable growth going forward, or is it negative? We need to really think about that. ROE is, of course, something that the shareholders and investors like to see improved, so we are going to make effort. What is included in our budget this fiscal year, we are reducing the capital to gain the benefit of FX.
What is included in the translation adjustment, about JPY 1 trillion, and we are trying to recycle that. The profit from translation adjustment. What we have in Australia is quite significant, but INPEX project is reaching a plateau. So we are now in a period of recoup the capital. We can actually recoup our capital by reducing capital there. Doing this, we want to prepare for investment in Abadi. We cannot invest from INPEX to Abadi, so we need to bring the money to Tokyo. We need to bring that JPY 1 trillion gradually to Tokyo. This is something that we intend to do. Now, if we were to do that, is this the objective or is it by chance? FX, when we invested in INPEX was about JPY 80-JPY 85 , but today it is JPY 150 to a dollar.
In the capital, there is a great gain that we have achieved from FX. But by reducing the capital, we were able to gain the benefit of FX. We are planning to increase their profit. IHAPL has a bout JPY 1 trillion of capital. To do the entire amount is a little excessive, but this is not something that we will do just in a single year, but in 2025 and 2026 as well. Before we reach FID to Abadi, we need to actually have funds ready. So from IHAPL , from Australia, we are going to reduce capital and build up on a capital for investment going forward. We cannot really anticipate the FX, but if the FX is for yen to depreciate, we should be able to benefit from a certain amount of gain. So that would be an initiative for improving our ROE.
It's not anything outrageous, but it is quite natural. The investment that we done at JPY 80 or JPY 85 , we want to actually reap the fruit from that investment now. I do feel that this is an appropriate economic practice. We'll take that into consideration and hope to achieve your expectations in terms of ROE. To increase ROE, doing a significant amount of the buyback probably is not the most ideal approach for our future growth. That's the kind of discussion that we're having internally.
We are at time, so we'd like to end today's meeting. For those people or those questions that were not raised today or answered today, please contact our IR group anytime, and we'd like to respond to your questions. Thank you so much for attending our results briefing today and out of your busy schedule. We appreciate your attendance. Thank you.