A ¥4bn battery plant in Kumamoto will not be built, because the bill for connecting it to the grid came back far above what the customer had assumed
A battery plant that was due to be handed over in December 2027 will not be built.
TESS Holdings said on Friday that the board of its consolidated subsidiary TESS Engineering had resolved that day to cancel the construction contract behind a large order the group first disclosed on 15 April 2025. The order covered the engineering, procurement and construction of a grid connected storage plant at Nishiki, in Kuma district, Kumamoto prefecture, with output of roughly 25 MW and capacity of roughly 100 MWh, for about ¥4.0bn. Cancellation is planned for the end of this month.
The reason sits in one paragraph
The customer was DEI Battery Fund Alpha LLC, a vehicle invested in through Daiwa Energy & Infrastructure. It had applied to the general electricity transmission and distribution utility for a grid connection, and the utility returned the result of its technical review. Two things in that answer stopped the project. The construction cost contribution required for the connection would significantly exceed the amount anticipated at the outset, and the connection work itself would take a considerable period of time, so the customer determined that commercial viability could not be ensured and decided not to proceed.
The utility is not named in the notice, and it is not named here.
TESS Engineering then cancelled by mutual agreement rather than being dropped. The notice states in terms that the cancellation is attributable to external circumstances related to the grid connection and to the customer's resulting business decision, and that it is not attributable to TESS Engineering's engineering, procurement or construction. No settlement sum appears anywhere in the document.
Already inside the forecast
Income from the order was to be recognised over time, across the years to June 2027 and June 2028. Both were guided years. The notice says the cancellation is already reflected in the forecast for the year to June 2027 published in the same batch of filings, which puts net sales at ¥64,000m, up 25.0 percent, and operating profit at ¥4,700m, down 11.8 percent.
The year just closed ran the other way. Net sales were ¥51,217m, up 39.6 percent, and operating profit was ¥5,326m against ¥2,548m. Ordinary profit was ¥3,834m, from a loss of ¥641m the year before. Profit attributable to owners of the parent was ¥2,123m, and earnings per share were ¥30.11 against ¥2.91.
The same board also raised the dividend for the year to June 2026 to ¥9.54, from the ¥8.08 forecast on 23 July, against ¥5.12 paid for the previous year. The company pays about 30 percent of profit calculated excluding valuation losses on forward foreign exchange contracts, which for the year gives ¥2,242m and ¥31.80 a share.
One project, on the company's own account
The last paragraph of the notice is the one worth keeping. As of Friday, TESS says, no other grid storage EPC project it holds or helps to develop has been cancelled or discontinued because connection charges rose or connection work stretched out. That is a company describing its own order book on the day it lost a contract from it, and it carries a date rather than a forecast.
It is also not the only battery order on the page. On 17 July the same subsidiary announced a larger one, at Komoro in Nagano, of roughly 43 MW and 171 MWh, for about ¥6.0bn and due in March 2028. Its revenue falls in the same two financial years as the revenue that has just gone.
