Tokyo Gas Co., Ltd.

Annual Report 2015

RISING TO
NEW HEIGHTS
OF CREATIVITY

Stock Code9531.TIR Contact

E-mail: tgir@tokyo-gas.co.jp
Tel:+81-3-5400-3888
Fax: +81-3-5472-3849

AboutTokyo Gas

Developing Business through the LNG Value Chain
Tokyo Gas has developed a comprehensive range of businesses that spans from upstream resource
development and procurement to gas transportation and sales. We specialize in natural gas, and thetechnologies and expertise we have accumulated in this respect are being leveraged to maximize the value we
provide and to expand all areas of our operations. Moving forward, Tokyo Gas will enhance its LNG value
chain and work to increase its corporate value.

Procurement andTransportation

Overseas Upstream andDownstream Businesses

7Countries
14 Projects

LNG Procurement Volume

13.967million t

※

※

※

Diversifying Activities※

Expanding All Areas of Operations

Darwin LNG Project(Bayu-Undan Gas Field)

5 Countries 11 Projects
Stable and affordable resource procurement

Pluto LNG Project
Woodside-operated Pluto LNG
onshore gas plant,
Image courtesy of Woodside.

Upstream projects
Major overseas downstream projects
LNG supply

Cove Point LNG Project

Cordova

Sakhalin

T-Power

LNG vessel「Energy Frontier」

Cove Point

Tokyo

Qatar

MT Falcon

Gas Malaysia

CameronBarnett
Bajio

Malaysia
Gas Malaysia
Energy Advance
BruneiMalhasDarwinQueensland Curtis
North West
Shelf (NWS)

Ichthys

EcogenPluto
GorgonAdvantages of Natural Gas①Natural gas reserves are scattered throughout the world with supply secured
on a stable basis②Low levels of CO2 and other emissions during combustion and highly
environmentally friendly③Robust pipeline network structure and configuration; high city gas supply
stability④Virtually zero loss during production and transportation

01

Tokyo Gas Annual Report 2015

Major confirmed reserves of natural gas(Unit: Trillion m3)
12.1
15.3
7.7

14.2

■ North America■ Central and South America■ Europe and Eurasia■ Middle East
■ Africa■ Asia and the Pacific

187.1
79.8

SourceBP Statistical Review of World Energy 2015

58.0

The Tokyo Gas Group will increase the added value delivered to its
customers and society through the LNG value chain of each of its
businesses. In addition to expanding overseas business development,
we will establish an additional pillar in the total energy business while
enhancing the LNG value chain.

Enhancing the LNG Value Chain
through Efforts Aimed at Realizing
Our Challenge 2020 Vision※Fiscal 2014 result (As of March,2015)
High-pressure lines (existing)

Production, Generation, Supply

4 LNG Terminals
4 power plants

High-pressure lines (construction commenced after“Challenge 2020 Vision” launch)
High-pressure lines (under construction / consideration)
High-pressure lines (medium-to-long-term concept)※2

Other companies’ pipelines (existing)Tokyo Gas Group supply area

※2 Including the Hitachi LNG Terminal, which is scheduled to come online in March 2016※

Hitachi
LNG
Terminal

Improving supply security
Further strengthening safety

Hitachi LNG Terminal

Gas Sales Volumes

15.5 billion ㎥

Ohgishima Power Co., Ltd.

※
Sodegaura LNG Terminal
Ohgishima LNG Terminal

Net Sales

Negishi LNG Terminal¥2,292.5 billion※
Negishi LNG Terminal

Net Income¥95.8 billion※

Profile（As of March 31, 2015）
Tokyo Gas Co., Ltd.

Gas sales
Energy services

Number of Customers:“ENE-FARM”

11.26 million

Established

October 1, 1885

Capital141.844 billion yen

Net sales

2,292.5 billion yen (Consolidated basis)

Number of employees

16,835 (7,979 Non-consolidated basis)

Service area

Tokyo Metropolitan Area and major
cities in Kanagawa, Saitama, Chiba,
Ibaraki, and Gunma prefectures

Affiliated companies

Consolidated subsidiaries: 69
Equity-method affiliates: 6※（1）Production, supply and sale of city gas（2）Supply and sale of gas appliances,

Lines of businessand related installation work（3）Construction work relating to

Gas sales that match customers’ needs
Providing diverse energy solutions

Smart Energy Center located in thenorthⅠdistrict from the east exit of
Tamachi station, Tokyo

the supply of city gas（4）Energy services（5）Supply of electricity

Tokyo Gas Annual Report 201502

Performance in Fiscal 2014
Overview of Performance
Results in Fiscal 2014: An Increase in Sales and a Decrease in Income

Up 5.5%

Gas Sales Volumes

An increase in sales due to such factors as growing demand forelectric power generation mainly in the Kashima area led to an 806
million m3 year-on-year, or 5.5%, rise in gas sales volumes, to 15,541
million m3. The gas sales volumes on a 2020 Vision basis, which
includes the portion used in tolling and the volume of LNG liquidsales, came to 18,360 million m3, up 1,135 million m3, or 6.6%.

Up 8.5%Net Sales

Net sales increased ¥180.4 billion, or 8.5%, year on year, to¥2,292.5 billion. This was largely driven by growing city gas sales,
mainly attributable to an increase in sales unit prices owing to thegas rate adjustments as well as the year-on-year upswing in gas
sales volumes coupled with higher year-on-year electricity and LNG
sales from the increase in sales volumes and unit prices.

Up 3.4%

Operating Income

Operating income rose ¥5.7 billion, or, 3.4%, year-on-year, to¥171.7
billion. This largely reflected an increase in gas gross profit due
mainly to an improvement in the sliding time lag as well as higher
overseas business profits mainly from the Pluto LNG Project.

Down 11.6%

Net Income

Net income was down ¥12.6 billion, or 11.6%, year-on-year, to¥95.8
billion due mainly to the posting of an impairment loss with respect tooverseas business.

Analysis of Ordinary Income（Year-on-Year Results）●Increase in gas gross profit due mainly to an improvement in thesliding time lag: +¥6.0 billion; other

City Gas ¥157.1 billion(+¥4.5 billion)

Fiscal 2014 (Results)¥168.1 billion
Operating Income¥171.7 billion(+¥5.7 billion)

Change+¥8.5 billion(Increase in volume: +8.0; sliding difference: +11.4; tariff revision effect: -15.5; other)Gas Appliances andInstallation Work
¥3.0 billion (-¥4.6 billion)●Provision for gas appliance maintenance: -¥3.6 billion, other

Other Energy¥30.5 billion (-¥2.0 billion)●Electricity: -¥2.0 billion: Sales volumes +9.4%; increase in fuelexpenses; other

Real Estate¥4.3 billion (-¥1.4 billion)●Revenue from building leasing declined, other●Overseas +¥7.9 billion: Increase in the Pluto LNG Project selling
price; other

Others ¥19.5 billion(+¥7.9 billion)

Fiscal 2013 (Results)¥159.6 billion
Non-Operating Income
and Expenses-¥3.6 billion (+¥2.9 billion)

Adjustments -¥42.8 billion(+¥1.3 billion)

Revenue from dedicated equipment: Increase in income fromlarge-scale dedicated pipeline facilities outside supply areas +¥2.4
billion, other*(+) & (–) refer to contribution to income.

Summary of Operating Results

Billions of yen

FY 2014

FY 2013

Change%Gas sales volumes (Million m3, 45MJ/m3)

15,541

14,735+806+5.5

Gas sales volumes on a 2020 Vision basis*(Million m3, 45MJ/m3)

18,36017,225+1,135+6.6

2,292.5

2,112.1+180.4+8.5

2,120.7

1,946.0+174.7

+9.0

171.7

166.0

+5.7

+3.4

168.1

159.6

+8.5

+5.4

95.8

108.4

▲12.6

▲11.6

Net sales
Operating expenses
Operating income
Ordinary income
Net income* Includes the portion used in tolling and the volume of LNG liquid sales.

Economic Frame

Pension Investment (non-consolidated)

JCC*（$/bbl）

Exchange rate（¥/$）

Average temperature（℃）

FY 201490.35

109.7616.0

FY 2013110.01

100.17

16.1* Japan Crude Cocktail.

03

Tokyo Gas Annual Report 2015

Investment yield(costs deducted)

Year-end assets(Billions of yen)

FY 2014

5.57%

281.0

FY 2013

1.61%

273.0

FY 2012

6.10%

276.0

Our Shareholder Return Policies●

Shareholder
ReturnPolicies

stock repurchases and to target a total payout ratio (ratio of dividends and stock repurchases toconsolidated net income) of approximately 60% each year until fiscal 2020.
●●

The Company’s financial policies call for Tokyo Gas to issue shareholder returns through dividends andIn regard to dividends, we aim to maintain stable levels while potentially raising dividend payments basedon growth levels.

In fiscal 2014, we issued the following shareholder returns in accordance with the aforementioned policies,
making for a total payout ratio of approximately 60%
1. Issued dividend payments of ¥10 per share, the same as in fiscal 2013.
2. Paid ¥33.8 billion to repurchase 50.0 million shares to be cancelled

Trends in shareholders returns
Dividends pershare¥7→¥8 up¥8¥8

¥8→¥9up¥9¥9¥9→¥10up¥10¥10

Total payout ratio

60.1.%

73.6%

63.4%

60.1%

60.9%

61.4%

60.7%

60.0%

60.8%

¥ billion

120
100

100.6

101.6

95.4

108.4
95.8

80
60

53.7
39.0

40

42.4

20

21.6

0

2006
Consolidated net income

41.7

10.0

5.0

21.3

21.4

2007

Dividends

46.0
34.0

7.9
24.3

2008

2009

36.0

40.0

25.7

25.1

33.8

5.0
24.1
2010

23.3
2011

2012

2013

24.4
2014

FY

Stock repurchases

Fiscal 2014 shareholder returns

Total payout ratio

60.8%

Dividends paidin fiscal 2014:¥24.4 billion

Stock repurchases
in fiscal 2015:¥33.8 billion

Consolidated net
income in fiscal 2014:¥95.8 billion

The cumulative total of stock cancellations as part of shareholder returns to be
413 million shares (14.7% of a record high number of issued shares) by March 31, 2016.
* Number of issued shares, including treasury stock, as of March 31, 2015: 2,446,778,295

Tokyo Gas Annual Report 201504

Factors Influencing Revenues and Expenses
Revenues and expenses in the gas business are determined by the increase or the decrease in gas sales volumes (volume
difference) and the gap between the selling price and the purchase price (price difference). It is necessary to distinguish between
factors that exert influence in the short term and those that exert influence in the medium-to-long term.

Major Factors Influencing Revenues and Expenses in the Short Term

SHORT TERM

Higher income

Temperature

Temperature changes influence demand for hot water andconsequently sales volumes.

Lower income

Lower temperatures
Higher temperatures

Gas Sales Volumes
Economic
TrendsGross Profits

High utilization rates
Low utilization rates

The price of LNG is linked to the price of crude oil. Accordingly,
a drop in the price of crude oil causes raw material costs to
decline and an increase in the price of crude oil causes raw
material costs to rise.

Crude
Oil
PricesRaw Material
Costs

Utilization rates of industrial and commercial facilities influencesales volumes.

Exchange
Rates

PensionActuarial
Differences

Crude oil price declining phase
Crude oil price rising phase

LNG purchase contracts are denominated in U.S. dollars.
Accordingly, yen appreciation against the U.S. dollar causes raw
material costs to decline and yen depreciation against the U.S.
dollar causes costs to rise.
Actuarial differences arise from differences between expected
and actual investment returns on pension assets as well as fromdifferences between expected and actual retirement benefits.
These costs are written off as a lump sum mainly in the fiscal
year following the year in which they arise and are posted as
operating expenses. Accordingly, actuarial differences influencerevenues and expenses.

Yen appreciation
Yen depreciation

Favorable differences
Unfavorable differences

POINT
Gas Rate Adjustment System’s Medium-to-Long-Term
Neutralizing Effect on Crude Oil Price and Exchange Rate Fluctuations
Gas prices are determined using the gas rate adjustment system.
Through this system, average raw material prices over a three-month
period according to trade statistics are compared with the raw
material cost that is used as the standard (standard average raw
material cost), and the gas rates are adjusted using a defined
calculation method based on the differences. A time lag of fourmonths on average (called a sliding time lag) exists between thepayment of raw material costs and the reflection of such changes
in gas rates. Consequently, fluctuations in crude oil prices andexchange rates may result in the under-recovery or over-recoveryof raw material costs if this lag cuts across a fiscal year, thereby
affecting income. Looking at the medium-to-long term, however,
the gas rate adjustment system has a neutralizing effect on theincome impacts of fluctuations in raw material costs.

Timing of the Standard Average Raw Material Cost
Calculation and Reflection in Gas Rates

How the Sliding Time Lag in Rates Works
All Japan LNG price
Average raw material
price reflected in gas rate

Timing of standard average raw material cost calculation
Jan.

Feb.

Mar.

Apr.

May.

Jun.

Jul.

Aug.

Sep. Dec.

Average raw material price
Average raw material price

Under
recoveryAverage raw material priceOver recovery

The average raw material price over the
past three months is calculated every
month and then reflected in the gas rate
three months later.

Reflection in gas rates

05

Tokyo Gas Annual Report 2015

Jun.

Jul.

Aug.

FY N

FY N+1

Major Factors Influencing Revenues and Expenses in the Medium-to-Long Term

MEDIUM-TO-LONG TERM

Government Policies and Regulations Relating to Energy

For details, see P.37

Tokyo Gas is involved in the city gas business and the electric power business, both of which are subject to regulations.
Revisions to regulations governing these businesses could influence the Company’s earnings.

Fluctuations in Raw Material Prices
Raw material price trends could influence our cost-competitiveness in comparison with other gas providers or suppliers of other forms of energy.
The Company is taking steps to hedge risks related to a decrease or stabilization of raw material prices, such as resolving to import natural gas at
prices based on the Henry Hub index.

Competition with Other Energy Sources
Competition between energy sources occurs with regard to such factors as eco-friendliness and efficiency, and this competition could possibly influencedemand for natural gas.
Tokyo Gas is actively promoting fuel conversion from heavy fuel oil to natural gas through such means as soliciting the environmental benefits of natural gas.

Population Movements and Industrial Development within the Company’s Service Area
Long-term trends, such as population movements and industrial development, within the Kanto region, the Company’s service area, have thepotential of influencing medium-to-long-term earnings.
Population influx into the Kanto region continues, and the number of houses is expected to rise into the future.

Demand and Infrastructure Development by Tokyo Gas
Tokyo Gas is simultaneously developing infrastructure and demand in the Kanto region, its service area.
We are also focusing on nationwide wholesale efforts. Our ability to develop demand could influence medium-to-long-term earnings.

POINT
Expansion of Industrial Gas Sales Volumes

For details, see P.23

Tokyo Gas aims to increase industrial gas sales volumes going forward. The causes of this expected rise can be categorized based on theabovementioned factors as follows.
①Competition with Other Energy Sources②Demand and Infrastructure Development by Tokyo Gas

Fuel conversion from heavy fuel oil to natural gas is proceeding
due to the following benefits of natural gas.
Natural gas has a very small impact on the environment. During
combustion, it emits no sulfur oxide (SOx). Further, nitrogenoxide (NOx) emissions are 60% less than those from coal, andcarbon dioxide (CO2) emissions are 40% lower than when using
coal and 30% lower than when using heavy fuel oil.
There is no need to store city gas in tanks, which contributes toimproved operational efficiency at factories.
Dirtying by soot is low when burning natural gas, thereby
reducing equipment cleaning requirements along withassociated costs.

Northern Kanto is ripe with latent demand, at the North Kanto
Industrial Zone for example. However, this area currently lacks
pipeline networks, necessitating the use of heavy fuel oil or othernon-gas energy sources. For this reason, the Company isundertaking capital expenditures targeting northern Kanto. In
March 2016, the construction of the Hitachi LNG Terminal will becompleted, allowing us to open a pipeline that will run from aterminal to Moka City, Tochigi Prefecture. Going forward, we will
progressively construct pipelines and develop demand, and weanticipate expanded gas sales volumes in northern Kanto toresult.

●●●Tokyo Gas Annual Report 201506

Contents
Basic Information on Tokyo Gas
01

About Tokyo Gas

03

Performance in Fiscal 201404

Our Shareholder Return Policies

05

Factors Influencing Revenues and Expenses

Information on the Views ofManagement

History of Tokyo Gas
Oct. 1885 : Tokyo Gas established.

08

Discussion with the President

Jul. 1893 : Following the enactment of the Commercial
Code, name changed to Tokyo Gas Co., Ltd.

Information on the Tokyo Gas
Group’s Growth Strategy

Sep. 1962 : Caloric value in the Tokyo Head Office service
area raised from 3,600 kcal to 5,000 kcal.
May 1966 : Negishi LNG Terminal went into operation.
Nov. 1969 : LNG imports from Alaska commenced.

— Challenge 2020 Vision —Jun. 1972 : Caloric value conversion to natural gas begun,

13

Overview of “ the Challenge 2020 Vision ”

Jan. 1973 : LNG imports from Brunei commenced.

15

Efforts to Date

17

Main Policies from Fiscal 2015 to Fiscal 2017from 5,000 kcal to 11,000 kcal.
Feb. 1973 : Sodegaura LNG Terminal went into operation.
Jan. 1976 : Looped Trunk Line from the Negishi LNG
Terminal to the Sodegaura LNG Terminal went
into operation.
Dec. 1977 : Tokyo Bay underwater Trunk Line went intoCore Businesses
21

Gas Business

27

Electric Power Business

31

Overseas Business

35

Other Initiatives

operation.
Feb. 1983 : LNG imports from Malaysia commenced.
Oct. 1988 : Caloric value conversion to natural gas
completed.
Aug. 1989 : LNG imports from Australia commenced.
Jan. 1994 : LNG imports from Indonesia commenced.
Oct. 1998 : Ohgishima LNG Terminal went into operation.
Dec. 1998 : LNG imports from Qatar commenced.
Dec. 1999 : Keihin Trunk Line and Yokohama Trunk Linewent into operation, connecting three terminals.
Apr. 2009 : LNG imports from Russia commenced.
May 2009 : Tokyo Gas was first in the world to release37

Deregulation of the Gas and Electric Industries

39

Corporate Governance49

Consolidated Subsidiaries andEquity-Method Affiliates

50“ENE-FARM” residential fuel cell systems.
Oct. 2009 : Establishment of new regional energy service
provider—“LIFEVAL”—completed.
May 2010 : Chuo Trunk Line went into operation.
Mar. 2012 : Chiba–Kashima Line went into operation.

Our Potential

Forward-Looking Statements
This annual report includes various management goals and other forecasts relating to the “Challenge 2020 Vision” announced in November 2011 and other strategies. This
information is based on forecasts, assumptions, and available information when preparing the “Challenge 2020 Vision” and other strategies and does not guarantee theachievement of goals and forecasts or future business results. Further, this information may change due to changes in business conditions. Therefore, placing undue reliance on
this information is not advised. In addition, the target figures for fiscal 2015 are based on the judgment of management and the information available when the figures were
published (April 28, 2015). The Company will disclose the latest information to the Tokyo Stock Exchange in a timely manner and at the same time publish it in the investor
relations section of its website (http://www.tokyo-gas. co.jp/IR/english/index.html).

07

Tokyo Gas Annual Report 2015

Discussion with the President

The Tokyo Gas Group is seeking
out sustainable growth while
taking up the challenge oftransforming itself.
Ahead of the full liberalization of the retail sectors
for electricity and gas, the fabric of the energy
industry itself is changing in Japan. At the centerof this tumultuous change, the Tokyo Gas Groupis transforming itself in a bid to sustain growth as
the industry enters virgin territory.
In November 2011, we formulated “The Tokyo
Gas Group’s Vision for Energy and the Future~Challenge 2020 Vision~.” My mission is to makethis “Challenge 2020 Vision” into a reality andensure the unfaltering growth of the Tokyo Gas
Group into the future.
From our base of operations in the Tokyo
metropolitan area and core gas business, we aim
for further growth by expanding our businessfields and strengthening our operating foundation.
In these endeavors, we may encounter theoccasional failure or setback, but we intend tominimize the impact of these missteps throughrisk management. I believe it is vital that we
continue to boldly take on new challenges
without hesitation in order to become a truly
global company—a total energy company thatflourishes in the coming new era of deregulation.
I ask for the continued understanding andRepresentative Director, President

Michiaki Hirose

support of our stakeholders, including ourcustomers, shareholders, local communities andbusiness partners.

Tokyo Gas Annual Report 201508

Discussion with the President

Q. What are your impressions of the fiscal year ended March 31, 2015?
A

Although performance was adversely affected byexternal factors such as the decline in crude oil prices,
we were able to lay the groundwork for taking the next

step.
Japan’s energy industry is undergoing its biggest transformation sincethe 1950s, and I was appointed to the position of president in April
2014 in the midst of this transformation. While emphasizing continuity
amid these unprecedented changes and rapidly shifting landscape, I
have served as president with a keen understanding of my role as abanner-bearing leader responsible for steering the Company in a new
direction.
Looking back on the fiscal year ended March 31, 2015, Tokyo
Gas’s performance was impacted in no small way by considerable
changes in external conditions, such as the sharp drop in crude oiland gas prices through the second half, as well as the consumption

tax hike in April 2014. Normally, earnings in the gas business do notfluctuate that much over the short timeframe. The impact from thedrop in crude oil and gas prices was especially significant, leading to
impairment losses of ¥29.5 billion in the overseas upstream businessduring the fiscal year.
Fiscal 2014 was also the final year of the initial three-year “hop”
stage of the “Challenge 2020 Vision.” In autumn 2014, we put
together the principle measures for the “step” stage over the next
three years. We are pleased that the Company has already gotten off
to an excellent start in the “step” stage during fiscal 2014, as evident
in a number of performance indicators. For example, Tokyo Gas Asia
Pte. Ltd. was established in Singapore as our regional headquarters
for business and investment activities in Southeast Asia. Centered on
this new company, we intend to create a group formation overseasthat encompasses bases in Vietnam, Indonesia and Thailand.

Q. How is progress toward “Challenge 2020 Vision,” and what measures
are being implemented?

Over the next three years, we will focus on evolving
into a total energy business, accelerating global
business development, and constructing a new groupformation.
Our Vision aims to further enhance value in the LNG value chain byfollowing an action plan that entails three components: (1) diversify
and expand resource procurement and overseas business; (2)ensuring a safe and reliable energy supply; and (3) provide energy
solutions that meet customer needs. On all these fronts, we havemade steady progress in line with initial plans. In light of these results,
we are transitioning to the “step” stage of the Vision from fiscal 2015,
and these three very important years will prepare us for the next
“jump” stage.

A

The primary measures for the “step” stage are threefold: evolve into
a total energy business, accelerate global business development, andconstruct a new group formation.
With regard to the evolution into a total energy business, TokyoGas has made progress diversifying sources for resource procurement, entering into agreements to purchase LNG from the Cameron

LNG Project in the U.S. and signing a memorandum of understanding
with Korea Gas Corporation for mutual cooperation on strategic
initiatives. At the same time, Tokyo Gas continues to upgrade
infrastructure centered on the Hitachi LNG Terminal Project, whichaims to spread the use of natural gas further. With an eye on the April
2016 deregulation of the electricity retail sector, we aim to attainapproximately 30 billion kWh in electric power sales by 2020,
equivalent to about 10% of electricity demand in the Tokyo metropolitan area. Tokyo Gas is focusing its efforts on the provision of optimalenergy solutions that combine value added from both gas andelectricity.
Changing Business Structure(Consolidated net income ratio by business)

As of the time the
Vision was put in place(Average for fiscal 2009 – fiscal 2011)

Overseas business10%

LNG sales, electric powerbusiness, others
20%

09Tokyo Gas Annual Report 2015

Fiscal 2020

Overseasbusiness25%

Gas business70%

Gas business50%

LNG sales, electric powerbusiness,others25%

In the context of accelerating global business development, Tokyo Gas
has been concentrating management resources specifically in thetargeted regions of North America in the upstream business and ofSoutheast Asia and North America in the midstream and downstream
businesses, including engineering solutions. We intend to swiftly
promote overseas business, but will take cautious steps due to thesignificant risks involved.
Thirdly, we seek to construct a new group formation. I have alreadytouched on overseas group formation above, and in Japan, we areadjusting the direction of each business with the aim of integrating
functions and operations, including at subsidiaries and affiliates,
through the selection and concentration of businesses. The gas
business will always be our core business. Going forward, however,
we will pivot toward fostering a second and third pillar of operations
to complement the gas business in a bid to shift away from management focused on one dominant business, like Mt. Fuji, to management of several large businesses, like an entire mountain range.

Q. Please describe the Company’s policies for the core gas business.
We emphasize a balance of stability, economic
viability, and flexibility in our procurement of resources, while continuing to upgrade infrastructure in thenorthern Kanto area.
Infrastructure must be upgraded to satisfy expanding demand forgas. Our existing gas infrastructure consists of pipelines extending
northward from three LNG terminals in Tokyo Bay. Farther to thenorth in Japan, Tokyo Gas is constructing the Hitachi LNG Terminal,from which pipelines are being constructed southward to compete
the connection to its supply network. Tokyo Gas plans to begin
operations of the Ibaraki-Tochigi trunk line that links up with the
Hitachi LNG Terminal in the second half of fiscal 2015. This trunk line
will improve the reliability of its natural gas supply infrastructure andshould play a major role as the Company taps into the potential for
considerable demand in the north Kanto area. As one example of thispotential demand surfacing, Tokyo Gas has already entered into anagreement with Kobe Steel, Ltd., one of the largest independent
power producers (IPP) in Japan, to supply gas to its gas-fired thermal
power plant that will be constructed near Moka City, Tochigi

A

Prefecture.
Resource procurement is another key aspect of the gas business.
When forming a strategy for resource procurement, reliability is themost important factor, but so is economic viability with competitive
sources, as well as flexibility in being able to adapt to changes. How
best to balance out these three factors is the conundrum weconstantly face. While economic viability has been main focus for the
past few years, we now aim to diversify procurement sources, pricing
benchmarks and destination clauses through more flexible arrangements with a variety of market players inside and outside Japan.
Levering economies of scale, we intend to ensure the stable andinexpensive procurement of resources.
Learning from the lessons of the Great East Japan Earthquake,
Tokyo Gas is stepping up efforts to prevent damage from natural
disasters, focusing on making its facilities more resistant toearthquakes.
The Tokyo Gas Group will continue to make every effort to ensure areliable and safe supply infrastructure, the foundation of its gas
business.

Tokyo Gas Annual Report 201510

Discussion with the President

Q. What is Tokyo Gas’s strategy for the electric power business inlight of deregulation?

Tokyo Gas is making preparations to begin sellingelectricity pre-order sales, with the objective of acquiring
10% of demand for electricity in the Tokyo metropolitan
area by 2020.
In the power generation business, with the full-scale liberalization of
the retail electricity sector in April 2016, Tokyo Gas is focusing on thesale of electricity to households and small commercial customers, thesectors that are subject to deregulation, in addition to wholesale andlarge-lot customer markets. By 2020, Tokyo Gas aims to acquire a
10% or so share of the electric power market in the Tokyo metropolitan area, a very ambitious target.

A

In 2017, the retail gas sector is due to be fully deregulated, putting
Tokyo Gas in a defensive position over its current 100% market
share. Since the electricity market is considerably larger than the gas
market, the Tokyo Gas Group regards the liberalization of the retailelectricity sector as a major business opportunity.
While developing the power generation business, we are putting inplace a value chain for electric power, from power plants to retailsales. In this endeavor, we can leverage our base of 11 million
customers in the Tokyo metropolitan area, the nerve center of Japan,
as well as the close customer relationships that have been built up
locally through Tokyo Gas Lifeval subsidiaries, our gas sales channels.
Tokyo Gas is in the final stages of preparations for the start ofelectricity pre-order sales this autumn, including system updates, rate
structures and service options. We now aim to win market share andgenerate synergies through advertising in mass media and community and customer-focused marketing through Tokyo Gas Lifeval
subsidiaries. I believe the true value of our relationships with customers
to date will be reflected in the number of customers that choose topurchase electricity from Tokyo Gas.
We plan to expand our own power generation capacity toapproximately 3,000 MW by 2020 from the current capacity of 1,300
MW. We also aim to build an even more competitive power source
portfolio by adding power sources to our current base of gas-fired
thermal power plants.

Q. Please explain plans for overseas business development and expansion.
Tokyo Gas is concentrating management resources in
specific target regions with upstream business in North
America and midstream and downstream business inSoutheast Asia and North America.
Above, I described how Tokyo Gas is dividing its overseas businessstrategy by region for
upstream business andmidstream anddownstream business.
In the upstream
business, which canbe regarded as aresource business,
Tokyo Gas pursues
growth through theacquisition of upstream
beneficiary rights
alongside traditional
LNG procurement, as
well as the acquisitionof gas field beneficiaryrights in North America
and other regions

A

11

Tokyo Gas Annual Report 2015

without rights for procurement. Moreover, Tokyo Gas aims to diversify
the ways it participates in projects, such as by participating in small
and medium-scale LNG projects as well. In North America, we are
aggressively seeking out promising projects while expanding andenhancing our management team based in Houston, Texas. Since
upstream business is exposed to short-term trends in crude oil
prices, we are balancing it with expansion in the midstream anddownstream business, which should bring in more stable revenues.
Our midstream and downstream business is centered on Southeast Asia. If countries in Southeast Asia follow the same path taken
by Japan in terms of population growth and economic development,
we see the need to create an LNG value chain in the region. Tokyo
Gas aims to contribute to the creation of energy infrastructure andprovide energy solutions, such as for factories and commercial
facilities, in Southeast Asian countries by leveraging the Group’s
accumulated technologies and expertise in the total energy businesscentered on LNG. Through alliances with local energy companies,
Tokyo Gas is taking on the challenge of developing value chains fromthe import of energy resources to its supply and consumption. We
intend to grow this business by contributing to the development ofcountries in Southeast Asia while fostering personnel with insight inlocal conditions, such as local legal systems and business practices,even if it takes time.

Q. What impact will reforms to electric power and gas systems
have on the business structure of Tokyo Gas?

Through trial and error, management will do its utmost to
steer Tokyo Gas through tumultuous change while
making preparations for every scenario imaginable amid
a strong likelihood of corporate restructurings and mergers.
The gist of reforms to the electric power and gas systems goes to theroots of these two businesses, tearing down regional barriers in boththe electric power and gas sectors. Throughout the process ofreforms, corporate restructurings and mergers are expected to pickup. In April 2015, Tokyo Electric Power Co., Ltd. and Chubu ElectricPower Co., Ltd. formed an alliance that established JERA Co., Ltd., a
new company with operational scope ranging from upstream
business and fuel procurement through to power generation. This
was a ground-breaking event for the energy industry in Japan.

A

As a country poor in natural resources, Japan must import most of
its energy, making it imperative to address the significant issue ofnegotiating lower LNG prices. JERA Co., Ltd. plans to procure 40
million tons of LNG annually, one of the largest procurement
mandates in the world. If this company is able to gain bargaining
power through economies of scale, we would expect positive

ripple-down effects for not only Tokyo Gas, but for Japan as a whole.
As Japan moves for the first time toward the full liberalization of its
electric power and gas markets, Tokyo Gas has been preparing forevery scenario imaginable by examining similar cases overseas aswell as cases of deregulation in other sectors, such as finance andtelecommunications. However, we have limited visibility on how theindustry will look after deregulation takes effect. By taking a flexible
approach through trial and error, we will spare no effort in charting apath of growth for Tokyo Gas throughout this period of tumultuouschange that only happens once in a lifetime.

Schedule for liberalization of electric power andgas markets (plan)
Full deregulation ofelectric retail sector

2015

2016

Full deregulation ofgas retail sector

2017

Q. What are the Company’s policies with regard to shareholder returns?
Tokyo Gas aims to maintain a total payout ratio of 60%
by striking a balance between returns for shareholders
and customers, given the strong public nature of its
business.
Tokyo Gas intends to increase dividend step by step over the longterm in tune with profit levels without cutting dividends. Moreover, ourbasic policy is to maintain a total payout ratio of 60% to shareholders
through the buyback and retirement of shares.

A

The introduction of the Corporate Governance Code has focused
attention more than ever on return on equity (ROE). Tokyo Gas has
traditionally emphasized efficiency indicators like ROE in addition tostability and growth indicators. Ever since we set a medium-termtarget for ROE of 8% in 2011, there have been a number of years
where ROE has been higher than this level. Tokyo Gas must gain theunderstanding of its customers in the course of operations, because
this is a heavily regulated industry that serves local communities andsociety as a whole. For this reason, our management stance to datehas emphasized a well-balanced approach our customers, ourbiggest stakeholders, and our shareholders. By making our operations more efficient, our customers benefit from lower gas prices, andour shareholders benefit in the form of higher dividends. I think thatan ROE target of 8% should be regarded as the level of commitment
we can make to shareholders, in light of the nature of our business.
Our corporate and business philosophy will not change in principle
after deregulation. As deregulation progresses along the timeline forfull liberalization, there may be a time when management revises its
approach to ROE. However, I believe we will stay with our current
approach until 2020, while looking for room for improvement.
Total payout ratio¥ billion

60.9%

61.4%

60.7%

120
100

101.6

95.4

60.0%
108.4

60.8%
95.8

80
60

46.0

40
20

58.1

0
2010
Consolidated Net Income

28.3
2011

61.7
2012

65.1
2013

58.2
2014

FY

Shareholder returns (Dividends and Stock repurchases)

Tokyo Gas Annual Report 201512

Challenge 2020 Vision
Overview

The Tokyo Gas Group’s Vision for Energy and the Future
Debate over the nature of Japan’s energy supply continues unabated. Against this backdrop, Tokyo Gas has long played a keyrole in the supply of energy in Japan, with a focus on the Tokyo metropolitan area. In order to address the challenges posed by
new energy issues, we put in place “Challenge 2020 Vision,” our vision for energy and the future. Recognizing the growing needto enhance energy security, reduce energy costs, and promote energy system innovation that helps to conserve energy andcurtail CO2 emissions, we will continue to hone our technologies and expertise in LNG and natural gas while working to address
the needs of each era.

Enhancing the LNG Value Chain
Increase in value added
Low prices and stableprocurement・Diversification andexpansion of upstream activities

Supply security,
security enhancement

Energy solutions content
upgrading and scale expansion

Procurement and transport

Production and supply

Energy solutions

Area expansion
Expansion of the LNG
value chain fromJapan to overseas

・Overseas NaturalGas-fired thermal power
generation
・Overseas city gas supply
・Overseas engineering・Overseas energy services

Expansion of the
Natural Gas value
chain fromthe Tokyo metro area
to the whole of Japan・Spread and expansion ofnatural gas use
・Engineering
・Energy services

Action Plan
❶Strive to reduce raw material prices and expand overseas
operations○Diversify and expand raw materials procurement and overseas
upstream projects○Construct an overseas LNG value chain○Pursue overseas expansion of energy services and engineering❷Deliver a safe and stable supply of energy○Strengthen resistance to disaster and ensure safe supply○Upgrade and expand optimal infrastructure in step with the spreadand expansion of natural gas use❸Provide energy solutions adapted to a variety of needs○Promote the spread and expansion of distributed energy systems○Promote the spread and expansion of gas equipment that contributes to peak saving, energy conservation and CO2 emissions
reduction○Expand the electric power business (natural Gas-fired thermal
power generation)○Implement renewable energy initiatives○Promote advanced utilization of natural gas and fuel conversion○Promote the spread and expansion of natural gas use and nationwide development of energy services❹Pursue technical development and IT utilization with a focus
on the future○Engage in technical development with a focus on the future○Use IT to enable closer communication with customers❺Realize a leaner, stronger business structure○Build a “smart energy society” that uses energy wisely

Hop (FY2012-2014)13

Tokyo Gas Annual Report 2015

Step

Challenge Performance Indicators

Billion ㎥

Gas Supply Volumes by Application

1.5 times

Billion m3

25
20

15.0 billion m

15

Fiscal 2011 Outlook

22.0 billion m

3

3.5
3.3

3

3.5
2.7

10

5.2

3.5
1.9

0

3.0
FY

2020

2011
Reference value as of the time the
Vision was put in place

Residential

3.5

3.5

0%

Commercial

2.7

3.3

2%

Industrial

3.4

7.0

8%

Industrial(power generation use)

3.5

5.2

4%

Wholesale

1.9

3.0

5%

Total

15.0

22.0

4%

(general use)

7.0

3.4

5

FY 2020（Reference value as of the time
the Vision was put in place）

Annual Average
Growth rate

■Residential ■Commercial ■Industrial (general use) ■Industrial (power generation use) ■WholesaleTokyo Gas will actively invest capital to prepare for sustained growth and has established the following performance indicators, taking into
consideration investment efficiency, financial position, and shareholder returns.
Capex・Investments and Financing・
Shareholder Returns

Use of Capital Expenditures andInvestments and Financing

FY2012 to 2020 total: approx. ¥2,480 billion

FY2012 to 2020 total: approx. ¥2,060 billion (approx. ¥230.0 billion/year)

Shareholder Returns¥420.0 billion (17%)

Business Base¥270.0 billion(13%)
CapitalExpenditures¥1,680.0 billion(68%)

Demand Development¥600.0 billion(29%)
Overseas Business¥320.0 billion (16%)¥2,240 billion¥240 billion¥2,480 billion

As of the time the Vision was put in place(Average for the period from FY2009-2011)

As of FY2020

Approx.
¥210 billion/year

Approx.
¥250 billion/year

ROE

7.3%

Approx. 8%

ROA

3.3%

Approx. 4%

D/E ratio

0.7

Approx. 0.8(each fiscal year)

60.6%

Approx. 60%

Consolidated operating
cash flow

Infrastructure¥730.0 billion(35%)

Investments
and Financing¥380.0 billion (15%)
Consolidated operating cash flow
External debt (interest bearing debt) etc.
Capex∙Investments and Financing∙Shareholder Returns

Other investments in affiliates¥140.0 billion (7%)

Financial Performance Indicators

Reference: Capital investments andinvestments and financing in themedium-term management plan for FY
2009 to 2013: Approx. ¥180.0 billion/year

Business Structure (Consolidated Net Income Ratio by Business)

Total payout ratio

As of the time the
Vision was put in place

As of FY2020(Average for the period from FY2009-2011)

Tokyo Gas will grow the LNG sales, power generation, other, andoverseas businesses while expanding the domestic gas business. We
will aim to change the current 7 to 2 to 1 ratio of net income from theGas Business, LNG Sales, Electric Power Business and Others, andOverseas Business to a ratio of 2 to 1 to 1 while at the same timeincreasing the total amount of earnings.

(FY2015-2017)

Overseas Business10%
LNG Sales,
Electric PowerBusiness,
Others20%

Overseas
Business25%
Gas Business
70%

Gas Business50%

LNG Sales,
Electric PowerBusiness,
Others25%

Jump (FY2018-2020)

Tokyo Gas Annual Report 201514

Hop stage

Challenge 2020 Vision

Steady Path from Fiscal 2012 to Fiscal 2014 toward Realizing Our “Challenge 2020 Vision”

Making Inroads into the Procurement of Raw Materials andExpanding Overseas Business while Upgrading andExpanding Infrastructure Development and Energy Solutions
In its effort to realize its “Challenge 2020 Vision,” the Tokyo Gas Group has identified the three hop (FY2012-2014), step
(FY2015-2017), and jump (FY2018-2020) periods. During the three-year period from fiscal 2012 to fiscal 2014, we took a positive
step forward in each of the raw materials procurement, overseas business, infrastructure development, and energy solution fields.

1 Efforts to Date
(1) Diversification and Expansion of
Raw Materials Procurement and Overseas BusinessIn line with the increase in LNG demand, the risk of rising raw materials costs is a major
concern. Against this backdrop, the Tokyo Gas Group has worked diligently to procure
resources from and acquire interests in existing large-scale LNG projects and topurchase shale and other unconventional gas resources while taking into consideration
the balance between supply stability, price, and flexibility. Every effort was made tofurther diversity and expand supply sources as well as overseas upstream projects andto lower raw materials prices.
❶March2012 : Signed a Memorandum of Understanding withPetroVietnam Gas regarding cooperation in thedevelopment of an LNG value chain in Vietnam❷November 2012 : Entered the energy service business in Brazil
February 2014 : Established an energy services business company in
Malaysia
2013 : Decided to participate in the U.S. Cove Point LNG❸AprilProject; contracted for the purchase of 1.4 million tons
per year of LNG❹April2013 : Joined a shale gas development joint venture in the
U.S. Barnett Basin2014 : Contracted for the purchase of approximately 0.52
❺Julymillion tons per year of LNG from the U.S. Cameron
LNG Project❻September 2014 : Signed a Memorandum of Understanding with Korea
Gas Corporation regarding the optimization of LNG
inventories, joint LNG procurement, and joint
investment in upstream businesses(2) Safe and Stable Energy Supply
The Tokyo Gas Group endeavored to put in place an optimal infrastructure in step with the spread and expansion of natural gas use by
constructing the Hitachi LNG Terminal and establishing trunk line loops. At the same time, we put in place a variety of disaster prevention
countermeasures to address the risks of a wide range of contingencies including earthquakes, tsunamis and blackouts and to ensure the safe
and stable of gas through a framework that is less susceptible to damage and interruption.
❶Infrastructure Improvements to Respond to Demand Increases andBoost Supply Stability［North Kanto Area］
November 2011 : Began construction of the Saito Line (operations
scheduled to commence from October 2015)
January
2012 : Began construction of the Ibaraki-Tochigi Line
(operations scheduled to commence from March
2016)
June
2012 : Completed construction of the Kashima Waterfront
Line and commenced supply to the Kashima Thermal
Power Station of Tokyo Electric Power Company
July2012 : Began construction of the Hitachi LNG Terminal(operations scheduled to commence from March2016)

Hop (FY2012-2014)15

Tokyo Gas Annual Report 2015

January

2014 : Began construction of the Koga-Moka Line
(operations scheduled to commence from March
2018)［Bay Area］
November 2013 : Began use of Ohgishima LNG Terminal No. 4 LNG
Tank❷Preparedness for Earthquakes and other Disasters
June
2012 : Concluded an agreement with Shizuoka Gas Company
Ltd. and INPEX Corporation for the reciprocal backup
of natural gas in an emergency
May
2014 : Subdivided the number of low-pressure pipeline blocks
into 207 blocks to minimize the areas affected bysupply failure during and after an earthquake disaster(140 blocks in 2011)

Step

(3) Energy Solutions that Meet Customer Needs
The Tokyo Gas Group released the world’s first ENE-FARM residential fuel cell system
for housing complexes. In addition to securing power sources in a bid to expand its
electric power business, the Group also worked to expand nationwide LNG sales.

❶ENE-FARM
April
2014 : Released the world’s first ENE-FARM residential fuelcell system for housing complexes❷Expansion of the Electric Power BusinessJune
2013 : Began construction of Ohgishima Power Station Unit 3(operations scheduled to commence from February
2016)
September 2014 : Signed an agreement with Kobe Steel, Ltd. for the
supply of electric power from the Shinko Moka Power
Plant (supply scheduled to commence from fiscal
2019)
March
2015 : Reached an agreement with Idemitsu Kosan Co., Ltd.
and Kyushu Electric Power Company Inc. to consider
the joint development of a coal-fired power plant; May
2015: Established Chiba-Sodegaura Energy Co., Ltd.

(FY2015-2017)❸Nationwide Development of LNG Supply
October
2012 : Began LNG supply to Hokkaido Gas Co., Ltd. via
ocean liners
September 2014 : Began construction of the Onahama Satellite Terminal
with a view to supply that meets industrial demand in
Iwaki City, Fukushima Prefecture (supply scheduled to
begin from January 2016)
October
2014 : Commenced supply of LNG to Saibu Gas Co., Ltd.

Jump (FY2018-2020)

Tokyo Gas Annual Report 201516

Step stage

Challenge 2020 Vision

Main Policies for FY2015-2017 toward Realizing “Challenge 2020 Vision”

Evolve the Total Energy Business andAccelerate Global Business Development
The Tokyo Gas Group has moved smoothly throughout the hop period in its efforts to realize its “Challenge 2020 Vision.” The
Group is now poised to enter the step period from fiscal 2015 and to lay the groundwork by advancing a variety of measures.
Here we provide details of our three main policies for the step period: “evolving the total energy business,” “accelerating global
business development,” and “constructing a new group formation.”

2 Main Policies from Fiscal 2015 to Fiscal 2017
(1) Evolve the Total Energy BusinessIn order to evolve the total energy business, the Tokyo Gas Group will work to further
diversify the procurement of raw materials and upgrade and expand infrastructure instep with the spread and expansion of natural gas use. At the same time, the Groupwill expand electric power sales, bolster competitive generation capacity, and provide
optimal energy solutions that combine gas, electricity, and value added while ensuring
safe and stable supply.
❶Further Diversify Raw Materials Procurement
Further advance diversification of procurement sources, price indices and destinations, and flexibly
form alliances not only with domestic companies but also with Korea Gas Corporation and otherdiverse foreign players, depending on the contract conditions and trading timing, for joint
procurement, optimization, and sales of LNG.

❷Upgrade and Expand Infrastructure in order to Spread and Expand the use of
Natural Gas
The Tokyo Gas Group will look to construct the Hitachi LNG Terminal LNG Storage Tank No. 2 aswell as Ibaraki Trunk Line with a view to completion by 2020. Steps will also be taken to pursue theconstruction of the Hitachi-Onahama Line by the 2020s. For this purpose, we will advance moredetailed studies on various aspects of the undertaking including demand trends and routeselection. In addition, operations will commence at the Hitachi LNG Terminal, Ibaraki-Tochigi Line,pipeline for the Mito area, and the Saito Line as a part of efforts to address natural gas demand in
the northern Kanto area focusing mainly on Ibaraki and Tochigi prefectures.

❸Ensure Safe and Stable Supply

The Tokyo Gas Group will aim to ensure zero major accidents and realize an earthquake resistanceratio of 90% by the mid-2020s by accelerating measures for aged gas pipes and carrying out
other initiatives.

Hop (FY2012-2014)17

Tokyo Gas Annual Report 2015

Step

❹Expand Electric Power Sales
Billion kWh

With the complete liberalization of retail electric power in 2016, the Tokyo Gas

40

Group will deliver electricity to residential and commercial customers and expand

30

sales to around 30 billion kWh (about 10% of Tokyo metropolitan area demand)by 2020 in addition to servicing the needs of existing wholesale and large-lot

20

customers.

10❺Increase Competitive Generation Capacity

0Electric Power Sales Volumes
An increase of approx.
20 billion kWh
About 30 billion kWh
About 10 billion kWh
2013

The Tokyo Gas Group will expand generation capacity from the present level of

2020

FY

approximately 1.3 million kW (company equity) to around 3.0 million kW by 2020.

❻Provide Optimal Energy Solutions by Combining Gas, Electricity, andMillion kW

Value Added

4.0

The Tokyo Gas Group will deliver the best mix of gas and electricity services. Every

3.0

effort will be made to boost and create value added through partnerships between

2.0

the Tokyo Gas Group and companies in diverse industries such as housing,

1.0

construction, facilities, communications, and information services. We will also0push forward smart energy trends and advance finely tuned energy solutions

Generation Capacity
An increase of approx.
1.7 million kW

About 3.0 million kW
About 1.3 million kW
2013

2020

FY

utilizing feedback from customers.

(2)Accelerate Global Business Development
The Tokyo Gas Group will expand and diversify upstream businesses whileat the same time specifying regions and focusing on midstream anddownstream businesses. Moreover, we will upgrade and expand overseas
bases in order to strengthen our overseas operations.

❶Develop Upstream Businesses
The Tokyo Gas Group will acquire interests in gas fields inNorth America and elsewhere without procurement,
participate in small and medium-scale LNG projects, andotherwise work toward the diversification of participation【Overseas base / staff】

formats aimed at further expansion.

❷Develop Midstream and Downstream Businesses＜Base in Europe＞
Paris
: 3

The Tokyo Gas Group will harness its technologies andknow-how to intensively develop businesses in specific＜Base in North America＞
Houston : 19
＜Bases in Asia＞
Singapore : 8
Jakarta : 4
Hanoi
: 2
Bangkok : 2
Kuala Lumpur : 2
As of April 2015

(FY2015-2017)

areas of Southeast Asia and North America.
❸Upgrade Overseas Base Functions

The Tokyo Gas Group will build local networks in
Singapore, Jakarta, Hanoi, and Bangkok. The Group will
also put together projects that make the most of theGroup’s comprehensive strengths and promotecommercial business opportunities. Moreover, we will

＜Bases in Australia＞
Perth,other : 26

increase the number of business development personnel
to around 200 (compared with the present number ofapproximately 100) over the next three years, andotherwise examine upgrading overseas base functions.

Jump (FY2018-2020)

Tokyo Gas Annual Report 201518

Step stage

Challenge 2020 Vision

Main Policies for FY2015-2017 toward Realizing “Challenge 2020 Vision”

Evolve the Total Energy Business andAccelerate Global Business Development
The Tokyo Gas Group has positioned efforts to construct a new Group formation as one of its main policies during the step
period. Moving forward, we will work to lay a foundation for the jump period from fiscal 2018 to fiscal 2020 during which we willrealize our “Challenge 2020 Vision”(3)Construct a new Group formation
In order to “evolve the total energy business,” we will further expand the electric power business while fostering and strengthening businesses
that help realize added value. In addition to fostering businesses that have the potential to become pillars of Group revenues through theselection and concentration of businesses, we will construct a new Group formation to accelerate global development.
❶Organizational Systems and Structure
The Tokyo Gas Group will work to gain a consensus regarding the selection and concentration of businesses. In addition to promoting specific measures
including the reorganization and consolidation of subsidiaries and affiliates, we will put in place and carry out appropriate growth strategies.

❷Management Systems

The Tokyo Gas Group will introduce personnel programs that cover the entire Group as well as operating and management systems that help to accelerate thepace at which it a dedicated organizational structure is established, take full use of diverse human resources, and foster businesses that have the potential to
become earnings pillars.

❸Address the Shift to Full Gas Deregulation
In the lead-up to full gas deregulation, the Tokyo Gas Group is putting in place a dedicated organizational structure and reviewing its operating and IT systems tosecure a finely tuned framework that is capable of addresses gas system reform. Every effort is also being made to generate added value by utilizing data. In
addition, the Group will work to secure fairness and transparency in the use of pipelines while increasing convenience by ensuring the proper application of its
dedicated organization.

Milestones in the Lead-Up to Realizing“Challenge 2020 Vision”
Core Businesses

Gas Businessp 21

Overseas BusinessCurrent statusp 31

Electric Power Businessp 27

Current efforts to realizing“Challenge 2020 Vision” ▶ P.20

Destination on realizing“Challenge 2020 Vision”

Jump stage

Other Initiatives
p 35

Step stage
Hop stage

As of FY2020

As of the time the Vision was put in place

Overseas Business
Gas Business
25%
50%(Average for the period from FY2009-2011)

Overseas Business
10%

Putting “Challenge
2020 Vision” in place

LNG Sales,
Electric
Power Business,
Others20%

2011.112012.3Hop (FY2012-2014)

19

Tokyo Gas Annual Report 2015

LNG Sales,
Electric Power Business,
Others25%

Gas Business70%

2015.32018.3

Step (FY2015-2017)2021.3

Jump (FY2018-2020)

Core Businesses
In order to achieve the targets in the “Challenge 2020 Vision,” Tokyo Gas has to attain sure and steady growth throughsound and bold measures for each business. Our main businesses are the gas business, electric power business andoverseas business. We once again describe these three businesses as our core businesses within the context of otherinitiatives being made to evolve into a total energy business, one of the objectives under our vision.

Gas BusinessElectric Power Business

P.21

P.27

Overseas Business

Other Initiatives

P.31

P.35

Tokyo Gas Annual Report 201520

Core Businesses1

Gas BusinessStable and affordable
resource procurement through Diversification
As a nation poor in natural resources, Japan has practically zero natural
gas resources, and there are no gas supply pipelines, such as those in
North America and Europe, that are alternatives to LNG imports. For
these reasons, Japan is in a relatively weak bargaining position forsettling prices with sellers. Japan must procure LNG at higher prices
than Europe and the U.S.
Prices for LNG currently imported into Japan are generally set undera framework that is linked to the price of crude oil. If crude oil prices
rise, LNG prices also increase.
Under these circumstances, Tokyo Gas continues to engage in harshnegotiations with LNG sellers. The Company has engaged in ongoing
efforts to to stably procure natural gas at as low a price as possible.
Tokyo Gas has been advancing an LNG procurement strategy bydiversifying into three areas in order to ensure stable and affordable
resource procurement through diversification.

Prices by region
US$ / MMBtu
18

12

6

0
2009/3

2012/3

Europe (NBP)
Japan (all-Japan LNG)
Source: Tokyo Gas based on various materials

2015/3
U.S. (Henry Hub)

1 Resource Suppliers

Diversification

We are diversifying our procurement sources, which have mainly been in Asia and Australia, to other regions of the world such as North America.

Strategic
Goal

Present

Ensure reliable procurement
and improve bargaining powerfor procurement prices
by diversifying sourcesof procurement

Primarily Asia andAustralia

Significanceof Export
Project inNorth
America

FutureAsia, Australia,
and the rest of the world

In addition to procurement fromsources in Asia and Australia, TokyoGas has been diversifying sources ofprocurement to ensure reliability ofsupply by working to import LNG
from the North America.

The price of LNG imports from the U.S. will be linked to
the Henry Hub price, the benchmark price for natural gas in
the U.S. Tokyo Gas aims for more stability in procurement
prices through portfolio effects, by procuring LNG from the
U.S. at prices linked to the Henry Hub benchmark, on top of
LNG procurement contracts with suppliers in Asia andAustralia that use prices linked to the crude oil price.

21

Tokyo Gas Annual Report 2015

Tokyo Gas Group’s LNG procurement by country(year ended March 31)

1,000 tons

Country

FY2012FY2013

FY2014Composition

Malaysia

4,409

4,767

5,638

(40.4%)

Australia

3,379

3,992

4,179

(29.9%)

Brunei

1,439

962

1,003

(7.2%)

Indonesia

835

614

192

(1.4%)

Russia

1,682

1,813

1,812

(13.0%)

Qatar

235

325

749

(5.3%)

Other

734

330

395

(2.8%)

Total

12,712

12,804

13,967(100.0%)

Cove Point ProjectStart of imports : 2017 (20 years)
Contracted volume : 1.4 million tons/year
Seller : ST Cove Point LCC (U.S.)*
Delivery terms : All volume FOB (free on board)* Tokyo Gas Group has a 49% stake in this company.

Cameron ProjectStart of imports : 2020 (20 years)
Contracted volume : About 0.52 million tons/year
Seller : Mitsui & Co., Ltd.
Delivery terms : Ex-ship (delivered ex-ship)

Core Businesses

Diversification

2 Contract Terms and Conditions

Tokyo Gas aims to diversify contract terms and conditions, by shifting from links to crude oil prices to links to various benchmarks, such as Henry
Hub, as well as by shifting from forwarding with destination clauses to forwarding without destination clauses.

Strategic
Goal

Present

Stabilize procurement prices through portfolio effects, such as by diversifying pricebenchmarks and using a combination of contract period lengths●Primarily crude oil price linked ●Mostly long term
●Forwarding with designation clauses

Diversification

Future●Crude oil price linked ●Henry Hub-linked●NBP-linked ●Combination of differing periods●Free shipment destinations

3 Our Global LNG network

Tokyo Gas aims to own interests in gas fields and electric power stations around the world. We aim to eliminate price differences among regions
by building distribution channels that bridge Asia, North America and Europe.

Strategic
Goal

Present

Narrow regional price differences and build a global LNG network●Transactions between exporting nations and Japan

Future●Global network of gas fields and electric power plants

Deploy own ships
The Tokyo Gas Group aims to
reduce resource prices by
diversifying and expanding
sources of procurement throughthe possession and management of its own LNG carriers.

Vessels owned
and managed by
the company

Name

Capacity

Type

Built

LNG project

LNG Vesta
Energy Frontier
Energy Advance
Energy Progress
Energy Navigator
Energy Confidence
Energy Horizon
New Vessel (1)New Vessel (2)New Vessel (3)New Vessel (4)127,000m3
147,000m3
147,000m3
147,000m3
147,000m3
155,000m3
177,000m3

Moss
Moss
Moss
Moss
Moss
Moss
Moss

1994/6
2003/92005/3
2006/11
2008/6
2009/5
2011/9

Expand North West
Shelf (NWS)
MalaysiaⅠ,Ⅲ
DarwinSakhalinⅡ
Pluto
Gorgon, Others

165,000m³

SPB

2017

Cove Point, Others

165,000m3

SPB
Moss
Membrane2018
1993/3Vessels charteredLNG Flora

127,000m3

to third party

GDF SUEZ NEPTUNE

145,000m³(Regasification Vessels)

GDF SUEZ CAPE ANN

145,000m3

Membrane(Regasification Vessels)

2009/112010/6

Tokyo Gas Annual Report 201522

1 Gas BusinessCore Businesses

Expansion of Natural Gas Usage throughInfrastructure Development
Under the “Challenge 2020 Vision,” Tokyo Gas plans to invest
around ¥730 billion, equivalent to 35% of its total investment
budget, in infrastructure upgrades over the nine-year period
from fiscal 2012 to fiscal 2020. Our strategic focus is on thenorthern Kanto region, where there is strong potential demand
for gas with a number of large-scale industrial zones.

Potential of Growing to 9.0 Billion m3
Kanto region (100~200-kilometer radius)

General Industrial Gas
Sales Volumes

2.0 billion m3

3.4
billionm3

FY2011

Tokyo Gas aims to expand gas sales volumes to 22.0 billion
cubic meters (including tolling gas usage and LNG sales) by
fiscal 2020, by further enhancing the stability of supply throughexpanded supply capacity for the development of potential
demand and the completion of its pipeline loops, as well as byfacilitating the transition from heavy oil and kerosene as fuel tonatural gas and promoting the advanced use of natural gas. In
particular, Tokyo Gas aims to double the volume of gas usedby general industry, from 3.4 billion cubic meters in fiscal 2011
to 7.0 billion cubic meters.

Kanto region (100-kilometer radius)

7.0 billion m3

7.0
billionm3

FY2020Total

9.0 billion m3

Northern Kanto Containing Significant Latent Demand
Hitachi–Onahama Line(provisional name)

Ibaraki–Tochigi Line

North Kanto
Industrial Zone

（2016.3）
Hitachi LNG Terminal(under construction /operations scheduled tocommence in March 2016)

Koga–Moka Line（2018.3）

Ibaraki Line

Kashima
Waterfront
Industrial
Zone

Saito Line
（2015.10）

Kashima Waterfront
Line

Chiba–Kashima Line

Tokyo–Yokohama
Industrial Zone

Ohgishima LNG
Terminal

High-pressure lines (existing)High-pressure lines (construction commenced after“Challenge 2020 Vision” launch)
High-pressure lines (under construction /information in parentheses is the date operations arescheduled to commence)
High-pressure lines(under consideration / route selection progress)
High-pressure lines (medium-to-long-term concept)
Other companies’ pipelines (existing)Tokyo Gas Group supply area
Industrial zones
Factories

Tokyo–Chiba
Industrial Zone
Sodegaura LNG
Terminal

10

0k

m

Negishi LNG
Terminal

Gas Sales Volumes (“Challenge 2020 Vision” forecasts)

Gas Sales Volumes in the Kashima Waterfront Industrial Zone

Billion m3

Million m3

25

15

2,000

22.0

20

15.8

16.7

17.2

18.3

1,794

1,500
1,000

10

500

5

765
405

0

0

2011

23

Near the Tokyo metropolitan area, northern
Kanto, centered on Tochigi Prefecture and
Ibaraki Prefecture, is a region with strong
potential demand for natural gas with a numberof large-scale industrial zones.
As a first step toward capturing latentdemand through the development of
infrastructure, we completed the
Chiba-Kashima Line in March 2012. Gas sales
volumes increased dramatically in the Kashima
Waterfront Industrial Zone.
Tokyo Gas plans to enhance the stability ofsupply by completing its pipeline network. We
are working to spread natural gas usage bydeveloping new customers in northern Kanto.

2012

Tokyo Gas Annual Report 2015

2013

2014

2020
（Plan）

FY

2012

2013

2014

FY

Core Businesses

Cultivating Demand Based Out of the Hitachi LNG Terminal
The Hitachi LNG Terminal began construction in July 2012 as a strategic production and supply base for the company’s expanding service area
and to penetrate markets further. The Ibaraki–Tochigi Line will connect existing pipelines in Moka City, Tochigi Prefecture to the Hitachi LNG
Terminal. We plan for the Hitachi LNG Terminal to be fully operational in March 2016. Here, we introduce the comments of project managers
working on the construction site for the new terminal.

Developing New Customers with
Company’s First LNG Terminal for
Large-Lot Customers
A New Energy Hub for the
Northern Kanto Area

Hitachi Project GroupManager Tohru Komatsubara

Tokyo Gas has expanded gas production facilities in tandemwith growth in demand for natural gas. However, the maximum
receiving capacity at our three LNG terminals around the Tokyo
Bay is approximately 18.0 billion cubic meters. New terminals
need to be constructed to meet future demand for natural gas.
Since a large number of ships pass through Tokyo Bay andfrom a security standpoint, we decided to build our first
offshore receiving terminal located outside Tokyo Bay.
When choosing a construction site, it is important to be on
good terms with local residents. Hitachi City is located innorthern Kanto, where we think there is potential demand, andour Hitachi Branch Office has built relationships of trust withgovernment officials over 70 years. Taking into consideration
the distance for laying the trunk line and other factors, we
decided to build our new terminal in the Hitachi port area. We
have worked very hard with representatives of Ibaraki
Prefecture and Hitachi City to gain the understanding of local
residents and to change port harbor plans.
The most important aspect of construction is the sharing of
our concept of the terminal, which is to create a new energy
hub for the northern Kanto region with our first LNG terminal
for developing new large-lot customers. The most ambitious
aspect of the new terminal is its aim to unearth new demand
for gas. In the northern Kanto region, the deregulated sector
for large-lot customers is the main battleground in thecompetition over energy. Tokyo Gas must reduce the cost of
production as much as possible without sacrificing safety andreliability. Construction of the new terminal requires a variety oftechnologies, from civil engineering and machinery to electricalfacilities and fixtures. When pursuing optimal configurations invarious parts of construction, the tendency is to over-engineer.

By sharing the concept of the new terminal with everyone
involved in the project, we take care to maximize use of the
LNG terminal construction and operating know-how nurtured
over four decades and make sure everyone’s eyes are on thesame goals.
The terminal site is approximately 10 hectares in size, smaller
than our other three terminals, so construction work efficiency
has suffered. Being an offshore project, sea conditions can also
slow construction down and pose many challenges for the
project. Leveraging our long years of accumulated LNG terminal
construction know-how, we have successfully cut costs
through the modularization* of pier facilities and substantiallyreduced construction time for storage tanks. After experiencing
the Great East Japan Earthquake, Tokyo Gas has reassessedbuilding specifications for stronger resistance against
earthquakes larger than the Great Hanshin-Awaji Earthquake,while making preparations to prevent cyberattacks against IT
systems.
The Hitachi LNG Terminal is a strategic base for developing
new customers in northern Kanto, and it will also enhanceenergy security in the Kanto region by connecting together our
networks of trunk lines while also making it possible to supply
high-pressure gas (7MPa) from the northern area. Kobe Steel’s
decision to build its Moka power plant near our facilities is proof
that our strategy to develop new customers in northern Kanto is
working. I believe the new terminal is helping to establish theTokyo Gas brand in the northern Kanto area as we strive tocooperate with local residents through contributions to local
communities and stable operations.
*Modularization: Pipes and other assembly work is performed at otherplant locations in order to reduce work volume on sites with limited area.
Only installation work is performed on-site.

Tokyo Gas Annual Report 201524

Core Businesses

1 Gas Business

Providing Diverse Energy Solutions
Stably Supplying Energy
Under the “Challenge 2020 Vision,” ¥600.0 billion, or 29% of total capital expenditures, investments, and financing, will be directed toward
cultivating energy demand over the period from fiscal 2012 to fiscal 2020. By providing various energy solutions centered on natural gas, we aim
to diversify the range of fields in which natural gas is used and thereby enhance the LNG value chain.

Fuel Conversion
The Benefits of Converting to Natural Gas
If we identify coal as the base rate of 100, the level of CO2 emissions
produced by natural gas during combustion comes in at 60. In thisregard, natural gas offers outstanding eco-friendly properties.
Coupled with efforts to increase the efficiency of burners, successful
steps can be taken to further reduce the amount of CO2 emissions.
Unlike heavy fuel oil, which requires various storage facilities
including tanks, gas is delivered through a network of pipes. This

The Benefitsof FuelConversion○Eco-friendly (helps to reduce
CO2 emissions)○Eliminates the need for storage
equipment and facilities○Offers improved operability○Delivers labor savings○Ensures high supply stability

helps to minimize management costs. Moreover, natural gas
generates low levels of soot during combustion, making it easier toclean the equipment used compared with other fuels.
Natural gas also offers benefits from a BCP perspective. Tokyo Gas
uses medium- and high-pressure pipelines that are laid underground.
These pipelines provide exceptional strength and flexibility allowing
the Company to ensure the stable supply of natural gas even whenearthquakes cut off traffic along roadways.
Comparison of Emissions (Coal=100)
Natural gas

Oil

Coal

SOx

0

70

100

NOx

40

70

100

CO2

60

80

100

Promoting the Widespread Use and Expansion of Distributed Energy Systems
Commercial and Industrial Cogeneration Systems
Against the backdrop of increased demand for energy security andbusiness continuity plans, we have been promoting sales of commercial
and industrial cogeneration systems, and our cumulative stock of thesesystems has reached 1,790 MW. We plan to raise this cumulative stock
to 4,000 MW in fiscal 2020.
Cogeneration systems supply electricity and heat through engines
and other sources of power. In addition to the installation of facilities atthe point of demand, cogeneration systems help to enhance energy
efficiency, reduce the amount of CO2 emissions, and improve economic
efficiency through the conservation of energy by effectively utilizing bothelectricity and waste heat. The introduction of cogeneration systems
continues to advance from a BCP perspective. This reflects the ability ofthese systems to provide stable supplies of electricity and heat asconcurrent disaster prevention facilities at the time of commercial power
network blackout if certain conditions are met.

Benefits ofCogeneration
Systems○Reduced Energy Usage
and Costs○Reduced environmental impact○Improved Energy Security

Cogeneration System (Commercial, Industrial) Stock Plan
MW

4,000

4,000
3,000
2,000

1,790

1,530

1,000
0
2011

2014

2020
(Plan)FY

Cogeneration Systems

Electrical energy
30％～48％

Pipeline
Gas
LNG
Terminal

Cogeneration

Waste heat that isdifficult to use
15～30％Heat energy (steam)
30％～55％
Total energy efficiency

70％～85％ ** The aforementioned energy efficiency is calculated based on certain assumptions made by the Company.

25

Tokyo Gas Annual Report 2015

Core Businesses“ENE-FARM”
The “ENE-FARM” residential fuel cell system is a type of distributed
energy system that is installed onsite at customers’ homes. Thishighly efficient system uses city gas to generate electricity while alsoutilizing the heat created through the generation process to heatwater. Moreover, “ENE-FARM” is an important strategic product inresidential gas sales as customers using this system also consume

greater volumes of city gas.
“ENE-FARM” has continued to evolve since the first unit was
launched in 2009. In April 2015, our “ENE-FARM” stock had risen to
approximately 43,000 units.
The “Challenge 2020 Vision” calls for a stock of 300,000 “ENE-FARM”
units to be accumulated by fiscal 2020, and we will continue to refine
these systems and promote sales with the aim of achieving this goal.

“ENE-FARM” (Residential) Stock Plan

Advances to Date

Thousands units

400

May 2009

First unit sold

Apr. 2011

New “ENE-FARM” model launched, priced approximately¥700,000 less than previous offerings (MSRP: ¥2,630,000 plus tax)

300

300

Apr. 2013200(MSRP: ¥1,900,000 plus tax)

100
0New, more affordable “ENE-FARM” model launched

9.6

17.2

29.4

2011

2012

2013

43.4
2014

2020
(Plan)

Apr. 2014

New “ENE-FARM” system for housing complexes launched

Apr. 2015

New product developed for detached house use; sales at arecord low price (MSRP: ¥1,600,000 plus tax)

FY

Supplying LNG throughout Japan
Not limiting its operations to the Kanto region, the resources procured
by Tokyo Gas are provided throughout Japan. We thereby meet theneeds of gas companies throughout the country, supplying them with
LNG via tank lorries, large ocean-going tankers, and smaller domestic
vessels. The expansion of our sales channels in this manner is yet
another one of our efforts to enhance the LNG value chain.
As one facet of these efforts, we commenced supply to the Ishikari
LNG Terminal of Hokkaido Gas Co., Ltd., in October 2012. This projectis our first endeavor to provide a domestic gas company with gas
procured by the Company via ocean-going tankers. Through thisventure, the Ishikari LNG Terminal will be supplied with between
300,000 tons and 400,000 tons of LNG per year during the 11-year
period beginning fiscal 2012. Further, we acquired a 20% stake in
Hokkaido LNG Co., Ltd., a consolidated subsidiary of Hokkaido Gas
that is the direct owner of the Ishikari LNG Terminal, to deepen our
relationship as we work to advance the spread of LNG. We also signed
an LNG sales agreement with Saibu Gas Co., Ltd., for the supply of
about 300,000 tons of LNG per year over the 16-year period beginningfiscal 2014. and commenced supplying them from October 2014.

Supplying LNG via Overseas Ocean-Going Tankers

LNG liquid sales volumes

Thousand t
1,500

Ishikari LNG Terminal
Hokkaido Gas Co., Ltd.
Hibiki LNG Terminal
Saibu Gas Co., Ltd.

1,237

1,200

920

900

784
600

508

545

604

300

0
2010

2011

2012

2013

2014

2015
Forecast

FY

Tokyo Gas Annual Report 2015

26

Core Businesses

2Electric Power Business

The scope of the Group’s electric power business encompasses the procurement of fuels, generation, and sales. In these operations, wholly owned subsidiary Nijio Co., Ltd. procures its own fuel and then subcontracts power generation to Group-owned
power plants. The power that is then generated is sold to wholesale and large-lot customers. Looking ahead, and with thecomplete liberalization of retail electric power, the Tokyo Gas Group will look to build a more competitive power source portfolio
while at the same time delivering electricity to residential and commercial customers as a part of efforts to expand its electric
power business.
High-pressure lines (existing)

Recent Initiatives

High-pressure lines (construction commenced after“Challenge 2020 Vision” launch)Jun. 2013

High-pressure lines (under construction /information in parentheses is the date operations
are scheduled to commence)

Sep. 2014

May 2015

Start-up of construction of third unit of Ohgishima Power Station (operations
scheduled to commence from February 2016)

High-pressure lines (under consideration /route selection in progress)
High-pressure lines (medium-to-long-term concept)

Concluded an agreement with Kobe Steel, Ltd. for the supply of electricity from the
Shinko Moka Power Station(1,200 MW; operations scheduled to commence from fiscal
2019)

Other companies’ pipelines (existing)Tokyo Gas Group supply area

Joint establishment of Chiba Sodegaura Power Co., Ltd. with Idemitsu Kosan Co., Ltd.
and Kyushu Electric Power Company Inc. to further promote the coal-fired thermal
generation business (power generation scale up to a maximum of 2,000 MW;
operations scheduled to commence in the mid 2020s)

Jun. 2015

Full-fledged consideration of the enlargement plan for the no. 3 and 4 units of the
Kawasaki Natural Gas Power Plant (power output of approximately 550 MW x 2 units;
operations scheduled to commence progressively from 2021)

Jul. 2015

Agreed with Tohoku Electric Power Co., Inc. to jointly establish an electric power retailsales company (New company scheduled to be established in October 2015)

Shinko Moka Power Station

Kawasaki Natural Gas
Ohgishima Power Co., Ltd.

Tokyo Gas BaypowerCo., Ltd.

Tokyo Gas Yokosuka Power Co., Ltd.

Coal-fired power
generation business(planned site)

The Group’s Natural Gas-Fired Thermal Power Plants

Tokyo Gas Baypower Co., Ltd.
Generation
capacity
Tokyo Gas
generation capacity
Generation method

Tokyo Gas Yokosuka Power Co., Ltd.

100 MW x 1 unit

240 MW x 1 station

Generation
capacity

100 MW

240 MW

100 MW

Tokyo Gas
generation capacity

Combined cycle generation

Generation method

Start of operations

2003

Tokyo Gas interest

100%

Kawasaki Natural Gas Power Generation Co., Ltd.
Generation
capacity

180 MW

Tokyo Gas
generation capacity

Combined cycle generation

Generation method

Start of operations

2006

Tokyo Gas interest

75%

420 MW x 2 units

840 MW

Ohgishima Power Co., Ltd.
Generation
capacity

407 MW x 3 stations

1,221 MW*

400 MW

Tokyo Gas
generation capacity

900 MW

Combined cycle generation

Generation method

Combined cycle generation

Start of operations

2008

Start of operations

Progressive rollout from 2010

Tokyo Gas interest

49%

Tokyo Gas interest75%* Unit 3 is scheduled to start operations fromFebruary 2016.

Operating Income from Electric Power Business
Operating Income (¥100 million)

Tokyo Gas’s Strengths

Sales volumes of Electricity (100 million kWh)(¥100 million)(100 million kWh)

250

125

244
224

200

191

100

99.8

106.1

97.1

150

75

100

50

25

0

0

2012

27

Tokyo Gas Annual Report 2015

2013

2014

FY

Close Proximity to High Demand Areas

Robust electricity demand
The Kanto region, is densely populated by the Tokyo-Yokohama and otherindustrial zones, and electricity demand is robust as a result. Electricity differsfrom gas in the fact that it cannot be stored. It is therefore necessary to adjust
generation levels in line with fluctuations in demand. Electricity also incurs large
losses during transmission. For these reasons, a location close to highdemand areas is a great advantage for an electric power business.
Tokyo Gas’s Strengths

50

1

2

Neighboring LNG Terminal

Efficient power plant operations
Close proximity to the LNG receiving terminal ensures that the power station
is easily supplied with the natural gas that is used as fuel. In addition, power
station operations can be contracted within the LNG terminal, thereby
ensuring efficient operation at low cost.

Core Businesses

Increasing Competitive Generation Capacity

Realize

Expand generation capacity from the current level of approximately 1,300 MW (company
equity) to around 3,000 MW by 2020.
● Aim at building a more competitive power source portfolio, including base load supply
sources, in addition to natural gas thermal power.
●“Challenge
2020
Vision”〈Confirmed Expansions in Generation Capacity (Own Equity)〉
Ohgishima Power Station

Shinko Moka Power Station

Start-up of operations of the third unit

Start-up of operations(300 MW)(1,200 MW)

Increase of approx. 1,700 MW

Approx. 3,000 MW

Approx. 2,800 MW

Approx. 1,300 MW

Earnings from theelectric power and
LNG sales as well asother businesses
account for 25% ofconsolidated net
income.

Approx. 1,600 MW

2015.32016.2

2019～2020 (Plan)

2020 (Vision Targets)

Expand Electric Power Sales

Tokyo Gas’s Strengths(Fiscal 2020)

Approx. 30 billion kWh

Sales Volumes ofElectricity＝

With the complete liberalization of retail electric power in
2016, in addition to thewholesale and large-lot
customer to date, deliverelectricity to residential andcommercial customers andexpand sales to around 30
billion kWh (about 10% ofTokyo metropolitan area
demand) by 2020.
● Commence pre-order sales ofelectricity to residential andcommercial customers fromfiscal 2015.
●

Approx. 10% of Tokyo metropolitan
area demand

Breakdown ofConsolidated Net Income

Increase of approx. 20 billion kWh■ Electric power business, LNG sales, others■ Gas business■ Overseas businesses

Increase of approx.
10 billion kWh

50%
70%

2013

Wholesalecustomers

10%

Expand business
partners

Large-lotcustomers

2020

25%

20%

Wholesale Large-lot Residential Commercial
customers customers customers customers

Image at the time the Vision
was put in place(Average for fiscal 2009–2011)25%

Fiscal 2020

3

Highly efficient gas turbine combined cycle(GTCC) generation
The Tokyo Gas Group currently generates electricity at its
gas-fired thermal power generation plants in Japan. These
plants employ GTCC generation, which is highly efficientand offers superior energy savings. In this manner, theCompany is engaging in highly efficient power generation.(record high of 58% realized at the Ohgishima Power
Station)Steam Turbine
Generation
Steam turbine

Generator

Steam

Exhaust heat collection boiler
Exhaustheat

Gas Turbine
Generation
Gas Turbine
Generator

Gas

Tokyo Gas Annual Report 201528

2 Electric Power BusinessCore Businesses

Initiatives Aimed at Increasing Competitive Generation Capacity
Electric Power Trading Contract with the Moka Power Station of Kobe Steel, Ltd.
In September 2014, Tokyo Gas concluded an agreement concerning the supply of electric power with Kobe Steel, Ltd. Under the agreement,
Tokyo Gas will supply city gas to Shinko Moka Power Station, the gas-fired thermal power station under construction by Kobe Steel in Moka
City, Tochigi Prefecture. All of the electricity generated at the station will then be supplied to the Company. This initiative, which complements
efforts to cultivate additional demand in the northern Kanto region through the construction of the Hitachi LNG Terminal, is a major step toward
Tokyo Gas increasing its competitive generation capacity in the lead up to the complete liberalization of retail electric power. Here, we provide
details of the significance of this agreement in the following interview with a Kobe Steel representative.

In ensuring the timely start-up
of Japan’s first full-scale thermal power
station located inland, we will balance thesupply of electric power atcompetitive prices withtechnological stability andreliability.

Special Features of the Shinko Moka Power Station
The Shinko Moka Power Station is attracting considerable interest
as Japan’s first full-scale thermal power station located inland. The
facility will yield a generation capacity of 1.2 million kW (0.6 million
kW x 2 units), which is equivalent to the output of one nuclear
power plant. In adopting a state-of-the-art gas turbine combined
cycle power generation format, positive steps are being taken toachieve Japan’s highest level of energy efficiency at around 60%.
In the case of inland power plants, where seawater is not an
option, the steam generated by steam turbines is cooled byambient air using fans. At the same time, long distance transportation is also a necessity after reducing the size of large-scale facility

General Manager
East Japan Power Project Department
Electric Power Project Divisioncomponents. The construction site in Moka City, Tochigi Prefecture,

Hisato Murakoshi

industrial zone site as well as existing plans by the Company tohowever, offers a host of benefits. In addition to a fully completed
construct a major trunk line, the location of the plant provides

Background Leading Up to the Decision
Drawing on its know-how in operating private power generation
facilities nurtured for over five decades, Kobe Steel, one of Japan’s
leading independent power producers (IPPs), has continued tosupply electricity on a wholesale basis through the Shinko Kobe
Power Station. Guided by its medium-term business plan, thecompany has made efforts to secure a stable profit base by
expanding its power supply business. Impacted by the Great East
Japan Earthquake that devastated the nation in March 2011, we
have taken steps to boost our generation capacity in a timely
manner and on a major scale by promoting plans to construct a
power station adjacent to our Moka Plant at the No. 5 Industrial
Park in Moka.
From the outset, the construction of a power station by Kobe

excellent access to large volume power distribution grids and thepotential to maximize use of existing or planned social infrastructure.
Taking into consideration the concentration of existing power plants
in and around Tokyo Bay and the Pacific Coast, scattered
distribution that includes inland areas also addresses such risks astsunami damage in the event of an earthquake. This attribute of
scattered distribution therefore helps to overcome some of theassociated weaknesses.
Turning to efforts aimed at securing power sources on a timely
basis, steps have been taken in advance to conduct the necessary
environmental impact assessment from March 2013. We anticipate
construction with commence around the middle of 2016 with thefirst station coming online in the second half of 2019 and thesecond station in the first half in 2020.

Steel was based on the supply of gas as a generation fuel from
Tokyo Gas. With our understanding toward Tokyo Gas’s electric
power business deepened, our confidence in and expectation
toward the Company have similarly increased. As a result, wePower generation
methodGas-fired, gas turbine combined cycle
power generation

Generator
output

1.2 million kW class(0.6 million kW class x 2 units)

FuelCity gas

Operations
scheduled tocommence

Unit 1: Second half of 2019
Unit 2: First half of 2020

decided to enter into this agreement.
Fukushima Pref.

Tochigi Pref.
Gunma
Pref.

Moka City

IbarakiPref.

SaitamaPref.
Target business implementation area

29

Tokyo Gas Annual Report 2015

Photo provided by the Tochigi Prefecture
Business Establishment Promotion Council

Core Businesses

Significance to Both Companies and Future Outlook
On completion, the Moka Power Station will become Japan’s first
fully-fledged inland thermal power station. In addition to ensuring thestable supply of electricity to the northern Kanto region, expectations arethat the Moka Power Station will serve as a precious source of power for
the Tokyo metropolitan area, which has a high dependence on power
generated along coastal areas. In recognition of the initiative taken
through this project, the Moka Power Station was selected by the Kanto
Bureau of Economy, Trade and Industry and the National Resilience
Promotion Office of Japan’s Cabinet Secretariat as a prime example ofenergy base resilience and private sector ingenuity, respectively. Energies
are now being channeled toward completing construction of the stationand heading toward the commencement of commercial operations in abid to meet these expectations and acclaim.
For Kobe Steel, which is overseeing the project and its operations, theShinko Moka Power Station is a component of its earnings platform. In
addition to providing Kobe Steel with a stable stream of earnings, theShinko Moka Power Station will also complement Tokyo Gas’s
generation capacity with an additional 1.2 million kW of electricity,
bringing within sight the Company’s target of 3.0 million kW identified
under its Vision. By controlling both the supply of fuel (entry) to the Power
Station as well as the purchase of electricity (exit), Tokyo Gas is well
positioned to properly manage risks,
By ensuring a competitive electricity price in combination withsuccessful efforts to promote technological stability and reliability, thisinitiative is expected to exert a significant presence in the stable supply ofelectricity to the Kanto region as a whole, while taking into consideration
trends in the complete liberalization of retail electric power. In addition,
Tokyo Gas, which maintains considerable experience in natural gas-fired
thermal power generation, and Kobe Steel, which has substantial
know-how in coal-fired thermal power, are anticipated to nurture close
ties of mutual trust through this business. By deepening mutual
exchange and interaction, both Tokyo Gas and Kobe Steel will further lift
the levels of their overall technological and power generation capabilities,
thereby enhancing corporate value. At the same time, the common goalof expanding power generation as the next business pillar is also serving
to deepen ties of mutual trust between the companies. Throughcollaboration that makes the most of each company’s inherent steps,
Tokyo Gas and Kobe Steel will continue to promote this business in a bid
to contribute to the next-generation and society as a whole.

Front row from left: General managers Yamamoto, Murakoshi, and Manabe from Kobe Steel, Ltd.
Back row from left: Mr. Sato and Mr. Miyamoto from Tokyo Gas Co., Ltd.

Initiating Steps to Consider the Construction of a Coal-Fired Thermal Power Plant～Establishing the New Company Chiba Sodegaura Power Co., Ltd.～
Overview

Special Features

Idemitsu Kosan Co., Ltd., Kyushu Electric Power Company Inc., and Tokyo Gas all agreed to jointly proceed with preparations for thedevelopment of a coal-fired thermal power plant in March 2015. As a part of these preparations, steps were taken to establish Chiba
Sodegaura Power Co., Ltd. in May 2015. This is the Company’s first venture into the coal-fired thermal power plant field. In the lead-up to
the full liberalization of the retail electric power, this initiative will go a long way to helping Tokyo Gas provide stable electric power at acompetitive price to the Tokyo metropolitan area and building a competitive power source portfolio.
In addition to securing stable and competitively priced base load supply sources, this initiative will help to maximize efforts aimed at
reducing environmental impact by incorporating a variety of technologies.

①Alliance between three companies②Economic rationality

Working to realize the stable supply of electric power at affordable
prices while making the most each company’s inherent strengths

Coal prices remain stable at a low level; considerable competitive
advantage from a generation cost (variable expenses) perspective

Tokyo Gas
Co., Ltd.
An 11 million-strong customer
base in the Tokyo
metropolitan area
The ability to securestable supplies of coalcoupled with holdings oflarge-scale sites for theconstruction of power
plantsTechnologies andknow-how in coal-fired
thermal power plants

Variable costs (¥ / kWh)

Generation Costs by Power Source: Variable Costs (representation)●

Idemitsu
KosanCo., Ltd.

KyushuElectric Power
Company Inc.

High-efficiency LNG-fired thermal
Coal-fired thermal
Hydro

Nuclear③Eco-friendliness●

Chiba-Sodegaura
Energy Co., Ltd.

LNG-fired thermal, oil-fired thermal, etc.

Supply capacity (MW)Reducing CO2 emissions by adopting highly efficient units that comply
with BAT.*
Plans are in place to reduce NOx, SOx, soot and dust through the
installation of environmental equipment and facilities.

*BAT is the acronym for best available technology. BAT is a specification that is announced at the national
level calling on business operators to utilize the best available technology. In the case of commercial
operations, BAT entails the introduction of technologies that ensure the highest levels of efficiency.

Tokyo Gas Annual Report 201530

Core Businesses

3

Overseas Business

Overview of Overseas Business
The Tokyo Gas Group develops wide-ranging businesses that include engaging in overseas projects, from upstream businesses,
such as overseas gas field development, to midstream- to downstream businesses, as exemplified by IPP business and energy
service and engineering businesses.

■Status of Overseas Business
Overseas midstream- to downstream projects
Overseas upstream projects

T-Power

Cordova

T-Power

Barnett

Tokyo

Barnett
MT Falcon

Bajio

Queensland
CurtisGas Malaysia
Gas Malaysia
Energy Advance Sdn Bhd.
DarwinMalhas

MT Falcon

Ichthys
Pluto
GorgonEcogenGas Malaysia
GorgonScale of Investment Fiscal 2012–2020 total

Income Level
Overseas Business Operating Income■ Other investments in affiliates:¥ billion¥140.0 billion

10.7

10.0

■ Operating foundations:

7.5¥270.0 billion

7%

5.0

■ Infrastructure:

13%
Approx.
¥2,060.0 billion

35%¥730.0 billion

2.4

2.5

2.8

0

2012

2013

2014

FY

In fiscal 2014, operating
income from overseas
business amounted
to¥10.7 billion, a
year-on-year increase of¥7.9 billion, due to theincrease in income fromthe Pluto LNG Project.

Composition of Consolidated Net Income

29%■ New demand

cultivation:¥600.0 billion

16%■ Overseas
business:¥320.0 billion

Time of Vision’s formulation(Fiscal 2009–10%
fiscal 2011 average)■ Overseas

Fiscal 2020

20%

50%

Business■ Gas business■ LNG sales, electric power

Of the total capital expenditures and investments of¥2,060.0 billion for the nine-year period from fiscal 2012 to
fiscal 2020, ¥320.0 billion, equivalent to 16%, is earmarked
for overseas business.

31

Tokyo Gas Annual Report 2015

25%

70%

25%

business, other

Under “the Challenge 2020 Vision”, we are aiming to expand total net
income and increase Overseas Business earnings to compose 25% ofconsolidated net income.

Core Businesses

Upgrading and Expanding Overseas Base Capabilities
Through alliances with local business partners, we are opening new overseas bases as well as augmenting our existing bases toundertake our own project composition and business promotion. Furthermore, during the next three years, we will increase ourbusiness development personnel to 200 and upgrade as well as expand our overseas base capabilities.

Examples of Initiatives(1)Singapore, Jakarta, Bangkok, Hanoi
We are building local networks and promoting project compositions and commercialization that leverage the Group’s comprehensive capabilities.
(2)North America, Australia
In addition to the operational management of existing businesses, we are leveraging the local networks that we have built up thus far andpromoting the development of new projects.

■Bases in Southeast Asia
Existing base
New base

VietnamThailand

Malaysia

Singapore

Indonesia

Deeply rooted in thelocal areas, we areleveraging the Company’s knowhow to theutmost and promoting
natural gas applications in all the countries of Southeast Asia.
Tokyo Gas Asia Pte. Ltd.
President

Nobuhisa Kobayashi
Providing energy solutions to customers conducting business inSoutheast Asia and contributing to the building of local energy
infrastructure, Tokyo Gas Asia Pte. Ltd. was established in Singapore
in December 2014 to convert into tangible forms “accelerate global
business development,” one of the main policies in the fiscal 2015 tofiscal 2017 period toward the realization of the Tokyo Gas Group’s“Challenge 2020 Vision.”
Southeast Asian countries are in the process of development, andin the years ahead demand for energy will stay on the increase in linewith further economic growth. Although many of Southeast Asian
nations possess their own in-country resources, the trend is forincreasing volumes of LNG imports within Southeast Asia to meetrobust demand, and consideration is being given to making further
progress with this utilization. Leveraging to the utmost its knowledgeof such areas as natural gas-related technologies and expertise inenergy solutions that have been built up in Japan, the Tokyo Gas
Group will support the promotion of natural gas utilization in all
Southeast Asian countries.
In order to accurately seize these opportunities, the Tokyo Gas
Group established representative offices in Vietnam and Indonesia in
April 2015 and is also planning to open an office in Thailand.
Including the existing office in Malaysia and Tokyo Gas Asia Pte. Ltd.
In Singapore, new projects are being researched and developed atfive bases in Southeast Asia, and Tokyo Gas Asia will continue to fulfil
a managing function over them.
In line with Tokyo Gas Asia’s method of conducting business, thecharacteristics of each country depend on the country, and topossess sufficient knowledge of each country’s culture, religion andbusiness practices, in other words to conduct business in a way thattakes into consideration factors that are deeply rooted in the locale, isof the utmost importance. What is more, while building good
relationships to gain and maintain the trust of a rich network ofcontacts—including people in local energy-related corporations andin government—as well as of major companies with a track record ofachievements, I would like to devote all of my own energy topromoting business in those countries and regions.
It is believed that Southeast Asia will undergo a rapid transformation in the years to come, but I am confident that Tokyo Gas Asia will
be able to accompany the region along the road to development.

Tokyo Gas Annual Report 201532

3 Overseas BusinessCore Businesses

Upstream Business
Objectives

In addition to working for sustainable growth by securing new sources of revenue as business investment, upstream
business enables both the stabilization of overall Group revenues in the face of fluctuations in raw material prices and thegathering of valuable information as a participant in upstream projects.

Project Name

Location

LNG Production Capacity

Year of Participation

Tokyo Gas Interest

Start of Operation

DarwinAustralia

3 million t/year

2003

3.07%

Pluto

Australia

4.3 million t/year

2008

5%

January 2006
April 2012

GorgonAustralia

15.6 million t/year

2009

1%

Planned to commence production in 2015

Queensland
CurtisAustralia

8.5 million t/year

2011

1.25% (Gas field)
2.5% (No. 2 Liquefaction Plant)

Commenced phased operations
from December 2014

Cordova

Canada5.5 million t/year

2011

3.75%

2009

IchthysAustralia

8.4 million t/year

2012

1.575%

Planned to commence production in 2016

BarnettUSA

2 million t/year

2013

25%

2003

Darwin LNG Project

Barnett

The business of the Queensland Curtis LNG Projecton the east coast of Australia is liquefying unconventional natural gas on the island of Curtis andshipping that gas as LNG. In this case, theunconventional natural gas is the coal bed methane(CBM) found in the coal seams centered on Surat
Basin in the state of Queensland. Having
commenced phased operations in December 2014,
the Company started to receive CBM-derived LNG
from this project in April 2015, marking the firstdelivery to Japan of long-term contract LNG fromunconventional natural gas sources.
First delivery to Tokyo Gas Sodegaura LNG Terminal (Sodegaura City, Chiba Prefecture)

Future Strategies
In addition to acquiring the upstream rights associated with conventional LNG procurement, we are planning further diversification in theform our project participation takes—such as the acquisition of gas
field rights not associated with procurement in North America andparticipation in small- to medium-scale LNG projects—and targeting
further expansion. When expanding business, if the project seems

33

Tokyo Gas Annual Report 2015

favorable following thorough and more careful scrutiny, we will not
hesitate to get involved in the project. Furthermore, with regard tochanges in the price of crude oil, currency exchange rates and thebusiness environment, we will promote strategies to mitigate anddecrease these fluctuating risks along the entire LNG value chain andwill continue to build a flexible yet robust business structure.

Core Businesses

Midstream- to Downstream Business
Objectives

In addition to being able to leverage the Group’s strengths competitive advantages, including in energy services andengineering, we are able to ensure a stable income as business investment.

Energy Service project

Engineering BusinessWe design, construct and conduct the operational management
and maintenance of facilities, including gas cogeneration
systems, and provide one-stop utilities, such as electricity, heat,water and compressed air.

Leveraging the information processing technologies associatedwith natural gas handling technologies and the gas business, we
design and construct as well as undertake the project management of energy infrastructure, including LNG terminals.

Project Name

Location

Main BusinessYear of Participation

Tokyo Gas Interest

Gas Malaysia Bhd.

Malaysia

City gas supply project

1992

14.8%

Bajio

MexicoNatural gas power project

2004

49%

MalhasBrazilNatural gas pipeline project

2005

15%

MT Falcon

MexicoNatural gas power project

2010

30%

T-Power

BelgiumNatural gas power project2012

26.66%

EcogenBrazilEnergy Service project

2012

10%

Gas Malaysia Energy Advance Sdn Bhd.

Malaysia

Energy Service project

2014

34%

Examples of Initiatives
Construction commenced of Building No. 1
at Gas Malaysia Energy Advance Sdn Bhd.
energy services businessWith the objective of entering the energy services business in
Malaysia, Tokyo Gas Engineering Solutions (TGES) Corporation
established Gas Malaysia Energy Advance Sdn Bhd. (GMEA), a
joint venture with Gas Malaysia Berhad, in April 2014.
Having concluded a 15-year agreement covering energy
services with three Toray Corporation-owned subsidiaries(Toray Group Malaysia), GMEA commenced construction of anenergy plant with the aim of commencing supplies in 2016.

Diagram of Energy Services Business
Toray Group Malaysia

Factory

Factory

Electric
power

Factory

Gas Malaysia Energy Advance Sdn Bhd.

（

Possesses a gas
turbine co-generation system

Natural gas

Establishing a gas turbine co-generation system on Toray
Group Malaysia premises, GMEA will supply electric
power and steam to Toray Group Malaysia using as fuelnatural gas procured from Gas Malaysia. GMEA will becollectively responsible for design, construction andmaintenance and receive energy service fees from Toray
Group Malaysia, which will thus reduce its energy costs,
conserve energy and cut the volume of its CO2
emissions.

Energyservices fees

Steam

） Gas fees

Gas Malaysia Bhd.

Designed to supply electric power and steam, the energy control
center under construction

Future Strategies
Leveraging the Group’s total energy-related technologies andknowhow, we will identify areas in Southeast Asia and North America
and develop business in a focused manner. To give specificexamples, we will contribute energy solutions to customers that are

deploying overseas and to the building of local energy infrastructure.
In addition, we will leverage the technologies and knowhow of local
energy businesses and take on the challenges of developing local
value chains through alliances with local energy companies.

Tokyo Gas Annual Report 201534

Core Businesses

4

Other Initiatives

In addition to the initiatives outlined above, Tokyo Gas promotes a number of businesses in its efforts to contribute to the evolutionof a total energy business. Of those businesses, this section contains profiles about smart energy networks, the real estatebusiness and the hydrogen business.

1 Smart Energy Networks
A combination of renewable energy and gas cogeneration system, asmart energy network provides optimum control by means of
information and communication technology (ICT) and realizes energy

conservation and reduced CO2 emissions by the comprehensive
utilization of electric power and heat within the network.

At the present time, Tokyo Gas is advancing several projects in collaboration with government and business partners.

Examples ofRecent Initiatives●

July 2014●

November 2014●

Future Strategies●

Construction commenced of Smart Energy Center in the wharf district of Toyosu, Tokyo(supply scheduled to begin in fiscal 2016)
Construction of a smart energy network in Japan’s first innovative urban community ina city block area in the northⅠdistrict from the east exit of Tamachi station, Tokyo

Commence construction of second Smart Energy Center to expand the smart energy network in thenorth district from the north exit of Tamachi station
Initiate commercialization study with a view to business participation in Nihonbashi-Muromachi District
Urban Redevelopment Electric Power and Heat Supply Plan, a smart city project that will be the first inJapan to include a fully developed urban area

Diagram of a Smart Energy Network

Apartment Buildings

Hospitals

・Photovoltaic Power Generation
・Fuel Cell・Photovoltaic Power Generation
・Gas Cogeneration
・Energy Storage System

LNG Terminal
Biomass
Generation

Waste Disposal Center

Office Buildings
・Photovoltaic Power Generation
・Gas Cogeneration
・Energy Storage System

Wind Turbine Generation

Information andCommunications Technology
Power Plant

35

Tokyo Gas Annual Report 2015

Detached Houses

Commercial Facilities

・Photovoltaic Power Generation
・Fuel Cell・Photovoltaic Power Generation
・Gas Cogeneration
・Energy Storage System

Core Businesses

2 Real Estate BusinessTokyo Gas holds high-potential, large-scale sites in such locations as
Tamachi and Toyosu in the Tokyo metropolitan area. While limiting
risk, the Company develops its real estate holdings and works to
improve asset value by their effective use. We are installing smart

JR Tamachi Station

New city hub

Residential hub

energy networks, an advanced energy system, in those assets thatare not yet developed and, in concert with efforts to improve asset
value, will promote initiatives as am energy business partner.

Intended location of theTokyo 2020 Olympics andParalympics Athletes’ Village
Toyosu-ohashi Bridge(scheduled to open
in fiscal 2016)

Hotel
OfficeToyosu Park

Minato Park Shibaura

ToyosuGastenani
Gas Science Museum Station●

Pedestrian deck

OfficeDay care centerfor children andother facilities

Shijoumae Station

Public district
Shibaura Park

Aiiku
Hospital

TGMM Shibaura Project (Provisional Name)

Yurakucho Line

Harumi-ohashi
Bridge

Shintoyosu Station

Toyosu New Market(Planed site)
Fujimi
BridgeAriake North
BridgeTamachi Station East Exit Northern District Redevelopment Plan
Ariake Tennis no Mori
StationYurikamome
Toyosu Station● Toyosu Ramp

Kiyari Bridge

Intended location of
a Tokyo 2020 Olympics andParalympics Stadium

Tokyo Gas Group site

Toyosu District Redevelopment Plan

晴海大橋

3 Hydrogen Business
Attention has been focused on hydrogen vehicles for their low
environmental impact and as replacements for conventional,
gasoline-powered vehicles. Hydrogen vehicles utilize electric power,
generated by a chemical reaction between hydrogen and oxygen in afuel cell, to drive electric motors. The city gas provided by Tokyo Gas
consists primarily of methane (CH4). Therefore, we are able to extracthydrogen from this gas to create fuel for hydrogen vehicles.
In addition to automotive innovation and reducing the cost of thevehicles, making hydrogen vehicles more widespread necessitatesbringing down the cost of the hydrogen fuel. Tokyo Gas, however,believes that the supply of hydrogen at a stable price will boost themarket penetration of hydrogen vehicles.
In December 2014, as part of the initiatives toward greaterhydrogen utilization in the years to come, Nerima Hydrogen
Station—the first commercial hydrogen station in the Kanto
region—was opened and commenced sales. A hydrogen station
under construction in Saitama City, Saitama Prefecture, is planned tocommence sales during the current fiscal year. We will continue toreview future construction, while monitoring social conditions and themarket penetration of fuel cell hydrogen vehicles.

Ceremony marking the filling of a hydrogen vehicles

Tokyo Gas Annual Report 201536

Deregulation of the Gas and Electric Industries
Overview of Gas Business Regulations
General gas utilities are granted the right to establish regional monopolies within their service area but are subject to regulation under the Gas
Business Act in order to protect user interests. Large-scale users with an annual gas consumption of 100,000 m3 or more fall within the scopeof deregulation. Users with an annual gas consumption of less than 100,000 m3 are subject to regulation. Details of typical regulations arepresented briefly as follows.

1 Rate Regulations●

The Act states that “The rates consist of fair costs incurred as aresult of efficient management and fair profits,” and rates must
undergo inspection by the Ministry of Economy, Trade andIndustry.
● The production costs required to supply gas to customers andthe costs required to fulfill safety responsibilities are considerednecessary costs for gas utilities, and these costs may therefore
be factored into gas rates to within an appropriate extent.
●●

In regard to profits, capital costs related to facilities necessary tooperate a gas business, based on profit figures calculated using
the total of shareholder capital cost and debt cost, may befactored into gas rates to within an appropriate extent. This
provision is meant to allow gas utilities to operate their businessin an appropriate manner.
Approval from the Ministry of Economy, Trade and Industry is
required to raise rates, but lowering rates only requires
notification to be submitted.

Overview of electricity and gas system reforms and the main schedule for revising the Business Act
Revision of the Business Act is designed to provide users with an enhanced degree of freedom with respect to their choice of energy, suppress energy
rates, and secure a safe and stable supply of energy thereby increasing benefits to consumers by creating a comprehensive energy market throughintegrated reform in the energy field.
The proposal to revise the Business Act was approved by Japan’s Cabinet in March 2015 and enacted at an ordinary session of the Diet In June 2015.
Electricity
2015

April Establishment of an organization for operating wide-area electrical grids
April

Full deregulation of the retail market
26％

2016

40％

62％

100%

Prior to 2004

2004

2005

2016～

2,000kW or more
Large-scale factory, other

500kW or more
Medium-scale factories, etc.

50kW or more
Small factories, etc.

Less than 50kW
Residential and small commercial users

2017
2020

April Legal separation of the power transmission and distributions networks

2022

Our StanceTokyo Gas has positioned electricity system reform as a significant opportunity to expand its business. Utilizing the following
inherent strengths, the Company will take up the challenge of growing its power generation business.
① Our superior LNG procurement capabilities② Our competitive power sources namely, our natural gas-fired thermal power plants that employ highly efficient combined
cycle generation methods, and③ Frequent opportunities to meet directly with customers.

37

Tokyo Gas Annual Report 2015

2 Obligation to Supply●

In exchange for receiving monopoly rights within their city gas
supply area, gas utilities are required by principle to supply to
any user upon request. Moreover, once supply has beencommenced, the utility may not cease supply without justifiablegrounds.

3 Safety Responsibilities

Gas utilities are responsible for ensuring the safety of gas
facilities, including users’ assets. “Gas facilities” refers to all
facilities installed for the purpose of supplying gas as well as
auxiliary facilities and includes gas generating facilities, pipelines,
gas meters, and gas taps. Gas utilities are required to maintainall gas facilities at levels safe for operation.
● If gas utilities manufacture their own gas facilities, they are
required to ensure that these facilities conform to technicalstandards. Gas utilities are also obligated to inform users withregard to potential dangers that could arise from gas usage andconduct inspections to assess conformity to technical standardsof certain gas facilities.
●

Gas
2015
2016
Full deregulation of the retail market

Effective date of full liberalization of Gas retail market is set by the government ordinance in less than two years and six months from theissued day of the revised law (June 24, 2015).

53%

56%

63%

100%

Prior to 2004

2004

2007

2017～

1 million ｍ3 or more
Manufacturers and large-scalecommercial facilities

500,000 ｍ3 or more
Medium-scale factories, et

100,000 ｍ3 or more
Small factories, etc.

Less than 100,000 ｍ3
Residential and small commercial users

2017

2020
2022

April Legal separation of the gas pipeline network

Against the backdrop of a fiercely competitive gas business environment attributable to full retail deregulation, the independence and autonomy of management is expected to rise. Under these circumstances, Tokyo Gas is harnessing the following
unique attributes to take all appropriate measures from each of the strategic, financial, and IT system perspectives to address
full deregulation as a priority issue and ensure that it remains the preferred choice of customers.
①Relationship with more than 11 million customers②Advanced energy solution technologies provided as a leader in the field of natural gas③Robust infrastructure centered on the Tokyo metropolitan area, including LNG terminals and pipeline facilities

Tokyo Gas Annual Report 201538

Corporate GovernanceTokyo Gas works to ensure continued development while consistently earning the trust of customers, shareholders, and society.
Based on this philosophy, we aim to achieve a continuous increase in our corporate value through enhancing corporate governance systems. We are endeavoring to develop systems with a commitment to management legality, soundness, and transparency. Tokyo Gas continues to emphasize the importance of accurate and prompt decision making, efficient business operations,strengthening of auditing and monitoring functions, and clarification of management and executive responsibilities.

Board of Directors
In principle, the Board of Directors meets once a month to discussand decide important matters regarding business operations. Directors
must submit reports to the Board of Directors regarding the status ofexecution of their duties periodically and when deemed necessary,
allowing the board to monitor the performance of directors.
The Board of Directors comprises 11 directors, 3 of whom areoutside directors. In addition, the term of directors is set at one yearwith the goal of further clarifying managerial responsibility.

Outside Directors
In accordance with their individual experience and knowledge, theoutside directors strive to secure the soundness and appropriatenessof deliberations and decisions regarding business execution. From an
independent viewpoint, the outside directors monitor the performanceof duties by the directors and exercise their authority at meetings ofthe Board of Directors. In this way, the outside directors contribute to

the improvement of the rationality and objectivity of the Company’sbusiness execution and of the deliberations and decisions of theBoard of Directors.
In making judgments about matters related to the independence ofoutside officers, such as capital, transactions, and relationships, we
comprehensively verify that they are unlikely to have conflicts ofinterest with general shareholders and they are in a position thatenables them to be objective and neutral, and on that basis we makea judgment on their independence. The Advisory Committee has
confirmed that none of the outside officers has a material conflict ofinterest with the Company—in regard to capital, transactions, or
relationships—and has confirmed their independence in accordancewith the above standards. The committee’s decision has beenreported to the Board of Directors, which has designated them as
independent officers and reported that designation to the stock
exchanges on which the Company is listed.

Reasons for selecting Outside Directors
Name

Major concurrent positions

Reason for selecting

Yoshihiko Nakagaki—

The Company’s management will benefit from Yoshihiko Nakagaki’s management way of thinking nurtured in a wide range ofbusiness development activities, including electric power source development and electric power wholesale supply, and his
advanced capabilities in management, such as the implementation of reforms reflecting changes in the operating environment.

Akihiko Ide—

The Company’s management will benefit from Akihiko Ide’s cosmopolitan outlook he has acquired in overseas businesses in
the general materials industry, particularly in Asia, as well as the strong management capabilities and deep insight he has
acquired through a wide range of business development in resource business and others.

Yoshinori Katori—

The Company’s management will benefit from Yoshinori Katori’s cosmopolitan and broad outlook as well as the deep insighthe has acquired over his many years as a diplomat.

Realizing Accurate, Rapid Decision Making andEfficient Business Execution
The Corporate Executive Committee, which meets weekly as a
general rule, deliberates on provisions stemming from Board of
Directors’ resolutions and important management-related issues. The
Company has introduced an executive officer system for businessexecution in accordance with decisions of the Board of Directors.

Substantial authority has been delegated to executive officers in theirdesignated areas of responsibility, while directors, as appropriate,
receive reports on the status of execution from executive officers andmonitor the executive officers. In addition, executive officers report to
the Board of Directors as needed. (To clarify management responsibility and executive responsibility, the terms of office of directors andexecutive officers have been fixed at one year.)

Audit & Supervisory Board Members
The audit & supervisory board members meet once a month as a
general rule and otherwise as needed. The five members of theboard, which include three outside audit & supervisory board
members, conduct deliberations and make reports.
In line with the Corporate Auditor’s Audit Standards, each audit &supervisory board member conducts effective audits through thefollowing principal initiatives.
● The audit & supervisory board members attend meetings of theBoard of Directors, the Corporate Executive Committee, and otherimportant meetings. They state their opinions relating to legality andother perspectives when necessary.
● The audit & supervisory board members conduct research into the

39

Tokyo Gas Annual Report 2015

state of operations at the head office, business offices, andsubsidiaries and hold discussions with directors to exchange
opinions, both on a regular basis and otherwise as needed.
The audit & supervisory board members cooperate closely with theInternal Audit Department, which is the internal audit organization,
and with the independent auditors and strictly audit the executionof duties by the directors, targeting the establishment of ahigh-quality corporate governance system.
● In regard to the internal control system for financial reporting, theaudit & supervisory board members receive evaluations of internal
control and reports on the status of audits from the Board of
Directors, etc., and KPMG AZSA LLC.
●

Corporate GovernanceOutside Audit & Supervisory Board Members

knowledge about finance and accounting.

The outside audit & supervisory board members conduct audits /monitoring from an independent viewpoint and contribute toimproving the rationality and objectivity of the Company’s businessexecution and of the deliberations of the Board of Directors throughtheir statements at meetings of the Board of Directors. In addition,
through their statements and the exercise of their majority voting
rights at meetings of the Audit & Supervisory Board, the outside audit& supervisory board members contribute to assuring and improving
the legality, appropriateness, rationality, and objectivity of the audits
by the audit & supervisory board members. In addition, with theobjective of assuring the effectiveness of audits by the audit &supervisory board members, the Company invites outside audit &supervisory board members who have a substantial degree ofIn making judgments about matters related to the independence ofoutside officers, such as capital, transactions, and relationships, we
comprehensively verify that they are unlikely to have conflicts ofinterest with general shareholders and they are in a position thatenables them to be objective and neutral, and on that basis we makea judgment on their independence. The Advisory Committee has
confirmed that none of the outside officers has a material interest with
the Company—in regard to capital, transactions, or relationships—andhas confirmed their independence in accordance with the above
standards. The committee’s decision has been reported to the Boardof Directors, which has designated them as independent officers andreported that designation to the stock exchanges on which theCompany is listed.

Reasons for Selecting Outside Audit & Supervisor Board Members
Name
Yoshihiko Morita

Major concurrent positions

Reason for selecting
The Company’s auditing will benefit from Yoshihiko Morita’s expansive international way of
thinking and deep insight nurtured through work in the fields of international finance and overseas
economic cooperation.

Outside Director of Kawasaki Heavy Industries, Ltd.

Kojiro Otani—

The Company’s auditing will benefit from Kojiro Otani’s abundant experience of organizational
management acquired in local government as well as his deep insight.

Wako Tojima—

The Company’s auditing will benefit from Wako Tojima’s wealth of expertise and deep insight as ascience journalist.

Officer Remuneration（3）Remuneration of outside directors shall comprise monthly
remuneration and bonus. Monthly remuneration shall comprise
only fixed remuneration, while bonus shall be the same as that ofinside directors.

In 2005, the Company formulated the basic policy on officer
remuneration, which outlines the method of remuneration for
directors, etc. At a meeting of the Board of Directors in February
2012, the policy was revised as follows.

1 Role of Officers and Remuneration

A portion of fixed remuneration shall be allocated to the purchase of shares based on ashare-purchase guideline and from the standpoints of reflecting the perspectives ofshareholders on management and improving shareholder value over the long term.

The role demanded of officers is to seek to enhance short-, medium-,and long-term corporate value, and officer remuneration shall serveas an effective incentive for them to perform that role.

4 Composition and Other Details of Remuneration
Paid to Audit & Supervisory Board Members（1）Remuneration of audit & supervisory board members shall be
paid within the scope of the remuneration limit approved at theGeneral Shareholders’ Meeting determined through discussions
among audit & supervisory board members.

2 Level of Remuneration
The level of officer remuneration shall be suitable for the role,
responsibility, and performance of the officer.

3 Composition and Other Details of Remuneration
Paid to Directors（2）Remuneration of audit & supervisory board members shallcomprise only fixed monthly remuneration.

（1）Remuneration of directors shall be paid within the scope of the
remuneration limit approved at the General Shareholders’Meeting.

5 Assurance of Objectivity and Transparency of theRemuneration System（2）Remuneration of inside directors shall comprise monthly
remuneration and bonus. Monthly remuneration shall comprise
fixed remuneration paid in accordance with the post of eachindividual and performance-linked remuneration. The amount ofbonus to be paid shall be determined in accordance with the postof each inside director after performance evaluation.

The Company shall assure the objectivity and transparency of thesystem of officer remuneration by establishing and operating theAdvisory Committee comprising a number of outside directors,
outside audit & supervisory board members, and inside directors togovern the system of personnel affairs and remuneration of officers.

Total Remuneration for Directors and Audit & Supervisory Board Members (Fiscal 2014)
Millions of yen
TypeThousands of U.S. dollars*2
Type

Total value of
remuneration

Base

Bonuses

Total value of
remuneration

Base

BonusesRemuneration for directors (excluding outside directors)

9*1

¥460

¥408

¥52

$3,833$3,400$433

Remuneration for audit & supervisory board members(excluding outside audit & supervisory board members)

*1

2

¥ 74

¥ 74

—

$

617

$ 617

—

Remuneration for outside officers(outside directors and outside audit & supervisory board members)

7*1

¥ 64

¥ 58

¥6

$

533

$

483

$ 50

*1 The number of officers included in the total value of remuneration for directors, audit & supervisory board members, and outside officers includes one director and one audit & supervisory board
member (of which one was outside officer) who retired upon the conclusion of the 214th Annual Shareholders’ Meeting.
*2 Equivalent U.S. dollar amounts are included for the convenience of readers outside Japan and are converted at a rate of ¥120 per U.S. dollar, the prevailing exchange rate at the end of March 2015.
These conversions should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any otherrate of exchange.

Tokyo Gas Annual Report 201540

Corporate GovernanceCorporate Governance System
Customers

Local Communities

Shareholders / Investors

General Shareholders’ Meeting
Appointment
Appointment

Advisory Committee*2

Audit, etc.

MonitorCollaboration

ReportApproval

Deliberation andreportCustomer Satisfaction Promotion Committee
Investment Evaluation Committee
Environmental Committee

Report submission

Settlement and monitor

Corporate Communications Promotion Committee
Risk Management Committee

Audit
Add to agenda and report

General Shareholders’ Meeting
Stakeholders
Tokyo Gas Co., Ltd.
Business Operations

Business Departments / Subsidiaries and Affiliates
Decision and monitoring

：
：
：
：

11 directors (3 outside directors and 8 internal directors)
3 representatives from outside directors and outside audit & supervisory board members, Chairman (1), and President (1)5 audit & supervisory board members (3 outside auditors and 2 internal auditors)
President, 2 Executive Vice Presidents, and 10 Senior Executive Officers (3 of the representative directors also serve as President and Executive Vice Presidents)

Overview of Corporate Governance System
As of June 26, 2015

Number of directors
Average age of directors

11
64.4

Number of outside directors

3

Number of independent officers

6

Number of audit & supervisory board members

5

Number of outside audit & supervisory board members

3

Participation of outside directors / outside audit &supervisory board members in determination of remuneration

Yes

Participation of outside directors in determination of
director candidates

Yes

Number of meetings of Board of Directors*

11

Attendance rate of outside directors at meetings ofBoard of Directors*
Term of office of directors

100%
One year

Results-linked remuneration

Yes

Share purchase system to reflect the perspective ofshareholders in management

Yes* Total for the period from April 2014 to March 2015

Tokyo Gas Annual Report 2015

Safety Committee

President (Corporate Executive Committee*4)

Other In-House Committees

Audit

41

Report submission

Management Ethics Committee

Collaboration*1 Board of Directors*2 Advisory Committee*3 Audit & Supervisory Board*4 Corporate Executive Committee

Board of Directors*1
Inquiry

Internal Audit Department

Audit & Supervisory Board*3

Collaboration

Report submission

AnswerReportIndependent Auditors

Appointment

ReportWorking to Promote Transparent Management andCreate a Flexible and Open Corporate Culture
In fiscal 2002, the Company established the Management Ethics
Committee, chaired by the President. We also formed in-housecommittees to address issues that are important from a management
perspective, such as compliance, safety, customer satisfaction, andrisk management. This structure facilitates the sharing of information
within the Group as well as deliberations and adjustments regarding
the Group’s overall direction.

Corporate Governance

Advisory Committee
In February 2005, we established the Advisory Committee to assure
objectiveness and transparency in management. It has been definedthat this committee will have no more than six members consisting of
no more than three representatives from outside of the Company andno more than three internal representatives, and that one of theoutside representatives will serve as the committee’s chairman.
Today, the Advisory Committee has five members—three representa-

tives from the outside directors and outside audit & supervisory board
members as well as the Chairman and the President. In accordancewith inquiries from the Board of Directors, the Advisory Committee
deliberates on officer candidates and officer remuneration in a fair andappropriate manner and makes reports to the Board of Directors. The
committee also deliberates on the independence of outside officer
candidates.

Independent Auditors
The Company has concluded an auditing contract with KPMG AZSA
LLC for auditing services based on the Companies Act and auditing
services based on the Financial Instruments and Exchange Act, as
well as internal control audits based on the Financial Instruments andExchange Act, and the Company is being audited on that basis. The
Company’s audits are handled by three certified public accountants—
Teruhiko Tanaka, Shuichi Ikeya, and Masaru Miura. For each of theseauditors, the number of consecutive years of auditing service is sevenyears or less (as of June 26, 2015).

Compensation for Independent Auditors (Fiscal 2014)
Millions of yen

Thousands of U.S. dollars*Compensation for auditing services¥261$2,175Compensation for non-auditing services

¥ 22

$ 183

Total

¥283

$2,358* Equivalent U.S. dollar amounts are included for the convenience of readers outside Japan, and areconverted at a rate of ¥120 per U.S. dollar, the prevailing exchange rate at the end of March 2015.
These conversions should not be construed as representations that the Japanese yen amounts
have been, could have been, or could in the future be, converted into U.S. dollars at this or any
other rate of exchange.

Internal Control System
To secure management legality soundness and transparency and torealize its management philosophy, the Company has formulated the“Basic Policy on Development of Corporate Structures and Systems
for Ensuring Appropriateness of Operations (Internal Control System)
for the Tokyo Gas Group,” and the Company is applying this policy inan appropriate manner.
Specifically, the Company has established systems to ensure that

directors and their assistants perform their duties in a manner that iscompliant to relevant laws and regulations, the articles of incorporation, and other rules. In addition, crisis management provisions havebeen formulated to limit losses from risks related to investments andnatural disasters. The Company also defines guidelines for ensuring
the independence of audit & supervisory board members andguaranteeing the effectiveness of the Audit & Supervisory Board.

Compliance
The Company has identified the following three points as its basic
policy and is promoting compliance on that basis.
● Fostering of a compliance oriented mentality● Compliance efforts by each workplace based on the fundamental policy● Establishment of the compliance PDCA cycle

Compliance Structure
We have established the Management Ethics Committee, chaired by
the President. This committee discusses at the management levelbasic compliance policies and all aspects of compliance initiatives by
the Company, monitors the implementation of compliance-related
measures, and confirms activity programs from the following year andthereafter. We have also established the Compliance Department tosupport compliance-related activities for each unit. These include
development of compliance promotion systems, encouragementawareness and educational campaigns about the code of conduct,
compliance risk reduction measures, maintenance of advisorysystems, and broad-based distribution of information within andbeyond the Tokyo Gas Group companies. To cultivate an understanding of compliance, we promote a thorough awareness of ongoing

activities related to our code of conduct that was revised in 2004. We
are also moving forward with a compliance casebook designed for
applying the code of conduct to various problems in the workplace,so as to achieve the permeation of compliance.

Compliance Risk Management
Through the effective operation of internal and external advisorysystems, we are endeavoring to ensure that compliance-related
problems are discovered and resolved quickly so that our corporate
self-regulatory processes will continue to function effectively. We
monitor the effectiveness of Group compliance promotion activities byconducting regular compliance awareness surveys of all employees.
The results of these surveys are reflected in initiatives for the following
years. The Compliance Audit Sect. of the Internal Audit Department
conducts audits of the Company, its subsidiaries, and its affiliates
focusing on the probability that risks will materialize and their degreeof importance from the viewpoint of strict compliance with laws,
corporate ethics, and social norms. When concerns are identified, theGroup conducts follow-up audits in the following year to verify
progress in tackling those concerns.

Tokyo Gas Annual Report 201542

Corporate GovernanceRisk Management System
Enterprise Risk Management System
In fiscal 2003, the Company established an enterprise risk
management (ERM) system and drew up risk management
regulations, which include documented rules concerning major risks
faced by the Group.
The Risk Management Committee was established in fiscal 2008
with the aim of tracking progress regarding the establishment and theoperational status of the ERM system as well as improving the level ofERM. The committee periodically undertakes risk assessments andchecks on the status of the ERM system. It also reports to the
Corporate Executive Committee and obtains the necessary

approvals. Moreover, in fiscal 2011, the risk management function
was made the responsibility of the Corporate Planning Department,
and there has been a framework in place for implementing unified
ERM in conjunction with operational management.
Under the framework, around 120 Risk Management Promotion
Officers are deployed in the business departments of Tokyo Gas andits subsidiaries and affiliates in order to promote ERM. Each year, we
assess risks and the implementation and improvement status ofcountermeasures. This system facilitates the steady implementationof the ERM-PDCA (Plan-Do-Check-Act) cycle.

Enterprise Risk Management (ERM) System
Corporate Executive Committee
Confirmation of major Group risks
Reflection of results of risk assessment

Securities Markets and Other Stakeholders
Disclosure of risk information through Securities
Report, Financial results, CSR report

Report / proposal for plan for assessment of major Group risks /other essential matters

Risk Management Committee(Executive Office: Corporate Planning Dept.)
Identifying and confirming Group risk management
Report regarding results of risk assessment, status of implementation ofcountermeasures, status of improvement, etc.

Business Departments / Subsidiaries and Affiliates(1) Identifying and evaluating risks, formulating and implementing
risk countermeasures(2) Improvement of risk assessment, countermeasures

Crisis Management System
Because the Company provides public services that comprise alifeline, for many years it has also had a crisis management systemthat serves as a response system in case an accident or otherrisk-related event actually occurs. Specifically, we have formulated
Emergency Response Organization Regulations. In case of crises,
including major natural disasters, such as earthquakes, or production
or supply disruptions arising from major accidents at pipelines or
terminals, as well as influenza, terrorism, failures in mission-critical IT
systems, and compliance problems, the Emergency Response
Organization responds to the situation immediately in accordancewith the Emergency Response Organization Regulations. Periodic
training is conducted in relation to major risk response measures.
Moreover, the Company has also formulated a business continuity
plan (BCP), outlining its responses in the event of a major earthquakeof the magnitude assumed by Japan’s Cabinet Office, a major
accident disrupting gas supply, a widespread blackout, an outbreakof influenza, etc. This plan is in place to reinforce the Company’s risk
management system.

43

Tokyo Gas Annual Report 2015

Clear statement of risk
management policies

Feedback of evaluation results /improvement proposals
Clear statement of risk
management policies

Emergency Response Organization
Suggestion of establishment of Emergency Response Organization, etc.

President (Organization Leader)
Instructions / orders

ReportBusiness Departments

Executive Office
Collaboration

Corporate Planning Dept.
(Group-wide coordination)* The organizational unit in charge of the executive office is determined in advance inaccordance with the type of the emergency.

Corporate GovernanceEfforts toward Diversity
1. Active Promotion and Development of Women

Ratio of Women in Management

Tokyo Gas recognizes the critical need to promote the success of adiverse pool of human resources and to create a workplaceenvironment that allows each and every employee to maximize his or
her various capabilities and strengths in order for it to secure growth
as a company. Guided by this understanding, we actively recruit andpromote women, while at the same time creating opportunities for
our female employees to excel across a wide range of occupational
fields. This in turn is helping to steadily increase the ratio of women in
management positions. In addition to upgrading and expanding ourchild-rearing and nursing care systems, Tokyo Gas places considerable weight on fostering employee awareness and creating anorganizational culture that is conducive to developing the careers of
the Company’s female employees by promoting a variety of initiatives
including seminars. Looking ahead, we will continue to actively
promote measures that will broaden the fields in which women can
excel.

％

7.0

6.3

5.8

6.0

5.3

5.1

5.0

4.3

4.6

4.0

3.0

2.0
2010.42011.42012.42013.42015.4 （Year/Month）

2014.4

2. Employment of People with Disabilities

our efforts to employ people with disabilities, we are improving ourfacilities in accordance with the type and level of disability, creating awork environment that is safe and comfortable, while also expanding
the locations and scope of work opportunities for people withdisabilities.

At Tokyo Gas, people with disabilities work alongside our other
employees and are performing a variety of duties. In order to further

As of April 2015, 138 people with disabilities were in our employment, which is 2.02% of total employees, achieving the statutory rate.

Promoting Work-Life Balance
1. Creating a workplace environment that allows
for balance between work and child as well as
nursing care
Tokyo Gas makes every effort to create a pleasant workplaceenvironment for both men and women. In order to provide
employees with increased flexibility in choosing their style of workand to better balance work with family concerns, the Company
has created systems for child-rearing and nursing care leave as
well as shorter working hours that exceed the levels mandated bylaw. We also offer systems that allow employees to take a leaveof absence for fertility treatment, to attend the school events of
their children and grandchildren, and to provide nursing care tofamily members. These systems are being widely used by our
employees.

2. Day for Leaving Work on TimeAt Tokyo Gas, one or more days are designated for employees toleave work on time each month. These days provide an
opportunity for employees to take another look at their methodsof working so that they can achieve maximum results within alimited period of time.

3. Encouraging employees to take summer
vacation
Tokyo Gas implements various measures aimed at encouraging
employees to take seven or more days of annual paid leave
between July and September each year. In addition to allowing
employees to refresh their minds and bodies, these efforts are
aimed at promoting variation in work styles.

Major Systems and the Number of Users
Number of Users (Fiscal Year)

SystemDetails

Category

2009

2010

2011

2012

2013

2014

M

F

M

F

M

F

M

F

M

F

M

F

Number of users (persons)

1

118

1

100

0

89

0

79

1

71

0

58

Rate of return to work (%)

100 100 100 97.5

ー 100 100 100ーChild-rearing leave

Until the end of April immediately following the child’s 3rd birthday

Child-rearing work

During pregnancy and until the child completes his/her sixth year of elementary school*; Flex-time system for childcare is available

207

202

235

219

226

221

Nursing care leave

Up to three years for one relative within the second degree of kinship requiring nursing care

4

5

3

1

1

2

Nursing care work

Up to two years for one relative with the second degree of kinship requiring nursing care
; Flex-time system for nursing care is available

4

3

3

2

1

0

Number of users (persons)

ー 100

96

Community service leave

Special leave (paid leave) of a maximum of five days within a year

21

20

149

134

77

42

Refreshment system

Provided to employees who reach the age of 30, 35, 40, and 50; Provided with commemorative gifts and special leave (paid leave)

637

685

657

651

631

668

Leave for spouse’s childbirthSpecial leave (paid leave) totaling five days is provided when a spouse gives birth

Leave system to attend to spouse

When an employee’s spouse is transferred overseas, he/she can receive up to three years of leave with the caveat that the employee live at the overseas location with the spouse (New system: Introduced from April 2014)

Note: Until March 31, 2013, the system was available up to the time when the child completed his/her 3rd year of elementary school.
Data is for Tokyo Gas on a non-consolidated basis.

Tokyo Gas Annual Report 201544

Corporate Governance
Board of Directors and Audit & Supervisory Board Members As of June 26, 2015
Directors

Director, Chairman

Representative Director, President

Tsuyoshi Okamoto

Michiaki Hirose

April
June
June
June
June
April
June
April

1970
1997
1998
1999
2002
2004
2004
2006

April
April
April
April

1974
2004
2006
2007

April

2008

April

2009

April

2007

June

2009

April
April
April

2009
2010
2014

Joined the Company
Deputy Chief Executive of Northern Regional Business Div.
General Manager of Documents Dept.
Assistant to Director in charge of General Administration Dept.
Executive Officer and General Manager of Corporate Planning Dept. of Strategic Planning Div.
Senior Executive Officer and Chief Executive of Strategic Planning Div.
Director, Senior Executive Officer and Chief Executive of Strategic Planning Div.
Director, Senior Executive Officer, Chief Executive of Corporate Communication Div.
and in charge of Compliance Dept. and Internal Audit Dept.
Representative Director, Executive Vice President and in charge of Personnel Dept.,
Secretary Dept., General Administration Dept., Compliance Dept. and Internal Audit Dept.
Representative Director, Executive Vice President and in charge of Personnel Dept.,
Secretary Dept., General Administration Dept. and Compliance Dept.
Representative Director, President
Director and Chairman of the Board

April
April

2012
2013

April

2014

Representative Director

Representative Director

Matsuhiko Hataba

Yutaka Kunigo

April
April
April
April
April
April

April
April
April

1977
2004
2007

April
April
April
June
April

2008
2010
2013
2013
2014

April

2015

1976
2004
2006
2007
2009
2012

June

2012

April

2013

April

2014

Joined the Company
General Manager of Human Resources Planning Dept. of Strategic Planning Div.
Executive Officer and General Manager of Human Resources Dept. of Business Support Div.
Executive Officer and General Manager of Corporate Planning Dept.
Senior Executive Officer and Chief Executive of Living Energy Div.
Senior Executive Officer and in charge of Corporate Planning Dept., TG-Group Reorganization
Project Dept. and Affiliated Companies Dept.
Director, Senior Executive Officer and in charge of Corporate Planning Dept.,
TG-Group Reorganization Project Dept. and Affiliated Companies Dept.
Director, Senior Executive Officer, and in charge of Corporate Planning Dept.
and Affiliated Companies Dept.
Representative Director, Executive Vice President and Chief Executive of Residential Sales andService Div.

Director

Joined the Company
General Manager of Gas Resources Dept. of Energy Resources Business Div.
Executive Officer and General Manager of Gas Resources Dept. of Energy Resources
Business Div.
Executive Officer and General Manager of Industrial Gas Sales Dept. of Energy Solution Div.
Senior Executive Officer and Chief Executive of Energy Resources Business Div.
Senior Executive Officer and Chief Executive of Energy Production Div.
Director, Senior Executive Officer and Chief Executive of Energy Production Div.
Representative Director, Executive Vice President, Chief Executive of Energy Solution Div.
and General Manager of Volume Sales Dept.of Energy Solution Div.
Representative Director, Executive Vice President and in charge of Power Business Planning Dept.,
Business Restructuring Project Dept., Gas Business Deregulation Project Dept.,
and Sales Innovation Planning Dept.

Director

Masahiro Mikami

Hiroaki Kobayashi

April
June
April
April
April
April
April

1975
2003
2004
2005
2007
2008
2011

April

2012

April
1980
April
2005
April
2006
April
2007
October 2007
April
2008
April
2009
April
2010
April
2012
April
2013

April

2013

June

2013

April

45

January 2010

Joined the Company
Executive Officer and Assistant to Chief Executive of Corporate Communication Div.
Executive Officer and General Manager of Corporate Planning Dept. of Strategic Planning Div.
Senior Executive Officer and in charge of Corporate Planning Dept.,Infrastructure Project Dept.,
Finance Dept., Accounting Dept., and Affiliated Companies Dept.
Senior Executive Officer and in charge of Corporate Planning Dept., Investor Relations Dept.,
Finance Dept., Accounting Dept.,
Affiliated Companies Dept. and Gas Industry Privatization Research Project Dept.
Senior Executive Officer and in charge of Corporate Planning Dept.
and Affiliated Companies Dept.
Director, Senior Executive Officer, and in charge of Corporate Planning Dept.,
Corporate Communications Dept., and Affiliated Companies Dept.
Director, Senior Executive Officer and in charge of Corporate Planning Dept., ProjectManagement Dept., Corporate Communications Dept. and Affiliated Companies Dept.
Representative Director, Executive Vice President and Chief Executive of Living Energy Div.
Representative Director,
Executive Vice President and Chief Executive of Residential Sales and Service Div.
Representative Director, President

2015

Joined the Company
General Manager of Saitama Branch of Customer Service Div.
General Manager of Saitama Branch of Corporate Communication Div.
General Manager of Secretary Dept. of Corporate Communication Div.
General Manager of Secretary Dept.
Executive Officer and General Manager of General Administration Dept.
Senior Executive Officer and in charge of Purchasing Dept., Real Estate Management Dept.,
Major Site Development Dept., and General Administration Dept.
Senior Executive Officer and in charge of General Administration Dept.,
Corporate Communications Dept. and Environmental Affairs Dept.
Senior Executive Officer and in charge of Secretary Dept., General Administration Dept.,
Corporate Communications Dept., Environmental Affairs Dept. and Compliance Dept.
Director, Senior Executive Officer and in charge of Secretary Dept.,
General Administration Dept., Corporate Communications Dept., Environmental Affairs Dept.
and Compliance Dept.
Director, Senior Executive Officer and in charge of Secretary Dept., General Administration
Dept., Corporate Communications Dept., Compliance Dept. and Internal Audit Dept.

Tokyo Gas Annual Report 2015

June

2014

April

2015

Joined the Company
General Manager of Technology Development Dept.
General Manager of Product Development Dept.
Assistant to Chief Executive of Living Energy Div.
General Manager of Area Development Planning Dept.
General Manager of Customer Safety Dept.
Executive Officer and General Manager of Customer Safety Dept.
Executive Officer and General Manager of Residential Fuel Cell Business Development Dept.
Senior Executive Officer, and Chief Executive of Technology Development Div.
Senior Executive Officer, Chief Executive of Technology Development Div.
and in charge of Smart Energy Business Development Dept.
Director, Senior Executive Officer, Chief Executive of Technology Development Div.,and in charge of Smart Energy Business Development Dept.
Director, Senior Executive Officer, Chief Executive of Pipeline Network Div.

Corporate GovernanceDirectors

Director

Director

Takashi Uchida

Satoru Yasuoka

April
June
April
April
April

1979
2006
2009
2010
2012

April
April
April
April

1979
2006
2008
2010

April

2011

April
June

2013
2015

April
April

2012
2015

June

2015

Joined the Company
General Manager of Pipeline Planning Dept. of Pipeline Network Div.
General Manager of Corporate Planning Dept.
Executive Officer and General Manager of Corporate Planning Dept.
Senior Executive Officer and in charge of Personnel Dept., Secretary Dept., Compliance Dept.
and Internal Audit Dept.
Senior Executive Officer and Chief Executive of Energy Resources Business Div.
Director, Senior Executive Officer, Chief Executive of Energy Resources Div.

Joined the Company
General Manager of Industrial Gas Sales Dept. of Energy Sales and Service Div.
General Manager of Gas Resources Dept. of Energy Resources Business Div.
Executive Officer and General Manager of Gas Resources Dept.
of Energy Resources Business Div.
Executive Officer and General Manager of Sales Marketing 1 Dept.
of Living Corporate Sales and Services Div.
Senior Executive Officer and Chief Executive of Regional Development Marketing Div.
Senior Executive Officer and Chief Executive of IT Div.
and in charge of Environmental Affairs Dept. and Fundamental Technology Dept.
Director, Senior Executive Officer, Chief Executive of IT Div.
and in charge of Environmental Affairs Dept. and Fundamental Technology Dept.

Outside Directors

Outside Director

Outside Director

Outside Director

Yoshihiko
NakagakiAkihiko
Ide

Yoshinori
Katori

April
June

April

1965

June

1994

June
June
June

1997
2000
2002

June
June
April
June
June

2004
2010
2015
2015
2015

1961
1996

June

1998

June

2000

June

2001

June

2009

June
June

2012
2014

Joined Electric Power Development Co., Ltd. (J-POWER)
Director and Department Director of Corporate Planning
Dept. of Electric Power Development Co., Ltd.
(J-POWER)Managing Director of Electric Power Development Co.,
Ltd. (J-POWER)
Vice President and Representative Director of ElectricPower Development Co., Ltd. (J-POWER)
President and Representative Director of Electric Power
Development Co., Ltd. (J-POWER)
Corporate Advisor of Electric Power Development Co.,
Ltd. (J-POWER)
Outside Director of the Company
Honorary Counselor of Electric Power Development Co.,
Ltd. (J-POWER)(Current position)

Joined Mitsubishi Metal Mining Co., Ltd. (Current
Mitsubishi Materials Corporation)
General Manager of General Administration Dept.
of Mitsubishi Materials Corporation
Director of Mitsubishi Materials Corporation
Managing Director of Mitsubishi Materials Corporation
Executive Vice President of Mitsubishi Materials
Corporation
President of Mitsubishi Materials Corporation
Chairman of Mitsubishi Materials Corporation
Senior Advisor of Mitsubishi Materials Corporation
Corporate Advisor of Mitsubishi Materials Corporation
Outside Director of the Company

April
AugustAugust

1973
2004
2005

August2006

October 2008
April

2010

March

2011

October 2014
June
2015

Joined Japan’s Ministry of Foreign Affairs
Director-General of the Consumer Affairs Bureau
Press Secretary/Director-General for Press and Public
Diplomacy of Minister’s Secretariat
Ambassador Extraordinary and Plenipotentiary to theState of Israel
Ambassador for ASEAN, and Science and Technology
Cooperation, Ministry of Foreign Affairs
Director-General of Foreign Service Training Institute, theMinistry of Foreign Affairs
Ambassador Extraordinary and Plenipotentiary to theState of Indonesia
Retired from the Ministry of Foreign Affairs
Outside Director of the Company

Audit & Supervisory Board Members

Audit & Supervisory Board Member

Audit & Supervisory Board Member

Tsutomu Oya

Hideaki Obana

April
June
Apri

1975
2002
2004

April
June
April

2006
2009
2010

April
July
April
April
April
April
April

1978
2003
2004
2005
2007
2009
2012

April

2013

April
April
June

2012
2013
2013

March
June

2015
2015

Joined the Company
General Manager of the International Affairs Dept. of the Strategic Planning Div.
Executive Officer, General Manager of Urban Energy Business Dept. of Energy Sales andService Div., and Acting General Manager of Volume Sales Dept.of Energy Sales and Service
Div.
Senior Executive Officer and Division Manager of Energy Resources Div.
Director, Senior Executive Officer, and Division Manager of Energy Resources Div.
Director, Senior Executive Officer, and Division Manager of Energy Production Div.
and in charge of the Environmental Affairs Dept.
Director, Senior Executive Officer, and Division Manager of Energy Production Div.
Director
Audit & Supervisory Board Member

Joined the Company
General Manager of Marketing Dept., Living Planning Div.
General Manager of Home Service Planning Dept. , Home Service Div.
General Manager of Kanagawa Branch, Corporate Communication Div.
General Manager of Corporate Communications Dept.
Executive Officer and General Manager of Corporate Communications Dept.
Senior Executive Officer and in charge of Purchasing Dept.,Real Estate Management Dept.,
Major Site Development Dept.
Senior Executive Officer and in charge of Purchasing Dept., Real Estate Management Dept.,
Personnel Dept., Internal Audit Dept.
Retired as Senior Executive Officer
Audit & Supervisory Board Member

Tokyo Gas Annual Report 201546

Corporate GovernanceOutside Audit & Supervisory Board Members

Outside Audit &Supervisory Board
MemberOutside Audit &Supervisory Board
MemberOutside Audit &Supervisory Board
MemberYoshihikoMoritaKojiroOtani

Wako
TojimaApril
October

1969
2004

June

2012

June

2013

Joined Export-Import Bank of Japan
Deputy Governor and Managing Director ofJapan Bank for International Cooperation
President of Japan Institute for Overseas
Investment
Outside Audit & Supervisory Board Member of
the Company
Outside Director of Kawasaki Heavy
Industries, Ltd. (Current position)

March
April

1971
2003

April

2006

July

2008

June

2013

Joined Yokohama City Hall
Director General of General Affairs Bureau of
Yokohama City Hall
Director General of Waterworks Bureau of
Yokohama City Hall
Vice President of Kanagawa Water Supply
Authority
Outside Audit & Supervisory Board
Member of the Company

July

1983

March

1985

April
March

1985
1991

April

2007

June

2014

Participated in Student Exchange Programof Japan’s Ministry of Education at Departmentof Political Science of University of Kansas,
United States
Graduated from College of Comparative
Culture of University of Tsukuba
Joined The Yomiuri Shimbun,
Retired from The Yomiuri Shimbun,
Freelance journalist
Part-time lecturer at School of Social andInternational Studies of University of Tsukuba
Outside Audit & Supervisory Board Memberof the Company

Executive Officers
Michiaki Hirose

Executive
Vice
Presidents

Matsuhiko Hataba

Division Manager of Residential Sales and Service Div

Yutaka Kunigo

In change of Power Business Planning Dept.,
Business Restructuring Project Dept.,
Gas Business Deregulation Project Dept., andSales Innovation Project Dept.

SeniorExecutive
Officers

Masahiro Mikami

In charge of Secretary Dept., General
Administration Dept.,
Corporate Communications Dept.
Compliance Dept., and Internal Audit Dept.

Hiroaki Kobayashi

Division Manager of Pipeline Network Div.

Takashi Uchida

Division Manager of Energy Resources Div.

Satoru Yasuoka

Division Manager of Information Technology Div.,In charge of Environmental Affairs Dept.,and
Fundamental Technology Dept.

Fumio Murazeki

47

Executive
Officers

President

Division Manager of Energy Solution Div.,
General Manager of Volume Sales Dept. of Energy
Solution Div.

Hideaki Arai

Division Manager of Regional Development
Marketing Div.

Shin Yamagami

Division Manager of Energy Production Div.

Masaru Takamatsu

In charge of Corporate Planning Dept.,
Personnel Dept. Chiba-Ibaraki Project Dept.,
Group Management Project Dept., andGroup Personnel System Project Dept.

Isao Nakajima

CFO, in charge of Finance Dept., Accounting Dept. ,Purchasing Dept., and Real Estate Planning Dept.

Kunio Nohata

Tokyo Gas Engineering Solutions Corporation
Representative Director and President

Tokyo Gas Annual Report 2015

Fumihiko Hara

General Manager of Pipeline Planning Dept.,
Pipeline Network Div.

Kiyotada Den

General Manager of Corporate
Communications Dept.

Takahiro Saito

General Manager of Supply Control &Disaster Management Dept., Pipeline Network Div.

Shinichi Takagi

General Manager of Industrial Gas Sales Dept.,
Energy Solution Div.

Toshiyasu Ishi

General Manager of Power Business Planning Dept.

Satoru Sawada

General Manager of Corporate Planning Dept.

Nobuhisa Kobayashi Attached to the Division Manager of Energy Resources Div.,
President, Representative Director of Tokyo Gas Asia
Pte, Ltd.
Tadashi Komiyama

General Manager of Gas Business Deregulation Project Dept.

Koki Hayakawa

General Manager of Group Personnel System Project Dept.

Takashi Anamizu

General Manager of Sales Innovation Project Dept.

Kentaro Kimoto

General Manager of Gas Resources Dept.,
Energy Resources Div.

Executive Yoshiaki Tajima
Specialists

Attached to the Officer in charge of Corporate Planning Dept.
President, Representative Director of Tokyo Gas ChemicalCo., Ltd.

Hiroyuki Yamakawa Attached to the Chief Executive of Regional Development
Marketing Div.
President, Representative Director of Nagano Toshi Gas Co., Ltd.
Masami Takayanagi Senior Executive Officer, Representative Director ofTokyo Gas Engineering Solutions Corporation
President of Energy Solution Company
Minoru Sanari

Chief Manager of Legal Sect., General Administration Dept.

Corporate Governance

From the Perspectives of Outside Officers
Here, we seek the comments from newly appointed outside directors Akihiko Ide and Yoshinori Katori as well as outside audit & supervisory board
member Yoshihiko Morita.
Message from Outside Director
To date, my thoughts toward corporate governance have been influenced by experiences gained through my position at Mitsubishi
Materials Corporation. In taking up the post of outside director at Tokyo Gas, I believe that my role is to monitor the Company’s
management to ensure that the interests of shareholders are protected. In order to fulfill this role, I plan to make what I believe areimportant and necessary comments, and to oversee senior executive in the execution of their duties.
As a manufacturer of non-ferrous metals, Mitsubishi Materials is closely linked to the resource and energy industries. Looking
ahead, I would hope to utilize my many years of experience at Mitsubishi Materials to support the management of Tokyo Gas inefforts to ensure sustainable development and growth.
In the lead-up to a fully deregulated electric power and gas market from 2016, I believe that considerable potential exists for
substantial reorganization within the industry. In this regard, Tokyo Gas can be expected to confront an unprecedented harsh
operating environment. Against this backdrop, the ability of the Company to transform adversity into positive opportunities will holdthe key to continued growth.
Outside Director
It would appear that the government is looking to promote the creation of total energy companies through its pursuit of system
Akihiko Ide
reform in the energy sector. This will inevitably entail considerable reorganization by the Company as well as the industry as a whole.
One strategic initiative would of course be to confront the challenge of gas and electric power market reform head-on. From a personal perspective, I see merit in further
developing business by harnessing the Company’s inherent strengths in such areas as community-based services and urban development. Turning to overseas businessdevelopment activities, Tokyo Gas must also be well aware of the associated risks. In its efforts to pursue growth, the Company must recognize the need at this time formanagement to take the helm with a greater sense of urgency, and to steer Tokyo Gas toward a transformation that can adapt to the new era that lies ahead. Moving
forward, I am committed to supporting management as it strives to overcome a difficult business environment.

Message from Outside Director
Without exception, all countries place considerable importance on the energy industry when setting national policies. On thedomestic front, and with various issues including vigorous debate on whether or not to resume operations at nuclear power stations,Japan’s electric power sector is entering a difficult and challenging period. Against this backdrop, gas, as an environmentally friendly
and economic source of energy, is attracting increased attention. Looking at the global market as a whole, the demand for gas andother energy sources is projected to enjoy a period of prolonged growth particularly in Asia, which is noticeably expanding. Taking
each of these factors into consideration, competition to secure stable supplies of energy can be expected to become increasingly
fierce.
Working at the Ministry of Foreign Affairs, I was engaged in a variety of activities including the adjustment and coordination ofpolicies with foreign countries, and the promotion of cooperation. From this experience, I became acutely aware that Japan is not
only recognized throughout the world as a major consumer of energy, but is also held in high esteem for its developed energy
Outside Director
infrastructure and capabilities in energy conservation and efficient use. Over the years, I have witnessed many countries in Asia
Yoshinori Katori
seeking assistance in learning more about Japan’s energy infrastructure and support in adopting many of Japan’s energy
conservation technologies and techniques.
It is with a deep sense of honor that I take up the position of outside director of Tokyo Gas. First and foremost, I recognize the need to quickly acquire a complete
understanding of the Company, its business activities, and issues faced. Only then can I provide any comments and advice from an independent perspective and fulfill therole that is expected of an outside director. As the electric power and gas industry heralds a fully deregulated era, Tokyo Gas will in turn be required to undergo a drastictransformation. It would please me if my input from an outside perspective including a grasp on international affairs, knowledge of external relations, and broad network
were of some assistance to the Company in its transformation and efforts to secure a stable supply of gas.

Message from Outside Audit & Supervisory Board Member
I have now served as an outside audit & supervisory board member of Tokyo Gas for three years. Over this time, I have gained anacute understanding of the Company’s seven identified strengths, which include a safe and reliable brand that has been nurtured over
130 years, a solid track record focusing on its gas business as well as in the electric power field, outstanding performance in
upstream businesses encompassing the continuous and stable supply of fuels, robust infrastructure and a maintenance platform
centered on the Tokyo metropolitan area, accumulated technologies and the ability to create synergies with other forms of energy, asound pipeline network and direct contact with 11 million customers, and a workforce that is distinguished by its strong sense of
mission and responsibility that effectively serves a public utility role. Each of these strengths is a vital asset in the efforts of Tokyo Gas
to remain a leading player in the industry as a total energy company, and to address the challenges imposed by a fully deregulated
electric power and gas retail market.
Outside Audit &Supervisory Board Member

Yoshihiko Morita

Recently, corporate governance has attracted significant attention from society. For its part, Tokyo Gas was quick to appoint
outside officers and to adopt an advisory committee structure to determine officer remuneration. In addition to fostering a Board of
Directors that engages in vigorous and constructive debate, the Company has initiated various innovative measures to ensure thatimportant agenda items are given careful and comprehensive consideration.

In essence, proper corporate governance ensures that a company’s activities are conducted in a sound and transparent manner, which in turn facilitates continuous
improvement in corporate value. From my perspective, I believe that improvements in the corporate value of Tokyo Gas are best achieved by the Company fulfilling its
obligations both as a public entity that provides a stable supply of energy to society and a corporate entity that secures an appropriate level of profit. In addition to balancing
these dual obligations, it is equally important for Tokyo Gas to pay close attention to risk management against the backdrop of an environment that requires prompt
decision-making and further striking a balance between its domestic and overseas businesses. As I have mentioned, these steps are critical to the Company fully harnessing
its inherent strengths and to taking up the challenge of promoting growth amid a new era. Looking ahead, I would like to play a role in further enhancing corporate value
while offering my opinions from an outside and independent perspective.

Tokyo Gas Annual Report 201548

Consolidated Subsidiaries and Equity-Method Affiliates

As of March 31, 2015

Main Consolidated Subsidiaries

Company

Business

1

Manufacturing and sales of gas appliances,

Gastar Co., Ltd.

sales and maintenance of air-conditioners (gas heat pump)2

Capty Co., Ltd.

Capital(¥ million)

Equity owned
by Tokyo Gas Net sales（%）(¥ million)

Operating
Income(¥ million)

2,450

66.7

35,653

2,577

1,000

100.0

56,889

1,569

3,000

100.0

91,017

1,337

Installation of gas supply lines, water supply and drainage lines,
air conditioning systems, new construction, andconstruction of gas mains and branch lines

3

ENERGY ADVANCE Co., Ltd.

Energy service, district heating and cooling, cogeneration orders,and maintenance businesses

4

Nijio Co., Ltd.

Wholesale of electricity

5

Ohgishima Power Co., Ltd.

Generation, supply and sales of electricity

47

100.0

140,449

10,119

5,350

75.0

8,679

6

Tokyo Gas Yokosuka Power Co., Ltd.

558

Independent Power Producer for TEPCO (IPP businesses)

980

75.0

10,772

7

Chiba Gas Co., Ltd.

608

Supply of city gas to Yachiyo city, Narita city, and surrounding cities

480

100.0

20,8581,137

8Nagano Toshi Gas Co., Ltd.

Supply of city gas in Nagano Pref.

3,800

89.2

14,9461,060

9Tokyo Gas Energy Co., Ltd.

Sales of liquefied petroleum gas (LPG) and coke

1,000

66.6

38,585-1,157

10 TOKYO GAS PLUTO PTY LTD

Participation in Pluto LNG project

11 Tokyo LNG Tanker Co., Ltd.

LNG transportation and chartering carriers

12 Tokyo Gas Chemicals Co., Ltd.

Sales of gas for industry and chemical products, anddevelopment of LNG cryogenic utilization technology

13 Tokyo Gas Engineering Co., Ltd.

Total engineering services with a particular focus on theenergy-related field

14 Tokyo Gas Urban Development Co., Ltd.

Real estate leasing, management, brokerage andnon-life insurance agents, etc.

15 Tokyo Gas Site Development Co., Ltd.

Real estate development and administration management

16 TG Information Network Co., Ltd.

Information processing services, software development, andsales of computer equipment, etc.

Number of consolidated subsidiaries: 69 (As of March 31, 2015)

202

100.0

27,797

11,112

1,200

100.0

22,871

2,627

1,000

100.0

23,874

396

100

100.0

62,5572,629

11,867100.0

24,219

3,996

5,000

100.0

2,184

387

400

100.0

22,335581

Figures are rounded off to the nearest million yen.

Other Subsidiaries
Tosetz Co., Ltd., Tokyo Kiko Co., Ltd., Tokyo Gas Remodeling Co., Ltd., Tokyo Gas Lease Co., Ltd., Tokyo Gas Telemarketing Co., Ltd., Living Design
Center Co., Ltd., Tokyo Gas Living Line Co., Ltd., Tokyo Gas Lifeval Minami-Setagaya Co., Ltd., Tokyo Gas Lifeval Chiba Co., Ltd., Tokyo Gas Lifeval
Kazusa Co., Ltd., Tachikawa Toshi-Center Co., Ltd., Tokyo Gas Baypower Co., Ltd., Tsukuba Gakuen Gas Co., Ltd., Tokyo Gas Yamanashi Co., Ltd.,Showa Unyu Co., Ltd., Washinomiya Gas Co., Ltd., Shoei Gas Co., Ltd., Tochigi Gas Co., Ltd., Miho Gas Co., Ltd., Enelife Carrier Co., Ltd., Tokyo Auto
Gas Co., Ltd., Tokyo Gas LPG Terminal Co., Ltd., Capty Tech Co., Ltd., Kawasaki Gas Pipeline Co., Ltd., Tokyo Gas Pipeline Co., Ltd., Tokyo Gas
International Holdings B.V., Tokyo Gas-Mitsui&Co.Holdings Sdn. Bhd., Tokyo Gas Bajio B.V., Tokyo Gas Shale Investment Ltd., TG Europower B.V.,
TOKYO GAS AUSTRALIA PTY LTD, TOKYO GAS DARWIN LNG PTY LTD, TOKYO GAS GORGON PTY LTD, TOKYO GAS QCLNG PTY LTD, TOKYOGAS ICHTHYS F&E PTY LTD, TOKYO GAS ICHTHYS PTY LTD, Tokyo Gas America Ltd., TGBI 1.LLC, TGBI 2. LLC, TG Barnett Resources LP, Tokyo
Gas Asia Pte. Ltd., TG PLUS Co., Ltd., Tokyo Oxygen and Nitrogen Co., Ltd., Tokyo Carbonic Co., Ltd., Tokyo Rare Gases Co., Ltd., TGE (SHANGHAI)LNG ENGINEERING CO., LTD., Japan Super Freeze Co., Ltd., NICCHO OPERATION CO., LTD., Park Tower Hotel Co., Ltd., Urban Communications,Inc., Tokyo Gas Auto Service Co., Ltd., Tokyo Gas Facility Service Co., Ltd., TGES America Ltd.

Equity-Method Affiliates
TOKYO TIMOR SEA RESOURCES INC.
GAS MALAYSIA BERHAD
East Japan Housing Evaluation Center Co., Ltd.
Bajio Generating VOF
MT Falcon Holdings Company, S.A.P.I. de C.V.
T-Power NV

49

Tokyo Gas Annual Report 2015

Our Potential
The Kanto region, the Company’s service area, is ripe with latent demand for natural gas present in such areas as industrial
zones populated by factories using heavy fuel oil. By extending our pipeline network into these areas, we will be well placed
to capture this latent demand.

Energy demand concentration in the Kanto Region
High-pressure lines (existing)High-pressure lines (construction commenced after “Challenge 2020 Vision” launch)
High-pressure lines (under construction / information in parentheses is the date operations are scheduled to commence)

Hitachi–Onahama Line(provisional name)High-pressure lines (under consideration / route selection in progress)
High-pressure lines (medium-to-long-term concept)

Ibaraki–Tochigi Line

Other companies’ pipelines (existing)Tokyo Gas Group supply area
Industrial zones
Factories（2016.3）

North Kanto
Industrial Zone

Hitachi LNG Terminal(under construction /operations scheduled tocommence in March 2016)

Koga–Moka Line（2018.3）

Ibaraki Line

Kashima
Waterfront
Industrial
Zone

Saito Line
（2015.10）

Kashima Waterfront
Line

Chiba–Kashima Line

Tokyo–Yokohama
Industrial Zone

Tokyo–Chiba
Industrial Zone

Ohgishima LNG
Terminal
Sodegaura LNG
Terminal

100km

Negishi LNG
Terminal

Potential for Industrial and Commercial Demand in the
Kanto Region (200-kilometer radius around Tokyo)■ Residential ■ Commercial ■ Industrial (general use)
■ Industrial (power generation use) ■ Wholesale

100~200-km area

2.0 billion m3

100-km area

7.0 billion m3

Billion m3

25
20

Cogeneration system /Power generation
0.3 billion m3

Fuel conversion
1.7 billion m3“Challenge 2020 Vision” Targets：
Gas Supply Volumes by Application

15

Total
9.0 billion m3

1.5 times 22.0
15.0 billion m

10
5

3.5
3.3

3

3.5
Fuel conversion
5.1 billion m3

billion m3

7.0

2.7
3.4

5.2

3.5
Cogeneration system /Power generation
1.9 billion m3

0

3.0

1.9
2011
Reference value as of the time the
Vision was put in place

2020

FY

Tokyo Gas Annual Report 201550

Financial and Industry Data
(EXCEL Spreadsheet Data Available)

Investors’ Guide

Tokyo Gas Co., Ltd.
東京ガス株式会社

INVESTOR´S GUIDE2015

http://www.tokyo-gas.co.jp/IR/english/library/invguid_e.html

Stock Code9531

IR Contact

E-mail: tgir@tokyo-gas.co.jp
Tel:03-5400-3888
Fax: 03-5472-3849

Quarterly Financial Results
Earnings Announcements
http://www.tokyo-gas.co.jp/IR/english/event/earn_e.html

Consolidated Financial Results Bulletin
http://www.tokyo-gas.co.jp/IR/english/library/earn_e.html

Details of Challenge 2020 Vision
The Tokyo Gas Group’s Vision for Energy and the Future~Challenge 2020 Vision~(Released November 2011)
http://www.tokyo-gas.co.jp/IR/english/manage/vision_e.html

CSR Activities
Tokyo Gas Group CSR Report
http://www.tokyo-gas.co.jp/csr/index_e.html

For inquiries regarding planning and editing of this report:
Investor Relations Sect., Finance Dept.,
Tokyo Gas Co., Ltd.
1-5-20 Kaigan, Minato-ku, Tokyo 105-8527, JapanTel:+81-3-5400-3888
Fax:+81-3-5472-3849
E-mail: tgir@tokyo-gas.co.jp
Published on August, 2015

This annual report is printed on Tokyo Gas Recycled Paper (made from recycled paper from Tokyo Gas offices, trimmings from afforestation activities,
and reused and unused wood materials) using vegetable oil ink that contains low levels of organic solvents.
Printed in Japan