Performance in Fiscal 2011
02 OperatingA Three-Minute Overview

Operating Performance in Fiscal 2011
A Three-Minute Overview
Before Analyzing the Figures[Factors that Affect Our Earnings]
Gross profits in the gas business are determined by the increase in gas sales volume (volume difference) and the gap between the selling andpurchase prices (price difference).

Gas Sales Volume

Gas Rate Adjustment System and Slide Time Lag

The Company’s net sales depend on sales of city gas, which accountTo increase the transparency of gas rates and encourage providers tofor 70% of the Company’s total. Therefore, changes in selling volume

be clear about their efforts to achieve higher business efficiencies, thedirectly impact net sales. Factors that have a major effect on selling

gas rate adjustment system was introduced.Through this system, av-volume are temperature and economic and other fluctuations.

erage gas resource prices over a three-month period according totrade statistics are compared to the gas resource cost that is used as

Temperature

the standard (standard average resource cost), and the gas rates are

Demand in the residential sector stems mainly from demand for hotadjusted using a defined calculation method based on the differences.

water and indoor heating, so selling volume declines when winters are

Under this system, the impact of changes in resource procurement

warm, resulting in lower sales and income. In the commercial sector,

costs on a gas company’s earnings is essentially neutral. However, agas is used mainly for air conditioning, so cool summers and warm

time lag of up to five months (called a slide time lag) exists between thewinters cause gas sales volume to decrease, reducing sales andpayment of resource costs and the reflection of such changes in gas

income.

rates. Consequently, fluctuations in crude oil prices and exchange
rates may result in the under-recovery or over-recovery of gas resource

Economic and Other Trends

costs if this lag cuts across a fiscal year, thereby affecting income.

Economic and other trends affect business in the industrial and commercial sectors. In the industrial sector, plant utilization rates fall when

How the Slide Time Lag in Rates Works

economic conditions are sluggish, reducing sales volumes. In the com-The average gas resource price over the past three months is calculated every month,and then reflected in the gas未回収
rate three months later.
(Example: The average gas resource cost for January through March is reflected in theJune gas rate.)

mercial sector, meanwhile, lackluster economic performance can, forexample, lower hotel utilization ratios, and commercial facilities may

Nationwide average LNG price
Average resource prices reflected in gas rate

shorten hours of operation, lowering sales volume.

Resource Costs

Under-recovery

Over-recovery

Resource costs account for a substantial portion of the Company’s
operating expenses. These costs tend to fluctuate in line with gas sales
volumes and be affected by changes in crude oil prices and exchangerates.

Crude Oil Prices

FY N

FY N+1The price of LNG, which is the source of city gas, is linked to the crude
oil price. Therefore, fluctuations in the crude oil price may affect resource prices. Changes in terms of contracts and negotiations withsuppliers of LNG may also affect resource costs.

Pension Actuarial Differences
Actuarial differences arise from differences between expected andactual investment returns on pension assets, as well as on differences

Exchange Rates

between expected and actual retirement benefits. These costs are

LNG purchase contracts are denominated in U.S. dollars. Accordingly,

written off as a lump sum in the fiscal year following the year in which

yen appreciation against the U.S. dollar causes resource costs to de-they arise and are posted as operating expenses.

cline on a yen basis. Conversely, yen depreciation against the U.S.
dollar pushes raw material costs upward.

Accordingly, major actuarial differences can have a substantial
impact on revenues and expenses in the following fiscal year.

Liquefied natural gas (LNG): LNG is produced by cooling gas (natural gas) composed primarily of methane (CH4) down to around minus 162°C,
thereby liquefying the gas. Liquefaction reduces the volume down to 1/600 that of the gas, allowing large amounts to be transported by tanker.
LNG value chain: This chain refers to the sequence of business activities leveraging the combined strength of the Tokyo Gas Group, spanning the procurement and transportation of LNG, production and supply of city gas and energy solutions, resulting in the provision of high-value-added energy and services.

Operating Performance in Fiscal 2011
A Three-Minute Overview

Summary Analysis of Operating Performance
In fiscal 2011, ended March 31, 2012, gas sales volume increased 445

the slide time lag expanded from ¥29.2 billion in the previous fiscal year

million m , or 3.0%, to 15,190 million m . The residential volume was up 11

to ¥47.3 billion in the year under review. This factor had a ¥18.1 billion

million m3 year on year, due to temperature-based influences, and salesnegative effect on gross profit.

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volume was up 18 million m3 for all residential use. Despite the cold winterIn fiscal 2010, the Company shifted its primary pension invest-weather, the rise was relatively small because early spring and winter tem-ments—which impact the depreciation of pension actuarial differences inperatures in the previous year had also been cold. The commercial volume

retirement benefit accounting —from a concentration on relatively variable

was down 215 million m3, owing to energy-saving efforts in the aftermathshares to bonds, in anticipation of stable investment performance. As aof the Great East Japan Earthquake. The industrial volume, on the otherresult of this move, investment performance in fiscal 2010 was down in

hand, increased 619 million m3 because of such factors as a rise incomparison with fiscal 2009, when higher stock prices resulted in stron-

demand for electric power generation following the earthquake.

ger investment performance. As a result, in fiscal 2011 the expense

Although the yen continued to appreciate, the crude oil price re-burden related to depreciation of pension actuarial differences in retire-

mained high, at US$114.16 per barrel, prompting an increase in unit

ment benefit accounting increased by ¥2.7 billion, whereas this burden

gas selling rates in accordance with the gas rate adjustment system.

decreased by ¥19.9 billion in the previous fiscal year; therefore these dif-

Reflecting the increase in the gas sales volume, gas sales expanded

ferences had a ¥22.7 billion negative impact on operating income.

¥169.2 billion.

In fiscal 2011, net income was down ¥49.4 billion from the previousHowever, gross profit worsened ¥20.1 billion owing to a ¥189.3

fiscal year, to ¥46.0 billion. This change was due in part to lower ex-billion increase in resource costs caused by a higher volume of resourc-

traordinary income, to which the sale of land in Toyosu contributed in

es used and higher unit costs. Of this amount, under-recovery due tofiscal 2010.
For details, please see Management’s Discussionand Analysis (page 40).

Summary of Operating Results

Billions of yen

Gas sales volume (Million m3, 45MJ/m3)
Net sales
Operating expenses
Operating income
Ordinary income
Net income

Fiscal 2011Fiscal 2010

Change%15,1901,754.2
1,677.1
77.0
75.6
46.0

14,745
1,535.2
1,412.7
122.4
121.5
95.4

+445+219.0+264.4
–45.4
–45.9
–49.4

+3.0
+14.3
+18.7
–37.1
–37.8
–51.8

Economic Frame

Fiscal 2011
Fiscal 2010

Pension Investment
JCC($/bbl)Exchange rate(¥/$)

Average temperature(ºC)

114.16
84.15

79.08
85.74

16.4
16.7

Fiscal 2010
Fiscal 2009

Investment yield(costs deducted)

Discount rateYear-end assets(Billions of yen)

2.70%
7.16%

2.0%
2.1%

235.0
222.0

Ordinary Income for Fiscal 2011: Analysis of Factors (Year on Year)
FY2010¥121.5 billion

Note: (+) & (–) refer to contributions to income.

Decrease in gas gross margin (slide time lag effect –¥18.1billion)

Increase in fixed costs
FY2011¥75.6 billion–¥20.8 billion

Net sales:+¥144.9 billion(Gas sales volume & composition +¥17.0 billion , Slide time lag +¥131.4 billion , Others –¥3.5 billion)
Gas resource costs:–¥165.7 billion(Amount & composition –¥15.4 billion, Foreign exchange+¥54.7 billion, JCC–¥161.6 billion, Others –¥43.4 billion)

Tokyo Gas
(Non-consolidated)–¥39.2 billion–¥20.6 billion

General expenses decreased:+¥0.9 billion(Decrease in advertising and other costs to develop demand +¥4.3 billion,Consignment costs –¥2.1 billion ,etc)
Personal expenses increased on pension actuarial difference:–¥22.0 billion(Pension actuarial differences +¥19.9 billion –¥2.7 billion)
Depreciation and amortization:±¥0

Increase in other operation/supplementary income+¥4.0 billion

Appliance sales +¥0.1 billion, Installation work +¥0.3 billion, Electric power +¥3.7 billion and others

Decrease in non-operating income–¥1.7 billion(+) Premature repayment adjustments +¥2.4 billion,
Foreign exchange gain and loss +¥1.6 billion (–¥1.3 billion +¥0.3 billion)(–) Financial balance –¥3.4 billion (+¥4.8 billion + ¥1.3 billion),
Decreased gain on weather derivatives –¥0.9 billion (+¥1.0 billion +¥0.1 billion)

Change–¥45.9 billion

Consolidated subsidiaries–¥8.9 billion
Internal offset, etc.
+¥2.2 billion(–) Australian subsidiaries –¥4.7 billion〔foreign exchange effect –¥2.8 billion (+¥2.2 billion
Tokyo Gas Urban Development –¥1.2 billion〔Profit decline from rent revisions〕
ENERGY ADVANCE –¥0.6 billion (Regional energy services profit decline)
Tokyo LNG Tanker –¥0.6 billion (Profit decline from freight rate revisions)Eliminations of dividends income +¥1.0 billion–¥0.6 billion)〕

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