Challenge 2020 Vision

CHALLE2020VISION
Toward Achieving theChallenge 2020 Vision
In November 2011, we released “The Tokyo Gas Group’s Vision for Energy andthe Future: Challenge 2020 Vision” as a guideline to lead us to what we aim to

be up to 2020. It was based on extensive internal discussions about the role ofan energy company in society that can enable it to realize a prosperous,

fulfilling way of life for people, contribute to the competitiveness of domestic
industries, and be friendly toward the environment.

We will develop and expand our business structure
and base, in order to enhance the value of ourLNG value chain, return profits to customers andshareholders, and contribute to society.

Gist ofChallenge
2020 Vision

Five action plans to advance the LNG value chain

Areaexpansion

123

Reduce LNG purchasecosts and expand
overseas operations

Deliver safe and stablesupply of energy

Provide energy
solutions adapted to avariety of needs

Procurement andtransportation

Production and supply

Energy solution

417

LNG value chain from theGreater Tokyo Area tonationwide

LNG value chain: fromJapan to the world

Pursue technical development
and IT utilization with a focus
on the future

5Realize a leaner andstronger businessstructure

NTOKYO GAS ANNUAL REPORT 2017

ENGE

Toward becoming the “total energy corporate group”
and the “global corporate group”
Tokyo Gas will make further progress in its core city gas business and develop the electric
power, engineering, wide-area gas supply, and other businesses into new sources ofstrength whereby to make being the “total energy corporate group” a reality. At the sametime, we will maintain our business base in the Greater Tokyo Area and develop businessacross Japan and overseas, aiming to become a “global corporate group” with about aquarter of earnings to be generated from overseas businesses in fiscal 2020.
Challenge Performance Indicators ofGas Supply Volumes by Application

22.0 billion mBusiness Structure(Consolidated Net Income Ratio by Business)

3.5

Residential

3.3

Commercial

7.0

Industrial

5.2

Industrial

1.9

3.0

Wholesale2012.32021.315.0 billion m

3

3.5
2.7
3.4

25 %

10 %

Targets forFY2020(general use)

20 %(power generation use)

3.5

Reference values as of the time
the Vision was put in place

Gas business
LNG sales, electric power, and other businesses
Overseas business3

As of the time
the Vision wasadopted

50 %

25 %

Average for
FY2009-2011
70 %MILESTONEThe Challenge 2020 Vision comprises the following
three periods or what we call “stages” with different
themes and initiatives to implement for each stage.

JUMP

stage

Fiscal 2018-2020
Our target

Advanced LNG value chain
Fiscal 2020

STEP

stage

Fiscal 2015-2017

Main initiatives

HOP

stage

Fiscal 2012-2014

Main initiatives•Diversification and expansionof LNG procurement andoverseas business•Safe and stable energy supply•Energy solutions that meetcustomer needs•Evolve into the total energy
business•Accelerate global businessdevelopment•Reconstruct the corporate
group

Consolidated operating
cash flow¥250 billion
D/E ratio

ROE

ROA

8%

4%

Total payout ratio

Approx. 0.8 Approx. 60%(each fiscal year)

Where we are at present

P19

In fiscal 2017, the final year of the “STEP” stage, we will
increase added-value by making total-energy proposals thatcombine services to the city gas, electric power, and liquid gas
businesses, and enhance initiatives to make the Tokyo Gas
Group to be chosen as a supplier of gas, electricity, andservices. Further, we are accelerating expansion of theoverseas business under a new structure, including 11 overseas
bases. We have defined seven business domains each of which
will have a specific growth plan and arrangements to generatesynergies among them.

18Challenge 2020 Vision

STEP stage
Final fiscal year

Fiscal
2017

CH
202

What we will doRegarding the specific business strategies for the seven business domains
we have identified, we will adjust conditions in our corporate groups tofacilitate growth and expansion, and generate synergies. This means wewill seek to deliver more added-value to customers. We will also strive tostrengthen our foundations to support business growth.

Business domains’ specific business strategies
City gas business
Enhancing alliances in
LNG procurement and forterminals; increasing use ofgas and securing its stablesupply under the newly
deregulated conditions

Electric power business

Overseas business

Liquid gas business

Expanding power sources
Stable low-cost supply

LPG sales via enhanced
alliances

One million low-voltage retailcustomers

Business expansion in
North America and Asia,with opening of newbases and increasing
manpower
Enhancing risk
governance

Living service businessEngineering service
business

Urban development
service business

Creating added-value forcustomers

Expansion of business areaand domain
Enhancing engineeringsolutions

Effective use andmanagement of real estate
Growth strategy planning

Accelerating global
business development

Evolving into the total energy business

Strengthening of foundations
Digitalization strategy

Environmental (low-carbon)
strategy

Workflow and workstylereformPromotion of digitalization;enhancing IT infrastructure

Research and development andstrategy planning, assuming progress
toward a low-carbon society

Drastic innovations in work,business structure, and workstyle

Engineering service business

Expanding business area and domain inengineering services that match the needs ofcustomers

19Liquid gas business

LPG business: Raising logistics efficiency andenhancing safety level and customer service via
alliances with various players
Industrial gas business: Enhancing one-stopsolutions, by combining LNG, engineering
services, and other services

City gas business
Aiming at enhancing alliances
in material procurement,
LNG terminals, and power
stations and at achieving both
stable supply of energy andcompetitive resource prices
Securing transparency,
neutrality, and fairness as a
new gas pipeline operator, andstriving for safety, stable supply,and promotion of use

Electric power business

Living service businessRealizing stable low-cost
electric power procurement
and sales expansion throughthe procurement and sales
optimization, in order to beable to service about a million
customers

In addition to the energy
business in the residential
market, expanding newvalues and services that help
make customers’ life more
comfortable

City gas, Electric power, Living service
Group-wide efforts to deliver proposals for a more
comfortable life to residential customers, offering
comprehensive choices in gas, electric power, andservices
Alliances with gas wholesale operators in providing
gas, electric power, and services. Expanding electric
power sales via business alliances in low-voltage
power with gas wholesale operators and others;
establishing arrangements for alliances in gas,electric power, and services

Urban development
service (real estate)business
Contributing to communitybased energy plans anddisaster-resilient urban
planning through effective
use and management of realestate, and cooperating withstrong players in the realestate industry, with an aim ofprofit growthTOKYO GAS ANNUAL REPORT 2017

HALLENGE
020 VISIONCity gas, Electric power, Engineering service

Providing gas, electric power, and services tocommercial and industrial customers. Promoting
energy solution proposals that meet customers’
needs, not limited to the gas supply area of Tokyo
Gas, for raising convenience and amenity ofcustomers’ business operations

Overseas businessParticipating in new projects, mainly in North
America and Southeast Asia, and studying
business expansion in new areas by leveraging
the existing overseas bases and staff and aiming
for higher and more stable profit
Enhancing risk management by using pastexperiences and raising added-value of business,
as risk will be diversified and increased, in linewith acceleration of expansion in area served andlines of businessInitiatives
towardstrengthening
businessfoundations
Digitalization
strategy;
Environmental(low-carbon)
strategy;
Workflow andworkstylereform20