TOKYO GASINTEGRATED REPORT 2019

Tokyo Gas Co., Ltd. INTEGRATED REPORT 2019

TOKYO GAS INTEGRATED REPORT 2019

For the next 50 years
CONTENTS

11 Message
11 CEO’s message
17 CFO’s message

03 For the next 50 years
LNG 50th

03 LNG has changed society
07 Our history
09 LNG value chain

21 Business overview
21 Gas business25 Invisible assets; Safe and stable energy supply infrastructure
27 Electric power business
31 Invisible assets; Relationships of trust with 11 million customers
33 Service businessEngineering solutions
35 Service business Urban development services (Real estate)
37 Overseas business19 Tokyo Gas Group FY2018-2020

Medium-Term Management Plan

GPS2020

On November 4, 1969, Tokyo Gas became Japan’s first company to introduce liquefied natural gas (LNG).
It was a big project that was launched with the strong aspiration to stably supply energy that would support Japan’s
industry and people’s lives for a long time as a clean, eco-friendly energy source.
This year marks the 50th anniversary of the introduction of LNG.
The Tokyo Gas Group has been supplying and will continue to supply reassuring energy to everyone.

41 Corporate governance

59 Deregulation

41 Corporate governance
47 Board of directors
49 Audit & Supervisory Board Members
50 Messages from Outside Directors

51 Invisible assets
52 Relationships of trustwith business partners
53 Digitalization and technology
development capabilities (Inovation)
55 Human resources
57 ESG initiatives(Environmental, Social, Governance)

61 Financial data
61 11-Year Consolidated
Financial Highlights
64 Consolidated Balance Sheet
64 Consolidated Statement of
Income/Consolidated Statement ofComprehensive Income
65 Consolidated Statement of
Cash Flows03

LNG 50th

Tokyo Gas was Japan’s first company todiscover the outstanding value of natural
gas and to overcome the challenges toachieve the introduction of LNG and help
resolve social issues.
Our predecessors’ sophisticatedbusiness judgment and courage motivatedthe next generation. Today, natural gas isa basic source of energy that supports theJapanese society and economy.

Social backgroundbehind LNG introduction

LNG
has changed society

Fifty years ago, natural gas, which was athird alternative in fossil fuels beyond
coal and oil, was introduced to bringabout dramatic changes to Japan’s
energy situation.
There were a number of unknown
challenges behind its introduction.

Actions towards
LNG introduction

Actions with an eye towards thewidespread use of LNG

The ceremony for signing along-term contract with the
Alaska LNG Project

1960s

In the 1960s, Japan experienced a sharp risein energy demand following its population
growth and remarkable postwar
reconstruction. However, urban air and otherpollution had emerged as social issues andJapan faced an urgent need to shift fromconventional coal- and oil-based materials toenvironmentally friendly and reliable energy
sources for the future that would not impair
economic efficiency.
Tokyo Gas found liquefied natural gas(LNG) to be an optimal solution to thosesocial problems, because it was expected toattain both environmental friendliness andeconomic efficiency. The company decided
to introduce it.

1969

1964

Gas pipeline construction
The main loop natural gas pipeline was completed at 220 km in length,
surrounding the entire Kanto region.
A high-pressure pipe with a diameter of 750 mm was introduced. It was the first introductionof this type of pipeline in the Japanese city gas industry.

1971

1966

Terminal construction

Construction of Japan’s first LNG terminal was completed
The construction was so large in scale that it took
three years and involved a cumulative total of 230,000 workers.
Cutting-edge technologies in those days were incorporated to withstandultra-low temperatures.

The Polar Alaska

1969

1972

Procurement
Japan’s first LNG procurement
Joint purchase with Tokyo Electric Power(currently JERA)(A pioneering case of a joint purchase between acity gas company and an electric power company)
Attempt at mass transport by ship(with equipment that withstands -162°C)

Major energy shift:
Attempted 50 years ago

The introduction of LNG required
extensive efforts, including those forsecuring consent from the public andcooperation from customers as well as
actions to meet growing demand.
Tokyo Gas carried out these actions toaccomplish a major energy shift.

04TOKYO GAS INTEGRATED REPORT 2019Social and environmental issues
facing Japan

1

2

Response to soaring
energy demand following
economic development
and population growth

A solution to social andenvironmental issues

3

Combating pollution
problems

Ensuring a stableenergy supply

LNG introduction

Withdraw from dependency on oil
and the Middle East
Ensuring stable supply
in the future

COLUMN

Natural gas(Gas)–162°cTemperature

Characteristics of natural gas led to higher transport efficiency
Natural gas transforms from gas into liquid, namely LNG, when it is chilled to -162°C. In the liquid state,
it is 1/600 of its volume in a gaseous state, which means higher efficiency in terms of transport. LNG is
imported efficiently from different places around the world with special LNG tankers that can withstandultra-low temperatures.

Cooling

1/600
Volume

LNG(Liquid)

1975

1977

Underwater main
pipeline construction
Globally unprecedented
underwater main pipeline crossing
Tokyo Bay was completed
After three years of consideration, themassive construction project took extra
four years.The work was done 24 hours
a day, under a two-shift system.

Chiba main pipeline work

Full completion of the calorific value change in thearea served by the Tokyo Higashi Branch Office

1988

Calorific value change
The change in calorific value for the then 5.5 million consumers in
the Greater Tokyo area took 17 years before it was completed.
Tokyo Gas staff visited customers one by one to change the calorific value of gas appliances. Later, as apioneering firm, Tokyo Gas helped at least 200 operators across the country with calorific value changes.

COLUMN

Calorific value change served social development
The calorific value change refers to an initiative for uniformly supplying natural gas 13A with a high calorificvalue. It was a large project joined by at least 200 operators nationwide to build a foundation for today’s city
gas operations. Tokyo Gas embarked on the change for all of its then 5.5 million customers in the Greater
Tokyo area in 1972. Over 17 years, and involving 7.8 million employees, it was decisive for the future of thecompany. The shift to the universal supply of high-calorie natural gas 13A doubled the supply volume using
the pipeline with the same diameter and length. This led to higher supply efficiency and eventually to social
development.

Appliance adjustment work forcalorific value change at acustomer’s residence

05

LNG 50th

The introduction of LNG and the universal
supply of high-calorie natural gas 13A
improved the city gas supply capacityand facilitated the widespread use ofnatural gas. They also paved the way forthe advanced use of city gas. The
application was expanded fromconventional household consumption tobusiness and industrial use. City gas
acted as a driving force during the periodof rapid economic growth. Today,
Southeast Asian countries, who areexporters of natural gas, are experiencing a soaring energy demand amid
their high-speed economic growth andthe introduction of LNG is spreading.
Tokyo Gas will contribute to social andeconomic development in Southeast
Asia by offering its technologies andexpertise in natural gas, LNG and city gas,
which has nurtured over the past 50 years.

LNG’s social impacts
2000

2010

Natural gas is a basic energy sourcethat supports society and theeconomy. It will play an increasingly
significant role in building a lowcarbon society.

A combination of renewableenergy with natural gas

For the next 50 years
Kashima Offshore Wind Power Generation (conceptual drawing)

COLUMN

Serving as an official partner in the category ofgas and gas utility services for the Tokyo 2020
Olympic and Paralympic GamesTokyo Gas is an official partner in the category of gas and gas utility services for
the Tokyo 2020 Olympic and Paralympic Games. It will work for successful sporting
events by stably supplying energy, taking security and other actions. It will also
take part in model projects for advanced environmental cities in the Harumi district
and elsewhere to move forward with progressive efforts in terms of energy.

Natural gas is defined by the Japanese
government as an effective low-carbon
measure towards 2050 in its fifth Energy Basic
Plan. It is expected to play a key role aroundthe world as well. When renewable energy,
which is susceptible to weather conditions, ispositioned as a core power source, natural gas
power generation will become significant for
two reasons. First, it can be flexibly operated.
Second, it has a limited environmental impact.
Expanded use of renewable energy will help
expand the effective use of natural gas.

06

TOKYO GAS INTEGRATED REPORT 2019

The rest of the
Middle East

13.1

COLUMN

1.9

38.9

Central Asia

Europe
Qatar

LNG’s superiority

The United States

23.8

Iran

3.9

As a result of introducing andspreading the use of LNG, Tokyo Gas
attained both a stable supply ofenergy and contribution to theenvironment.

CanadaThe RussianFederation

31.9

11.9

China

6.1

24.7

Proven recoverable
natural gas reserve

Malaysia

2.4

The United
Arab Emirates
Africa

5.9

4.6

2.8

14.4

196.9

The rest of
Asia-PacificIndonesia

Central andSouth America

8.4

trillion m 3Australia

BP Statistical Review of World
Energy 2019

2.4

Eco-friendlinessStability of supply

Energy security improvement
There are natural gas reserves from which LNG is produced inmany different locations around the world that offer stableproduction and supply regardless of circumstances. In addition,technological progress has paved the way for the development of
shale gas. Today, it is said that natural gas reserves will be
sufficient to meet global energy demand for at least 200 years.

Contribution to the environment
Natural gas is clean and does not contain hazardous substances. Carbon
dioxide emissions from its combustion are lower than those from coal andoil. It is an effective energy source for carbon reduction.

Comparison of emissions
from combustion,in which a value of 100 indicates( emissions
from coal combustion )High transport efficiency
When natural gas is cooled to -162°C to form liquefied natural gas(LNG), its volume is around 1/600 of its usual size, facilitating
efficient mass transport.

Hiroshi Anzai, the thenpresident of Tokyo Gas shakes
hands with the then Governorof Tokyo Ryokichi Minobe
after the announcement of thecooperation on anti-pollution
initiatives of the Tokyo
Metropolitan Government.

Higher supply capacity
High in calorific value, LNG ensures a large supply capacity. It willthus meet future increases in demand and ensure stable supply.

CO 2

100

Coal

NOx

SOx

100

100

(nitrogen oxide) (sulfur oxide)

Oil

80

70

70

Natural gas

60

40

0

2020
Gas cogeneration system (CGS)
Waste heat that is difficult to use
City gas

Gas cogeneration system
A gas cogeneration system is a system underwhich city gas is burned to produce electric
power where it is used, while the heatgenerated from combustion is used for cooling,heating, hot water supply, steam generationand other purposes. It uses energy without
being wasteful to exhibit high total energy
efficiency, achieving energy conservation and
CO 2 reduction. When combined with renewableenergy with unstable output, it helps disperse
energy systems and makes significant
contributions to the construction of a lowcarbon society.

(natural gas)70〜85％

Total energy
efficiency％

CGS Customers

LNG terminal

Primary sourceof energy

15〜30

Electric energy

100％

Exhaust heat that canbe put to effective use

30〜42％
30〜55％

Conventional system
Electricity(oil, coal and natural gas)

40％

Electric energy

40％

Customers

Thermal power plantPrimary sourcesof energy

Total energy efficiency

100％

60％

Unused exhaust heat,
power transmission
loss and others* Calculated under the preconditions determined by Tokyo Gas

Tamachi SEN Park

Smart energy network (SEN)A smart energy network (SEN) is a regionalenergy network centered on a large, highefficiency gas cogeneration system that uses
ICT technology for providing and receiving heatand electric power to and from different
positions in an area according to the supply
and demand. Surplus heat and electricity aresupplied to places where they are needed to
optimize the demand-supply balance in thearea and to achieve energy conservation and
CO 2 reduction. It also ensures the stableprocurement of energy in emergency situations.
Solutions to local environmental, disaster control
and other issues will increase real estate value.
*1 Smart Energy Network Energy Management System*2 Gas cogeneration system

SENEMS*1
Optimal control, central management and information distribution for energy supply
Elementary school(planning)

Hotel
Offices andcommercial facilities

Public facility

Sunlight

Nursery school

Hospital

Wind
power
Fuel cells

Fuel cells

Pedestrian deck
District II
SEN Center
CGS*2

Heat
sourceequipment

District I
SEN Center
Interchangeof heatin an area

CGS*2

Heat
sourceequipment

Supply to District I during a power failure (planned)
Information

Electricity

Heat

Water inundergroundtunnels

07

LNG 50th

Tokyo Gas continues
to grow as “Energy Frontier”
The Tokyo Gas Group has been constantly supplying gas and pursuing exhaustive initiatives for about 130
years to support economic development and customers’ fulfilling lifestyles and to create its corporate value.
We regard this deregulation as an opportunity to propose and supply optimal energy systems as a set,
including both electric power and gas. By continuing to implement our process of non-linear reforms(business changes unprecedented in its boldness and fundamental reform of our organizational structure),
and by advancing our unique “GPS×G” (Gas & Power + Service × Global) management plan for creating newvalue by specifying concrete initiatives with regard to what we can do as a company, we will continue
working to ensure further advancements and breakthroughs for the Tokyo Gas Group into the 2020s.
Gas sales volume (billion m3 )Electric power sales volume (billion kWh)

* The numbers of gas customers and gas sales volumes are non-consolidated-based up to fiscal 2002 and consolidated-based from fiscal 2003.
* The gas sales volume for fiscal 2011 and later includes the volume used in-house under tolling arrangement and the LNG sales volume.

Era of coal and oil

Era of LNG
1973First oil crisis

1973

Negishi LNG
Terminal starts
operation

1941-45
Pacific
War

1979
Second oil crisis

Sodegaura LNG
Terminal starts
operation

1966
1923
Great Kanto
Earthquake

6,053

36,451

Tokyo Gas
established

1885

1950

1885~ Chapter 1
Period of establishment of
the city gas businessBusiness commenced with gas lamps
Spread of city gas for households

1980

1969

1945~ Chapter 2
Period of reconstruction fromwar devastation

Became the first
to introduce
LNG to Japan

Business reconstruction after catastrophic
damage in the Pacific War
Expanded use of city gas for households inline with post-war reconstruction andeconomic growth

1969~ Chapter 1
Period of domestic business growth
Construction of LNG terminals and pipeline networks
contributed to Japan’s rapid economic growth.
Seventeen years of efforts to change the calorific value finishedfor 5.5 million customers in the Greater Tokyo area.

See page 04
1970

1971

1981

Gas
usage

Gas lamp

Gas Kamado
oven

Gas heater

Automatic gas
rice cooker

Kuramae Kokugikan The old Shinjuku District
First natural gas
Heating and CoolingFirst gas heating andcogeneration system
Centercooling system

08TOKYO GAS INTEGRATED REPORT 20192018
Procurementof shale gas
commenced
2011
Great East Japan
Earthquake

2010

2016

Hitachi LNG Terminal
starts operation

Ohgishima Power
Co., Ltd.

For thenext 50
years
Tokyo Gas will find business
opportunities from environmental
changes and make a variety ofattempts to create new value.

(billion m3 )

20

2019

2008

Moka Power
Station scheduled
to start operation

Kawasaki Natural
Gas Power
Generation Co., Ltd.

19.9

2006

(billion kWh)Tokyo Gas Yokosuka
Power Co., Ltd.

15

2003
Tokyo Gas
Bay PowerCo., Ltd.

1998

15.5

Power plant coming
into operation

Ohgishima LNG
Terminal starts
operation

10

1992

11,818

Capitalparticipation in Gas
Malaysia Bhd.

11,946

10,739Number ofcustomers(thousand)

8,872
2.8

64,055

7,373

58,574

Length ofpipeline
network(km)

47,90841,949

1.6

Tokyo Gas’ power
generation capacity(million kW)

5

2.40

1.1

1.77

Number of retailcustomers (million)

1.13
0.67
0.1

1990

0

2000

2010

2018

2000~ Chapter 2
Period of jumping beyond the conventional framework
District heating and cooling andcogeneration systems came into
being. Gas applications expandedfrom households to business andindustrial purposes.

2002

Gas built-in cook
stove

2003

Power plant

Efforts to evolve into a global integrated energy company
Launch of electricity business after market deregulation (and launchof electricity retail business in 2016)
Advance utilization of natural gas with an eye towards a future
low-carbon society
2003

2009

Hydrogen filling
stationResidential fuel cell
“ENE-FARM”

2016

Toyosu Smart Energy
Center2019
Planned

LNG
50th Anniversary

09

LNG 50th

LNG value chain forvalue creation
The Tokyo Gas Group contributes to the sustainable development of society by advancing its LNG Value Chain.

Principal social demand

Transportation

Stable procurement
at a low cost

Prompt transport

Safety, constanthigh-efficiency
and cleanliness

Diversity of procurement sources(long-term contracts)

Fleet owned and managed
by Tokyo Gas

Sales / Energy solutions

Energy conservation, CO2
reductions and cost reductions

Related SDGs

Procurement

Production and supply ofcity gas
Natural gas-fired power
generation

Advantage

6
14

countries

13

Four LNG terminals

Hitachi LNG
Terminal

ships

projects

Ohgishima LNG
Terminal
Sodegaura LNG
Terminal

Diversifying procurement sources P22

million tons

17

Approx. % ofJapan’s total
procurement volume,
namelymillion tons

80

Alliance with LNG players inJapan and overseas

180
outlets

Negishi LNG
Terminal

Procurement volume

13.95

Community-based sales organization
Lifeval, Enesta and Enefit

Energy Liberty featureshigh fuel efficiency anda low environmental
impactPipeline network

over

60,000km
Storage capacity

3.47

14,000employees

million tons

Natural gas
fired power plants

Kansai ElectricPower

Kyushu Electric
Power

Korea Gas
Corporation

CPC Corporation,
TaiwanCentrica, U.K.

RWE, Germany

million kW
associated with Tokyo Gas

Relationships of trust with business partners P52

Including that of the Moka Power
Station, which is scheduled tostart operation in 2019 or 2020

2.8

Relationships of trust with customers P31

Business operation in
the Greater Tokyo area
Tokyo Gas operates its business in the
Greater Tokyo area, which contributes to
40% of Japan’s GDP and foresees acontinued influx in population.

10TOKYO GAS INTEGRATED REPORT 2019

For thenext 50
years
OUTPUTOUTCOME

Customers

Social value
outcomeOne-stop energy solutions suited to customers’ needs

Support for business continuity

1Competitive prices

Energy security
improvement

2

Contribution to fulfillment of SDGs P57

Environmental
contribution
Gas Sales Volume

18.4
billion m3* Including the volume used in-house under tollingarrangements and the LNG sales volume

Reduction in CO 2 Emissions from Customers

4.52

million tons-CO2
Electric Power Sales Volume

15.5
billion kWhEngineering

14

Smart energy network

projects
Participation in the construction of LNG
terminals in Japan and overseas

City Gas

Domestic market share ofsales volume

Approx.

40%3People’s safe and reliable
lives and community
development

9.8 million subscriptions and
11 million supply destinations

Economic
value

Electricity

1.77

FY2020 targets

Electricity retail costomers

Approx.

millionTaking the lead among the new power
suppliers

No.1

Wholesale Customers

19

P20 See “GPS2020”

Operating cash flow

280 billion¥

aroundcompanies

Global Expansion

Tokyo Gas capitalizes on its knowledge
on natural gas infrastructure and theutilization of technologies cultivated inJapan for overseas expansion.

8%

ROE

Total payout ratio

60%

11

CEO’s Message

We will develop into a genuine,
integrated energy company with apioneering spirit that has been passed
on from generation to generation.
Representative Director, President and CEO

Takashi Uchida
Getting the blue sky back in Tokyo
This year marks the 50th anniversary of the Tokyo
Gas Group’s first import of liquefied natural gas

liquefaction technology. In November 1969, wewelcomed the first ship from Alaska, Polar Alaska, to
our Negishi LNG terminal, ushering in the era of LNG.
The introduction of LNG followed a change in(LNG), when we became the first Japanese company

calorific value, which took 17 years. We replaced theto import LNG. When deciding to implement a largegas supplied with one that had a higher calorificproject that could shape the future of the company,

value. This low-profile effort of visiting individual

the management team at that time devised thecustomers one by one to adjust their gas appliancesslogan: Getting the blue sky back in Tokyo. As it

involved 7.8 million employees. As a result, today

suggested, the introduction of LNG eliminated sulfur

natural gas is widely used and it supports Japan’soxide (SOx) emissions, reduced nitrogen oxide (NOx)development as a major energy source. This process

emissions from the levels of conventional coal- andhelped to build close relationships of trust withoil-based fuel, and curbed photochemical smog, acustomers. Now they are another invisible asset thatsocial issue. It also cut carbon dioxide (CO 2 ) emissions.

provides an advantage over our competitors in today’s

The spirit of carving out new energy frontiers with
innovation is an intangible asset of Tokyo Gas thatderegulated energy market.
The shift to LNG coincided with our management

should be passed on to the next generation. During

stance of contributing to society through our core

the period of rapid economic growth in the Showabusiness. The change in calorific value was helpful inera, natural gas gained attention as a source of clean

our subsequent growth. It is largely unknown thatenergy with high calorific value to replace oil-based

natural gas is so high in calorific value and supply

energy sources amid mounting energy demand andefficiency that our Group’s investment in pipeline

environmental deterioration. Our Group subsequently

construction was minimized. Before the change, theattempted to liquefy overseas natural gas and import

calorific value of the gas varied from region to region

it by ship. At that time, natural gas rarely used on aand from operator to operator. At least 10 different

practical level and this attempt was consideredkinds of gas were supplied. Since the change, a single

technically challenging. We cleared a number of difficulttype of gas is supplied, which is beneficial for both

hurdles, one after another, including refrigerated

customers and gas appliance manufacturers.

12TOKYO GAS INTEGRATED REPORT 2019

13

CEO’s Message

The spirit of carving out energy frontiers with
innovation is an invisible asset of Tokyo Gas
that should be passed on to the next generation.
We will continue to supply energy in a safeand reassuring manner to enhance
consumer confidence.

action between Japanese and European businesses.
This also applies to our expansion of LNG importsources to Canada, Mexico and other countries aswell as the joint introduction with Shell Eastern

Almost a year has passed since I became

Trading Pte Ltd of a revolutionary pricing system

Representative Director and President in April 2018.

based on coal prices to ensure the long-term, stable

Looking back on the past 12 months, I feel that the

procurement of more competitive LNG. We arecircumstances surrounding the energy industry

delighted that our Group’s sincere actions for LNG,

became increasingly tougher.

which have continued since we started importing it in

Especially following the deregulation of theelectricity and gas utility markets, competition among

1969, are recognized globally.

expected switch to other operators while gaining

We will carve out new market as energy
frontiers with our continued long-term
mindset.

electricity customers at a higher than expected pace.

The general public may think that the city gas industry

Overall, we have managed to benefit fromis protected by regulation. However, it is often exposed

deregulation. Some of our gas customers who had

to fierce competition, for example, when gas lamps

switched to other suppliers are slowly returning.

and rice cookers were replaced with electric versions.

energy companies has intensified. The Tokyo Gas
Group saw more of its city gas customers thanPricing is not the only factor that draws consumers

Our Group started to hold cooking classes more than

to a particular energy company. It is important to build

100 years ago to help participants use gas with ease

trust by constantly supplying energy in a safe andof mind and learn how to make full use of gas

reassuring manner. In 2018, Japan experienced aappliances along with cooking techniques. To survive

series of natural disasters in different locations,that tough competition, our Group has created newincluding earthquakes to the north of Osaka and in

markets by addressing people’s lifestyles and fulfilling

eastern Hokkaido as well as typhoons and heavy rain

its social responsibility to attain continued growth.

in Western Japan. These incidents renewed our

ENE-FARM consists of residential fuel cells and isawareness of our responsibility toward the stable

the result of our low-profile research and development

supply of energy and disaster control, compelling usefforts over more than 20 years. Despite the common

to reconfirm that we would work on them as highbelief that the commercialization of ENE-FARM waspriority matters.

difficult, our Group managed to release it in 2009,

In addition, the call for carbon reduction iswith 110,000 units sold by last year. While LNG

growing in Japan and around the world. Last year, I

transport traditionally depended on trading

realized this through direct experience. Our Group

companies, as an energy firm, we acquired LNG

considered building a coal-fired power plant intankers to acquire more freedom in transactions. Our

Sodegaura, Chiba Prefecture, with Idemitsu Kosan

Group started to supply energy at low prices before

Co., Ltd. and Kyushu Electric Power Co., Inc.;

our competitors. We are also proud that our Group

however, we decided to withdraw from the joint

made floor heating common as we see it today.

development, because it was not feasible from theperspective of additional environmental measures.
Local communities and investors in Japan and abroadpraised us for that decision from an ESG perspective.
We were also greatly admired for our leadership in

In the second year of the Jump stage inGPS2020, we will continue to achieve
steady development.
In November 2011, the Tokyo Gas Group announced

the joint procurement of LNG from Mozambique with

its long-term management vision ending in fiscal

UK-based Centrica plc in the world’s first innovative

2020, The Tokyo Gas Group’s Vision for Energy and14TOKYO GAS INTEGRATED REPORT 2019

the Future: Challenge 2020 Vision. It was aimed atother companies expanded their service areas andachieving continued growth of the Group.

now serve the entire country, from Hokkaido to

In the Hop stage (fiscal 2012-2014) and the Step

Okinawa. They engage in the construction andstage (fiscal 2015-2017), we worked to significantly

operation of LNG terminals, energy supply, fuel shifts,

expand our business domains and areas, establish

energy-saving services and offer wide-ranging value.

seven business domains and construct a new group

In addition, they are expanding operations toformation, with the aim of becoming a global,

Thailand, Bangladesh, the US and other countries.
In the real estate segment, we also made good

integrated energy corporate group.
Taking over the managerial leadership, it is myprogress, including redevelopment of the land that weduty to steadily implement the GPS2020 medium-term

own, which is directly linked to the east gate of JR

management plan for fiscal 2018-2020, which

Tamachi Station, acquisition of a new property incoincides with the final Jump stage of the vision,

Toranomon in Minato-ku, and leasing operations atachieving targets ahead of schedule if possible, andmedium- and small-sized land lots. In addition, we

pushing ahead with considerations for the next long-integrated our three related subsidiaries into one toterm management vision.

create a structure for more active operations.

For fiscal 2018, which was the first year in the

power segment. We worked towards the goal of

We will overcome harsh businesscircumstances by taking a long-term
perspective.

supplying the Tokyo Gas Group’s electricity to 2.2

Meanwhile, our overseas expansion is lagging.

million customers by the end of fiscal 2020, andRegrettably, no massive growth in energy supply

consequently attained a steady hike in electricity

volume is likely in Japan, because of the aging andcustomers in the first fiscal year. We therefore revised

shrinking population with the decline in the birth rate,

the target upwards from 2.2 million to 2.4 million, andthe decrease in households and improvement in heat

revised the target date to the end of fiscal 2019, one

insulation and draft-free characteristics of buildings.

year ahead of the initial schedule, which has boosted

However, it is possible to expand business mainly tothe confidence of our employees.

countries in Southeast Asia, where natural gas is

Jump stage, we successfully increased both net sales
and profit and saw remarkable results in the electric

We also made healthy progress in the energy-

becoming widely used. While striving to obtain arelated segment. Tokyo Gas Engineering Solutions

larger market share in the mature domestic market,

Corporation (TGES), a subsidiary of Tokyo Gas, andwe will focus on the expansion of overseas business.

Gas Sales Volume (based on the Vision)

Electric Power Sales Volume(billion m )(billion kWh)

25

30.0

3

Increase
2.3
billion m3

20

Increase
15.5
billion kWh

20.7*
22.5

18.4

15

31.0

15.0
15.5

15.0
10

7.5

8.3

5

0

0
2012.3
Launch of the Vision 20202019.32021.3* Gas handling volume
according to GPS2020

2012.3
Launch of the Vision 20202019.32021.3

15

CEO’s Message

The next long-term management
vision will target 2030.
Towards a target of achieving an environmentally-

It has already been implemented in projects infriendly energy supply, mainly for natural gas, in

Tamachi and Nihombashi Muromachi. Using clean city

overseas markets, we will enter new markets andgas as fuel, its cogeneration system produces

contribute to the enhancement of customers’

electricity, and at the same time the heat generated islifestyles and industrial development.

supplied for cooling, heating, hot water supply andOur most important target is to stop the decreasesteam supply. The network also features ICT-basedin gas retail customers from surpassing the preset

energy management. It is not only helpful for energy

limit. New market entrants include not only TEPCO

conservation and environmental preservation, but

Energy Partner, Inc., but also CD Energy Direct Co.,

also delivers reassurance in the sense that electricity

Ltd., in which CHUBU Electric Power Co., Inc. andis available even in the event of a disaster.

Osaka Gas Co., Ltd. are stakeholders, in addition to
distributor in Japan. Today, we are competing with at

We will take steady steps towards evolving
into a genuine, integrated energy company.

least 20 companies, making it difficult to maintain our

We are increasingly asked by investors about ourmarket share in the gas retail market. We think weactions towards complete freedom from carbon,

need a long-term perspective with an eye toward thetranscending low-carbon society. I do not think that a

future of energy to restore the business.

society only built on unstable renewable energy

JXTG Nippon Oil & Energy Corporation, the largest oil

We will address EaaS with a focus on thefour Ds.

sources, such as photovoltaic and wind power, can bebuilt in a day, because a low-carbon society has yet tobe achieved. The fastest path to building a low-carbon

In our next long-term management vision that willsociety will be to make effective and intensive use ofserve as the guidelines for our actions, we will define

natural gas, which will also pave the way for meeting

2030 as a target and emphasize how the businessthe target set by the government for cutting

structure may change in the future, paying attention togreenhouse gas emissions by 26% (from the fiscal

the four Ds for gaining insights into changes in the2013 level) by fiscal 2030. This explains why we are

surrounding business circumstances.

focusing on natural gas and constructing a system for

The first D stands for deregulation. We will study
how to respond and establish unbeatable operations.

supplying it in combination with renewable energy.
Subsequently, we may see a carbon-free society

The second D refers to decarbonization. We must

created with the use of hydrogen or other means.

consider how to respond to the demand and prepare.

Meanwhile, we will carry on with our research and

The third D pertains to the decentralization of energy.

development efforts.

This trend is already gathering momentum in society.

Our Group has an entrepreneurial spirit, and more

We will explore how to combine gas cogeneration

importantly, we are supported by more than 11 million

systems, storage batteries, photovoltaic and windcustomers. We will overcome the challenges that arise

power generation and suchlike in addition to thefrom deregulation and liberalization and steadily taketraditional one-way energy transmission from large

steps toward evolving into a genuine, integrated

power plants. The fourth and final D means

energy company. We will thus work to constructdigitalization. It offers a perspective on what businessfoundations for supplying energy to the world.

should be created by using the latest digital

We define the period until 2020 as an investment

technologies and how conventional business andstage. However, we will firmly boost profit in a bid towork can change through digitalization.

maintain a total payout ratio of 60%. For the fiscal

We are planning to consider the balance of energy

year ended March 31, 2019, we increased dividends

supplied in view of the four Ds and to create andper share by 5 yen to 60 yen. I hope that ourdevelop Energy as a Service (EaaS) for the domestic

stakeholders will look forward to the Tokyo Gas

market, where demand growth will be limited.

Group’s future developments and continue to support

The smart energy network is an example of EaaS.

it for years to come.

16

TOKYO GAS INTEGRATED REPORT 2019

What I want to tell you
We will aim to achieve the goalsof our GPS2020 medium-term
management plan as far ahead ofschedule as possible.

We will evolve from a gas
company serving the greater
Tokyo area into a global,
integrated energy company.

We will formulate the next
long-term management vision
towards 2030.

Our strength lies in our invisible
assets, such as the trust of ourcustomers and business
partners, and the humanresources and technologies that
support it.

Use of renewable energy and
LNG is the best path towards thecreation of a low-carbon society.
We will contribute to society
through our core business.

While making growthinvestments, we increased
dividends per share by 5 yen.

17

CFO’s message

Tokyo Gas iscommitted to following
its basic financial policy
and maintaining
continuous growth.
Senior Managing Executive Officer, CFO

Koki Hayakawa

Capitalizing on experience tosupport continuous growth from afinancial perspective
My name is Koki Hayakawa. I was just appointed chief
financial officer (CFO). I have worked in energy
production, sales planning, personnel affairs and othersections before acting as a manager on the frontline ofobtaining gas and electricity customers over the past
three years since the full deregulation of the electricity
and gas retail markets. Under harsh competitive
circumstances, I always considered how to boost ourcompetitiveness and sow the seeds for future growthby investing in promising areas while streamlining
operations and cutting costs.

Basic Financial Strategy Policy

1
2
3Continue to maintain competitive shareholder
returns (total payout ratio of 60%)
Steadily implement growth investments, withconsideration given to investment efficiency andawareness of achieving an 8% ROE
Maintain sound financial base, as a basis forstable management and securing the trust andconfidence of stakeholders

Tokyo Gas’s basic policy for its financial strategy is toachieve a balanced distribution of operating cash flow
between full and stable shareholder payouts, growthinvestments, and maintaining sound financial base.
This will continue when I am CFO. I believe that my duty
is to steadily carry out the three tasks mentioned above.
Because energy markets are increasingly
deregulated, competition will become fiercer and theindustrial structure will face substantial changes. I
therefore believe that it is important to return profits to18

TOKYO GAS INTEGRATED REPORT 2019

shareholders while maintaining an appropriate financial

depending on the temporary injection of money. Whilebalance to beat the competition and make steadyalways paying attention to this target, we will work hardinvestments in supplying energy safely and securely toto develop a predisposition for seeking an approximate

achieve continued growth.

ROE level of 8% in the long run.

Actively investing overseas and in Japan
while retaining stable financial foundations

announced that we will maintain a total payout ratio of

We plan to make investments, including capitalcommitment by properly combining dividends and theinvestment and financing, worth around 1 trillion yen

acquisition of treasury shares. Three years have passed

during the three-year period from fiscal 2018 to fiscal

since the last dividend increase. While steadily carrying

2020 under the GPS2020 medium-term managementout the GSP2020, our management team is becoming

plan. This is about 1.5 times the amount under theconfident in the future. We have constructed a financial

previous medium-term plan. To meet the soaring

base that is resilient to an increase in dividends. We

demand for natural gas, we are constructing LNG tankrecently decided to raise dividends from 55 yen per shareNo. 2 in the Hitachi LNG Terminal. Meanwhile,

to 60 yen per share. In parallel with steady investments

construction of a high-pressure gas pipeline called thein promising areas, we will mildly increase dividends toIbaraki Line is in progress towards its inauguration in

return profits to shareholders. The company and I, asfiscal 2020. It will connect two existing lines, theCFO, will continue to listen to shareholders andKashima Waterfront Line and the Ibaraki-Tochigi Line,

investors and strive for greater corporate value throughto advance construction of a loop of high-pressure gas

constructive communication. We respectfully ask forpipelines. This will ultimately strengthen the supply

your continued support and understanding.

With respect to returns to shareholders, we have
60% until fiscal 2020. We have firmly fulfilled our

stability in the Greater Tokyo area and boost thetransport capacity of the entire supply network.
In addition, we will invest in mission-criticalsystems that link with customers. We will study thefeasibility of constructing new, independent power

Capital Expenditures and Gas Sales Volume(¥ billion)

Capital expenditures (LH)300

Gas sales volume (RH)

(billion m3 )20

plants and examine our overseas investments andfinancing for further growth in terms of the significance,

225

15

150

10

75

5

economic efficiency and risks before implementation.
This investment is expected to bring about atemporary rise in the D/E ratio, to 0.9 in fiscal 2020,and I think it is within the allowable limit. With aremarkably low interest rate, corporate bonds may be
issued under favorable conditions. We are promptly

0

Improvement in profitability is the most significant
issue from the financial perspective. Currently, Kobelco
Power Moka Inc. is constructing a cutting-edge natural
gas thermal power plant in Moka City, Tochigi
Prefecture. After its completion, we will have morecompetitive procurement of power sources. Three2005.32010.3*1 Non-consolidated basis up to fiscal 1998; consolidated-basis from fiscal 1999
*2 Gas sales volumes from fiscal 2011 are on a 2020 Vision basis. (Including the gas volume
used in-house under tolling arrangement and the LNG sales volume.)

Shareholder Returns(¥ billion)

Share repurchases

80

60

60.1% 60.9% 61.4% 60.7% 60.0% 60.8% 60.1% 60.7% 60.2% 60.3%
67.3
65.1
61.7
58.2
58.1
50.9

40
32.2

remains solid. I hope that the electricity business will
drive our profit growth.

20

The GPS2020 medium-term management plan sets
the ROE target at around 8%, while the actual ROE
figure was 7.4% for the last fiscal year. ROE fluctuates

Total payout ratio

Shareholder returns

years since the full deregulation of the electricity retailmarket, our pace of gaining electricity customers

2019.3Chiba-Kashima Line, Hitachi LNG
Terminal, Ibaraki-Tochigi Line, etc.

Ohgishima LNG Terminal,
Keihin Line, etc.

conditions (10-40 years).

Bolstering profit rate to maintain stable
returns for shareholders01997.3 2000.3

procuring funds at low interest rates under long-term

40.0
33.8

32.3

28.3

7.9

24.3

36.0

34.0

23.3

24.0
20.0

7.0

5.0

24.1

45.1

41.0

25.7

25.1

24.4

26.3

25.3

25.1

26.9

0
2010.3 2011.3 2012.3 2013.3 2014.3 2015.3 2016.3 2017.3 2018.3 2019.3

19Tokyo Gas Group FY2018-2020
Medium-Term Management Plan

GPS2020

Tokyo Gas Group FY2018-2020
Medium-Term Management Plan

GPS2020

In November 2011, the Tokyo Gas Group released its Group Management Vision: “Challenge 2020 Vision - Initiatives
by the Tokyo Gas Group for Energy and for the Future” .
In our previous management plans, “Hop” (FY2012-2014) and “Step” (FY2015-2017), our goals were to realize a
integrated energy and global corporate group. In addition to widely expanding our business domains and areas,
and forming seven business domains, we also built a new group formation.
During the “Jump” period (FY2018-2020), we will deploy the Tokyo Gas Group’s “GPSxG” system to generate real newvalue in “the things we can do” while pressing forward with the integrated vision of non-continuous reform (business
transformation unprecedented in its boldness and fundamental reform of our organizational structure).
The 2020s will be a period of solid growth and forward movement.

Tokyo Gas’s
Concept of theComing Era

1

2

3

The Era of Natural Gas

The Era of Single-Source
Providers of Electricity and Gas

The Era of Next-Dimensional
Innovation Fueled by
the Rapid Digital Evolution

With its excellent stability, economics, andenvironmentally friendly characteristics,
natural gas is becoming an increasingly
important energy source, both in Japan andaround the world.
Going forward, natural gas is expected to
become more widely used, in a greater rangeof fields and areas, as it expands dynamicallyon a global scale.

Transition from
“Goals” to“Capabilities”

Until now, customers in Japan were only able
to buy electricity from electric powercompanies, and gas from gas companies. But
now, with the full deregulation of the electric
power and gas retail markets, consumers inJapan can now purchase both electricity andgas from a single supplier.
Moving forward, it will now be possible for us topropose and introduce optimal energy systems
combining both gas and electric power.

We will pay close attention to such changes
as we move forward.

During the “Jump” period, we will deploy the Tokyo Gas Group’s “GPSxG” system to generate real new value in“the things we can do” while pressing forward with the comprehensive vision of non-continuous reform(business transformation unprecedented in its boldness and fundamental reform of our organizational structure).
The 2020s will be a period of solid growth and forward movement.

Integrated energy
Provide optimal energy, featuring gas and electricity
as a packaged service.

Provide a one-stop offer for a full range of services
designed to meet life stages andneeds of residential customers.

We will provide energy services andengineering for our commercial and industrial customers
to reduce their energy usage and costs.

VisionThe rapid evolution of digital technologies suchas IoT and AI is having an enormous impact
on daily life and industry. These technologies
are expected to spur new kinds of innovationthat differ from anything seen before.

GlobalEstablish offices in strategic areas and concentrate
management resources to engage in proposal planning.
Contribute to building energy infrastructure incoordination with the governments and enterprises in the
fast-growing countries of Southeast Asia and other regions as
the energy supply and demand structure of these regions
continues to evolve.
Build a firm foundation for profitability in North America andother regions where deregulation and market trading of energy
is advancing, while acquiring and using
the know-how that will contribute to our other businesses
in Japan and overseas.

In fiscal 2019, we will formulate a future long-term management vision for the Tokyo Gas Group.
To shape the next fifty years, we will see the changes in the surrounding business circumstance as an opportunityand strive to create new value by pursuing innovation.

20

TOKYO GAS INTEGRATED REPORT 2019

Gas

Electric PowerGas handling volume
Number of customers (with city gas meters)

11.90
millionAiming toachieve
2.4 million
by the endof FY2019

Electric power sales volume
Number of customers(electric power contracts)

2.20 million
1.00
million11.50
million31 billion kWh

Service
In addition to gas and electric power as a
package, we will propose and deliver optimal
service combinations to match customers’
lifestyle and business needs.
Lifestyle services including gas devices
and equipment

end of( at theFY2020 )Target set
in 2017
15 billion kWh

10.85
millionEngineering services
Regional development services (Real estate)

8.27 billion kWh

FY2011FY2017

FY2020Tokyo Gas power sources (existing)Tokyo Gas power sources (replaced or new)Alliances or market procurement
Aim to reachapproximately 5.0 million kW

15.0

19.1

20.7

billionm3

billionm3

billionm3

GlobalUtilizing our experience in the LNG value chain
management, we will deepen and expand ourbusiness operations according to the regional
characteristics of each area.
We will participate in upstream,
midstream and downstream business
operations to acquire know-how andenhance our revenue base.

North
America
3.0 million kW

This area is expected to see further

Southeast growth. We will continue to drive
initiatives in midstream and downstream
Asia
business operations.

1.6 million kW

Australia
FY2011FY2017

FY2020FY2017

FY2020We will seek to maximize the value ofexisting upstream projects.

2020s

Cash flow distribution method for FY2018-2020
Cash provided
by cash flows

Cash out

1,180 billion yen

1,180 billion yen(3-year total)

Consolidated
operatingExternal loans,
cash flowetc.

810
billion yen (69%)

370
billion yen (31%)(3-year total)

Capitalinvestment

Investment andfinancing

730

290

billion yen (62%)

billion yen (25%)

Profit breakdown
Operating profit + equity income

130

107

Overseasbillion yen

billion yen

20%

Shareholder
returns (dividends,

Services/ Other

20%
10%treasury stock)

Electric
Power

160

50%
50%

billion yen (13%)*
FY2017

Electric
power
Gas

FY2020Future*Equivalent to 60% of consolidated net profit in
FY2018 to FY2020

Investments for infrastructure development,
future advancements, and breakthroughs
Total investment in individual segments
over three years (¥ billion)

FY2018-2020

1,020 billion yen(Avg. 340 billion yen / year)

500 (49%)
30 (3%)
230 (23%)
Real estate investment amount100
included in the above
Overseas260 (25%)
Gas
Electric power
Services / Other

Consolidated operating
cash flow

Profitability (ROE)

Shareholder returns(Total payout ratio)

Stability(Debt-to-equity ratio)

FY2017244 billion yen

5.5%

60 %

0.71

FY2020280 billion yen

Approx. 8 %60 %Approx. 0.9*Figures for FY2017 andthe gas handling volume
figure for FY2011 arevalues estimated at thetime of plan formulation.

21

Business overview

Gas business

GAS BUSINESS
OutlineApplications of gas from the Tokyo Gas Group span a wide range,from household use such as cooking, heating and hot watersupplies, to commercial use including air conditioning, industrialuse, power generation, and other uses.The Tokyo Gas Group has
also extended its coverage from the Kanto region encompassing
Tokyo and its adjacent three prefectures (Kanagawa, Chiba, andSaitama) to North Kanto (Ibaraki and Tochigi), by lengthening its
pipeline network to serve more customers and cater to more demand.

Number ofcustomers(with city gas meters)

City gas sales
volumeSegment profits

Customer base of over 11 million customers and a relationship oftrust with customers through close ties with local communities
Established history of providing a safe and reliable supply of gas
amongst our customers
The Kanto region centered around Tokyo, with its highconcentration of production and consumption, as our primary sales
area (the Kanto region accounts for around 40% of Japan’s total GDP)

City Gas and LNG sales

11.818 million

FY2018FY2018Equivalent to approximatelyof total nationwide gas
15.19 billion m 40%
sales volume in Japan3¥92.2 billion

FY2018Difficulties in LNG procurement due to the impact of geopoliticalrisks, etc., regarding imports
Strengths

Potential supply issues due to damage to production and supply
facilities caused by a large-scale disaster

Risks

Intensified competition driven by market deregulation; decline indemand caused by changing lifestyle

Safety-related know-how and energy solution capabilities

Net sales and Segment Profit

City gas sales volume and Number of customers(with city gas meters)(¥ billion)

Net sales (LH)(¥ billion)

Segment Profit (RH)

(billion m3 )Sales volume (LH)

Number of customers (RH)

(million)

200

20

1,500

150

15

15

1,000

100

10

10

500

50

5

5

0

0

2,000

0
2014.32015.3 2016.3

2017.32018.3 2019.3 2020.3(Planned)02014.32015.3 2016.3

2017.32018.3 2019.3 2020.3(Planned)

Factors affecting revenues and expenses

New Procurement

20

P65

Mozambique LNG Project
In February 2019, Tokyo Gas and Centrica LNG Company Limited in the UK concluded a saleand purchase agreement with Mozambique LNG1 Company Pte. Ltd. for the offtake of liquefied
natural gas (LNG) from the Mozambique LNG Project. This agreement paves the way for the
revolutionary and innovative joint procurement of LNG between Japanese and European
companies. Tokyo Gas and Centrica will, as foundation buyers, continue to support to the earlylaunch of the project with abundant reserves, and proactively manage demand fluctuations
across regions in Japan and Europe by taking advantage of different market circumstances.
Project Benefits

1

Diversify resource suppliersTokyo Gas’ first procurement from Africa basedon a long-term contract

2

Diversify contract terms
and conditions

Introducing multiple price indices anddestination free clauses

3

Diversify our LNG network

Constructing an LNG network that links between
Asia and Europe, aiming to proactively manage
demand fluctuations based on different market
circumstances and to improve the liquidity in the
LNG market

22TOKYO GAS INTEGRATED REPORT 2019Japan relies heavily on LNG imports for procuring natural gas, and LNG import prices are generally determined by a mechanism linked tocrude oil prices. With the aim of achieving stable and affordable LNG procurement under these conditions, the Tokyo Gas Group strives toachieve three types of diversification: diversification of supply sources, contact terms and conditions, and its LNG network.
Diversification 1

Supply sourcesTokyo Gas’ long-term contracts

In 2018, we started to procure LNG from the US, while continuing
to acquire supplies from existing sources, including Southeast
Asia, Australia and Sakhalin (Russia). Now we have long-term
offtake contracts with 14 projects in 6 countries, including the
Ichthys Project in Australia, which we began receiving LNG
shipments from in 2018. In addition to the sale and purchaseagreement with the Mozambique LNG Project, we signed heads ofagreements with the LNG Canada Project and the Energia Costa
Azul LNG Project in Mexico in continuous pursuit of diversificationof procurement supply sources. Through efforts such as these,
we are working to enhance the stability of our LNG supply.
Numberof LNG
procurement
projects

2002

2017

2019

7

12

14

projects

projects

projects

Existing LNG Project
New LNG Project (Sales and purchase agreement signed)
New LNG Project (Heads of agreement signed)
LNG Canada

Sakhalin

Cove PointTokyo

Energia Costa Azul LNG
Cameron

Qatar

BruneiMalaysia
Mozambique

Pluto
GorgonDarwinNWS

QC

Ichthys

Diversification 2

Contract terms and conditions
In addition to conventional crude oil price-linked contracts, we willconclude contracts under which the prices are based on natural gas
prices in the US and coal prices in a bid to increase price stability. We
also plan to increase the number of contracts with no restrictions onshipping destinations and other matters, and increase our ratio ofshort-term “spot” procurements, in order to enhance our flexibility.

Past

Linked to crude oil prices, long-term contract
periods, restrictions on shipping destinations

FutureDiversification of price indices and contract
periods, destination free clauses

Stable prices

Diversification 3

LNG Network

Past

FutureMainly trade between Japan andits export-market countries

Network connecting Asian, North
American and European markets

By establishing an LNG network that connects the markets in Asia,
North America and Europe, we aim to improve LNG transportation
efficiency and reduce regional price differonces, which will increase
our flexibility to proactively manage demand fluctuations.

For innovative LNG procurement
We have had continued success procuring a stable supply of LNG over the past half century, however,following full deregulation of the electricity and gas markets, it is also necessary to take flexible action
in response to the fluctuation and uncertainty of demand and for more competitive LNG procurement.
To address these issues, it is vital to capitalize on our experience, past achievements and alliances wehave formed with Japanese and non-Japanese companies to take the lead in changing this LNG industry
without being constrained by past norms.
One specific example comes from our revolutionary joint procurement between a Japanese andEuropean company from the Mozambique LNG Project. The joint procurement came about from our longterm collaboration and a strong relationship with Centrica. This procurement is intended to secure highcompetitiveness and an ability to respond to demand fluctuations through flexible LNG transactions thatcombine two different markets in Asia and Europe.
Subsequently, we have continued talks for procurement from Canada and Mexico. We will continue
to exhibit our strengths in LNG procurement including transport and trading globally, and will continue tofurther implement innovative procurement aiming to increase our competitiveness and flexibility. With ourefforts we will contribute to the further development of the LNG industry.

Message
Etsuko Okuno
Procurement Sect. II
Gas Resources Dept.

Initiatives Towards Achieving the Sustainable Development Goals (SDGs)

Diversification of supply sources leading to the expansion of the LNG network
In May 2018, Tokyo Gas began receiving shipments of LNG produced at Cove Point, Maryland, United States.
During FY 2018, Tokyo Gas began receiving LNG shipments from the Ichthys Project in Australia, and jointly
signed a sale and purchase agreement regarding the Mozambique LNG Project with Centrica. With the additionof these and various other projects, Tokyo Gas Is advancing the diversification of its supply sources.
In addition, by driving three types of diversification in procurement, such as in its initiative to exchange LNG in
cargo-unit volumes based on the memorandum of understanding on a strategic alliance signed with Centrica,
Tokyo Gas is accelerating the construction of an LNG network connecting Japan to the rest of the world.

23

Business overview

Gas business

Promotion and Expansion of Natural Gas
Usage through Infrastructure Development

2.0 billion m

Potential toincrease

Kanto 100 km radius

9.0 billion m

Kanto 100-200 km radius
3

Total

7.0 billion m3

Kiyohara Industrial Park

Plans to invest ¥500 billion in gas business overa three-year period (FY2018-2020)3

Moka Power Station(Scheduled for 2019 onwards)

Hitachi LNG
Terminal
Ibaraki–Tochigi Line
Ibaraki Line

Koga-Moka Line

(Scheduled for FY2020)

Saito Line

Significant potential demand in the Northern
Kanto area

Kashima
Waterfront
Industrial Zone

Kashima
Waterfront
Line

Kawasaki Natural Gas Power
Generation Co., Ltd.
Ohgishima Power Co., Ltd.
Ohgishima LNG Terminal

ChibaKashima
Line

Negishi LNG Terminal
Tokyo Gas Yokosuka
Power Co., Ltd.

Under the GPS2020 management plan, Over a period of three
years (FY2018-2020), Tokyo Gas plans to invest ¥500 billion,
equivalent to approximately half of the total amount ofinvestments for the overall plan, to enable the safe and stabledelivery of city gas to customers. In addition to investments forsecurity, stable supply, and promotion and expansion of city
gas usage (maintenance and improvement of pipeline facilities,etc.), we will also carry out large-scale improvements toequipment and facilities, including the completion of the Ibaraki
Line, expansion of the Hitachi LNG Terminal, and theconstruction of a customer information management system.

Tokyo Gas Baypower Co., Ltd.

Tokyo Gas puts particular strategic emphasis on the Northern
Kanto area, which has strong potential demand for natural gas
owing to its numerous large-scale industrial districts. We aim to
expand gas sales volume from 19.1 billion m3 in fiscal 2017
(forecast at the time of formulation of GPS2020) to 20.7 billion
m 3 by promoting and expanding the widespread use of natural
gas by extending the length of our pipeline network and lorry
supply; and providing energy solutions including energy
conservation, CO 2 reductions and cost reductions via the use ofnatural gas and gas appliances.

Sodegaura LNG Terminal

Promoting the widespread use and expansion of distributed energy systems
Cogeneration systems supply electricity and heat by using city gas asfuel. In addition to the installation of facilities at the point of demand,cogeneration systems help enhance energy efficiency, reduce theamount of CO 2 emissions, and improve economic efficiency through theconservation of energy by effectively utilizing both electricity andwaste heat.
Having identified cogeneration system as a strategic product, Tokyo
Gas is promoting adoption of the residential fuel cell system ENEFARM and, for commercial and industrial customers, optimalcogeneration systems matching their demand.

Installation Results (March 2019)
ENE-FARM

Cogeneration System

Reached 110,000 units incumulative sales of ENE-FARM
in December 2018(equivalent to the capacity of about 2
nuclear power stations)2.29 million kW

Cogeneration System (Commercial, Industrial)Gas
LNG terminal

Pipeline

Cogeneration
Electricalenergy30-42%Heat energy
30-55%

Waste heatthat is difficult
to use15-30%
Total energy
efficiency

70-85%** Energy efficiency stated above is calculated based on certain assumptions made by Tokyo Gas.

Wider Energy Supply Business
Area-wide Energy supply to Kiyohara Industrial ParkAn energy center mainly consisting of a 30 MW-class cogeneration
system will come into operation in fiscal 2019 to supply electricity andheat to facilities (three companies and seven facilities) in the Kiyohara
Industrial Park in Utsunomiya City, Tochigi Prefecture.
The Tokyo Gas Group, to achieve maximum efficiency in serving
these customers, will monitor the fluctuating load of each facility
and engage in optimally balanced operation to supply energy. This
will be one of the largest area-wide energy supply undertakings in
an inland industrial park in Japan. We are promoting widespread
use and expansion of distributed energy systems and tapping
industrial demand.

24

TOKYO GAS INTEGRATED REPORT 2019

Promoting and expanding the widespreaduse of gas in the Northern Kanto area
Achievements of the Chiba-Kashima Line
The Chiba-Kashima Line commenced operation in March 2012, andhas succeeded in dramatically increasing our gas sales volume in
Kashima waterfront industrial zone. As a result, our gas sales volume
in that area has grown to such an extent that it now accounts forapproximately 10% of our total consolidated gas sales volume.

Securing Potential Demand in the Kanto Area
In October 2015, Tokyo Gas commenced operation of its Saito Line(connecting Soka, Saitama and Koga, Ibaraki). This was followed by
the opening of our Hitachi LNG Terminal and the Ibaraki-Tochigi Line(between Hitachi, Ibaraki and Moka, Tochigi) in March 2016; and the
Koga-Moka Line (between Koga, Ibaraki and Moka, Tochigi
Prefecture) in October 2017. By linking our three LNG terminals inTokyo Bay and our existing trunk line network, we have completed aloop of high-pressure pipelines in our primary supply area, andimproved the stability of our supply infrastructure. Capitalizing on
our infrastructure development efforts, Kobelco Power Moka Inc. isconstructing a natural gas-fueled thermal power plant in Moka City,
Tochigi Prefecture. In addition to an expected increase in gas sales
volume by supplying gas to this power plant, we are also working tofurther develop potential demand. Additionally, we are constructing
a new Ibaraki Line that will connect the cities of Hitachi and Kamisu
in Ibaraki Prefecture, aiming to commence operation in fiscal 2020.
The completion of this line will enable even greater widespreadpromotion and expansion of natural gas usage in the Kanto region.

Lorry-based LNG sales
Even in regions where gas pipelines have not been laid, Tokyo
Gas is enabling the use of natural gas by transporting LNG using
lorries. We have a track record of 50 years transporting LNG in
this way since 1969, and have the largest scale lorry-based supply
business in Japan, with over 190 vehicles.

Lorry supply
area map

200km

150km

100km

50km

Expanding business operations
through alliances with other LPG business
operators, etc.
In July 2018, we set up Gas Crew Co., Ltd. It operates LPG fillingand distribution services in the Kanto region. In collaboration withvarious LPG industry players, we will work to enhance efficientdelivery and improve safety and customer services. We will thus aim
to deliver LPG to one million customers by fiscal 2020.

Utilizing LNG cold energy to manufacture andsupply industrial gases
We make effective use of LNG cold energy, to manufacture andsupply affordable high-grade industrial gas. We are also seeking toenhance our sales capabilities by offering one-stop solutions tolarge-account customers by combining LNG, engineering, and otherTokyo Gas services.
Tokyo Gas Liquid Holdings

Structure ofTokyo Gas
Liquid Holdings

Tokyo Gas Energy

Tokyo Gas Chemical

Sales of LPG

Manufacturing and salesof industrial gas, utilizing
LNG cold energy

Examples of alliances with LPG business operators
Established Gas Crew Co., Ltd.
logistics management company (July 2018)
Astomos Energy Corporation, ENEOS GLOBE Corporation
Comprehensive alliances
Astomos Energy Corporation (October 2016)
Saisan Co., Ltd. (February 2017)
Test project to validate IoT-based remote meter-reading/telemetry (June 2017)
Azbil Corporation, Azbil Kimmon Co., Ltd.
Release of an LPG container delivery plan
optimization system using AI (April 2019)
Azbil Kimmon Co., Ltd., Lyna Logics, Inc.

Liquid gas business

OutlineTokyo Gas operates a liquid gas business, in which it sells LPG
to customers in locations outside its city gas supply area and/or those who otherwise do not use Tokyo Gas gas, and utilizes
LNG cold energy to manufacture and sell industrial gases.

Number of customers (LPG)

60 thousand FY2018
Distributors 230 thousand FY2018

Direct sales

Segment profits¥0.3 billion

FY2018

25

Business overview

Gas business

INVISIBLE ASSETS
P51

Safe and stable energy
supply infrastructure
Contributing to the achievement of Sustainable Development Goals (SDGs)

We are working to secure diversity in our LNG procurement and stable transport, serving as the safe and stable energy supply
infrastructure for more than 11 million customers in the greater Tokyo area. We boast city gas production and supply facilities
with sufficient quake resistance to withstand tremors comparable with those in the 2011 Great East Japan Earthquake. We
also engage in a wide variety of actions that include segmentation of the pipeline network for minimizing the impact of supply
stoppages in the event of disasters, monitoring at normal times for ensuring safety in gas utilization, and the establishment ofa system for staff deployment in case of an emergency.

Diversifying LNG procurement and achieving efficient andstable transportation of LNG
Diversifying procurement sources
We procure LNG from 14 projects in 6
countries, including the United States aswell as Southeast Asia and Australia
Ensuring stable transportation of LNG
We utilize our own fleet of 13 ships, owned
and managed by Tokyo Gas

Natural gas reserves are abundant in various parts of the world. The Tokyo Gas
Group was among the first to notice the potential of natural gas, and in 1969
we became the first in Japan to import LNG from Alaska.
To achieve stable procurement of LNG, by seeking to diversify our
procurement sources (resource suppliers), we are working to ensure thatinterferences to LNG procurement do not arise, even in cases where there are
evident geopolitical risks such as disasters or human conflicts. We also
operate stable transportation of LNG through the efficient deployment of ships(including ships owned and managed by Tokyo Gas).

Safe and secure production and supply facilities
Four LNG terminals(Three in Tokyo Bay, one in Northern Kanto)
Pipeline network with total length of over
60,000 km
High level of resistance to seismic
activity, even in the case of major
earthquakes such as the Great
Hanshin-Awaji (Kobe) Earthquake, or
the Great East Japan Earthquake(High- and medium-pressure gas pipelines)

We import LNG by tankers and store it in tanks at LNG terminals. It is thenreconverted into gas and adjusted in calorific value to produce city gas, andsupplied to 11 million customers via our pipeline network. Based on almost 50
years of experience and knowledge since our introduction of LNG to Japan in
1969, we adopted structural designs with superior anti-seismic properties for
LNG terminals, and introduced materials that are resilient to ground deformation
to our pipeline network. This ensures a high level of quake resistance for the
infrastructure. Since city gas is made by conversion from LNG to natural gas at
an LNG terminal and then distributed via pipeline, there is no energy conversion
loss or transport loss to the point of consumption.

26

TOKYO GAS INTEGRATED REPORT 2019

Division of the low-pressure
pipeline network

Safety know-how and measures
to prevent earthquake disasters

Approximately 300 lowpressure blocks

Division of the mediumpressure pipeline network

130 years of accumulated safety know-how

Over 25 mediumpressure blocks

Monitoring using around 4,000 seismometers(Si sensors) in supply area
Subdivision of units for supply stoppage inthe event of an earthquake or other disasters(Over 25 large blocks, further subdivided into
approx. 300 smaller blocks)

In order to constantly deliver natural gas safely and steadily to over 11 million customers, we are continually developing humanresources involved in safety. It is indispensable to have human resources that are equipped with advanced specialized skills in
facility design, construction, and maintenance, as well as decision-making capabilities that enable the reliable execution of gas
supply and safety responsibilities even in times of emergency. The trust of customers that has been earned as a result of safetyrelated expertise developed over the course of our long history, and its continuation, is one of our greatest strengths.
We have also developed a disaster-readiness system, which protects entire local areas by automatically cutting off the supplyof gas when it detects an earthquake that poses the possibility of affecting our pipeline network and/or other structures. In orderto minimize the impact of supply stoppages, we subdivide our supply areas, enabling us to stop the supply of gas remotely, inblock units, depending on the extent of the damage.

Facilitating safe use of gas
Safety inspections of gas facilities
Monitoring and control of the status of operationof city gas production and supply facilities
Readiness for swift emergency dispatch inresponse to gas leak reports

Periodic Safety inspections
We conduct periodic safety inspectionsof gas-related equipment and facilities
for all customers, as frequently as
required by law. We visit customers to
conduct inspections for gas leaks oncustomer premises (as a general gas
pipeline operator), and to examine gas
appliances and supply and exhaustequipment (as a gas retailer).

Supply Command Center

Gaslight 24(Monitoring and control at normal times)(Emergency response actions)

The Supply Command Center performs
24/7 monitoring and control on thestatus of operation of city gas
production and supply facilities. It
facilitates the analysis of damage,remote operation to stop gas supply andother initial actions for preventing
secondary damage following anearthquake. It conducts around 100
initial action drills per year.

The Safety Command Center receivesgas leak reports from customers. It
receives information about theirsituations without omission to give
safety advice and to ask Gaslight 24 tosend personnel. Gaslight 24 operates
emergency dispatch bases forprevention of accidents such as arisingfrom gas leaks. Upon receipt of a report,
its personnel will immediately visit thereporting customer to take swift action
even on holidays or at night.

27

Business overview

Electric power business

ELECTRIC POWER
BUSINESS
OutlineSince 2000, when the Tokyo Gas Group began to generate andsupply electricity, it has engaged in a comprehensive range ofbusiness activities that extend from fuel procurement to power
generation and sales. Among the new entrants to the sector
following the start of deregulation, we own one of the largest power
stations in the Greater Tokyo region, and sell generated power towholesale and large-lot customers. With the full deregulation of theelectric power retail sector in April 2016, we also began sellingelectricity to residential and commercial customers.

Some of the largest-scale, most highly-efficient power sourcesamong the new power suppliers in the Greater Tokyo region
Community-based sales network (operated by Tokyo Gas Lifeval,
Enesta, etc.) and over 11 million customers as a baseStrengths

Decline in price competitiveness of natural gas thermal
power generation, associated with changes in prices of raw
materials and fuels

Risks

Potential damage to power generation facilities and supply
issues of raw materials and fuels, stemming from a largescale disaster

Power source infrastructure, operational know-how and systems
aligned with both wholesale and retail sales

Net sales and Segment Profit(¥ billion)

400

Net sales (LH)

As of the end

1.774 million of March 2019
Electricity Sales
15.48 billion kWh FY2018
VolumeFY2018Segment Profits ¥10.1 billion

Number of RetailCustomers

Electricity Sales Volume and Number of Retail Customers(¥ billion)

Segment profit (RH)

30.0(billion kWh)

20

Electricity sales volume (LH)

Number of retail customers (RH)

(million)

3.00

300

22.5

15

2.25

200

15.0

10

1.50

100

7.5

5

0.75

0

0

0

0

2014.3 2015.3 2016.3 2017.3 2018.3 2019.3 2020.3

2014.3 2015.3 2016.3 2017.3 2018.3 2019.3 2020.3(Planned)(Planned)

The era of single-source providers of electricity and gas
For many years, customers in Japan were only able to buy electricity
from electric power companies, and gas from gas companies. With
the full deregulation of the electric power and gas retail markets,
consumers in Japan can now purchase both electricity and gas
from a single supplier, just as in the EU and the US.
Based on this, the Tokyo Gas Group will aim to expand its
energy business through the proposal and deployment of optimalenergy systems.

Full Deregulated Market of the Electricity and Gas
Number ofcompanies*

Approximate potential Approximate market
customers (million)
size (¥ trillion)

10

85

8.0

Within TEPCO’s
domain

29

2.8

203

26

2.4

Electricity

City gas* Former general electric power operators and former general city gas operators* From materials officially announced by the Ministry of Economy, Trade and Industry

28

TOKYO GAS INTEGRATED REPORT 2019

Kiyohara
Industrial Park

Hitachi LNG
Terminal

The Tokyo Gas Group launched its electric power business in the year
2000. Seizing the opportunity of the full deregulation of the electric
power retail market in 2016, the Group expanded its sales toresidential and commercial customers, in addition to the existing
wholesale segment, selling an electricity volume of around 15.5 billion
kWh in fiscal 2018. This volume is equivalent to around 5% of total
demand in the Greater Tokyo Area. By 2020 we plan to expand thisvolume to 31.0 billion kWh, equivalent to around 10% of total demandin the Greater Tokyo Area.

Moka Power Station(Kobelco Power Moka)(Scheduled for 2019)

Ibaraki Line

(Scheduled for FY2020)

Kashima
Waterfront Line
Kawasaki Natural
Gas Power
Generation Co., Ltd.

Ohgishima LNG
Terminal/Ohgishima
Power Co., Ltd.

Chiba-Kashima
Line

Negishi LNG
Terminal

Sodegaura LNG Terminal

Tokyo Gas Baypower Co., Ltd.

Tokyo Gas Yokosuka
Power Co., Ltd.

(billion kWh)

Selling approximately 5% of electricity
demand in the Greater Tokyo Area

Electricity Sales Volume

Achievements over the past three years
since the full deregulation of the electric
power retail market
We have marketed and provided the “Always Plan,” a one-stop
package that delivers gas, electricity, and various other services, tosupport our expansion into the electricity retail market. As of March
31, 2019, we are now supplying electricity to 1.77 million customers.
For fiscal 2018, we held the largest market share in low-voltage
services among new electric power market entrants for the third
consecutive fiscal year. Announced in October 2017, our management
plan for fiscal 2018-2020, GPS2020, envisioned that the Tokyo Gas
Group would deliver its electricity to 2.2 million customers by the endof fiscal 2020. However, in April 2019 we announced that we would
increase the number of our electricity customers to 2.4 million by theend of fiscal 2019. We are working to attain the target one year earlier.
We will continue to develop service options that many people willfind beneficial in an effort to gain more customers for our one-stop
service of supplying gas, electricity and other services.

Number of Retail Customers(million)40

3
2.4 million
Wholesale

30

Retail

31.0kWh

1.774 million
21011.0kWh11

12.0kWh
2.3
10.4

14.7kWh15.5kWh

4.6

6.6

10.1

8.9

2.20 million

1.13 million

19.9kWh20(2021.3)

Target at the time offormulation in 2017

0.667 million

1

0
0

0

FY2015FY2016FY2017FY2018FY2019FY2020(Planned) (Planned)

2016.32017.32018.32019.3

Initiatives Towards Achieving the Sustainable Development Goals (SDGs)

Sustainable Development Goals
Helping to prevent global warming through power generation
With its high-efficiency gas-fired thermal power stations, adopting the latest cutting-edge gas turbine combined cycle
technology, and wind power generation facilities, Tokyo Gas is contributing to the prevention of global warming.
We have also decided to accept supply of electric power from Moka Power Station, which is currently under construction
by Kobelco Power Moka Inc., and are driving the development of renewable energy power sources such as photovoltaic
and wind power generation, such as through the signing of a capital partnership agreement with Shizen Energy Inc.

2020.3(Planned)

29

Business overview

Electric power business

Expand power sources
Prompted by the full deregulation of the electric power retail market
in 2016, Tokyo Gas began delivering electricity to low-voltage
residential and commercial customers, in addition to serving thewholesale market.
To accomplish this and match the growth of our sales stock with theaim of delivering electric power to 2.4 million retail customers by theend of fiscal 2019, we will continue to increase and expand our
network of Tokyo Gas-owned power sources. To meet our targets ofachieving an approximate total power output of 3.0 million kW byfiscal 2020 and 5.0 million kW in the next decade, we are developing
our own power sources while purchasing electricity from othercompanies through direct negotiations and from Japan ElectricPower Exchange.
It has already been determined that we will receive power from theMoka Power Station constructed by Kobelco Power Moka Inc. as well
as from the Tokyo Gas Group’s power stations.
In addition to our competitive natural gas-fired thermal powersources and base load supply sources, we will also promote
initiatives aimed at expanding renewable power sources, in order toaddress the issue of preventing climate change.

Expansion of Tokyo Gas-owned power sources
Construction of the Moka Power Station (gas-fired power
generation, approximately 1.2 million kW, all to be purchased by the
Tokyo Gas Group) is progressing smoothly towards starting
operations in fiscal 2019. For the further expansion of powersources, we are considering the construction of natural gas thermal
power plants in Sodegaura City and in Ibaraki Prefecture.

Electric Power Expansion Plan
Own power sources (existing)
Own power sources (replacements, new)Alliance, market procurement

Moka Power Station’s
start-up of operations(1.2 million kW)

Approx. 3 million kW
1.6 million kW

FY2017

Own powersourcesTokyo Gas Baypower Co., Ltd.
Generation capacity

0.10 million kW
0.1 million×1 unit

Aiming for the scopeof 5 million kW

Owned power

0.10 million kW

Start of operations 2003
Tokyo Gas interest 100%

FY20202020s

Tokyo Gas Yokosuka Power Co., Ltd.
Generation capacity

0.24 million kW
0.24 million×1 unit

Owned power

0.18 million kW

Start of operations 2006
Tokyo Gas interest 75%

Expand electricity sales to low-voltage customers
The Tokyo Gas Group has constructed a network with 11 million
customers through its city gas business. We will offer the mostsuitable energy for the actual use of customers and combine
lifestyle-related services to improve value for economy, peace ofmind, simplicity and convenience.

Community-based sales network
The Tokyo Gas Group has established a community-based sales
network with around 180 outlets in the Kanto region (including
Tokyo Gas Lifeval, Enesta and Enefit), enabling us to tailor ourservices to fit the needs of individual customers. Through its 14,000
employees, Lifeval has built strong relationships of trust withcustomers. As the “face” of Tokyo Gas Group, Lifeval employeesinteract directly with customers and engage in a wide array ofservices ranging from the sale and maintenance of gas appliancesand opening/closing of gas fixtures when customers move house, togas appliance safety checks and gas meter reading.
In retail sales of electricity, too, through push-type marketingmaking effective use of such opportunities for direct contact withcustomers, we will continue to steadily accumulate more contracts
to enhance our customer base.
P31

Alliances with various industry partners
Tokyo Gas has formed business partnerships with a total of 48
companies (including wholesale customers such as gas business
operators and LPG vendors) regarding the sale of low-voltage
electric power. Through this network, we will continue to sellelectricity to customers in the Greater Tokyo Area.

30

TOKYO GAS INTEGRATED REPORT 2019

Development of renewable energy sources
The Tokyo Gas Group has been working to secure renewable energy
power sources mainly for onshore wind power generation. In fiscal 2017,
we embarked on our activities for photovoltaic and offshore wind power
generation. We will accelerate joint project participation with business
partners in Japan and around the world in a bid to initially obtainrenewable energy power sources with an approximate output of 1 million
kW (of which 400 MW is in Japan and 600 MW is overseas).
Kashima Offshore Wind Power Generation (Conceptual drawing)

Renewable Energy Projects
Formed a business alliance with Shizen Energy Inc.
Feb. 2017

Apr. 2018

May 2018(with the objective of acquiring around 60 MW ofphotovoltaic solar power generation sources)

Invested in a large-scale project of the Kashima
Port offshore wind power generation plant.
Acquired a partial stake in SFK Power LLC.
(SFK Power has a total power generation capacity of 9.7 MW.)

Signed an agreement with Photon Japan LLC.
Jun. 2018(with the aim of jointly developing photovoltaic power stations witha power generation capacity of 30 MW)

Jan. 2019

Acquired Kyoto Ayabe Solar Power LLC (4.872 MW)

Apr. 2019

Joint renewable energy development project in Mexico
899 MW (including 450 MW owned by Tokyo Gas)

Conceptual drawing

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

0.84 million kW
0.42 million×2 units

Owned power

0.42 million kW

Ohgishima Power Co., Ltd.
Generation capacity

1.22 million kW
0.407 million×3 units

Start of operations 2008
Tokyo Gas interest 49%

Owned power

0.90 million kW

Start of operations 2010
Tokyo Gas interest 75%

Moka Power Station
Generation capacity

1.20 million kW
0.6 million×2 units

Owned power

1.20 million kW

All the power generated will be( purchasedby the Tokyo Gas Group. )Start of operation: 2019 or later (scheduled)Tokyo Gas interest: 0%
Unit 1: H2 of 2019 (scheduled)
Unit 2: H1 of 2020 (scheduled)Expand electricity sales to high-voltage and extra-high-voltage customers
Through the establishment of Ennet in 2000, as a joint venture with NTT FACILITIES and Osaka Gas, we have worked to expand our electricity sales.
In October 2015, we established Synergia Power Co., Ltd., as a joint venture with Tohoku Electric Power Co., Inc. As of April 2016, Synergia beganselling electricity to high-voltage and extra-high-voltage customers in the Kanto region, primarily in the Northern Kanto area.

Corporate name

Established

Main business

Shareholders

ENNET Corporation

July 7, 2000

Electricity trading and electricity
generation

NTT FACILITIES, INC. 32.7%, Nippon Telegraphand Telephone Corporation 18.3%
Tokyo Gas Co., Ltd. 24.5%, Osaka Gas Co., Ltd. 24.5%

Synergia Power Co., Ltd.

October 1, 2015

Electricity retail supply to high-voltage
and extra-high-voltage customers in the
Kanto region, mainly in its northern area

Tohoku Electric Power Co., Inc. 50%
Tokyo Gas Co.,Ltd. 50%

31

Business overview

Gas, Electric Power and Service Businesses

INVISIBLE ASSETS
P51

Relationship of trust with11 million customers
Contributing to the achievement of Sustainable Development Goals (SDGs)

Lifeval, Enesta and Enefit act as the faces of Tokyo Gas in local communities
Our bonds and relationships of trust with our 11 million customers, developed over the past 130 years, are our greatest
strength. Tokyo Gas Lifeval, Enesta and Enefit have 180 outlets and over 10,000 employees to act as the faces of Tokyo Gas indifferent communities. They offer close services matched with customers’ needs and serve as one-stop providers of products
and services that help increase the quality of life for building close ties with individual customers.
Interface withthe community
Customers

Outlets

EnestaGunma
Prefecture 7 outlets

180

Enesta1 outletTochigi
Prefecture

EnestaIbarakiPrefecture 5 outlets
LifevalSaitamaPrefecture 8 outlets

Enesta5 outlets

Enefit7 outlets

Tokyo

Lifeval53 outlets

Enefit37 outlets

Kanagawa Lifeval
Prefecture 38 outlets

Enefit9 outlets

Enefit3 outlets

Lifeval / Enesta / Enefit

Employees

14,000Help in gas andelectricity planning
Gas tap opening
and shutoff
at the time of moving
Meter reading
Safety inspection andrepair of gas appliancesand equipment

Chiba
Prefecture
Lifeval4 outlets

Enesta2 outlets

Enefit1 outletSales and installation ofgas appliances andhousing appliances
Gas plumbing
Design and installation ofplumbing equipment
and air conditioners* As of April 2019

Home improvement
etc.

The face of Tokyo Gas, across the entire Kanto area
We believe strong relationships of trust with customers based on this community-based sales organization is the driving force
that has enabled us to maintain our position as No. 1 new electric power market entrant in fiscal 2018, the third year after entry.
In the retail gas business, too, which marks its third year since full deregulation, we are determined to augment and strengthen
our relationships of trust with customers.

32

TOKYO GAS INTEGRATED REPORT 2019

Wide-ranging services that cement bonds with customers
We offer optimal lifestyle suggestions that are uniquely available from the Tokyo Gas Group, gained from paying close
attention to customers’ lifestyles and delivering gas and electricity to them. In a bid to ensure that customers think of Tokyo
Gas when facing lifestyle-related difficulties, we will offer reassuring lifestyle-related services that match each life stage andthe requests of individual customers in addition to gas and electricity on a one-stop basis to strengthen bonds.

Always Reliable Services
Our Always Reliable Services provide reassurance in terms of gas appliances and others concerning the overall
aspects of customers’ lives.

Gas Fixture
Special Support
The payment of a monthly
subscription fee offers
unlimited access to repair
services for city gas
appliances and hot waterterminal appliances madeby Japanese manufacturers.
This service also covers apredetermined portion of
the purchase expenses for
replacement. It thus provides
accommodating services tosupport life with gas.

Gas Fixture
Troubleshooting
SupportTokyo Gas’ gas customers
are entitled to the visiting
repair service with no visiting
charge. That allows themto call for a visit without
hesitation in the event of
failure of their city gas water
heater or stove.

Emergency Home Assist
ServiceThis service responds to
unexpected issues withplumbing products, entrance
keys and others on a 24/7
basis to reduce customers’
anxiety.

Electricity Fixture
Troubleshooting
SupportTokyo Gas also deals withelectricity-related issues.
This support service isprovided for customers that
subscribe to Tokyo Gas’
electricity services. We offer
reassurance in the eventof unexpected issues not
only for gas, but also forthe electricity that supports
everyday lives.

Residential Monitoring
Services
These services enable
customers to remotely check
whether the gas is used,the door and windows arelocked, and if any family
member is at home. They arefor monitoring the children in
double-income families andelderly family members thatlive separately.

Always Home Support
It is a package with a variety of services aimed at solving overall issues related to customers’ residences.
It provides customers with comfort and safety at home.

Minor home
improvements, repairs
and renovations
We offer a wide variety
of services ranging fromminor repairs including the
replacement of wallpaperand screen doors and theadjustment and replacementof door knobs to therenovation of bathrooms,
kitchens, lavatories and otherhousehold equipment.

Plumbing trouble
response
Our staff will visit customers
to address issues withplumbing products, such as
water leakage and clogging
of drainage conduits.

Repair of gas appliancesHome safety measures

Housekeeping service

We will deal with abrupt
failures and other issues withgas appliances. We receive
requests 24/7.

We will propose safetymeasures at home, including
the installation of fire alarms
and handrails and the salesof fire extinguishers and otherdisaster management items.

Our customers can enjoy
house cleaning, delivery
cleaning and home services
from Kajitaku Co., Ltd.,an AEON Group company
providing these services, atbeneficial prices by applying
for services via the Tokyo
Gas Group.

33

Business overview

Service business

SERVICE BUSINESSEngineering Solutions

OutlineFor almost half a century, since introducing LNG to Japan for the first timein 1969, Tokyo Gas has consistently handled processes across the entire
LNG value chain, including both upstream and downstream processes,
from procurement and transportation to manufacturing and supply, sales
and energy solutions.
Utilizing the technological capabilities and know-how developed
through these processes, Tokyo Gas provides one-stop solutions to matchthe needs of customers both in Japan and overseas, including LNG
terminals, pipelines, district heating and cooling, and energy services.

Providing individual solutions
as a bundle
We offer optimal services by bundling a selection of engineeringsolutions that meet the needs of customers based on those
owned by Tokyo Gas Engineering Solutions Corporation(hereinafter “TGES”).

¥146.9 billion FY2018
Segment profits¥6.2 billion FY2018
Net sales

Current model

Bundled service model

Providing case-by-caseengineering solutions

Engineering solutions are bundled toprovide optimal services

LNG
facilities

Energyservice

Pipelines

District heating
and cooling
service Smart
EnergyEnergy use
facilities

Mapping,
Soil etc.

LNG
facilities
Energy service

Pipelines

District heating andcooling service
Smart Energy

Energy use
facilities

Mapping,
Soil etc.

Moreover,Investment
LNG

From Kanto to the whole of Japan, and to the world
TGES was established in April 2015 to integrate the Tokyo Gas
Group’s capabilities in engineering and energy solutions. It has
branches in Nagano, Fukuoka and Okinawa. In Ehime, it jointly
established Niihama LNG Co., Ltd. with four companies that are
engaged in business with local firms and other organizations.
Overseas, it operates an energy service business throughGas Malaysia Energy Advance Sdn. Bhd. (GMEA) in Malaysia andthrough TGES America Ltd. in the U.S. An LNG terminal
construction project is in progress in Thailand.
By partnering with energy suppliers in various regions andutilizing its technological capabilities and know-how, TGES provides
engineering solutions to customers both in Japan and overseas.

Diagram of Engineering Solution Supply
Okinawa Office

GMEA* 2
Supplying electricity and steam to
Toray Group Malaysia
Supplying electricity to PanasonicAppliances Air-Conditioning Malaysia
Sdn. Bhd.

PlantsMiddle-pressure
pipeline
High-pressure
pipeline

Niihama LNG* 1

TGES America
Nagano Office
Kyushu Office (in Fukuoka)

LNG receiving
terminal

Energy (utility)
service center
Middle-pressure
pipeline

Smart Energy
centerValve station
Governor station

Supplying steam, etc. to Toray Composite
Materials America, Ltd. (CMA)*1 Niihama LNG Co., Ltd. (TGES: 50.1%, Shikoku Electric Power Co., Inc.: 30.0%,
SUMITOMO CHEMICAL COMPANY, LIMITED: 9.9%, SUMITOMO JOINT ELECTRIC
POWER CO., LTD.: 5.0%, Shikoku-Gas Co., Ltd.: 5.0%
*2 Gas Malaysia Energy Advance Sdn. Bhd.GAS MALAYSIA ENERGY ADVANCE Sdn. Bhd.
(Gas Malaysia Co.:66%, TGES:34%)

Gas network
Medical facilities
Heat network
Electricity network
Hotels andUtility networkcommercial
ICT network

facilities

Schools
Offices andhousingcomplexes

34

TOKYO GAS INTEGRATED REPORT 2019

Providing engineering solutions leveraging technological capabilities andknow-how developed over almost half a century
The Tokyo Gas Group has handled processes across the entire
LNG value chain for almost half a century, including both
upstream and downstream processes. We offer the knowledge
and expertise that we have accumulated through actually using

the LNG terminals, pipelines, district heating and cooling centersand various other facilities and equipment that we have designed
and built during that time as engineering solutions based onuser’s know-how, to clients both in Japan and overseas.

Engineering business

Energy service business

Based on accumulated user’s know-how, the Tokyo Gas Group
provides total, optimal engineering solutions, including those forafter facilities commence operation. Since the 1980s, the Grouphas built up a track record of achievements both in Japan andoverseas, and is involved in numerous projects in regions such as
Asia, where growth in demand is becoming increasingly evident.

Through its energy service business, TGES supplies heat,electricity, water and air by building systems—which focus
primarily around gas cogeneration, but also incorporate
renewable and unharnessed energy sources—to meet customer
needs that include energy-saving, CO 2 -reducing, cost and laborsaving, and BCP (Business Continuity Planning) solutions. We
also continue to evolve and adapt by engaging in new initiatives
such as smart energy networks and regional lending.

Case 1Case 2Thailand: LNG receiving terminal construction PMC

Utility services at the Iwaki City Medical Center(January 2018)(Iwaki City, Fukushima Prefecture)

In 2014, TGES was awarded an order for assignment as a project
management contractor (PMC) for the capacity expansion construction
project at PPT LNG Map Ta Phut LNG Receiving Terminals, Thailand. TGES
was subsequently awarded another PMC contract by PTT LNG to manage
its Nong Fab LNG Receiving Terminal construction project, and is currently
engaged in associated project management duties.
In recognition of its technological strengths and abundant experience
accumulated through the construction,
operation and maintenance managementat LNG receiving terminals in Japan andoverseas, TGES won this order. It will
carry out the overall management of the
project, including the technological andcontractual aspects, to ensure the design,
procurement, construction (safety, quality
and process) and trial operation
performed by the construction contractor
Nong Fab LNG
will be implemented as planned.
Receiving Terminal

Reconstructed at a new location in winter 2018 and designated as a coredisaster hospital, Iwaki City Medical Center has introduced gas
cogeneration to enhance its business continuity and reduce theenvironmental impact. TGES carried out one-stop management of gas
cogeneration and other energy equipment and built facilities throughstationed personnel to provide an environment that allows the client toconcentrate on hospital management. During the introduction, it
collaborated with JobankyodogasCo., Ltd. on gas supply and energy
services. The client, the gas
operators and service operators
respectively contribute to local
medical care in their own roles.

Iwaki City Medical
CenterExample of bundled services

Implementation of the Niihama LNG Project
It is a joint project with four other companies: Shikoku Electric Power Co., Inc., Sumitomo Chemical Co., Ltd.,
Sumitomo Joint Electric Power Co., Ltd., and Shikoku-Gas Co., Ltd. The five companies made joint investments
to establish Niihama LNG. Currently, a new LNG terminal is being constructed on the premises of the Ehime
Works of Sumitomo Chemical. Niihama LNG will accept LNG at the terminal and operate the terminal, including
gasification. Natural gas and LNG will be supplied to the Ehime Works, the natural gas thermal power plant built
by Sumitomo Joint Electric Power and the neighboring district. This project will spread the use of natural gas.
TGES will capitalize on its engineering abilities in design, construction and operation for the construction of theterminal and the pipeline. It will push ahead with demand cultivation using its diverse know-how gained byengaging in energy solutions.

New business development in Southeast Asia

My duties are to develop the district heating and cooling business outside Japan. In
Southeast Asia, economic growth is accelerating urban development. The introductionof district heating and cooling systems is predicted to quicken. TGES has around 50
years of experience as Japan’s largest district heating and cooling operator, although it
is a new entrant overseas, where it lacks a track record. In the tough competitiveenvironment, we are careful to respond swiftly and sincerely in business talks andinvolve concerned parties to persistently advertise the Tokyo Gas Group’s latest
technologies, proven track record and reliability. Now it is vital to win a first project thatwill serve regional development using the technologies cultivated in Japan. We willcontinue to work with an eye towards developing peripheral businesses, such as energy
services and the expansion of the smart energy network.

Message
Masahiro Suzuki
Overseas Business DivisionTokyo Gas Engineering
Solutions Corporation

Niihama LNG Terminal

35

Business overview

Service business

SERVICE BUSINESSUrban Development Service (Real Estate)

OutlineOver the course of 130 years in business, the Tokyo Gas Group has
acquired large-scale and medium-scale properties (areas of land) with highutilization value, in high-profile areas such as Shinjuku, Ginza, Tamachi andToyosu. Utilizing sites which it owns but which are no longer required forbusiness purposes, and with a primary focus on city center areas, theGroup operates an office and residential real estate leasing business,working around the basic concept of securing stable revenues andimproving asset value. It will work on joint projects with business partners
in an effort to expand the regional development services business.

¥44.6 billion FY2018
Segment profits¥9.1 billion FY2018
Net sales

Chiyoda-ku

Toranomon

Tokyo Station
Chuo-ku

Shibuya-ku

Koto-ku

Shimbashi Station
Shiba
Minato-ku

TamachiToyosuMeguro-ku

Shinagawa-ku

Shinagawa
Stationmsb Tamachi(musubu Tamachi)

Type 1 Urban
Redevelopment Projectin the Toranomon
2-Chome District

Office leasing business
msb Tamachi (musubu Tamachi)
At our property which connects directly to the East Exit of Tamachi
Station on the JR Yamanote Line, we are engaged in thedevelopment of a smart energy network and enhanced BusinessContinuity Planning (BCP) functionality (such as by installing dual-fuelemergency generators that can run on both heavy fuel oil and citygas). Through this project, we aim to contribute to the local
community by creating an advanced and appealing urban
development and real estate leasing business. Phase I of thedevelopment (Tamachi Station Tower S and Pullman Tokyo Tamachi)
was completed in May 2018, and it is now followed by Phase II(Tamachi Station Tower N). We are striving to finish it in fiscal 2020.
Note: Phase I: Land leasing business, Phase II: Office leasing business(based on Tokyo Gas capital investment)

Shiba Park Building

JR Tamachi Station

Pullman Tokyo
Tamach*1
Pedeastriandeck

NagisaTerrace*2

Tamachi
StationTower S

Tamachi
StationTower N

Minato Park Shibaura

Shibaura
Nursery School

Shibaura Park

Redevelopment area
msb Tamachi (musubu Tamachi)

Aiiku
Hospital*1 Hotel*2 Commercial Building

Type 1 Urban Redevelopment Project in the
Toranomon 2-Chome District

Shiba Park Building

The Tokyo Gas Group takes part in the consortium for theconstruction of a large complex that will mainly accommodate offices(scheduled to be completed in November 2023) and for theacquisition of its reserve floor area in the redevelopment project at
the former site of the Toranomon Hospital, near Toranomon Stationon the Tokyo Metro Ginza Line and Tameike-Sanno Station on the
Ginza Line and on the Namboku Line.
Around the project site, there are a number of other ongoingredevelopment projects. The district is gaining significant attention,
because it will undergo a dramatic change in the next couple of years.
We will be committed to the project to contribute to energization of
the entire area.

It is a rare, large office building in Tokyo, with a single floor area ofapproximately 6,000m 2 and located within walking distance from JR
Hamamatsucho Station, and Daimon Station and Shiba-Koen
Station on the Toei Subway. We have acquired it and now jointly
operate it with five companies, including Kanden Realty &Development Co., Ltd.
We and Kansai Electric Power Co., Inc., a parent company of
Kanden Realty & Development, Co., Ltd. have concluded a strategic
partnership in the real estate business. Acquisition of this property
is the first achievement of the partnership between the twocompanies. We will continue to share know-how, consider joint
projects and take other actions that enrich the partnership.

36

TOKYO GAS INTEGRATED REPORT 2019

Toyosu mixed land area property development

Residential leasing businessWe are also engaged in proactive leasing business
operations on small to medium-sized properties(as of March 2019, 13 buildings with 326 residential
units). As we head towards the 2020s, we will aim
to achieve further business growth and expansion,as we acquire more real estate properties in orderto create good quality assets that are well-suited
to leasing. In October 2019, construction of arental housing complex in Nerima-ku, Tokyo,
provisionally named Toyotama Rental Housing
Complex, is scheduled for completion.

The Toyosu area is situated in a prime
location, approximately 4km away from
Tokyo Station. With significant events
such as the opening of the new Toyosu
Fish Market in October 2018 and thecoming hosting of the Olympic andParalympic Games in 2020, the area is
now attracting even greater attention.
The Tokyo Gas Group aims to create a new
mixed land area development in Toyosu
that will include both residential andcommercial properties, in a development
area covering approximately 17ha.

Intended location of the Tokyo 2020
Olympics and Paralympics Athletes’ Village
Toyosu-ohashi
BridgeHarumi-ohashi
BridgeTokyo Gas
Group site

ToyosuMarketToyosuMarketFujimi Bridge

Shijoumae
Station

Shintoyosu
StationAriake North
BridgeKiyari Bridge

ToyosuStationToyosu Market
Toyosu Smart Energy Center

Yurikamome

Ariake Tennis noMori Station

Intended location of the Tokyo 2020 Olympics andParalympics Stadium

Initiatives Towards Achieving the Sustainable Development Goals (SDGs)

We are conducting urban development to construct urban districts where communities
are in harmony with the environment. Using gas cogeneration systems, renewable energy
and suchlike, the smart energy network improves energy conservation, eco-friendlinessand disaster control qualities.

Promotion of GPS for households
Broadening the array of Service items through co-creation

The Tokyo Gas Group will combine services matched with customers’ lifestyles
through its proposal of gas and electricity supply to provide greater economic
value, peace of mind, simplicity and convenience for customers. To further satisfy
their requests, we are expanding the co-creation of services developed withbusiness partners, including business ventures. We will consider investing in
partner companies if a higher level of synergy is expected.

Gas

Tariff for gas;
General Tariff, Always
Gas, Specified Gas

Extended
Existing

Delivering vitality
Delivering reassurance

Safety and reassurance

Tariff for electricity;
Always Electricity 1S,
Power
Always Electricity 1~3(Electricity)- Always Reliable Services
including Gas Fixture Special
Support and Residential
Monitoring Services

Housing fixtures- Always Home Support
including minor home
improvements and renovations,home services such as cleaning,tidying up and storage

A wide variety of services that build
closer ties with customers
Utilization of IoT and digital technologies

Lifestyle-related services- Service content to be expanded in Residential
Monitoring Services and others- Service offering all manuals for housing fixtures

Services

P32

Food and health- Broadening the array of
products and services against
heat shock response- Home services (mealpreparation) and others
1

Utilization of IoT anddigital technologies 2- Sleep and fatigue relief
support services- Voice content services

3

Existing

Overall facilities
1

Expansion of co-creationand consideration of
investment
We will integrate our knowledge andexpertise with business partners toprovide vitality in addition toreassurance.

Gas and electric appliances, housing fixtures and equipment,
renovations, leasing and credit(Co-creation) Home services

We offer home services to customers in collaboration with Kajitaku Co., Ltd., which operates meal
preparation, cleaning and tidying and storage services. Especially for the meal preparation service, Tokyo
Gas offers premade recipes to KAJITAKU CO., Ltd based on its know-how cultivated by running cooking
classes since 1913 and giving food preparation guidance to its employees.
2(Co-creation and investment) Sleep and fatigue relief support services

We have formed a capital and business partnership with EcoNaviSta Co., Ltd. to jointly develop services
that will support customers’ health.

3(Co-creation and investment) Voice content services

We have formed a capital and business alliance with OTOBANK Inc. to jointly develop voice content thatis helpful for putting young children to sleep, meal preparation and other daily situations.

37

Business overview

Overseas business

OVERSEAS
BUSINESS
OutlineWe have expanded and increased overseas bases and staff, andhave participated in LNG or natural gas related business projects
in Australia, North America, and Southeast Asia, all in order tomake overseas business another major source of growth for the
Tokyo Gas Group, as indicated in the Challenge 2020 Vision.
Looking ahead, in addition to conducting discussions with a view
to further business development, we will also work to ensure
efficient distribution of management resources as we advance ouroverseas business operations.

¥50.9 billion
Segment profits ¥15.3 billion
Net sales

Know-how in the midstream and downstream
businesses accumulated in Japan
Global network established through activities
such as material procurement and businessparticipation

Strengths

Net sales and Segment profits(billion)

Net sales (LH)

Risks

FY2018FY2018Business operations may be stalled, or the burden of expenses
may increase, as a result of country-specific laws, regulations
and/or business practices
Fluctuations in crude oil/gas prices and foreign exchange rates
may impact the revenues and expenditures of all overseas
business operations

Crude Oil Price and Foreign Exchange Rate(billion)

Segment profits (RH)($/bbl)Crude Oil Price (LH)

Foreign Exchange Rate

(¥/$)

16

120

45

12

90

150

30

8

60

100

15

4

30

50

0

0

60

0
2014.3 2015.3 2016.3 2017.3 2018.3 2019.3

2020.3(planned)

20002014.3 2015.3 2016.3 2017.3 2018.3 2019.3 2020.3(planned)

Aiming to develop and advance our overseas business operations as a global
integrated energy corporation
Leveraging our experience related to the global LNG value
chain, we will enhance and expand businesses inaccordance with the characteristics of each region where
we operate in an attempt to increase recognition of Tokyo
Gas as an LNG specialist.
We will continue to invest in projects that contribute to
the construction of energy infrastructure, with a primary
focus on midstream to downstream businesses, for which
we can expect to see stable returns. We will aim to build aportfolio with the least impact from fluctuations in energy
prices, and continue working to increase the added value of
our existing projects. In addition, we will consider renewableenergy and other future business fields with growthpotential, entry into regions where we can expect to seemarket growth and where we can leverage our strengths.
The Tokyo Gas Group’s operations currently span 13
business locations in nine countries (including North
America, Southeast Asia and Australia).

38

TOKYO GAS INTEGRATED REPORT 2019

North America

Upstream Business

Midstream- andDownstream Business

Operation andmanagement of shale
projects

Natural gas-fired power
generation
Renewable energy—

LNG terminal business
Natural gas-fired power
generation
Gas supply
Energy service

Southeast Asia

Australia

Operation andmanagement of LNG
projects

Other regions

Business Location
Tokyo Gas America Ltd.

TGES America Ltd.

Acario Ventures

Houston, Texas

South Carolina

Silicon Valley

Tokyo Gas Asia Pte. Ltd.

Jakarta Representative Office

Manila Representative Office

Singapore

Indonesia

Philippines

Bangkok Representative Office

Ho Chi Minh & Hanoi
Representative Offices

Kuala Lumpur
Representative Office

Thailand

Vietnam

MalaysiaTokyo Gas Australia Pty Ltd.

——

Perth & Brisbane
Paris Representative Office—FranceAiming to construct LNG value chains and expand renewable energy
North America

Projects and business locations
Empire
Upstream Business
Midstream- andDownstream BusinessBusiness Location

Birdsboro
AcarioCove Point LNG
East Texas

Barnett

TGES America

Tokyo Gas America
Eagle FordLtd.
MT Falcon
Bajio
Joint projects for renewableenergy exploration

Upstream Business

Monitoring commodity price trends and carefully estimating
the productivity and reserves of gas fields, we are proceeding
to form appropriate alliances with experienced operators andinvest in prime assets. Tokyo Gas has so far participated inthree natural gas development projects in the United States.

Start ofInvestment
Participation
ratio

Project Name
U.S.A. Barnett shale gas development

Mar. 2013

25%

U.S.A. Eagle Ford shale gas development

Jun. 201625%

East Texas gas development
business

May. 2017

30%

U.S.A.

In North America, energy is in high demand and thenatural gas market is expected to rise for a long time.
The energy market is deregulated with active
transactions. In this region, we will accelerate ourparticipation in upstream, midstream and downstream
businesses and renewable energy business. We will
strive to acquire know-how that will be useful for futurebusinesses worldwide while working to establish arevenue base.
Midstream- andDownstream Business

Renewable energy

When planning natural gas-fired power generation we willcontinue to use well-defined criteria to select projects in which toparticipate, giving due consideration to demand and supply ofelectricity, competition with other power sources, regulations
and business environments on a state-by-state basis. We haverecently participated in two natural gas fired power generation
businesses in the East Coast region, where there is large-scaledemand.
In April 2019, we announced our intention to secure a 50%
stake in a renewable energy exploration and operationcompany based in Mexico, established by Engie S.A., which is
a company headquartered in France. We will work on the
renewable energy business in Mexico using the company as aplatform with Engie.

Project Name

Start of
Participation

Investment
ratio

MexicoNatural gas-fired power plantbusiness

Oct. 2004

49%

MexicoNatural gas-fired power plantbusiness

Jun. 2010

30%

U.S.A.

Industry-oriented energy
services business (TGES America)

Feb. 2015(Foundation)

100%

U.S.A.

Natural gas-fired power plantbusiness

Oct. 201625%

Natural gas-fired power plantbusiness

Apr. 201733.33%

Joint project for renewableenergy exploration2019(scheduled)50%(scheduled)(Bajio Power Plant)(MT Falcon Power Plant)(Empire Power Plant)

U.S.A.

(Birdsboro Power Plant)

MexicoBirdsboro Power Plant

39

Business overview

Overseas business

Southeast Asia

Tokyo Gas Group’s Bases in Southeast Asia
Hanoi Representative Office

Manila Representative Office

Bangkok Representative Office

Following rapid economic growth, natural gas demand and LNG
imports are forecasted to rise in Southeast Asia. We will contribute to
the introduction of LNG and natural gas and the construction of anenergy infrastructure in collaboration with governments andcompanies in each country. Specifically, we will work on midstream
and downstream businesses, such as LNG terminals, gas-fired power
generation, gas distribution and energy services.
As bases for implementing these actions, we launched branch offices
in Malaysia, Singapore, Indonesia, Thailand, Vietnam and the Philippines.

Ho Chi Minh City
Representative Office
Kuala Lumpur
Representative Office

Tokyo Gas Asia Pte. Ltd. (Singapore)

Jakarta Representative Office
Jakarta Representative Office
Midstream- andDownstream Business

The Tokyo Gas Group will provide a wide range of value, from natural
gas engineering to expertise to operational know-how and energysaving services, to contribute to the development of natural gas
infrastructure by capitalizing on its knowledge and experience in theutilization of LNG and natural gas. We will take part not only in tangible
aspects such as the construction of LNG terminals, power stations andother energy infrastructure expected in various countries, but also inintangible aspects such as LNG demand cultivation, LNG terminal
operation, and LNG procurement. In this way, we will increase ourinvolvement and presence across the entire LNG value chain.
In 2017, we invested in gas distribution businesses in Vietnam andIndonesia, while in 2018, we commenced the first independent gas
supply as a private business to industrial consumers in Thailand
through a local gas distribution operator in which we had invested. In
addition, we concluded a joint development agreement concerning theconstruction and operation of an LNG receiving terminal in thePhilippines.
In the field of engineering, in 2017 we were awarded an order for
feasibility studies and engineering work concerning the construction of
LNG receiving terminals in Bangladesh, while in 2018, we were awarded
an order to provide project management consultant services for theconstruction of LNG receiving terminals in Thailand.

Start of
Participation

Project Name
Philippines

Submitted declaration of interest
regarding formation of an LNG value
chain

Oct. 2017

Philippines

Concluded a joint development
agreement for construction andoperation of an LNG receiving
terminal in the Philippines

Dec. 2018

VietnamInvested/acquired a stake in a gas
supply business company and formeda strategic allianceJul. 2017

ThailandInvested/acquired a stake in a natural
gas-fired thermal power generation
project

Oct. 2016

Thailand

Secured an order to provide PMC
services in the construction of theNong Fab LNG receiving terminal

Jan. 2018

Invested/acquired a stake in a gas
supply business company

Jan. 2018

Started gas distribution businessDec. 2018

Indonesia

Invested/acquired a joint stake in agas supply business company

Oct. 2017

Bangladesh

Secured an order for work relating to
LNG receiving terminals

Jul. 2017

ThailandIn the Philippines, the country’s introduction of LNG amid the future exhaustion of domestically
produced gas is predicted, and its government is working to attract domestic and overseas businesses
for the construction of LNG receiving terminals. My duty is to collect information on trends in energy
policies and LNG-related regulations that are being dramatically changed as well as stakeholders’Messageactivities though everyday communication with government bodies and private energy-related
firms, and participation in energy-related seminars and forums. I ensure that the information is
Lady Trishia
up-to-date and accurate, which will be broadly shared among those concerned in the company.
GonzalesManila Representative The Philippines has never used LNG, which is why government officials among others are highly
Officemotivated to learn about the LNG industry. Every day, we receive inquiries on the business of LNG
receiving terminals and LNG import and procurement, as well as requests for visits of our terminals.
I hope to gain knowledge and expertise in the overall LNG value chain through this experience andcontribute to building close relationships of cooperation between the Philippines and Japan.

40TOKYO GAS INTEGRATED REPORT 2019

Investing our energies into the operation and management of existing projects
Australia

Participating projects and business locations
Participating project
Business Location

Darwin (Bayu-Undan gas field)
Ichthys

Pluto
GorgonQueensland Curtis
Tokyo Gas Australia Pty Ltd.
Perth Office

Tokyo Gas Australia Pty Ltd.
Brisbane Office

Ichthys LNG Project

Upstream BusinessWe have invested in five LNG projects in Australia, which has grown into amajor LNG supply base to East Asia. One of these is the Ichthys Projectthat recently came into operation. We will continue to operate and manage
these projects with a view towards maximizing their value.

Tokyo Gas Australia Pty Ltd. (Perth)

LNG Production
Capacity(Million tons / year)

Start of
Participation

Tokyo Gas Interest

Start of Production(Operation)

Darwin

3.0

2003

3.07%

Jan. 2006

Pluto

4.9

2008

5.00%

Apr. 2012

Gorgon

15.6

2009

1.00%

Mar. 2016

Queensland Curtis

8.5

2011

1.25% (Gas Field) / 2.50% (No. 2 Liquefaction Plant)

Dec. 2014

Ichthys

8.9

2012

1.575%

Oct. 2018

Project Name

Message
WataruNakayama
Tokyo Gas Australia
Pty Ltd.

Aiming to achieve stable LNG supply and revenue expansion, Tokyo Gas Australia participates infive large-scale LNG projects and engages in project management.
In October 2018, the Ichthys LNG Project started shipment, which meant that all our projects
in Australia were in operation. The Ichthys project is the first in history to be operated by a Japanesebusiness and joined by major Japanese gas and electric power companies, including Tokyo Gas.
We contributed to increasing the project value by offering advice on project operation whenshifting from the construction phase to the operation phase, as well as offering suggestions on agas production well drilling plan for higher efficiency and lower risks based on our experience
gained through participation in the four projects in Australia that were already in operation.
Tokyo Gas Australia has participated in the joint operation of projects with a number of major
oil companies. It also works intensively to train personnel for overseas businesses. We actively
engage in education activities based on the work experience of personnel to quickly develop
people who will contribute to the maximization of value for overseas business.

Initiatives Towards Achieving the Sustainable Development Goals (SDGs)

Taking up the challenge of creating an LNG value chain in Southeast Asia
In 2017, we invested and acquired stakes in gas supply businesses in Vietnam (July) and Indonesia (October). In January
2018, we acquired a stake in a similar business in Thailand. In December 2018, we signed a joint development agreement
regarding construction and operation of an LNG receiving terminal in the Philippines.
By leveraging our Group’s technological capabilities and know-how to provide energy solutions and constructinfrastructure, we are seeking to promote the widespread adoption of clean, environmentally-friendly natural gas. We also
hope that contributing to the creation of jobs and economic development through our local business operations will lead toan increase in educational opportunities and help to eliminate disparities in wealth and living standards in those countries.

41

Corporate governance

CORPORATE GOVERNANCE
Tokyo 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 throughenhancing 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 ofmanagement and executive responsibilities.
Basic Policy on Corporate Governance www.tokyo-gas.co.jp/IR/english/gvnnc/pdf/policy.pdf

Progress in Governance
Composition of the Board of Directors

Board of Directors
In principle, the Board of Directors meets once a month todiscuss and decide important matters regarding business
operations. Directors must submit reports to the Board of
Directors regarding the status of execution of their duties
periodically and when deemed necessary, allowing theBoard to monitor the performance of directors.
The Board of Directors comprises 9 directors, 4 ofwhom are outside directors. In addition, the term of
directors is set at one year with the goal of further clarifying
managerial responsibility.

Outside Directors
In accordance with their individual experience andknowledge, the outside directors strive to secure thesoundness and appropriateness of deliberations anddecisions regarding business execution. From an
independent viewpoint, the outside directors monitor the
performance of duties by the directors and exercise theirauthority at meetings of the Board of Directors. In this way,
the outside directors contribute to the improvement of therationality and objectivity of the company’s businessexecution and of the deliberations and decisions of theBoard of Directors.
In making judgments about matters related to the independence of outside officers, such as capital, transactions,and relationships, we comprehensively verify that they are
unlikely to have conflicts of interest with general shareholders and they are in a position that enables them to be
objective and neutral, and on that basis we make a judgmenton their independence. (The company discloses the Independence Standards for Outside Directors on its website:
www.tokyo-gas.co.jp/IR/english/gvnnc/pdf/independence.pdf)
The Advisory Committee has confirmed that none of theoutside officers has a material conflict of interest withthe company—in regard to capital, transactions, or
relationships—and has confirmed their independence inaccordance with the above standards. The committee’s
decision has been reported to the Board of Directors,
which has designated them as independent officers andreported that designation to the stock exchanges on
which the company is listed.

Directors
InsideNo femalememberOutsideNo femalememberAudit &
Supervisory
Board members
Inside223outsidemembers

outsidemembers

FY20029FY20195

insidemembers

insidemembers

Outsideoutside2 femalemembers 4 members

1

femalemember3
2

outsidemembers

insidemembers

insidemembers

Realizing Accurate and Rapid Decision Making,and Efficient Business Execution
The Corporate Executive Committee, which meets weekly
as a general rule, deliberates on provisions stemming from
Board of Directors’ resolutions and important managementrelated issues. The company has introduced an executive
officer system for business execution in accordance withdecisions of the Board of Directors. Substantial authority
has been delegated to executive officers in their designatedareas of responsibility, while directors, as appropriate,
receive reports on the status of execution from executive
officers and monitor the executive officers. In addition,
executive officers report to the Board of Directors asneeded. (To clarify management responsibility andexecutive responsibility, the terms of office of directors andexecutive officers have been fixed at one year.)

Analysis and Evaluation of Effectiveness of theBoard of Directors
Starting in Fiscal 2018, the Board of Directors has analyzed
and evaluated its effectiveness by having each of its
Directors complete a questionnaire-based self-evaluation.
The Board then held discussions and exchanged opinions

42

TOKYO GAS INTEGRATED REPORT 2019

based on the outcome of those self-evaluations, to maintainand enhance the Board’s effectiveness.
Based on the results of the questionnaire and theexchange of opinions at the Board of Directors’ meetings, it
was determined that measures for improving the Board’s
effectiveness are functioning effectively through efforts toimprove and enhance site inspection visits and to increase
opportunities for Executive Officers to attend Board meetings.
On the other hand, ceaseless efforts are required tofurther increase the Board’s effectiveness. Accordingly,
initiatives to contribute to the strengthening of thesupervisory functions of the Board, including further
enhancement of site inspection visits by the Directors, will
be examined and implemented in the future.

Audit & Supervisory Board members
The Audit & Supervisory Board members meet once a month
as a general rule and otherwise as needed. The 5 membersof the board, which include 3 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 the following principal initiatives.
The Audit & Supervisory Board members attend meetings of the Board of
Directors, the Corporate Executive Committee, and other important meetings. They
state their opinions relating to legality and other perspectives when necessary.
The Audit & Supervisory Board members conduct research into the state ofoperations at the head office, business offices, and subsidiaries and holddiscussions with representative directors to exchange opinions, both on a regularbasis and otherwise as needed.
In regard to the internal control system for financial reporting, the Audit &Supervisory Board members receive evaluations of internal control and reportson the status of audits from the Board of Directors, etc., and KPMG AZSA LLC.

Outside Audit & Supervisory Boad Members
The outside Audit & Supervisory Board members conduct
audits monitoring from an independent viewpoint andcontribute to improving the rationality and objectivity of thecompany’s business execution and of the deliberations of
the Board of Directors through their statements at meetingsof the Board of Directors. In addition, through theirstatements and the exercise of their majority voting rights atmeetings of the Audit & Supervisory Board, the outside
Audit & Supervisory Board members contribute to assuring
and improving the legality, appropriateness, rationality, andobjectivity of the audits by the Audit & Supervisory Board
members. In addition, with the objective of assuring theeffectiveness of audits by the Audit & Supervisory Board
members, the company invites outside Audit & Supervisory
Board members who have a substantial degree ofknowledge about finance and accounting.
In making judgments about matters related to the
independence of outside officers, such as capital,transactions, and relationships, we comprehensively verify
that they are unlikely to have conflicts of interest withgeneral shareholders and they are in a position that enables
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 amaterial interest with the company—in regard to capital,transactions, or relationships—and has confirmed their
independence in accordance with the above standards. The
committee’s decision has been reported 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.

43

Corporate governanceCorporate Governance System
Tokyo Gas Co., Ltd.
aa

Shareholders Meeting

Appointment

Appointment

ReportAppointment

ReportFive Audit&Supervisory
Board Members(including three outside members)

Board of Directors
Audit(including four outside directors)

Supervise

ReportCollaboration(

ReportPresident and CEO

Collaboration

Independent
auditorTwo outside directors,
one outside Audit & Supervisory
Board Member, the Director
and Chairman of the Board,
the President

Nine directors

ReportAuditing
corporation

ReportAdvisory Committee

Audit & Supervisory Board

Corporate Executive Committee

Collaboration

President and CEO, two executive vicepresidents, two senior managing
executive officers, and seven managing
executive officers)
Internal
Audit
Department

Oversee

ReportManagement ethics, safety, risk
management, CS, sustainability, etc.

Investment Evaluation Committee

Departments

Audit

Financialaudit

Committees to address importantmanagement issues

ManageCollaboration

ReportSubsidiaries

Overview of Corporate Governance System (As of June 27, 2019)
Number of directors

9Participation of outside directors andoutside Audit & Supervisory Board members
in selecting director candidates

Yes

Average age of directors

61

Number of meetings of Board of Directors*

12

Number of outside directors

4

Attendance rate of outside directors at meetings of Boardof Directors*

100%

Number of Audit & Supervisory Board members

5

Term of office of directors

One year

Number of outside Audit & Supervisory Board members

3

Performance-linked remuneration

Yes

Number of independent officers

7

Share purchase system to reflect the perspective ofshareholders in management

Yes

Participation of outside directors /outside Audit & Supervisory Board members indetermination of remunerationYes* Total for the period from April 2018 to March 2019

Working to Promote Transparent Management andCreate a Flexible and Open Corporate Culture

Investment Evaluation Committee

We have established in-house committees—such as theManagement Ethics Committee, chaired by the President
and CEO—to address issues that are important from amanagement perspective, such as compliance, safety, customer
satisfaction, and risk management. This structure facilitates
the sharing of information within the group, as well as
deliberations and adjustments regarding the group’s overall
direction.

Of the matters to be discussed at the Corporate Executive
Committee, the Investment Evaluation Committee chaired by
the Executive Officer in charge of financial affairs evaluatesmatters that require the evaluation of the significance,
economy and risks related to investment and postinvestment follow-up and reports to the Corporate Executive
Committee.

44TOKYO GAS INTEGRATED REPORT 2019

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

2 Level of Remuneration

5 Assurance of Objectivity and Transparency of
the Remuneration System
The company shall assure the objectivity and transparencyof the system of officer remuneration by establishing andoperating the Advisory Committee comprising a number ofoutside directors, outside Audit & Supervisory Board
members, and inside directors to govern the system of
personnel affairs and remuneration of officers.
Composition of
Remuneration for Directors* Monthly remuneration ofoutside directors are fixed
remuneration only.

Total Remuneration for Directors and Audit &Supervisory Board Members (Fiscal 2018)

The level of officer remuneration shall be suitable for therole, responsibility, and performance of the officer.

Total value of remuneration by type (¥ million)

4 Composition and Other Details ofRemuneration 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 the General Shareholders’ Meeting anddetermined through discussions among Audit &Supervisory Board members.
(2) Remuneration of Audit & Supervisory Board members
shall comprise only fixed monthly remuneration.

Total value of
remuneration

Classificationof officers

3 Composition and Other Details ofRemuneration Paid to Directors(1) Remuneration of directors shall be paid within the scopeof the remuneration limit approved at the General
Shareholders’ Meeting.
(2) Remuneration of inside directors shall comprise monthly
remuneration and bonus. Monthly remuneration shallcomprise fixed remuneration paid in accordance with thepost of each individual and performance-linked
remuneration. A portion of fixed remuneration shall beallocated to the purchase of shares based on a sharepurchase guideline and from the standpoints of reflecting
the perspectives of shareholders on management andimproving shareholder value over the long term. The
amount of performance-linked remuneration shall be
determined after evaluating companywide performanceand performance of operating units from the standpointsof motivating inside directors to execute management
strategies and reflecting their performance clearly in theirremuneration. The amount of bonus to be paid shall be
determined in accordance with the post of each insidedirector after performance evaluation.
(3) Remuneration of outside directors shall comprisemonthly remuneration and bonus. Monthly remuneration
shall comprise only fixed remuneration, while bonus shallbe the same as that of inside directors.

Performancelinked
remuneration

Fixed
remuneration(¥ million)

Directors

outside(excluding)
directors

Fixed
remuneration(Monthly
remuneration)

Performance-linked
remuneration
Monthly
Bonusesremuneration

NumberRetirement of eligible
officers
benefits

368

253

59

56

-

8

)

74

74

-

-

-

2

Outside Directors

34

27

-

6

-

3

Outside Audit& Supervisory
Board Members

33

33

-

-

-

4

(

Audit
& Supervisory
Board members
excluding outside
Audit & Supervisory
Board members*The number of officers includes 3 Directors and 1 Audit & Supervisory Board member
who retired upon the conclusion of the 218th Annual General Meeting of
Shareholders.
*It was resolved that the amount of monthly remuneration of all Directors (including
Outside Directors) should be under ¥50 million at the 205th Annual General Meetingof Shareholders and that the amount of annual bonus for all Directors should beunder ¥90 million at the 206th Annual General Meeting of Shareholders.
*It was resolved that the amount of monthly remuneration of all Audit & Supervisory
Board members (including outside members of the Audit & Supervisory Board)should be under ¥12 million at the 190th Annual General Meeting of Shareholders.

Advisory Committee
In February 2005, we established the Advisory Committee
to assure objectiveness and transparency in management.
The committee has up to five members, consisting of the
Chairman, the President and CEO, and up to three
directors selected by the Board of Directors; with over halfof its membership consisting of outside directors, and thecommittee chairman also being an outside director.
Advisory Committee Membership (as of June 27, 2019)
Committee
chairmanCommittee
members

Hitoshi Saito (Outside Director)
Kazunori Takami (Outside Director)
Yoshihiko Morita (Outside Audit & Supervisory Board Member)Michiaki Hirose (Director, Chairman of the Board)
Takashi Uchida (Representative Director, President)

In accordance with inquiries from the Board of Directors,
the Advisory Committee deliberates on officer candidates
and officer remuneration in a fair and appropriate mannerand makes reports to the Board of Directors. The
committee also deliberates on the independence ofoutside officer candidates.

45

Corporate governanceInternal Control System

ComplianceTo secure management soundness and transparency, and torealize its management philosophy, the company has
formulated the “Basic Policy on Development of Corporate
Structures and Systems for Internal Control System,” and isapplying this policy in an appropriate manner.
Specifically, the company has established systems toensure that directors and their assistants perform theirduties in a manner that is compliant to relevant laws andregulations, the articles of incorporation, and other rules. In
addition, crisis management provisions have beenformulated to limit losses from risks related to investments
and natural disasters. The company also defines guidelines
for ensuring the independence of Audit & Supervisory Board
members and guaranteeing the effectiveness of the Audit &Supervisory Board.

Compliance Structure

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 and ExchangeAct, and the company is being audited on that basis. The
company’s audits are handled by 3 certified public
accountants: Yoshihide Takehisa, Toshiyuki Tamura andYoshihiro Uehara. For these auditors, the number ofconsecutive years of auditing service is 3 years, 2 years and4 years, respectively (as of June 27, 2019).

Compensation for Independent Auditors (Fiscal 2018)
Compensation for auditing services¥264 million

Compensation for non-auditing services¥31 million

Total¥295 million

We have established the Management Ethics Committee,
chaired by the President and CEO. This committee
discusses at the executive level basic 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 and thereafter. The Compliance Department operates
counseling service counters, distributes information within
and beyond the Tokyo Gas Group companies, and promotes
a thorough awareness of ongoing activities related to our
Code of Conduct, which represents a compliance standardof the Tokyo Gas Group. The Compliance Department also
supports a wide range of compliance-related activities foreach department. These include development of compliancepromotion systems, encouragement awareness andeducational campaigns about the Code of Conduct, andcompliance risk reduction measures.

Compliance Risk Management
Through the effective operation of internal and external
advisory systems, we are endeavoring to ensure thatcompliance-related problems are discovered and resolved
quickly so that our corporate self-regulatory processes willcontinue to function effectively. We monitor the effectivenessof Group compliance promotion activities by conducting
regular compliance awareness surveys of all employees.
The results of these surveys are reflected in initiatives forthe following years. Furthermore, the Internal Audit
Department conducts internal audits of the Company and its
subsidiaries, focusing on the probability that risks willmaterialize and their degree of importance from the viewpointof strict compliance with laws and regulations, corporate
ethics and social norms. The status of improvement
concerning any recommendations made as a result of theinternal audits is checked in a follow-up audit in the following
year to ensure stable improvement in risk management.

46

TOKYO GAS INTEGRATED REPORT 2019

Risk Management System
Enterprise Risk Management System

Crisis Management System

The company has established an enterprise risk
management (ERM) system, and drawn up risk management
regulations that include documented rules concerning majorrisks faced by the group.
The Risk Management Committee was established withthe aim of improving the management level of the ERM
system. The Committee checks progress regarding theestablishment and operational status of the ERM system,
including periodic risk assessments. It also reports to the
Corporate Executive Committee and obtains the necessary
approvals.
Under the framework, around 150 Risk Management
Promotion Officers are deployed in the business departmentsof Tokyo Gas and its subsidiaries in order to promote ERM.
Each year, we assess risks and the implementation andimprovement status of countermeasures. This systemfacilitates the steady implementation of the ERM-PDCA(Plan-Do-Check-Act) cycle.

Because the company provides public services thatcomprise a lifeline, for many years it has also had a crisis
management system that serves as a response system incase an accident or other risk-related event actually occurs.
Specifically, we have formulated Emergency Response
Organization Regulations. In case of major crises, including
major natural disasters, such as earthquakes, or production
or supply disruptions arising from major accidents at
pipelines or LNG terminals, as well as new strains ofinfluenza, terrorism, failures in mission-critical IT systems,
and compliance problems, the Emergency Response
Organization is established to respond to the situation
immediately in accordance with the Emergency Response
Organization Regulations. Periodic training is conducted inrelation to major risk response measures. Moreover, thecompany 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, amajor accident disrupting gas supply, a widespread blackout,
an outbreak of a new strain of influenza, etc. This plan is inplace to reinforce the company’s risk management system.

Enterprise Risk Management ( ERM ) System

Emergency Response Organization

Securities Markets and Other Stakeholders

President and CEO(Organization Leader)

Disclosure of risk information through Securities Report,
Financial results and Sustainability Report

Reflection of results of risk assessment

Corporate Executive Committee
Confirmation of major risks, etc.

Reporting and proposal of plans forassessment of major risks
and other necessary matters

Clear statement ofrisk management policies

Instructions /ordersCollaboration
ReportCorporate Planning
Dept.
(Group-wide coordination)

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

Improvement proposals
Convey statement of risk
management policies

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

Business Departments

47

Corporate governance

Board of Directors(As of June 27, 2019)

Director, Chairman of the Board

Representative Director, President and CEO

Michiaki Hirose
Joined the Company

April 1979

Joined the Company

June 2009

Director, Senior Executive Officer and in chargeof Corporate Planning Dept., Corporate
Communications Dept. and AffiliatedCompanies Dept.
Representative Director, Executive Vice
President and Chief Executive of Living Energy
Div.
Representative Director, President
Director and Chairman of the Board

June 2015

Director, Senior Executive Officer and Chief
Executive of Energy Resources Div.
Representative Director, Executive Vice
President and Chief Executive of Residential
Sales and Service Div.
Representative Director, President and CEO

April 2012

April 2014
April 2018

April 2018

Reason for appointment In his career, Takashi Uchidahas engaged mainly in pipeline, resources and overseas
business-related work duties. Since April 2018, he hasserved as President and CEO, with ultimate responsibility
for the execution of duties within the company. He is highly
knowledgeable, and has extensive work experience withthe company.

Director Outside

Director Outside

Chika Igarashi

Hitoshi Saito

April 1997

Registered as an attorney at law

April 1976

Joined Mitsui Fudosan Co., Ltd.

April 1997

Joined a law firm in Tokyo Metropolitan area

June 2011

July 2006

Joined Asahi Law Office (Currently Nishimura &Asahi)
Registered as an attorney at law in New YorkState, USA
Director of the Company

Executive Managing Director and Executive
Managing Officer of Mitsui Fudosan Co., Ltd.
Managing Director and Senior Executive
Managing Officer of Mitsui Fudosan Co., Ltd.
Managing Director, Senior Executive Managing
Officer and Chief Executive of International Div.
of Mitsui Fudosan Co., Ltd.
Advisor of Mitsui Fudosan Co., Ltd.
Director of the Company

June 2016

April 2016

Reason for appointment Over the course of his career,Michiaki Hirose has engaged mainly in planning andliving-related work duties. For four years, from April 2014
until March 2018, he served as President. Since April 2018,as Director and Chairman, he has served as chairman of
the Board of Directors. He is highly knowledgeable, andhas extensive work experience with the company.

Director Outside

June 2007

Takashi Uchida

April 1974

April 2013
April 2015

June 2017
June 2019

Kazunori Takami
April 1978
June 2009
April 2012

April 2015

June 2017
March
2018
June 2019

Reason for appointment Chika Igarashi is highly
knowledgeable, and possesses high-level legal expertiseand a broad-minded perspective, developed through her
many years of involvement in corporate legal affairs. We
hope that she will make use of these qualities in helping tomanage Tokyo Gas.

Reason for appointment Mr. Hitoshi Saito is expected touse his international perspective acquired from overseas
businesses in the real estate industry, as well as his
management capabilities, broad outlook and in-depth
knowledge gained through a wide range of businessdevelopment for the Company’s management.

Joined Matsushita Electric Industrial Co., Ltd.
(Current Panasonic Corporation)
Managing Director of Panasonic Corporation
Representative Director, Senior Managing
Executive Director and President of Appliances
Company of Panasonic Corporation
Representative Director, Executive Vice
President and in charge of Japan, Customer
Satisfaction, and Design of Panasonic
Corporation
Corporate Advisor of Panasonic Corporation
Retired from Corporate Advisor of Panasonic
Corporation
Director of the Company

Reason for appointment Mr. Kazunori Takami is
expected to use his management capabilities, broad
outlook and in-depth knowledge acquired through a wide
range of business development in the electrical industry for
the Company’s management.

Significant joint responsibilities

Significant joint responsibilities

Lawyer at Nishimura & Asahi Law OfficeOutside Director of Tokyo FM Broadcasting Co., Ltd.
Outside Director of Nojima Corporation
Outside Director of FUJITA KANKO INC.

48

TOKYO GAS INTEGRATED REPORT 2019

Representative Director

Representative Director

Director

Masaru Takamatsu

Takashi Anamizu

Kunio Nohata

April 1980

Joined the Company

April 1985

Joined the Company

April 1984

Joined the Company

June 2016

Director, Senior Executive Officer and in chargeof Personnel Dept., Secretary Dept., General
Administration Dept., Compliance Dept., andInternal Audit Dept.
Representative Director, Executive Vice
President and Chief Executive of Residential
Sales and Service Div.

June 2017

Director, Senior Executive Officer, Chief
Executive of Global Business Div.
Representative Director, Executive Vice
President and Chief Executive of Energy
Solution Div. and Power Business Div.

June 2017

Director, Senior Executive Officer of theCompany, Chief Executive of Power BusinessDiv., In charge of Environmental Affairs Dept.

April 2018

Director, Senior Managing Executive Officer,
Chief Executive of Global Business Div.

April 2018

Reason for appointment During his career, Masaru
Takamatsu has engaged mainly in living and planningrelated work duties. He currently serves as Executive Vice
President. He is highly knowledgeable, and has extensive
work experience with the company.

April 2018

Reason for appointment In his career, Takashi Anamizu
has engaged mainly in living, resources and overseas
business-related work duties. He currently serves as
Executive Vice President. He is highly knowledgeable, andhas extensive work experience with the company.

Reason for appointment Over the course of his career,
Kunio Nohata has engaged mainly in energy sales,
resources and overseas business-related work duties. He
currently serves as Senior Managing Executive Officer, andis responsible for the company’s Global Business Division.
He is highly knowledgeable, and has extensive work
experience with the company.

Executive Officers
President and CEO Takashi Uchida
Executive Vice
Presidents

Masaru Takamatsu Chief Executive of Residential Sales and Service Div.
Takashi Anamizu

Chief Executive of Energy Solution Div. and PowerBusiness Div.

Senior Managing
Executive Officer

Kunio Nohata

Chief Executive of Global Business Div.

Satoru Sawada

The Japan Gas Association

Koki Hayakawa

CFO, in charge of Financial Management Dept.,
Accounting Dept., Purchasing Dept., Compliance Dept.
and Internal Audit Dept.

Tadashi Komiyama

Chief Executive of Region Div.

Kentaro Kimoto

Chief Executive of Gas Resources &Energy Production Div.

Hiroshi Kishino

In charge of Personnel Dept., Secretary Dept., General
Administration Dept., Corporate Communications Dept.
and Sustainability Dept.

Shinichi Sasayama

Chief Executive of Digital Innovation Div., in charge ofCorporate Planning Dept. and Business Transformation
Dept.

Ayumi Shigitani

General Manager of CIRIUS Project Dept., Digital
Innovation Div. and President, Representative Director ofTOKYO GAS i NET CORP.

Takashi Higo

President, Representative Director of Tokyo Gas
Engineering Solutions Corporation

Isao Hosoya

Chief Executive of Pipeline Network Div.

Director Outside

Junko Edahiro
April 2003

Representative Director of Edahiroba Inc.
(Current e’s Inc.)
Director and Chairperson of
Change Agent Inc.
August 2018 Professor, Graduate School of Leadership andInnovation, Shizenkan University
June 2019
Director of the Company
May 2006

Managing
Executive Officer

Reason for appointment Ms. Junko Edahiro is expected
to use her experience as a corporate manager, advanced
specialization related to the environment and in-depth
knowledge as an environmental journalist for theCompany’s management.

Significant joint responsibilities
Representative Director of e’s Inc.
Director and Chairperson of Change Agent Inc.
Professor of Shizenkan University Graduate School of
Leadership & Innovation

Executive Officers

Toshiyasu Ishii Yohei Nitta Tomoyuki Yoshioka Yoshiharu Kikuyama
Akihiko Matsuda Hiroshi Hanada Akihiro Saito Masayuki Kado
Satoshi Tanazawa Shinsuke Ogawa Yasuhiro Konishi Hirofumi Sato
Yo Endo Nobuhiro Sugesawa Eito Tsuji

49

Corporate governance

Audit & Supervisory
Board Members(As of June 27, 2019)

Audit & Supervisory Board Member

Audit & Supervisory Board Member

Hideaki Arai

Isao Nakajima

April 1979
April 2013

Joined the Company
Senior Executive Officer, Chief Executive ofPipeline Network Div.
March 2017 Retired as Senior Executive Officer
June 2017 Audit & Supervisory Board Member of theCompany

April 1982

Reason for appointment Hideaki Arai is highly
knowledgeable, and has extensive work experience with
the Company. He has engaged mainly in pipeline andwide-area sales-related work duties, and has also served
as a Senior Executive Officer.

Reason for appointment Isao Nakajima is highly
knowledgeable in financial affairs and accounting, and has
extensive work experience with the Company. He has
carried out financial and accounting operations and has
served as Senior Managing Executive Officer.

Audit & Supervisory Board Member Outside

Audit & Supervisory Board Member Outside

Audit & Supervisory Board Member Outside

Yoshihiko Morita

Masato Nobutoki

Sawako Nohara

Joined the Company

April 2015

Senior Executive Officer, CFO and in charge ofFinance Dept., Accounting Dept., Purchasing
Dept. and Real Estate Management Dept.
April 2018
Senior Managing Executive Officer, CFO andin charge of Finance Dept., Accounting Dept.,
Personnel Dept. and Purchasing Dept.
March 2019 Retired as Senior Managing Executive Officer
June 2019
Audit & Supervisory Board Member of theCompany

April 1981

Joined Mitsubishi Corporation

December 1988 Joined Life Science Institute Co., Ltd.

October 2004 Vice Governor of Japan Bank forInternational Cooperation
October 2008 Representative Director and Senior
Managing Executive Officer of Japan
Finance Corporation, Deputy CEO of Japan
Bank for International Cooperation
June 2011Retired as Deputy CEO of Japan Bank forInternational Cooperation
June 2012
Audit & Supervisory Board Member of theCompany

April 2007

Joined City of Yokohama
Director General of City Growth Strategy
Promotion Department, Economic Affairs
Bureau, City of Yokohama
Consultant of Future City Promotion, Climate
Change Policy Headquarters, City of Yokohama
Audit & Supervisory Board Member of theCompany
Retired from Yokohama Ciy as a consultant

July 1995

Reason for appointment Yoshihiko Morita is highly
knowledgeable and has a broad international outlook,developed through his experience in fields such as
international finance and overseas economic cooperation.
We hope that he will make use of these qualities in his roleas an Audit & Supervisory Board member for Tokyo Gas.

Reason for appointment Masato Nobutoki is highly
knowledgeable and has extensive experience, both as acompany employee and as a member of staff at regional
public bodies. We hope that he will make use of thesequalities in his role as an Audit & Supervisory Board
member for Tokyo Gas.

April 1969

Joined Export-Import Bank of Japan

April 2016
June 2017

Joined InfoCom Research, Inc.

December 2001 President and Representative Director of
IPSe Marketing. Inc.
November 2009 Project Professor, Graduate School ofMedia and Governance, Keio University
June 2018
Audit & Supervisory Board Member of theCompany

Reason for appointment Sawako Nohara is highly
knowledgeable, and possesses corporate management
experience and high-level IT-related expertise. We hopethat she will make use of these qualities in her role as an
Audit & Supervisory Board member for Tokyo Gas.

Significant joint responsibilities
President and Representative Director of
IPSe Marketing. Inc.
Outside Director of Sompo Holdings, Inc.
Outside Director of JAPAN POST BANK Co., Ltd.
Outside Director of DAIICHI SANKYO COMPANY, LIMITED50

TOKYO GAS INTEGRATED REPORT 2019

Messages from Outside Directors
Utilizing my experience in corporate management and overseas
business, I will monitor business growth and corporate governanceimpartially and present my opinions.

Director Outside

Hitoshi Saito

Since I joined Mitsui Fudosan Co., Ltd., I have gained experience in overseas business, financial affairs,
residential business, commercial facilities, building development and other areas. During that period, I wasposted to overseas offices twice, Los Angeles and New York.
At Mitsui Fudosan Co., Ltd., I worked primarily to expand its overseas business as the person
responsible for promoting globalization while serving as Managing Officer and Director. I also focused onenhancing corporate governance and compliance on the back of rapid business expansion supported byproactive investment.
I look forward to working as Outside Director for Tokyo Gas, a company with a strong commitment topublic service. The major role of Outside Director is corporate governance, in other words management
supervision and advice. However, overly strong supervision can hinder the seeds of growth. I believe thatmy role will be to properly monitor the offense-defense balance from an independent standpoint andpresent my opinions to the management.
In the GPS2020 medium-term management plan, Tokyo Gas aims to evolve from being the leading city
gas company in Japan to being a global integrated energy corporation, and make overseas business intoanother major source of growth for the future. I would like to find opportunities where I can help to achieve
this goal as much as possible by applying my work experience and knowledge.

Highly regarding ties with customers, I shall be committed to helping
the Company continue to be the closest infrastructure that protects
customers’ lives.
Since joining Matsushita Electric Industrial Co., Ltd. (currently Panasonic Corporation), I was exclusively
engaged in sales activities for 20 years. Later, I served as General Manager of the Corporate Planning Officeand General Manager of a business department and assumed other posts, and then as Executive Vice Presidentof Panasonic Corporation. What has remained constant throughout my career is the idea of putting customers
and employees first. I have been making resolute decisions based on discussions with many people, which isessential for achieving sustainable corporate growth.
In 1969, Tokyo Gas decided to introduce LNG to Japan for the first time. At that time, it was impractical toimport LNG because it entailed sophisticated import technologies and high costs. However, this decision
supported the energy demand during the high economic growth period and became a catalyst for improving air
pollution, which was recognized as a social problem.
Tokyo Gas spent several decades adjusting the gas appliances of all customers to help them use LNG
safely and with peace of mind. The core idea is the same as that of Panasonic, who connected with customers
as the electrical appliance center in each local community, earning their trust and confidence. I shall present my
opinions by using my past experience.
Social problems, including the falling birth rates and aging population, are becoming increasingly serious.
By constantly questioning: “Is the present state sufficient?” I hope to focus on helping the Company continue tobe the closest infrastructure that protects customers’ lives and I will make proposals for smarter lifestyles.

Director Outside

Kazunori Takami

Energy lies at the foundation for achieving the SDGs. I shall contribute tothis by applying my knowledge and experience accumulated from mycommitment to environmental issues over many years.

Director Outside

Junko Edahiro

For more than 20 years, I have been involved in environmental issues. Believing that solving environmental
concerns requires a focus on the concepts of happiness, economy and society, I have established theInstitute for Studies in Happiness, Economy and Society and have been engaged in a variety of activities.
Global warming is an energy issue. Energy also lies at the foundation for achieving the SDGs. Among the
global trend of reducing the use of coal, the gas industry has the key to increasing renewable energy and will
simultaneously need to make a significant change in its business model. I am very honored and humbled tohave been appointed as an Outside Director in this phase of major change. I hope to present my opinions byusing my knowledge and global network fostered through a variety of initiatives over a long period.
In addition, believing that leadership development is important for organizations, I am teaching systems
thinking and challenges in sustainability to adult students from 22 countries at Shizenkan University Graduate
School of Leadership & Innovation. Strengthening the abilities to look to the future, understand the structureof reality and enlist people, which are necessary skills to survive in an age of instability and uncertainty, willlead to solving social issues. I wish to apply my knowledge and experience to help Tokyo Gas strengthen
these three abilities and contribute to solving social issues.

51

Invisible Assets

INVISIBLE ASSETS

Achieving sustainable growth by refining the invisible assets that underpin our
GPS×G ([Gas & Power + Service] × Global) strategy

Safe and stable energy
supply infrastructure
P25

See details in the “Business overview.”

Relationships of trust with11 million customers
P31

See details in the “Business overview.”

Relationships of trustwith business partners
P52

Digitalization andtechnology development
capabilities (Innovation)
P53

Human resources
P55

ESG Initiatives
Environmental, Social, Governance
P57

52

TOKYO GAS INTEGRATED REPORT 2019

Relationships of trustwith business partners
In the present stage of transformation of the energy industry, namely,
the full deregulation of the electricity and gas retail markets, we areexchanging information broadly with not only electricity and gas
companies but also players in various industries. Moreover, we arepromoting cooperation in areas where we foresee mutual synergies
such as gas resource procurement and the electricity business(power plant construction and electricity sales).

LNG value chain

LNG procurement

Using technology and know-how concerning the integrated energy business,
we provide energy solutions to customers who are expanding business inSoutheast Asia and North America, and contribute to infrastructure-building.
PetroVietnam
Gas

Signing of a Memorandum of Understanding for Coopration on
the Development of the LNG Value Chain in Vietnam

PT Pertamina

Signing of a Memorandum of Understanding with Pertamina
towards Forming a Strategic Alliance-Cooperation for
Development of LNG Value Chain in Indonesia

Petronas LNG
Ltd.

Signing of a Memorandum of Collaboration

PT MiuraIndonesia

Signing of a Memorandum of Understanding on Mutual
Cooperation in Indonesia

First Gen

Signing of a Joint Development Agreement on the construction
and operation of the LNG receiving terminal in the Philippines

Ensure flexibility and realize cost-competitive LNG
procurement by enhancing and expanding alliance with
LNG players in Japan and overseas.

Kansai Electric Power

Korea Gas Corporation

Centrica, U.K.

Kyushu Electric PowerCPC Corporation, Taiwan

RWE, Germany

Power generation

Electricity sales

Expand competitive power sources.

Expanding electricity sales to high-voltage and extra-highvoltage customers

JXTG Nippon Oil & Energy Corporation(Kawasaki Natural Gas Power Station)
Kobe Steel, Ltd. (KOBELCO) (Moka Power Station)
Idemitsu Kosan Co., Ltd. (Ohgishima Power)
Idemitsu Kosan Co., Ltd. and KYUSHU ELECTRIC POWER CO., INC.
(Chiba-Sodegaura Energy)
ENGIE, France (Renewables joint-venture company in Mexico)Tohoku-Electric Power Co, Inc.

NTT Group

OSAKA GAS CO., LTD.

(Synergia Power Co., Ltd.)(ENNET Corporation)(ENNET Corporation)

Expanding electricity sales to low-voltage customers
Business alliances with 21 companies including gas operators
which are our city gas wholesale customers(approx. 630,000 city gas customers)

Business alliances with 27 LP gas sales companies(approx. 310,000 LP gas customers)

Enhance the electricity sales structure through cross-industrial
alliance with partners, including real estate companies who havecontact points and relationships with customers.

Service fields
Expand synergetic alliance with business partners toaccelerate initiatives to provide gas, electricity and services
as a packaged service.
OTOBANK Inc.

Audio book services

KAJITAKU CO., Ltd.

Cooking services

ENECHANGE Ltd.

Use of the basis for new services

Examples of companies in alliance
Cable TV

Real estate agency

Energy saving service Management company

Housekeeping service
MovingCity Gas Retail Services
Jupiter Telecommunications (J:COM) and 19 J:COM Group
companies (42 channels)(Plan to accept orders from the first half of fiscal 2019)

53

Invisible Assets

Digitalization and technology
development capabilities(Innovation)
Contributing to the achievement of Sustainable Development Goals (SDGs)

In light of the recent rapid advance in technology innovation in
the distributed energy system fields, including solar power,
storage battery, and electric vehicles (EVs), we are shifting fromour previous R&D focused on gas energy to an open innovationstyle of R&D focused on a broad range of innovative energy
technologies. We will acquire distributed energy systems, AI, IoT
and other digital technologies, and business models that makeuse of them to accelerate initiatives to create new energy
businesses and new services. We will also use digitaltechnologies to enhance convenience to our customers, promote
efficiency and sophistication in operations and solve
management issues.

2017

Commenced
initiatives todevelop newtechnologies

The history and future of our innovation
Tokyo Gas history of innovation

1885

1902

1969

1981

2001

2009

2017

Tokyo Gas
establishedFirst gas equipment
to receive a patent inJapan

First LNG Cargocame to JapanFirst natural gas
cogeneration
system introduced
to JapanCommenced
operation of
SUPREME earthquake
disaster prevention
systemLaunched salesof world’s firstresidential fuelcell system

Established Acario
Ventures

Applying and deploying advanced examples around theworld in the Japanese market

Creating new businesses and services

Through information gathering on U.S. venture firms, andinvestment in and collaboration with energy-related venture
capitals by Acario Ventures, which we established in Silicon
Valley, we absorb new technologies and business models in theenergy service business areas around the world to apply anddeploy them in the Japanese market, while making smart use of
our advantages.
Capitalinjection

Creating new energy businesses
By combining energy-saving and eco-friendly gas cogeneration
systems and storage cells, we will create new value, such asadvanced energy management for customers and providing load
adjustment capabilities required with the widespread use ofrenewable energy (participated in the verification tests in the UK).

Creating new services
We will combine our service and energy capabilities in a specificmarket, such as sales and maintenance of gas equipment andenergy, to create business and provide high added value tocustomers and society. We will create business on a broad front,
eyeing possibilities, such as development of sub-brands.
Capitalinjection

The New Business Creation Project
Department was established
To be spun off into a separate
company within fiscal 2019

54

TOKYO GAS INTEGRATED REPORT 2019

Society in the
futureLow-carbon society
Hydrogen-oriented society

Future innovation

Blockchains

Smart society

Storagecells

Robotics

IoT

AI

Use of data in solving management issues

Electric
power

Renewableenergy

VPP(Virtual Power
Plant)

Earthquake disasterprevention and stable supply
Comfortable, convenientand secure living

Improving productivity through Business
Process Reform (BPR), etc.

Use of the cloud, etc.
and organizational
re-engineering
Corporate operations
Contact points withcustomers

Through unified management of operation status data
concerning equipment for gas production and power generationequipment, and information on demand, prices, and ship
deployment, and by AI-enabled forecasting of equipment
operation and sales planning, we work on solving management
challenges, including optimization of equipment management
and the entire value chain.

Procurement

Transportationand production(LNG terminals andpower generation
plants)

Sales

Promoting efficiency
and sophisticationin operations
and enhancing
convenience tocustomers
Use of SNS, chats, andother digital channels
Accepting inquiries
from customers

Use of VR,
tablets, etc.
On-site patrol andinspections
Proposals tocustomers

Demand forecasting

Use of digital technologies

Optimizing deployment of ships and operation ofterminals and power generation plants

Review and decluttering of operations
Thorough benchmarking

Price forecasting of crude oil, LNG and electricity
Optimizing market trade

Establishment of the Corporate
Innovation Project Department

55

Invisible Assets

Human resources
Contributing to the achievement of Sustainable Development Goals (SDGs)

Because we see human resources as the underlying source of
creation of corporate value, the Tokyo Gas Group is striving todevelop employees who have high-level expertise and integrity,
and respond flexibly to changes in society and the businessenvironment. In line with this policy, we are working to implement
workstyle reforms and promote diversity, to ensure maximum
effective utilization of the knowledge, skills and experience of
personnel working in the Tokyo Gas Group.

Personnel
hiring anddevelopment

Strengthening personnel tosupport growth

Creating an environment
conducive to maximizing theeffective use of knowledge,
skills and experience

Workstylereform
Improvingproductivity andachieving a healthy
work-life balance

Driving

Promotingdiversity
Promoting activeroles for diverse
personnel

Personnel hiring and development
We are engaged in the hiring anddevelopment of human resources
with a strong sense of duty andresponsibility, who can takethe initiative to think and act forthemselves, and who can growwhile cooperating with their fellow
colleagues; who can become corepersonnel and act as a strong driving
force for business operations in adiverse range of fields.

Hiring personnel with high levelsof expertise

Strategic shift to
growth domains

Developing business leaders

In addition to hiring new graduates
for specific job types (inhumanities, sciences and theprofessional domain), we also
engage in flexible hiring ofexperienced and highlyspecialized mid-career personnel.

In addition to our gas business, we
also prioritize assignment of
personnel to strategically-importantfields such as our electric power
and overseas business operations.
In this way, we are promoting
growth and expansion in a diverse
range of fields.

We train business leaders who willlead the Tokyo Gas Group in the
future, with a training program that
focuses primarily on development
through a wide range of on-the-job
training (OJT) experiences gained bymeans of transfers and rotations,combined with additional off-the-job
education and training (OFF-JT).

Hiring, fostering and placing of personnel who support promotion of “GPSG”

Workstyle reform (Improving productivity and achieving a healthy work-life balance)
In order to enable each and every
one of our employees to work
energetically and make maximum
effective use of their abilities, we
are working proactively to rectify
and reduce long working hours, andto implement workstyle reforms withawareness of “the value of time,”
which we regard as important issues
for management involvement.

Specific initiatives
Promoting workstyles with awareness of the value of time
Prohibiting overtime work after 20:00 (as a general rule) and encouraging
employees to declare in advance what time they will be leaving work, etc.

Collaborative work space of a new office of
the Digital Innovation Division

Environmental improvement to allow diverse personnel to display their full potential• Introducing a “Work Anywhere” program which eliminates • Working to create workplaces that enable innovation to occur
restrictions on working location (Work at home, mobile work) • “Work in a Free-form Animated Manner” (Online video• Building satellite shared offices
conferencing, office reforms, etc.)• Improving the office environment toward further• Promoting automation / mechanization using ICT, and more
improvement in productivity
sophisticated use of data (utilizing RPA, audio AI, etc.)

56TOKYO GAS INTEGRATED REPORT 2019

Promoting diversity (Promoting active roles for diverse personnel)
Top Management Commitment
The Tokyo Gas Group is working to promote diversity (promoting
active roles for diverse human resources), with a view to future
growth and advancement. Even in the midst of this greatcompetitive age of energy, the Group aims to grow and advanceas a global integrated energy corporation by coming to termswith every one of its customers, having them choose Tokyo Gas
products and services, and contributing to creation of a better
society and secure and comfortable lifestyles. One important
issue for the entire Group to tackle in order to achieve this, isthe promotion of diversity. In order to satisfy the continually
diversifying needs of each and every customer, it is essential for
us to create an environment in which every Group employee cantake an active role and work as part of a team, making maximum
effective use of his or her knowledge, skills and experience. Moving
forward, we will continue working proactively to develop andenhance more schemes for supporting this ideal, to foster greater
employee awareness and create a better corporate culture within
our organization, and aim to create a corporate group in which all
employees can take an active role, regardless of their gender, age,presence or absence of disabilities, employment type, nationality,
sexuality, gender identity, or any other such attributes.

Basic Policy Regarding Promotion of Diversity
1 Realize diversity in working styles, and productivity

enhancement

We aim to achieve the realization of an organization (withdiverse working styles and increased productivity) in which
every person accepts each other’s working style while
enhancing productivity.

2 Promoting empowerment of women in workplace
We regard promoting the success of women as the beginningof the promotion of diversity, and will continue to undertake
this proactively.

3 Diversity Promotion TeamWe will establish a “Group Diversity Promotion Team” andpromote diversity throughout the entire group, in an integrated
manner together with management.

Takashi Uchida
Representative Director, President and CEO
Tokyo Gas Co., Ltd.

Specific Initiatives
Promotingempowermentof women in
workplace

2016: First female executive officer appointed
2018: First female senior executive officer appointed

Almost 100% return-to-work rate for female
employees returning from childcare leave
Almost no difference in gender in terms of average
years in service of the company

Employmentof people withdisabilities

Employment rate of 2.46%, exceeding the
mandatory rate (as of June 2019)
Established a liaison committee to promote
employment of disabled people as a group
Working to create safe and comfortable working
environments

Careerdevelopment
support for
employees intheir 50s andoverEstablished the “Grand Career System” to support
career development for employees in their 50s andover, through training sessions and interviews withcareer consultants, etc.

People differ from each other.
We believe this makes them great assets.
We have established a Concept Message as a tool
to more simply communicate our vision that “eachand every employee makes use of his or her diverse
strength and helps grow the Group” as described in
the Top Management Commitment. In order to raiseawareness and actions by more group employees,
we set November 2018 as a “Month of Diversity”
and held various seminars concerning diversity,
which was attended by around 800 people.

Occupational safety and health
Health and safety are the essential basis for the existence of any company, in protecting the
lives and health of their employees. The Tokyo Gas Group is working to reduce risks with a viewto eliminating work-related accidents, and to maintain and improve the health of its employees
through mental health initiatives and measures to prevent lifestyle-related illnesses. In termsof health management, we work to ensure that 100% of our employees take regular healthcheckups, and make effective use of early-stage detection of disease outbreaks and external
healthcare institutions.

External
Evaluation

Selected as a Nadeshiko Brand

Granted Kurumin certification

Selected as a Health & Productivity Stock

Tokyo Gas was selected
as a corporate brand thatis appealing in terms of
its proactive efforts toencourage and empower
women.

Tokyo Gas was certified by the Ministryof Health, Labour and Welfare (MHLW) as
a company that has formulated an action
plan, achieved targets and met certain
criteria in accordance with the Act on
Advancement of Measures to Support
Raising the Next Generation of Children.

Tokyo Gas was selected as a
Health & Productivity Stock,
as a company that considers
and strategically approaches
employee health managementfrom a corporate management
perspective.

57

Invisible Assets

ESG initiatives

Environmental, Social, GovernanceTokyo Gas Sustainability Report 2019tokyo-gas.disclosure.site/en

CSR priority issues (materialities) and contributing to the achievement of Sustainable Development Goals (SDGs)
CSR priority issues (materialities)

Materiality
Stable supply of gas and electricity

Stable supply of energy both in Japan andoverseas

P25

Stable procurement of raw materials
Construction of energy infrastructure in developing countries

Strategy

Safety and disaster prevention / readiness

Robust energy platform

Sustainable urban development and comfortable lifestyles

Conversion of society overall to a low-carbon
society through the supply of energy

P25

Measures against global warming
Promoting recycling of resources

P05

Promoting conservation of biodiversity
Creating an organization full of energy and vitality

Infrastructure

P39

Building good relationships with stakeholders

Fulfilling our public duty as an energy company

P55
P31
P52
P25

Governance and compliance
Under the Basic Policy on CSR to tackle social challenges through our business activities, we seek to maintain the security andsafety of people’s lives by providing a stable supply of energy, which is the foundation of daily life and industry, and to play ourpart in building a sustainable society by supplying energy that excels in environmental consideration. As for promoting activities,
we make assessment and improvement of targets that have been identified for each materiality, while making clear the relationshipbetween materialities and SDGs to help achieve the SDGs through CSR management.

ESG

Highlights

E Environmental
By developing and promoting widespread use of highefficiency equipment, and expanding use of distributed
power generation systems, we reduced the amountof CO 2 emissions by 4.52 million tons in fiscal 2018 incomparison with fiscal 2011.

110,000

Reduction in CO2 emissions during consumption of city gas by customers

Gas cogeneration system’s power generation efficiency

4.52

million tons

CO2

Cumulative sales of ENE-FARM

units

52

%

CO2

Concerning the residential fuelcell system ENE-FARM thathelps enhance energy efficiency
and reduce the amount of CO2
emissions, we as vendors reached
110,000 units in cumulative sales
of ENE-FARM in December 2018.

By promoting development ofhigh-efficiency gas cogeneration
systems, we developed
commercial-use fuel cells withpower generation efficiency of
52% and total efficiency of 90%.

58

TOKYO GAS INTEGRATED REPORT 2019

Stable supply of gas and electricity
Stable procurement of raw materials
Construction of energy infrastructure
in developing countries
Stable Supply of Energy

Development of
Sustainable Communities

Development of
Innovative Technologies

Response to Climate
ChangeSafety and disaster prevention
Sustainable urban development

Further promoting CSR management
Given heightened expectations and requests nowadays tocompanies to help realize sustainable society, we unified theEnvironmental Affairs Department and the CSR Room of the
Corporate Communications Department and established theSustainability Promotion Department in April 2019. In addition,
we have reorganized the CSR Promotion Committee chaired by
an officer in charge to a Sustainability Committee chaired byPresident, with the aim of further promoting CSR management.

CSR promotion organizational chart

Measures against
global warming

Strategic initiatives

Infrastructure
initiatives

Board of Directors
Creating an organization full ofenergy and vitality
Building good relationships withstakeholders
Fulfilling our public duty as anenergy company

Corporate Executive
Committee

Sustainability Committee
Chairman: Representative Director,
President & CEO

Most relevantmaterialities toTokyo Gas

Sustainability Promotion Committee
Chairman: Officer in Charge of
Sustainability
Executive Office: Sustainability Promotion Dept.

Leveraging our insights and technologies accumulated infrom over 130 years of operations in the energy business,
we focus on Sustainable Development Goals (SDGs) 7, 9,
11, and 13 and promote initiatives that contribute to solve
social issues by engaging with our stakeholders.

Business
departmentsof Tokyo Gas

Subsidiaries

S Social

G Governance

As a general gas pipeline operator, we provide clean city gas
to over 11 million customers via a gas pipeline network of over
60,000 km. We had no supply disruption arising from major
accidents in fiscal 2018.

We made changes to further increase the proportion of outside
members in our Board of Directors and Audit & Supervisory
Board by reducing the number of inside members by three incomparison with the previous year (from 10 to 7) in fiscal 2018,
and increasing the number of outside members by one (from 6to 7) in fiscal 2019.
P41
Corporate governance

Number of customers

11

million

Supply disruption arisingfrom major accidents

0Changes to the makeup of our Board of Directors and Audit & Supervisory Board
FY2018FY2019!
InsideMembers 7

OutsideMembers 6

InsideMembers 7

OutsideMembers 7

59

Deregulation

City Gas andElectric PowerBusinesses

Electricity
Meaning and Objectives ofElectricity System Reforms

After Full Deregulation

Securing a stable supply ofelectricity
Lowering electricity rates
Expanding choices for customers

After the phased and subsequent full deregulationof the electric power retail market in April 2016
and of the retail gas market in April 2017,
Japan’s energy market has become fully deregulated.

Deregulated

Progress of deregulation
Deregulation has progressed in phases, shifting from large-lot tosmall-lot sales.

Deregulation
progress

Electricity

City gas

26 %

1999

Deregulation begins

1995

100 %

2016

Full deregulation of theretail market

2017

2020

Legal separation of powertransmission and gas pipeline

2022

Deregulation
progress

49 %Our strengths and achievements
Tokyo Gas owns four high-efficiency LNG- fueled
power plants (1.6 million kW equivalent power
generation capacity).

Powergeneration

The present

100 %Kobelco Power Moka Inc. is currently
constructing power station at Moka, in Tochigi
prefecture. Tokyo Gas plans to begin phased
acceptance of supply of electric power from theplant as of 2019, and expand the generation
capacity of its own power sources to around 3.0
million kW by 2020.

Regulated businessElectric power service area

Responsibility for supply(power transmission and distribution operator)(Providing final guarantee service,
maintaining balance of supply and demand, etc.)

Electric power service
covers the whole of Japan

Transmission
and distribution

Our operation
Tokyo gas transmits and distributes electric powerusing transmission and distribution grids owned
and operated by power transmission anddistribution operator.

Deregulated

60Hz

50Hz

Our strengths and achievements
All electric power grids across the whole of Japan, from Hokkaido in
the northeast to Kyushu in the southwest, are connected by power
distribution lines. This infrastructure enables power exchange(lending) across the conventional barriers between individual powercompanies, and supports the stable supply of electricity andefficient operation of power generation facilities.
Although in Japan electricity is distributed at frequencies of
either 50Hz (East Japan) or 60Hz (West Japan) depending on theregion, the installation of specialized transformer equipment in
Nagano and Shizuoka prefectures has enabled the transformationand mutual exchange (lending) of certain volumes of electric power
even between east and west.

RetailUtilizing our sales network, which is closely linked
to local communities, we supply electric power
as a retail service to 1.77 million customers (as ofmarch, 2019).
We also maintain alliances with other companies.

60

TOKYO GAS INTEGRATED REPORT 2019

Division of safety responsibility
Gas retail operators, including new market entrants, are obligatedto perform gas appliance inspections and engage in risk prevention
publicity. However, as the existing gas operators have know-how
regarding these obligations, the market environment has been
prepared to make it easy for new entrants to outsource these duties
to existing operators.

City gas
Meaning and Objectives of
Gas System Reforms

Securing a stable supply of city
gas and increasing its use
Lowering city gas rates andincreasing customer
satisfaction
Expanding choices forcustomers and enhancing
safety at customer sites

Safetyregulations

City gas facilities

Gas appliances

Gas meter
Boundary ofpropertyGas
valvesUser’s site

Deregulated

Assetseparation

Business
operator

Our strengths and achievements
Tokyo Gas owns four LNG terminals in the
Kanto region. Utilizing these four terminals(the Negishi, Ohgishima, and Sodegaura
LNG terminals in Tokyo Bay, and Hitachi
LNG terminal in Ibaraki Prefecture), weare promoting stable, efficient terminal
operations.

Gas pipeline operator

Gas retail operator

Inner-pipe leakage
testing

Gas applianceinspection, etc.

Safetyresponsibility

Production

Emergency
maintenanceFull Deregulated Market of the Electricity and Gas
Number ofcompanies*
Electricity
City gas

Approximate
potential customers(million)

Approximate
market size(¥ trillion)

85
29
26

8.0
2.8
2.4

10

Within TEPCO’s
domain203*Former general electric power operators, former general gas operators*From materials officially announced by the Ministry of Economy, Trade and Industry

Regulated business

Expansion of city gas service area

Obligations of fair operation andguarantee of final (last resort) supply to
all retail operators
Our achievements
Tokyo Gas’s pipeline network covers a total distanceof over 60,000 km in the Kanto region. We are also
expanding and enhancing our network with new
infrastructure to improve our supply capabilities.

User(excluding gas meters)

SupplyMoving forward city
gas service willcontinue to expand thecity gas service area

We operate a safe and stable pipeline network.

Deregulated
Service area

Our strengths and achievements
Our sales organization is closely linked to local
communities.
We also have the capability to propose a variety ofenergy solutions.

Retail

Because city gas business developed through efficient pipeline
network construction, utilizing economies of scale, the supply areas
are centered primarily around urban areas, and city gas business do
not currently operate in regions with low population densities or low
industrial concentrations.
In Japan, city gas business rely on LNG imports from overseas forthe majority of our raw materials, and have established a supply
infrastructure, within the scope of reason, by constructing LNG
terminals in proximity to major consumer areas. Because of thishistory, the development of a nationwide gas pipeline network has notprogressed in the same way as the electric power business.
In the Japanese government’s gas system reforms, too, experts havepointed out the necessity for developing an overall optimal pipeline
network, and considerations are currently underway with regard to this.

61

Financial data

11-Year Consolidated Financial Highlights As of March 31, 20192009.32010.32011.32012.3

1,660,162

1,415,718

1,535,242

1,754,257

Operating Profit (¥ million)

65,20485,229122,451

77,075

Operating Profit Margin (%)

3.93

6.02

7.98

4.39

Ordinary Profit (¥ million)

58,337

83,519121,548

75,620

Profit attributable to owners of parent (¥ million)

41,70853,781

95,46746,060Net Sales (¥ million)

Equity (¥ million)

772,365

813,886

858,920

839,166

Total Assets (¥ million)

1,764,185

1,840,972

1,829,661

1,863,885

Interest-bearing Debt (¥ million)

593,230

555,919584,169

625,830

Operating Cash Flow (¥ million)

182,791

199,898

244,803

194,565

Free Cash Flow (¥ million)

36,862

51,712

94,60048,152

EBITDA (¥ million)

206,287

231,346

271,788

225,580

Capital Expenditure (¥ million)

145,929

148,186

150,202

146,413

Depreciation (¥ million)

141,083

146,117

149,336

148,505

15.37

19.86

35.63

17.70

EPS (Earnings per Share, fully diluted) (¥)
BPS (Book Value per Share) (¥)

284.72301.58320.70324.672,717,571

2,703,761

2,684,193

2,590,715

8

9

9

9

DOE (Dividends on Equity) (%)

2.78

3.07

2.88

2.74

Payout Ratio (%)

51.18

45.32

25.26

50.85

Total Payout Ratio (%)

63.35

60.11

60.87

61.36

Current Ratio (%)

118.99120.93142.26156.89D/E (Debt-Equity) Ratio (times)

0.77

0.68

0.68

0.75

Equity Ratio (%)

43.78

44.21

46.94

45.02

ROE (Return on Equity) (%)

5.41

6.78

11.41

5.42

ROA (Return on Assets) (%)

2.41

2.98

5.20

2.49

Total Asset Turnover (times)

0.96

0.79

0.84

0.95

TEP (¥100 million)

-48

186

640

91

WACC (%)

3.4

3.2

3.3

3.1

Number of city gas customers (thousand)

10,513

10,637

10,73910,855

Gas Sales Volume (million m 3 )13,942

13,666

14,745

15,190

Number of Issued Shares (Common Stock) (thousands of shares)
Dividend per Share (¥)

2020 vision basis*

15,833

Number of electricity retail customers (thousand)Electric power sales volume (billion kWh)

8.27

Notes: * 2020 Vision basis … The figures represent baseline values for sales volume targets set forth in our management vision, Challenge 2020 Vision. They are obtained by adding volume forin-house use and LNG sales volume (excluding volume for Nijio) to consolidated gas sales volume.
* Depreciation includes amortization of long-term prepaid expenses.
* The financial information contained in this integrated report is based on annual securities report. However, it has not been audited by certified public accountants.
* The Company carried out a share consolidation at a ratio of 5 common shares to 1 on October 1, 2017.
The dividend per share of 55.0 yen is calculated on the post-consolidation basis (the interim dividend of 5.50 yen per share before the share consolidation and the year-end dividend of
27.50 yen per share after the share consolidation).

62

TOKYO GAS INTEGRATED REPORT 20192013.32014.32015.32016.32017.32018.32019.3

1,915,639

2,112,117

2,292,548

1,884,656

1,587,085

1,777,344

1,962,308

145,633

166,044

171,753

192,008

58,365

116,30293,704

7.60

7.86

7.49

10.19

3.68

6.54

4.78

147,453

159,613

168,169

188,80955,688111,546

89,386

101,678

108,451

95,828111,936

53,13474,98784,555

927,634

1,011,787

1,069,515

1,100,271

1,101,498

1,136,027

1,159,055

1,992,403

2,176,816

2,257,662

2,251,518

2,230,269

2,334,316

2,428,149

642,550

713,823

730,739715,769

713,596

724,940

803,216

240,448

248,831237,680

257,122

217,439

240,328

246,436

56,651827

13,08425,08914,081

31,58322,655

284,403

306,424

313,605

337,194

222,670

281,643

255,585

183,797

248,004

224,596

232,033

203,358

208,745

223,781

138,770

140,380

141,852

145,187

164,305

165,342

161,881

39.52

43.10

39.15

46.68

23.02

164.12*

187.60360.70402.91438.28460.35479.742,487.58*

2,575.99

2,577,919

2,517,551

2,446,778

2,396,778

2,302,856

458,073*451,356

10

10

10

11

11

55*

60

2.91

2.59

2.34

2.42

2.29

2.25

2.35

25.30

23.20

25.55

23.57

47.79

33.51

31.98

60.70

60.00

60.80

60.10

60.71

60.17

60.31

162.16

156.67150.63155.48142.69135.59156.01

0.69

0.71

0.68

0.65

0.65

0.64

0.69

46.56

46.48

47.37

48.87

49.39

48.67

47.73

11.51

11.18

9.21

10.32

4.83

6.70

7.37

5.27

5.20

4.32

4.96

2.37

3.29

3.55

0.99

1.01

1.03

0.84

0.71

0.78

0.82

598

507

434

676

-62

244

68

3.2

3.2

3.6

3.4

3.0

3.1

3.0

10,978

11,111

11,263

11,398

11,536

11,678

11,81815,39014,735

15,541

15,436

15,72015,56815,19816,741

17,22518,36018,587

19,05319,052

18,397

667

1,130

1,774

12.65

14.66

15.48

9.98

9.71

10.61

10.96

Computations
Operating Cash Flow = Profit attributable to owners of parent + Amortization of Long-term Prepaid Expenses + Depreciation
Free Cash Flow = Profit attributable to owners of parent + Amortization of Long-term Prepaid Expenses + Depreciation – Capital Expenditure
Current Ratio = Current Assets (year-end) / Current Liabilities (year-end) x 100
Debt-Equity Ratio = Interest-bearing Debt (year-end) / Equity (year-end)
Equity Ratio = Equity (year-end) / Total Assets (year-end) x 100
Total Asset Turnover = Net Sales / Total Assets (average)
TEP (Tokyo Gas Economic Profit) = Profit after taxes and before interest payments – Cost of capital (invested capital x WACC)

WACC calculation data (fiscal 2018 actual)∙ Interest-bearing debt cost: Real interest rate of 0.85%(after tax)
∙ Cost of shareholders’ equity∙ Risk-free rate: 10-year JGB yield of 0.06%∙ Risk premium: 5.5%, Beta coefficient of 0.75

63

Financial data

Operating cash flow

Total payout ratio(¥ million)(%)

300,000

70.0

60.0

250,000

50.0
200,000
40.0
150,000
30.0
100,000
20.0
50,00010.0

002012.32013.32014.32015.32016.32017.32018.32012.32019.32013.32014.3Return on equity (ROE)

2015.32016.32017.32018.32019.32016.32017.32018.32019.32018.32019.3

TEP(%)(¥100 million)

12

750

10

600

8

450

6

300

4

150

2

0

0

-150
2012.32013.32014.32015.32016.32017.32018.32012.32019.3

Gas sales volume

2013.32014.32015.3

Electric power sales volume(million m )(billion kWh)

21,00018

17,50015

14,00012

10,500

9

7,000

6

3,500

3

3

0

0
2012.32013.32014.32015.32016.32017.32018.32019.32012.32013.32014.32015.32016.32017.3

64

TOKYO GAS INTEGRATED REPORT 2019

Consolidated Balance Sheet2018.3.31

Consolidated Statement of Income(¥ million)
2019.3.31

AssetsNon-current assets
Property, plant and equipment
Production facilities
Distribution facilities
Service and maintenance facilities
Other facilities
Inactive facilities
Construction in progress

236,334
560,216
52,244406,221316
157,913

234,433
548,529
49,586447,608316
145,160

Total property, plant and equipment

1,413,246

1,425,634

Intangible assets
Goodwill
Other intangible assets

1,254
92,167

1,306
119,052

Total intangible assets

93,422

120,359

Investments and other assets
Investment securities
Long-term loans receivable
Retirement benefit asset
Deferred tax assets
Other investments and other assets
Allowance for doubtful accounts

239,379
27,9291740,856
36,693(378)

225,212
40,15824
42,42547,950(362)(¥ million)
2017.4.1-2018.3.31

2018.4.1-2019.3.31

Net sales
Cost of sales

1,777,344
1,203,991

1,962,308
1,407,345

Gross profit

573,353554,963

Selling, general and administrative expenses
Supply and sales expenses
General and administrative expenses

392,680
64,370392,466
68,791

457,050

461,258

116,30293,704

1,158
2,967
1,637

1,612
2,812
1,668

Total selling, general andadministrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Rent income
Share of profit of entities accounted
for using equity method
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Miscellaneous expenses
Total non-operating expenses

2,493

2,794

4,800

4,883

13,057

13,771

11,6196,193

11,091
6,997

17,81318,089111,546

89,386

3,403
3,049

29,306
6,420

6,452

35,727

Total investments and other assets

344,497

335,409

Total non-current assets

1,851,165

1,901,403

128,331
216,234
22,18815
2,494
12,41745,45456,897(884)

93,092
265,225
19,647

3,213

7,865

483,150

526,745

Profit before income taxes

114,784

117,248

2,334,316

2,428,149

Income taxes - current
Income taxes - deferred

31,527
7,957

26,113
6,823

Non-current liabilities
Bonds payable
Long-term loans payable
Deferred tax liabilities
Retirement benefit liability
Provision for gas holder repairs
Provision for safety measures
Provision for appliance warranties
Provision for point card certificates
Asset retirement obligations
Other non current liabilities

Total income taxes

39,48432,936294,998
358,680
10,89873,161
3,107
3,115
9,984
835
13,20061,572334,998
394,542
17,51775,262
2,990
1,776
14,0571,450
11,94064,640

Profit75,30084,311

312(244)

74,98784,555

Total non-current liabilities

829,554919,176

58,09480,8197,800
30,237
179,376

51,566
69,605
5,133
31,283
180,037

356,328

337,626

1,185,882

1,256,803

141,844
1,898
936,635(3,642)

141,844
1,634
976,550(4,111)

1,076,736

1,115,918

30,28222,756(251)
33,206(3,945)

1,604
24,770(5,994)59,291

43,137

Current assets
Cash and deposits
Notes and accounts receivable - trade
Lease receivables and investment assets
Securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Other current assets
Allowance for doubtful accounts
Total current assets
Total assets

2,194
12,73063,73571,306(1,186)

Liabilities

Current liabilities
Current portion of non-current liabilities
Notes and accounts payable - trade
Short-term loans payable
Income taxes payable
Other current liabilities
Total current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on availablefor-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated othercomprehensive income
Non-controlling interests

12,405

12,289Total net assets

1,148,433

1,171,345

Total liabilities and net assets

2,334,316

2,428,149

Ordinary profit
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Total extraordinary income
Extraordinary losses
Impairment loss
Loss on valuation of investment
securities

3,213
7,865

Total extraordinary losses

Profit (loss) attributable to noncontrolling interests
Profit attributable to owners of parent

Consolidated Statement ofComprehensive Income
Profit before minority interests2017.4.1-2018.3.31(¥ million)
2018.4.1-2019.3.31

75,30084,311

3,145(7,528)Other comprehensive income
Valuation difference on available-forsale securities
Deferred gains or losses on hedges
Foreign currency translation
adjustment
Remeasurements of defined benefit
plans, net of tax
Share of other comprehensive
income of entities accounted forusing equity method

666

221

(3,537)(6,735)(8,784)(2,073)407(78)

Total other comprehensive income(8,101)(16,193)

67,198

68,11866,856

68,401

341(283)

Comprehensive income
Breakdown of comprehensive income
Comprehensive income
attributable to owners of parent
Comprehensive income attributable tonon-controlling interests

65

Financial data

Consolidated Statement of Cash Flows(¥ million)

Cash flows from operating activities
Profit before income taxes
Depreciation
Amortization of long-term prepaid expenses
Loss on retirement of property, plantand equipment
Loss (gain) on sales of non-current assets
Loss (gain) on sales of investment securities
Loss (gain) on valuation of investment
securities
Increase (decrease) in retirement benefit liability
Increase (decrease) in reserve for safetymeasures
Increase (decrease) in reserve for
fixtures assurance
Interest and dividend income
Interest expenses
Share of loss (profit) of entities
accounted for using equity method
Decrease (increase) in notes andaccounts receivable - trade
Decrease (increase) in inventories
Increase (decrease) in notes andaccounts payable - trade
Increase (decrease) in accrued
consumption taxes
Decrease (increase) in accounts
receivable - other
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of investment securities
Proceeds from sales and redemption of
investment securities
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of long-term prepaid expenses
Proceeds from sale of non-current assets
Purchase of shares of subsidiaries resulting inchange in scope of consolidation
Proceeds from sales of shares of subsidiaries
resulting in change in scope of consolidation
Payments of long-term loans receivableCollection of long-term loans receivable
Net decrease (increase) in short-termloans receivable
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Net increase (decrease) in commercial papers
Repayments of lease obligations
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Purchase of treasury shares
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash
and cash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of
periodCash and cash equivalents at end of period

2017.4.12018.3.31

2018.4.12019.3.31

114,784
161,093
4,248

117,248
157,574
4,306

1,845

2,248

(3,397)(3,042)(29,283)(6,385)

435

7,865

(12,461)

1,039(1,596)(1,338)

(314)

4,073

(4,125)
11,619(4,425)
11,091(2,493)(2,794)(20,602)(46,191)(4,948)(18,336)(631)(5,321)

3,000(3,002)

1,265(2,541)

36,578281,258
12,295(11,502)(22,312)259,738(16,526)
169,300
9,387(10,809)(26,571)
141,306(47,898)(17,603)

5,021

12,082(177,671)(27,638)(1,653)
3,799(168,144)(39,491)(8,561)
25,050-(1,054)99

1,768(3,101)
2,801(12,238)
4,074

(580)

3,686

(340)
(247,162)(3,030)(203,462)(2,645)(1,526)60,471(62,065)
20,000(7,082)(25,187)
1,385(16,651)(1,466)
10,000(1,613)59,354(23,726)
70,000(40,000)(20,051)(24,936)
68
27,628

(220)

(710)

(4,294)(35,238)

132,566

128,271

128,271

93,032

Factors Affecting Revenues
and Expenses
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 rateadjustment system. Through this system, average
raw material prices over a three-month period
according to trade statistics are compared with theraw 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 offour months on average (called a sliding time lag)exists between the payment 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 orover-recovery of raw material costs if this lag cuts
across a fiscal year, thereby affecting income.
Looking at the medium- to long-term, however, thegas rate adjustment system has a neutralizing
effect on the income impacts of fluctuations in raw
material costs.
Timing of the Standard Average Raw Material
Cost Calculation and Reflection in Gas Rates
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
Average raw
material price

Reflection in gas rates Jun. Jul. Aug.

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

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

Under
recovery

FY N

Over
recoveryFY N+1

66

TOKYO GAS INTEGRATED REPORT 2019

Our Potential

Energy demand concentration in the Kanto Region
We are extending our pipelines across the Kanto region, our market area, to meet the huge potential demand for natural gas
mainly from industrial districts where many plants using heavy oil are located.

Ibaraki–Tochigi Line

North Kanto
Industrial Zone

Hitachi LNG Terminal

Moka Power Station(Scheduled for 2019)

Ibaraki Line (Scheduled for FY2020)

Kashima Waterfront
Industrial Zone

Kashima Waterfront Line

Kawasaki Natural Gas
Power Generation Co., Ltd.

Chiba–Kashima Line

Tokyo–Yokohama
Industrial Zone

Tokyo–Chiba
Industrial Zone

Ohgishima
Power Co., Ltd.

Tokyo Gas Baypower Co., Ltd.
Sodegaura LNG Terminal

Tokyo Gas Group pipelines
Tokyo Gas’s pipeline(under construction)

Other companies’ pipelines
Tokyo Gas Group Supply Area
Industrial zones

Ohgishima LNG Terminal
Negishi LNG Terminal

Factories

Tokyo Gas Yokosuka Power Co., Ltd.

100km

Potential for Industrial and Commercial Demand in the
Kanto Region (200-kilometer radius around Tokyo)

100~200-km area

100-km area

2.0 billion m3

7.0 billion m3

Cogeneration system /Power generation

Fuel conversion

0.3 billion m3

5.1 billion m3

20.7 billion m
15.0 billion m

3

Cogeneration system /Power generation

Fuel conversion

1.7 billion m

Gas handling volume target revised upward

3

Total

1.9 billion m3

9.0

billion m3

2012.3

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

2021.33

Financial and Industry Data
(EXCEL Spreadsheet Data Available)

Investors’ Guide
www.tokyo-gas.co.jp/IR/english/library/invguid_e.html

Quarterly Financial Results

Earnings Announcements
www.tokyo-gas.co.jp/IR/english/event/earn_e.html

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

Details of The Tokyo Gas GroupFY2018-2020 Management Plan (GPS2020)

Tokyo Gas Group– Initiatives for Energy and for the Future –(Released in October 2017)www.tokyo-gas.co.jp/Press_e/20171005-02e.pdf

Details of Corporate GovernanceCorporate Governance Reportwww.tokyo-gas.co.jp/IR/english/gvnnc/index_e.html

Sustainability activities

Tokyo Gas Group
Sustainability Report 2019tokyo-gas.disclosure.site/en

Tokyo Gas Co., Ltd. INTEGRATED REPORT 2019
1-5-20 Kaigan, Minato-ku, Tokyo 105-8527, Japan

www.tokyo-gas.co.jp/en/index.html
Stock Code 9531
IR Contact E-mail:tgir@tokyo-gas.co.jp

This integrated report is printed on Tokyo Gas
Recycled Paper (made from recycled paper
from Tokyo Gas offices, trimmings fromafforestation activities, and reused andunused wood materials) using vegetable oil
ink that contains low levels of organic solvents.

Published on August, 2019
For inquiries regarding planning and editing of this report:
Investor Relations Sect., Finansial Management Dept., Tokyo Gas Co., Ltd.

Printed in Japan