TOKYO GAS ANNUAL REPORT 2018

Invisible assets

Tokyo Gas
Group’s
Invisible Assets
Achieving sustainable growth by refining theinvisible assets that underpin our GPS×G(Gas & Power + Service × Global) strategy

ESG Initiatives(Environmental, Social, Governance)
Initiatives for achieving the realization ofa low-carbon society

Safe and stable energy
supply infrastructure

Relationships of trust withbusiness partners

The Tokyo Gas Group contributes to the creation of a low-carbon society bothin Japan and around the world by promoting and expanding the widespreaduse of natural gas, which is the cleanest of all fossil fuels.
As the Paris Treaty and other factors drive environmental policy, we will continue
to enhance our low-carbon initiatives, such as by increasing investments inrenewable energy-based power generation and future technologies.

Reduce CO2
emissions on
the customerside

Promote introduction of natural gas and/or change of fueltype for customers in areas without access to city gas
Develop and promote widespread use of high-efficiency
equipment (ENE-FARM fuel cell and cogeneration systems, etc.),
and provide solutions that make use of them
Expand the way of use for natural gas (LNG bunkering: fuelsupplies for ships)

Promote“smart” energy

demand response utilizing distributed power sources and storage
cells, etc.)

Relationships of trust with11 million customers

Digitalization and technology
development (innovation)
capabilities

Promote optimization of energy supply and demand (gas,electricity, heat etc.) using regional energy networks
Contribute to furthering the development of a low-carbon
society by creating smart energy networks (including

Developmentof renewableenergy sources

Approach renewable energy sources (such as photovoltaic
and wind power generation) with a sense of urgency, including
alliances with relevant companies
Aim to achieve a power generation capacity of 0.4 million
kW from renewable energy sources by the early 2020s
Operate a business model that also includes the use ofrenewable energy sources

Globalexpansion

Expand natural gas infrastructure and utilization
technologies cultivated in Japan to overseas markets, tocontribute to low-carbon society and sustainable growth
on a global scale

Promote development of technologies using hydrogen (ultra-

Futuretechnologies(hydrogen, etc.)

Human resources

47

efficient fuel cells with power generation efficiency of 65%, etc.)

Promote the introduction and use of technologies usinghydrogen (e.g. introduce fuel cell vehicles (FCV) for corporate fleets)
Consider hydrogen production and transportation-related
technologies

Introduction

CSR priority issues (materialities) and contributing to the achievement of Sustainable
Development Goals (SDGs)
whom reside in the Greater Tokyo Area. We also apply ourdomestic and global experience and know-how to efforts
such as constructing energy infrastructure in Southeast Asia.
Through our business activities, we aim to contribute to theachievement of the Sustainable Development Goals (SDGs).

Message

The Tokyo Gas Group conducts a full range of businessactivities in the LNG value chain (from procurement,
transportation, city gas production and supply, to power
generation and energy solutions) to ensure the safe andstable supply of energy to our customers; the majority ofPriority issues (materialities) according to their importance to stakeholders and the businessPriority issue (materiality)

Stable supply of energy
both in Japan andoverseas

Robust energy platform

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

Stable supply of gas and electricity
Stable procurement of raw materials
Construction of energy infrastructure indeveloping countries
Safety and disaster prevention/
readiness

Overall image after
full deregulation

Strategy

Relationship with SDGs

GPS2020

Priority area

Sustainable urban development andcomfortable lifestyles
Measures against global warming
Promoting recycling of resources
Promoting conservation of biodiversity

Business overview

Creating an organization full of energy
and vitality
Infrastructure

Building good relationships withstakeholders
Fulfilling our public duty as an energy
company

FY 2017

FY 2018

Inside Directors

Outside Directors

Inside Directors

Outside Directors

10

6

7

6

Perspectives for considering governance

P37

Board of Directors
Audit
Audit &
Supervisory
Board
members

Supervise

Executives

Involvement indecision-making
and appropriatemonitoring

Financial data

Corporate governance

Changes to the makeup of our Board of Directors
and Audit & Supervisory Board

Invisible assets

To ensure sustainable growth, our Board of Directors
involves itself in the decision-making processes forbusiness strategies under GPS×G in order to promote theindependent growth and development of each business,
and also conducts appropriate monitoring.
In fiscal 2018, we reduced the number of inside members
in our Board of Directors and Audit & Supervisory Boardby three in comparison with the previous year (from 10 to7), and made changes to further increase the proportion ofoutside members.
Moving forward, we will continue to implement reforms withthe aim of building a better, more appropriate governancesystem, based on external trends and other factors.

Corporate governance

Governance

Subsidiaries

48

TOKYO GAS ANNUAL REPORT 2018

Invisible assets

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

Diversifying LNG procurement and achieving efficient and stable transportation of LNG
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 webecame 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 that interferences to LNG
procurement do not arise, even in cases where there are evident geopoliticalrisks such as disasters or human conflicts. We also operate stable transportationof LNG through the efficient deployment of ships (including ships owned andmanaged by Tokyo Gas).

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 11 ships, owned
and managed by Tokyo Gas

Safe and secure production and supply facilities
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, and supplied
to 11 million customers via our pipeline network. We endeavor to operate our LNG
terminals safely, based on almost half a century of experience and knowledge
accumulated since we introduced LNG to Japan for the first time in 1969.
Our LNG terminals and pipeline network are a crystallization of our latest knowledge
and technologies, and have a high level of resistance to earthquakes. Since city
gas is made by conversion from LNG to natural gas at an LNG terminal and thendistributed via pipeline, there is no energy conversion loss or transport loss to thepoint of consumption.

Relationshipsof trust withbusiness
partners
In this period of transformation of the energy industry, namely, the full deregulation of
the electricity and gas retail markets, we are exchanging information broadly with not
only electricity and gas companies but also players in various industries. Moreover,
we are promoting cooperation in areas where we foresee mutual synergies such as
gas resource procurement and the electricity business (power plant construction andelectricity sales).

49

Four LNG terminals(Three in Tokyo Bay, one in Northern Kanto)
Pipeline network with total
length of over 60,000km
High and medium-pressure gas
pipelines with a high level of resistanceto seismic activity, even in the case ofmajor earthquakes such as the Great
Hanshin-Awaji (Kobe) Earthquake, or theGreat East Japan Earthquake

LNG Value Chain
Using technology and know-how concerning
the total energy business, we provide energy
solutions to customers who are expanding
business in Southeast Asia and North America,
and contribute to infrastructure-building.
PetroVietnam Gas
Signing of a Memorandum of Understanding toconduct a feasibility study on energy solution
businesses

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

Petronas LNG Ltd.
Signing of a Memorandum of Collaboration

PT Miura Indonesia
Signing of a Memorandum of Understanding on
Mutual Cooperation in Indonesia

Introduction

Safety know-how and measures to prevent earthquake disasters
130 years of accumulated safety know-how
Supply area monitoring using around 4,000
seismometers (Si sensors)
Subdivision of units for supply stoppage in the event of anearthquake or other disasters (25 large blocks, further
subdivided into 290 smaller blocks)

Low-pressure pipeline network
block (290 blocks or more)

Blocks formed by remote operation

Permanently established blocks

GPS2020

Medium-pressure pipeline
network block (25 blocks)

MessageIn order to constantly deliver natural gas safely and steadily to 11
million customers, we are continually developing human resources
involved in safety.
It is indispensable to have human resources that are equipped withadvanced specialized skills in facility design, construction, andmaintenance, as well as decision-making capabilities that enable thereliable execution of gas supply and safety responsibilities even intimes of emergency. The trust of customers that has been earned as aresult of safety-related 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 supply of gas when
it detects an earthquake that poses the possibility of affecting ourpipeline network and/or other structures. In order to minimize theimpact of supply stoppages, we subdivide our supply areas, enabling
us to stop the supply of gas remotely, in block units, depending on theextent of the damage.

Facilitating safe use of gas
related equipment and facilities for all customers, as frequently as required by law.
We visit customers to conduct inspections for gas leaks on customer premises (as ageneral gas pipeline operator), and to examine gas appliances and supply and exhaustequipment (as a gas retailer).

24-hour emergency dispatch to respondto gas leaks and other incidents
49 bases manned by approximately 600
professional gas leak responders

Overall image after
full deregulation

Periodic Safety inspections We conduct periodic safety inspections of gas-

Safety Command Center When we receive a report of a gas leak from a customer,
Business overview

it is immediately forwarded to our dedicated Safety Command Center. The centerasks questions to confirm the details of the situation, provides safety advice to thecustomer, and requests Gaslight 24 dispatch in response. The center is also able tocontact the fire service, police and other emergency services via a hotline.

Gaslight 24 Gaslight 24 are emergency dispatch bases for responding to gas leaks

Ensure flexibility and realize costcompetitive LNG procurement by enhancing
and expanding alliance with LNG players inJapan and overseas.

Kansai Electric PowerPower Generation
Expand competitive power sources.

Tohoku Electric Power (Synergia Power)
NTT Facilities (Ennet)
Osaka Gas (Ennet)

Showa Shell Sekiyua(Ohgishima Power)

Expanding electricity sales to low-voltage customers

Korea Gas Corporation

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
Idemitsu Kosan and Kyushu Electric Power(Chiba-Sodegaura Energy)
Shizen Energy(Development of photovoltaic power
generation)(approx. 310,000 LP gas customers)

Financial data

Kobe Steel (KOBELCO)(Moka Power Station)

Centrica, U.K.

Expanding electricity sales to high-voltage andextra-high-voltage customers

JXTG Energy(Kawasaki Natural Gas Power Station)

Kyushu Electric PowerCPC Corporation, Taiwan

Electricity Sales

Invisible assets

Raw materials procurement

Corporate governanceand other incidents in our gas pipeline network and customer gas equipment.
When a report is received, Gaslight 24 personnel respond swiftly with an emergency
dispatch, even on holidays or at night.
Our emergency vehicles are also equipped with mapping systems that can instantly
display the necessary sections of our massive pipeline diagrams, enabling them torespond swiftly and effectively to any incident.

Making progress with talks regarding thepossibility of sales through partnerships withcompanies in housing, construction, equipment,
telecommunications, information services andother industries.

50

TOKYO GAS ANNUAL REPORT 2018

Invisible assets

Relationship of trust with11 million customers
Our bonds and relationships of trust with our 11 million customers, developed
over the course of the past 130 years, are our greatest strength. Tokyo Gas Lifeval,
Enesta, and Enefit have 185 outlets and over 10,000 employees who act as “theface of Tokyo Gas” in each local region, providing one-stop services and support toensure comfortable daily lifestyles for customers in local communities.

Contributing to the achievement of
Sustainable Development Goals (SDGs)

The face of Tokyo Gas, across the entire Kanto area

Gunma
Prefecture

EnestaTochigi
Prefecture

8 outlets

Enesta1 outletIbarakiPrefecture

SaitamaPrefecture

LifevalEnestaEnefit9 outlets

5 outlets

7 outlets

Tokyo

Kanagawa
Prefecture

LifevalEnefit52 outlets

37 outlets

LifevalEnefit41 outlets

9 outlets

We believe strong relationships of trust withcustomers based on this community-based salesorganization is the driving force that has enabled
us to maintain our position as No. 1 new electric
power market entrant in 2017, the second year
after entry. In the retail gas business, too, whichmarks its second year since full deregulation, weare determined to augment and strengthen our
relationships of trust with customers.

EnestaEnefit5 outlets

3 outlets

Chiba
Prefecture
LifevalEnestaEnefit4 outlets

2 outlets

2 outlets

Interface with the community
Outlets

185

51

Employees

14,000

Customers

Lifeval / Enesta / Enefit
Help in gas and electricity planning
Gas tap opening and shutoff at the timeof moving
Meter reading
Safety inspection and repair of gas
appliances and equipment
Sales and installation of gas appliancesand housing appliances
Gas plumbing
Design and installation of plumbing
equipment and air conditioners
Home improvement etc.

Introduction

2017: Launched new technology development initiatives
Future innovation

Tokyo Gas history of innovation
1885

1969
First LNG Cargocame to Japan

1981

2001

2009

First natural gas
cogeneration
systemintroduced toJapan

Commenced
operation of
SUPREMEearthquake disasterprevention system

Launched salesof world’s firstresidential fuel cellsystemElectric
power

AI

Blockchains| Low-carbon society || Hydrogen-oriented society | Smart society || Earthquake disaster prevention and stable supply || Comfortable, convenient and secure living |Production, Generation & Distribusion

Sales & Services

Predict and detect failures at LNG
terminals and power generation plants,
and increase efficiency of operation andmaintenance work

Provide optimal services for ourcustomers based on the results of digitalmarketing
Increase the sophistication of ourenergy management system (to achieve
automatic optimized operation of energy
equipment by remote control)

1Improve quality of service and achievelabor-saving benefits for operators by
the introduction of voice-recognition
systems, etc., in our call centers

In December 2017, we established Acario Ventures in Silicon Valley,
and launched a program of activities to assimilate innovativetechnologies and business models from around the world.

Helionet Advance
Remote monitoring

Automatic optimized
operation

n
tio
za
Di
git

n

Decentralization

tio

a
fic

ali

tri

c
Ele

Venturecompanies

RenewableenergyCustomerenergysavingCold water
Steam
Air

Data collection

Helionet AdvanceOn-site terminal

Automated optimizationof energy equipment
Compressor

CGS

BoilerFreezer

Optimalregional
lending

Financial data

Remote control

Electricity

Helionet21(failure prediction /energy saving operational support)

Tokyo Gas
Acario Ventures(100% ownership)

2

Digitalization for energy management

2

Invisible assets

Stop and restart gas supply to zonepressure regulators, etc., by remote
operation using an earthquake disasterprevention system
Optimize efficiency of distribution
utilizing LP gas usage data gatheredusing frequent remote metering
technology

Creating innovation through our Silicon Valley location

Venture capital

IoT(rechargeable
batteries)

Corporate governanceTechnological development

Investment in Japan andoverseas

Robotics

Storage cells

We are effectively introducing digital technologies such as IoT, AI, mobile
devices, and technologies utilizing big data, while at the same time drawing
on advantages such as our technical capabilities and sales network that isclosely linked to local communities.

Digital innovation domain 1
Open innovation

AcarioInnovation LLC

VPP

Digitalization initiatives

Digital innovation

AcarioInvestment One
LLC

RenewableenergyBusiness overview

1902
First gasequipment toreceive a patentin Japan

Overall image after
full deregulation

The history and future of our innovation

GPS2020

Moving forward, we will shift from our previous R&D focused on gas energy toan open innovation style of R&D focused on a broad range of innovative energy
technologies.
In order to improve efficiency and save labor in our existing business operations,develop new products and services, and create new business, we will gather
information on a broad range of innovative energy technologies while alsocollaborating with progressive universities and venture companies both in Japan andoverseas, to absorb new technologies and create innovation.

Contributing to the achievement of
Sustainable Development Goals (SDGs)

Tokyo Gas
establishedMessage

Digitalization andtechnology development(innovation) capabilities

Operations
bundling
multiplecustomers

52

TOKYO GAS ANNUAL REPORT 2018

Invisible assets

Human resources

Contributing to the achievement of
Sustainable Development Goals (SDGs)

Personnel hiringand development

Strengthening personnel
to support growth

Creating anenvironment conducive
to maximizing theeffective use ofknowledge, skills andexperience

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

WorkstylereformPromotingdiversity

Improving productivity
and achieving a healthy
work-life balance

Promoting active roles
for diverse personnel

Driving

Personnel hiring and development
We are engaged in thehiring and development of
human resources with astrong sense of duty andresponsibility, who can takethe initiative to think and act
for themselves, and who cangrow while cooperating with
their fellow colleagues; who
can become core personnel
and act as a strong driving
force for business operations
in a diverse range of fields.

Hiring personnel with highlevels of expertise

Strategic shift to growth domains

Developing business leaders

In addition to hiring new graduates
for specific job types (in humanities,
sciences and the professional
domain), we also engage in flexible
hiring of experienced and highlyspecialized mid-career personnel.

In addition to our gas business,
we also prioritize assignment of
personal to strategically-importantfields such as our electric power andoverseas business operations (wehave increased numbers of personnel
assigned to these businesses byapproximately 50% in comparison
with FY2015.) In this way, we arepromoting growth and expansion in adiverse range of fields.

We train business leaders who will lead
the Tokyo Gas Group in the future,with a training program that focuses
primarily on development througha wide range of on-the-job training(OJT) experiences gained by means oftransfers and rotations, combined withadditional off-the-job education andtraining (OFF-JT).

Hiring, fostering and placing of personnel who support promotion of “GPS x G”
Multi-purpose space in the new office ofTokyo Gas Engineering Solutions

Workstyle reform (Improving productivity andachieving 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 areworking proactively to rectify andreduce long working hours, and to
implement workstyle reforms withawareness of “the value of time,”
which we regard as important issues
for management involvement.

53

Specific initiatives
Promoting workstyles with awareness of the value of time
Prohibiting overtime work after 20:00 (as a general rule) andencouraging employees to declare in advance what time they will beleaving work, etc.
Promoting workstyle reform project “Work with Enthusiasm”• Eliminating restrictions on working location with “Work Anywhere” (including at home, or on the move, etc.)• Working to create workplaces that enable innovation to occur• “Work in a Free-form Animated Manner” (Online video conferencing, office reforms, etc.)• Promoting automation / mechanization using ICT, and more sophisticated use of data (utilizing RPA, etc.) with “Workto Be Entrusted”

Introduction

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

and productivity enhancement
We aim to achieve the realization of an organization(with diverse working styles and increased
productivity) in which every person accepts eachother’s working style while enhancing productivity.
2 Promoting empowerment of women in workplace

We regard promoting the success of women as the
beginning of the promotion of diversity, and willcontinue to undertake this proactively.
We will establish a “Group Diversity Promotion Team”
and promote diversity throughout the entire group, in
an integrated manner together with management.

Almost 100% return-to-work rate for female
employees returning from childcare leave
Almost no difference in gender in terms of average years inservice of the company
Employment rate of 2.35%, exceeding the mandatory rate (as ofJune 2018)
Established a liaison committee to promote employment of
disabled people as a group
Working to create safe and comfortable working environments

Career development
support for
employees in their
50s and overEstablished the “Grand Career System” to support careerdevelopment for employees in their 50s and over, throughtraining sessions and interviews with career consultants, etc.

LGBT

Childcare

Promotion of
employmentof people withdisabilities

Young
staff

Nursingcare

Careerdevelopment
support for
employees

Mid-career
hired staff
Diverse working
styles andproductivity
enhancement

Foreignnationals

External
Evaluation

Tokyo Gas was selected
as a corporate brandthat is appealing interms of its proactive
efforts to encourage andempower women.

Granted Kurumin
certification
Tokyo Gas was certified by theministry of health, Labour andWelfare (MHLW) as a company
that has formulated an action
plan, achieved targets and met
certain criteria in accordancewith the Act on Advancement of
Measures to Support Raising the
Next Generation of Children.

Selected as a Health& Productivity Stock
Tokyo Gas was selected
as a Health & Productivity
Stock, as a company thatconsiders and strategicallyapproaches employee
health management froma corporate management
perspective.

Financial data

Selected as aNadeshiko Brand

Invisible assets

Occupational safety and health
Health and safety is 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 view to 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 terms of healthmanagement, we work to ensure that 100% of our employees take regular health checkups, and make effective use of early-stage
detection of disease outbreaks and external healthcare institutions.

Corporate governance

Employmentof people withdisabilities

Promotingempowermentof women in
workplace

Business overview

Promoting diversity

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

Overall image after
full deregulation

3 Diversity Promotion TeamSpecific Initiatives

Promotingempowermentof women in
workplace

GPS2020

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 great competitive age ofenergy, the Group aims to grow and advance as a global total energy
corporation by coming to terms with every one of its customers, having
them choose Tokyo Gas products and services, and contributing tocreation of a better society and secure and comfortable lifestyles.
One important issue for the entire Group to tackle in order to achievethis, is the 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 can takean 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.

Message

Promoting diversity (Promoting active roles for diverse personnel)

54