Core Businesses

2Electric Power Business

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

Recent Initiatives

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

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

Sep. 2014

May 2015

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

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

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

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

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

Jun. 2015

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

Jul. 2015

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

Shinko Moka Power Station

Kawasaki Natural Gas
Ohgishima Power Co., Ltd.

Tokyo Gas BaypowerCo., Ltd.

Tokyo Gas Yokosuka Power Co., Ltd.

Coal-fired power
generation business(planned site)

The Group’s Natural Gas-Fired Thermal Power Plants

Tokyo Gas Baypower Co., Ltd.
Generationcapacity
Tokyo Gasgeneration capacity
Generation method

Tokyo Gas Yokosuka Power Co., Ltd.

100 MW x 1 unit

240 MW x 1 station

Generationcapacity

100 MW

240 MW

100 MW

Tokyo Gas
generation capacity

Combined cycle generation

Generation method

Start of operations

2003

Tokyo Gas interest

100%

Kawasaki Natural Gas Power Generation Co., Ltd.
Generationcapacity

180 MW

Tokyo Gas
generation capacity

Combined cycle generation

Generation method

Start of operations

2006

Tokyo Gas interest

75%

420 MW x 2 units

840 MW

Ohgishima Power Co., Ltd.
Generationcapacity

407 MW x 3 stations

1,221 MW*400 MW

Tokyo Gas
generation capacity

900 MW

Combined cycle generation

Generation method

Combined cycle generation

Start of operations

2008

Start of operations

Progressive rollout from 2010

Tokyo Gas interest

49%

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

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

Tokyo Gas’s Strengths

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

250

125244
224

200

191

10099.8

106.1

97.1

150

75

10050

25002012

27

Tokyo Gas Annual Report 2015

2013

2014

FYClose Proximity to High Demand Areas

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

5012

Neighboring LNG Terminal

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

Core Businesses

Increasing Competitive Generation Capacity

Realize

Expand generation capacity from the current level of approximately 1,300 MW (companyequity) to around 3,000 MW by 2020.
● Aim at building a more competitive power source portfolio, including base load supply
sources, in addition to natural gas thermal power.
●“Challenge2020Vision”〈Confirmed Expansions in Generation Capacity (Own Equity)〉
Ohgishima Power Station

Shinko Moka Power Station

Start-up of operations of the third unit

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

Increase of approx. 1,700 MW

Approx. 3,000 MW

Approx. 2,800 MW

Approx. 1,300 MW

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

Approx. 1,600 MW

2015.32016.2

2019～2020 (Plan)

2020 (Vision Targets)

Expand Electric Power Sales

Tokyo Gas’s Strengths(Fiscal 2020)

Approx. 30 billion kWh

Sales Volumes ofElectricity＝With the complete liberalization of retail electric power in2016, in addition to thewholesale and large-lot
customer to date, deliverelectricity to residential andcommercial customers andexpand sales to around 30
billion kWh (about 10% ofTokyo metropolitan areademand) by 2020.
● Commence pre-order sales ofelectricity to residential andcommercial customers fromfiscal 2015.
●Approx. 10% of Tokyo metropolitan
area demand

Breakdown ofConsolidated Net Income

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

Increase of approx.
10 billion kWh50%
70%2013Wholesalecustomers

10%

Expand business
partners

Large-lotcustomers

2020

25%

20%

Wholesale Large-lot Residential Commercial
customers customers customers customers

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

Fiscal 2020

3

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

Steam Turbine
Generation
Steam turbine

Generator

SteamExhaust heat collection boiler
ExhaustheatGas Turbine
Generation
Gas Turbine
Generator

Gas

Tokyo Gas Annual Report 201528

2 Electric Power BusinessCore Businesses

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

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

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

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

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

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

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

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

Generator
output

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

FuelCity gasOperations
scheduled tocommence

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

decided to enter into this agreement.
Fukushima Pref.

Tochigi Pref.
GunmaPref.

Moka CityIbarakiPref.

SaitamaPref.
Target business implementation area

29

Tokyo Gas Annual Report 2015

Photo provided by the Tochigi Prefecture
Business Establishment Promotion Council

Core Businesses

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

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

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

Special Features

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

①Alliance between three companies②Economic rationality

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

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

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

Variable costs (¥ / kWh)

Generation Costs by Power Source: Variable Costs (representation)●Idemitsu
KosanCo., Ltd.

KyushuElectric PowerCompany Inc.

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

Nuclear③Eco-friendliness●Chiba-Sodegaura
Energy Co., Ltd.

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

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

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

Tokyo Gas Annual Report 201530