Management’s Discussion and Analysis

Summary
In fiscal 2012, ended March 31, 2013, gas sales volume rose

m3, due to the impacts of tolling arrangements (explained

200 million m year on year, or 1.3%, to 15,390 million m ,below). However, the slide time lag effect will result in improve-

following a rise in industrial demand centered on demand forments, leading to a year-on-year increase in net sales ofpower generation applications. Electricity sales volumes were¥200.4 billion, or 10.5%, to ¥2,116.0 billion. Likewise, ordinary

also up due to the favorable market conditions that haveincome will rise ¥7.6 billion, or 5.1%, to ¥155.0 billion. Regard-

continued since the Great East Japan Earthquake. As a result,less though, net income is projected to decrease ¥0.6 billion,

net sales increased ¥161.4 billion, or 9.2%, to ¥1,915.6 billion;

or 0.7%, to ¥101.0 billion.

3

3

ordinary income grew ¥71.8 billion, or 95.0%, to ¥147.4 billion;

With respect to appropriations to shareholders, theand net income was up ¥55.6 billion, or 120.7%, to ¥101.6 billion.

Company maintained its existing policy of a total payout ratio

In fiscal 2013, ending March 31, 2014, gas sales volume isof approximately 60% and raised dividend payments in fiscal

forecast to decline 609 million m3, or 4.0%, to 14,781 million

Performance in Fiscal 20122012 by ¥1 per share, to ¥10 per share.

In the industrial sector, the impacts of tolling arrangements(explained below) resulted in sales volume declines. Regardless,we worked to address demand in the Kashima area following theGas Sales Volume
In fiscal 2012, consolidated gas sales volume rose 200 million m3

start of operations on the Chiba–Kashima Line. At the same time,year on year, or 1.3%, to 15,390 million m . Sales volume by

we saw a rise in demand for gas for power generation purposes

sector is described below.

in other areas. As a result, sales volume in the industrial sector

3

Demand in the residential sector declined 3 million m3, or

was up 199 million m3, or 2.9%, which was a primary factor

0.1%. This decrease is partially due to the fact that the previous

behind the 200 million m3 increase in overall gas sales volume. In

year was a leap year and, thus, was one day longer. In addition,

the wholesale sector, lower demand from other gas utilities led

warm weather was experienced over a longer period than in fiscal

wholesale supplies to decrease 17 million m3, or 0.9%.

2011. Both of these factors resulted in lower sales volume.
However, a rise in the number of customer households helped us
limit this decline to 0.1%. The increase in customer households
can be attributed to the ongoing influx of people into the Tokyo
metropolitan area as well as a rise in the ratio of households
using gas due to the construction of new homes.
In the commercial sector, sales volume was impacted by theleap year and warm weather in a manner similar to the residential
sector. We are noticing some increases in sales volume as thesensitivity toward energy saving that appeared after the Great
East Japan Earthquake fades, but we cannot expect sales volume

Gas Sales Volume by Sector
Million m3, 45MJ/m3
16,00012,000
8,000
4,000
0

09
Residential

10
Commercial

11
Industrial

12

13

Years ended
March 31

Wholesaleto recover to the levels seen before the earthquake.

Impacts of Tolling Arrangements on Gas Sales Volumes
The electric power business previously employed a business
scheme in which Nijio Co., Ltd., would sell gas to power companies, and these companies would then use this gas to generate
electricity to be sold. However, we are shifting to a scheme
involving tolling arrangements through which Nijio subcontracts
generation to power companies, paying them commissions, andthen sells the electricity generated itself. Kawasaki Natural Gas
Power Generation Co., Ltd., switched to this tolling scheme infiscal 2012, and Ohgishima Power Co., Ltd., is scheduled toswitch in fiscal 2013.

40

Tokyo Gas

Annual Report 2013

The volume of gas used for power generation under thistolling scheme is deemed to have been used for in-house power
generation, and gas sales volume has declined on a consolidated
basis for this reason. In fiscal 2012, the introduction of thisscheme has resulted in declines in gas sales volumes totaling
380 million m3 from fiscal 2011’s levels. However, this decline waspurely due to the change in accounting methods following the
introduction of the tolling scheme. Calculated using prior methods,
gas sales volume in fiscal 2012 increased 698 million m3, or
4.6%, from fiscal 2011’s 15,288 million m3, to 15,986 million m3.

Analysis of Income and Expenses

facilities of pipelines for large-volume customers outside supply

In fiscal 2012, sales in the city gas business grew ¥95.7 billion

areas of ¥2.8 billion under extraordinary income. Under extraordi-

year on year due to the abovementioned increase in gas sales

nary income, gain on sales of overseas subsidiaries’ and affiliates’

volume as well as a rise in selling prices stemming from anstocks of ¥3.4 billion was recorded in association with sales ofincrease in material cost associated with the depreciation of thestock in GAS MALAYSIA SDN. BHD. These factors resulted in ayen. In the electric power business, sales rose ¥25.2 billion due¥55.6 billion, or 120.7%, increase in net income, to a record highto higher utilization ratios for power plants in conjunction with theof ¥101.6 billion.

tight supply and demand situation for electricity as well as an

Under-recovery due to the slide time lag effect from changes

increase in selling prices. Similarly, LNG sales increased ¥20.9

in material costs improved ¥37.9 billion from ¥48.4 billion in thebillion as a result of higher sales volumes. Accordingly, total net

previous fiscal year, to ¥10.5 billion in fiscal 2012. The burden ofsales were up ¥161.4 billion, or 9.2%, to ¥1,915.6 billion.

amortization of actuarial differences rose from ¥3.1 billion in the

Meanwhile, operating expenses rose ¥92.9 billion, or 5.5%,

previous fiscal year to ¥4.4 billion in fiscal 2012, decreasingto ¥1,770.0 billion, due to increases of ¥59.3 billion in city gas

operating income ¥1.3 billion from the previous fiscal year.

material costs, ¥19.6 billion in LNG sales expenses, and ¥14.0
billion in expenses associated with the electric power business.

Economic Frame Years ended March 31

Regardless of higher expenses, operating income increased

JCC ($/bbl)¥68.6 billion, or 88.9%, to ¥145.6 billion. Likewise, ordinary

Exchange rate(¥/$)

Averagetemperature (ºC)

income was up ¥71.8 billion, or 95.0%, to ¥147.4 billion, due to

2013

113.9

82.9

16.7

the recording of revenue from the construction of dedicated

2012

114.2

79.1

16.4

Ordinary Income for Fiscal 2012: Analysis of Factors (Year on Year)

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

Gas gross margin increase: �������������������������������������������� +¥36.4 billion(Sales volume +¥5.4 billion, Tariff revision –¥10.3 billion, Slide time lag
effect +¥37.9 billion, etc.)

City Gas+¥43.9 billion(+45.1%)FY2012(Result)

147.4 billion

billion(+95.0%)Operatingincome+¥68.6 billion(+88.9%)

Electric power+¥11.2 billion(+140.7%)
Other energy+¥3.9 billion(+128.6%)
Overseas+¥3.7 billion(−)

FY2011(Result)¥	‌Material cost:	–¥59.3 billion(Sales volume –¥10.8 billion, Exchange –¥36.7 billion,
Crude oil –¥24.3 billion, Amount and composition +¥12.5 billion, etc. )Depreciation and amortization decrease: ������������������������ +¥6.5 billion(Decrease from FY2007 tax code revision, increase from Chiba–KashimaLine’s service for business use)

Gas appliances /Installation Work+¥1.3 billion(+41.3%)+¥ 71.8+¥95.7 billion

Personnel expenses decrease: ���������������������������������������� +¥0.7 billion¥

Change	‌Net sales:(Sales volume +¥16.2 billion, Slide +¥85.6 billion,
Tariff revision –¥10.3 billion, etc.)

Real estate / Others+¥4.9 billion(+ 41.8%)

75.6 billion
Non-operating
income+¥3.2 billion(−)

Adjustment, etc.
– ¥0.4 billion

Installation work: ��������������������������������������������������������������� +¥0.2 billion
No. of new houses increase (non-consolidated: +18 thousand, +9.7%:
189 thousand 207 thousand)Gas appliances sales: ������������������������������������������������������� +¥1.1 billion
GHP sales increase(non-consolidated: +1,574 units: 6,034 units 7,608 units)
Electric power: Sales volume increase (+20.2%, +¥1.6 billion),
Unit price increase (+¥9.5 billion) ������������������������������������� +¥11.2 billion
LNG sales: Sales volume increase (+¥0.2 billion),
Unit price increase (+¥1.1 billion) ��������������������������������������� +¥1.3 billion
Energy-service: Depreciation andamortization decrease, etc.����������������������������������������������� +¥2.2 billion
Investment abroad: Interest received from TG Bajio, Revenue
increase from start of production at Pluto, etc. ��������������� +¥3.7 billion
Real estate: Reduction in expenses from
FY2011 business restructuring, etc. ��������������������������������� +¥2.3 billion
Shipping: Income from higher freight revenue ������������������ +¥0.9 billion
Revenue from dedicated facilities of pipeline for large-volume
customers outside supply areas (¥1.0 billion ¥2.8 billion) ��� +¥2.7 billion
Dividend income ������������������������������������������������������������������� +¥0.7 billion

Tokyo Gas

Annual Report 201341

Management’s Discussion and Analysis

Income by Segment

Uses of Cash Flows

Operating income in the city gas segment increased ¥43.9 billion,

On a non-consolidated basis, capital expenditures by Tokyo Gas

or 45.1%, primarily due to the previously mentioned improvement

Co., Ltd., were ¥127.1 billion, whereas expenditures by consoli-of ¥37.9 billion that resulted from the slide time lag effect. This

dated subsidiaries amounted to ¥58.9 billion. As a result, totalrise offset a ¥10.3 billion decrease stemming from price reduc-capital expenditures in fiscal 2012 rose ¥37.3 billion year on year,

tions following tariff revisions for small-volume customers

or 25.5%, to ¥183.7 billion, after elimination or corporate. Expen-

instituted in March 2012.

ditures by Tokyo Gas included ¥87.5 billion for installing trunk

In the gas appliances and installation work segment, a rise inlines and other distribution facilities and ¥22.8 billion forsales of gas heat pump air conditioning systems resulted in aconstructing production facilities, such as the Hitachi LNG¥1.3 billion, or 41.3%, year-on-year increase in operating income.

Terminal. Roughly ¥27.2 billion of capital expenditures by subsid-

The electric power business of the other energy segment

iaries was directed toward upstream areas. At the same time, we

experienced a substantial 20.2% increase in electricity sales

conducted investments and financing in overseas businesses

volumes and sales prices rose due to the tight supply andtotaling ¥15.0 billion.

demand situation. Accordingly, operating income grew ¥11.2
billion, or 140.7%.

Capital expenditures exceeded those in fiscal 2011 as we
progressively invested in infrastructure development centered on

Excluding this rise in the electric power business, the otherthe northern Kanto region while conducting investments overseas

energy segment saw a ¥3.9 billion, or 128.6%, rise in operatingtargeting the enhancement of the LNG value chain. Both of theseincome.

areas represent goals defined in “The Tokyo Gas Group’s Vision

In the LNG sales business, operating income was up ¥1.3
billion, or 93.6%. This increase can be attributed to higher sales

for Energy and the Future~Challenge 2020 Vision~.”
These expenditures exceeded the scope of on-hand capital,

volumes and the benefits of the slide time lag effect, which also

and funds were procured to cover deficiencies. As a result,contributed to performance in the city gas business.

interest-bearing debt rose to ¥642.5 billion as of March 31, 2013,

The investment abroad business recorded a ¥3.7 billionup ¥16.7 billion from ¥625.8 billion a year earlier.

increase in operating income, following a rise in interest income
received from Tokyo Gas Bajio B.V. and income associated withthe start-up of production at the Pluto LNG Project.
Excluding the investment abroad business, operating incomein the real estate and other segment rose ¥4.9 billion, or 41.8%.

fiscal 2011’s 2.5%, rising to 5.3% in fiscal 2012. Return on equity(ROE) similarly improved greatly, from 5.4% in fiscal 2011 to
product of higher profit margins.

Sales¥ billion

City gas sales

Return on assets (ROA) showed a substantial improvement from

11.5% in fiscal 2012. These improvements were primarily theBusiness Results by Segment
Years ended March 31

Key Management Indicators

The weighted average cost of capital (WACC) was relatively

2012

2013

unchanged in fiscal 2012 at 3.2%, compared with 3.1% in fiscal

1,306.2

1,401.9

Gas appliances and installation work

2011. Meanwhile, Tokyo Gas Economic Profit (TEP: Net oper-

187.6

206.0

Other energies

302.5

336.6

ating profit after tax prior to interest payments minus the cost of

101.8

127.0

Real estate

29.6

30.2

Other

181.8

195.7

3.2

12.4

2,008.0

2,170.6

The debt-to-equity ratio (D/E ratio) decreased slightly from

(Electric power)(Investment abroad)Total

capital) jumped from ¥9.1 billion to ¥59.8 billion. This is because
increases in net operating profit after tax prior to interest
payments (NOPAT) significantly outweighed the slight rise ininvested capital.

Adjustments(253.7)(255.0)0.75 in fiscal 2011 to 0.69 in fiscal 2012. As such, it is once again

Consolidated

1,754.2

1,915.6

possible for the Company to increase investment amounts to acertain degree while still meeting the goal of 0.8 for this ratio

Sales figures for each segment include intersegment transactions.

described in the “Challenge 2020 Vision.”Contribution to Operating Income
Years ended March 31

2012

2013

Changebillion. When combined with the acquisition of ¥36.0 billion worth

City gas sales

80.0%

74.1%

–5.9 pts.

of treasury stock in fiscal 2013, this makes for total shareholder

Gas appliances andinstallation work

2.6%

2.3%

–0.3 pts.

returns of ¥61.7 billion. This represents 60.7% of the consoli-

Other energies

9.0%

13.6%

+4.6 pts.

6.5%

10.0%

+3.5 pts.

Real estate

2.7%

2.9%

+0.2 pts.

Other

5.7%

7.1%

+1.4 pts.

—%

1.3%

—

(Electric power)(Investment abroad)42

In fiscal 2012, total dividend payments amounted to ¥25.7

Tokyo Gas

Annual Report 2013

dated net income of ¥101.6 billion recorded in fiscal 2012,
allowing us to meet our goal of approximately 60% for the total
payout ratio, as we have previously.

ROA and ROE

Shareholder Returns%

In accordance with its financial policies, the Company targets a

12total payout ratio of approximately 60% each year up until fiscal
2020, which is to be accomplished by issuing shareholder returns

9through dividend payments and treasury stock acquisitions.

6

In fiscal 2012, one part of these efforts included raising3

dividend payments by ¥1 per share. This was done in consideration of income and expenditure trends as well as our desire to

0

09
ROA

10

11

12

13

Years ended
March 31

ROE

return the successes of management to our shareholders.
Going forward, we will refrain from lowering dividend payments

ROA = Net income / Total assets (average of positions at start and end of fiscal year)
ROE = Net income / Total equity (average of positions at start and end of fiscal year)

while gradually increasing payments in line with income levels.

TEP¥ billion

Forecasts for Fiscal 2013

70.0
60.0
50.0

Gas Sales Volume

40.0
30.0

In fiscal 2013, consolidated gas sales volume is forecast to decline

20.0

609 million m3, or 4.0%, to 14,781 million m3. The primary factor

10.0

behind this decline will be a decrease in gas sales volume of 969

0

million m3 associated with the introduction of the tolling scheme at

–10.0

09

10

11

12

13

Years ended
March 31

TEP = NOPAT – Cost of capital (Invested capital x WACC)NOPAT: Net operating profit after tax prior to interest payments

Ohgishima Power. When the tolling portion is included, gas sales
volume is expected to total 16,273 million m3, representing an
increase of 287 million m3, or 1.8%, from fiscal 2012’s 15,986

Credit Ratings As of March 31, 2013

million m3. Sales volume forecasts by sector are described below.
In the residential sector, projected sales volume declines

Moody’s

Aa3

High creditworthiness and very low credit risk to meetlong-term obligations.

S&P

AA–

Very strong capacity to meet obligations. Difference fromthe highest rating, AAA, is small. (Plus and minus signs
indicate relative standing within each rating category.)

R&I

AA+

Very high creditworthiness supported by some
excellent factors.

JCR

AAA

The highest level of capacity of the obligor to honor its
financial commitment on the obligation.

include 32 million m3 resulting from temperature impacts and 37
million m3 stemming from lower usage volume per customer
household. However, an increase in the number of customer
households in line with the solid pace of new installations will
result in a 42 million m3 increase in sales volumes. Regardless,overall gas sales volume will decrease 25 million m3, or 0.7%.
We are forecasting a 37 million m3, or 1.3%, year-on-year
decline in the commercial sector, which will primarily result fromTotal Equity and Equity Ratio

temperature impacts.

¥ billion

%

1,000

50

800

40

casting a 309 million m3 increase due to efforts to cultivate new

600

30

demand in the Kashima area, making for an overall decrease of

400

20

619 million m3, or 8.8%.

200

10

0

0

09
Total equity (left)

10

11

12

13

At March 31

In the industrial sector, we are expecting a 969 million m3
decline accompanying the shift to tolling, but we are also fore-

Consolidated Gas Sales Volume Forecasts by Sector
Million m3, 45MJ/m3
18,000Equity ratio (right)

12,000Interest-Bearing Debt and D/E Ratio¥ billion

Times

800

0.8

600

0.6

400

0.4

200

0.2

6,000

0
Residential

0

14Years ended
March 31

Tokyo Gas

Annual Report 201313
Commercial

Industrial

Wholesale

0

09
Interest-bearing debt (left)

10

11

12

13

At March 31

D/E ratio (right)

43

Management’s Discussion and Analysis

Income and Expenses

However, net income will decrease ¥0.6 billion, or 0.7%, toOur economic frame for calculating our forecasts assumes a¥101.0 billion, due to the absence of extraordinary income ofcrude oil price of $110 per barrel and an exchange rate of ¥100

¥3.4 billion associated with sale of stock in GAS MALAYSIA

to US$1.

during fiscal 2012, etc.

Our full-year forecasts for fiscal 2013 project higher net sales
Economic Frame Years ended March 31

and ordinary income, which will be largely due to improvements
resulting from the slide time lag effect.
For net sales, we are forecasting a year-on-year increase of

JCC ($/bbl)

Exchange rate(¥/$)

Averagetemperature (ºC)¥200.4 billion, or 10.5%, to ¥2,116.0 billion. This includes an

2014

110.0

100.0

16.5

increase of ¥117.8 billion, or 8.4%, in city gas sales as a result of

2013

113.9

82.9

16.7

a rise in unit prices under the gas rate adjustment system stemming from higher crude oil prices. It also includes an increase of

Sensitivity to Price and Exchange Rate Fluctuations¥19.4 billion, or 20.0%, in LNG sales.
Operating expenses are expected to rise ¥185.0 billion, orAn increase of US$1 to the barrel in the Japan Customs-cleared

10.5%, to ¥1,955.0 billion, in conjunction with an increase in

Crude price (JCC) is estimated to result in a decrease of ¥0.7

material prices associated with yen depreciation.

billion in gross profit on gas. Similarly, the impact of depreciation

As a result, we project operating income will increase ¥15.4
billion, or 10.6%, to ¥161.0 billion, and ordinary income will growof ¥1 to US$1is estimated to be a ¥1.4 billion reduction ingross profit.

¥7.6 billion, or 5.1%, to ¥155.0 billion.

Ordinary Income for Fiscal 2013: Analysis of Factors (Year on Year)

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

Gas gross margin increase: �������������������������������������������� +¥24.7 billion(Sales Volume –¥11.1 billion, Slide time lag effect +¥30.5 billion, etc.)

City Gas+¥17.6 billion(+12.4%)FY2013(Forecast)

Gas appliances /Installation– ¥0.9 billion(–20.8%)155.0 billion¥

Electric power+¥1.0 billion(+5.2%)
Change+¥7.6 billion(+5.1%)

Operatingincome+¥15.4 billion(+10.6%)

Other energy– ¥0.5 billion(–6.4%)

Overseas+¥2.7 billion(+112.5%)

FY2012(Result)¥

147.4 billion
Non-operating
income– ¥7.8 billion(−)

44

Tokyo Gas

Annual Report 2013

	‌Net sales:
+¥117.8 billion(Sales volume –¥33.8billion, Slide +¥144.7 billion, etc.)–¥93.1 billion
	‌Material cost:	(Sales volume +¥22.7 billion, Exchange –¥142.8 billion,
Crude oil +¥26.3 billion, etc. )Enterprise tax to increase following increasein Tokyo Gas (non-consolidated) sales ���������������������������� –¥7.1 billion

Gas appliances sales: GHP sales to decrease
Installation work: No. of new houses to increase

Electric power: Sales volume to decrease (–5.9%, –¥1.1 billion),
Unit price to increase (+¥2.1 billion) ����������������������������������� +¥1.0 billion

LNG sales: Sales volume to increase (+¥0.4 billion),
Unit price to increase (+¥1.9 billion) ����������������������������������� +¥2.3 billion
Energy-service: District heating and cooling cost
to increase from a rise in resource prices ������������������������ –¥2.7 billion

Investment abroad: Increased earnings from TG Pluto,
Barnett, etc. ����������������������������������������������������������������������� +¥2.7 billion

Real estate / Others– ¥4.4 billion(–26.2%)

Real estate: Property taxes on land, etc., to increase ���� – ¥1.0 billion

Adjustment, etc.
– ¥0.2 billion

Revenue from dedicated facilities: Earnings from constructionof dedicated facilities of pipelines for large-volume customers
outside supply areas (¥2.8 billion ¥0.0 billion), etc.������������� – ¥2.8 billion

Construction: Revenue from large-scaleconstruction (LNG terminal) decrease ����������������������������� – ¥3.7 billion

Dividend income ��������������������������������������������������������������� – ¥1.0 billion
Financial expenses to increase on growth ininterest-bearing debt �������������������������������������������������������� – ¥1.7 billion

Operating Income by Segment

Uses of Cash Flows

In the city gas segment, we are forecasting a ¥17.6 billion, orOn a non-consolidated basis, capital expenditures by Tokyo Gas

12.4%, rise in operating income. This increase will be the result ofCo., Ltd., will be ¥146.6 billion, whereas expenditures by consoli-

an improvement of ¥30.5 billion from the slide time lag effect,

dated subsidiaries will amount to ¥114.4 billion. As a result, total

which will offset decreases of ¥11.1 billion from lower sales

capital expenditures in fiscal 2013 will increase ¥74.3 billion year

volume and ¥7.1 billion from an increase in enterprise tax.

on year, or 40.4%, to ¥258.0 billion, after elimination or corpo-

While sales volume in the electric power business declined

rate. Expenditures by Tokyo Gas will include ¥96.6 billion for

5.9% in fiscal 2012, we expect that sales prices will be high ininstalling trunk lines and other distribution facilities and ¥28.1

fiscal 2013 due to the continuation of the tight supply andbillion for constructing production facilities, such as the Hitachi

demand situation for electricity. As a result, operating income is

LNG Terminal. Approximately ¥68.3 billion of capital expenditures

expected to increase ¥1.0 billion, or 5.2%.

by subsidiaries will be directed toward upstream areas. At theIn the investment abroad business, we are forecasting a ¥2.7
billion, or 112.5%, increase in operating income due to thesame time, we will conduct investments and financing in overseas businesses totaling ¥20.0 billion.

commencement of full-scale production at the Pluto LNG Projectand earnings contributions from the Barnett basin project.

Continuing from fiscal 2012, investment in fiscal 2013 will bedirected toward infrastructure development centered on thenorthern Kanto region as well as investments overseas targetingthe enhancement of the LNG value chain. Both of these repre-

Forecast by Segment
Sales¥ billion

Years ended March 31

2013

sent goals defined in the “Challenge 2020 Vision.”2014

As the amount of these aggressive investments is expected

1,401.9

1,519.7

to exceed the scope of on-hand capital, funds will be procured to

Gas appliances and installation work

206.0

209.0

cover deficiencies. As a result, interest-bearing debt is forecast to

Other energies

336.6

337.9

rise to ¥716.0 billion as of March 31, 2014, up ¥73.5 billion from

127.0

126.4

¥642.5 billion as of March 31, 2013.

Real estate

30.2

28.0

Other

195.7

188.8

City gas sales(Electric power)(Investment abroad)

12.4

22.6

Total

2,170.6

2,283.4

Key Management Indicators

Adjustments(255.0)(167.4)In fiscal 2013, ROA is expected to decline slightly, from fiscal

Consolidated

1,915.6

2,116.0

2012’s 5.3% to 4.9%. Likewise, ROE will show a slight decrease,from 11.5% to 10.7%. While financial leverage and the total asset

Sales figures for each segment include intersegment transactions.

turnover ratio will not change significantly between fiscal 2012
Contribution to Operating Income

and fiscal 2013, the ratio of net income to net sales will decline toYears ended March 31

2013

2014

Changea limited extent, resulting in declines in the abovementioned

City gas sales

74.1%

77.0%

+2.9 pts.

margins. The decline in the ratio of net income to net sales will beGas appliances andinstallation work

2.3%

1.7%

–0.6 pts.

the result of the absence of the temporary increase in non-oper-

Other energies

13.6%

12.9%

–0.7 pts.

10.0%

9.7%

–0.3 pts.

Real estate

2.9%

2.2%

– 0.7 pts.

Other

7.1%

6.2%

– 0.9 pts.

in fiscal 2012. The ratio of operating income to net sales,

1.3%

2.5%

+1.2 pts.

however, will be unchanged.

(Electric power)(Investment abroad)ating income (revenue from the construction of dedicated facilitiesof pipelines for large-volume customers outside supply areas) andextraordinary income (sales of stock in GAS MALAYSIA) recorded

The WACC in fiscal 2013 will be 3.2%, the same as in fiscal
2012, and TEP will show a small decline, from ¥59.8 billion to¥57.5 billion. This decline will be the result of an increase incapital costs associated with the rise in invested capital that will
be used for aggressive capital expenditures, effectively offsetting
the projected increase in NOPAT.
The D/E ratio is projected to increase marginally, from 0.69 in
fiscal 2012 to 0.74 in fiscal 2013. However, we will still meet thegoal of 0.8 for this ratio described in the “Challenge 2020 Vision,”giving us some leeway in investment amounts.
In regard to shareholder returns, we will continue to issue
stable dividend payments in fiscal 2013 while targeting a total
payout ratio of approximately 60%.

Tokyo Gas

Annual Report 201345