SPECIAL FEATURE 2

Tokyo Gas Group Medium-Term
Management Plan for FY2009–2013
EVOLUTION AND
ADVANCEMENTOF INTEGRATEDENERGY BUSINESS

Through the enhancement of the integrated energy business,offering multi-energy supply retaining natural gas at thecore, and energy services offering one-stop energy solutions,Tokyo Gas prepares itself for future patterns of energy use
and the development of society.

Growth Potential 10 Years into the Futureadvancement of the integrated energy business.” While looking

Under our previous medium-term management plan, we worked

ahead to the latter half of the coming decade, by strategicallytoward the rapid establishment of the integrated energy business.

allocating management resources, and by taking steps to reinforce

Through a variety of measures that were steadily implemented

our business foundations, we will strive to be a resilient corporate

throughout the period covered by the plan, we worked to creategroup that flexibly adapts to the future business environment in

new growth fields and were able to realize strong competitiveness.

order to achieve sustained growth.

Such new fields have included upstream operations, LNG transportation, and electric power.
While we do not anticipate any change in the advantage andFramework for the Medium-Term
Management Plan

importance of natural gas as an energy resource, we are seeing

To achieve further evolution and advancement of our integratedchanges in our operating environment that will have a major effectenergy business with natural gas at its core, we will conduct

on our business development. These include further increases inoperational development with an emphasis on the “three E’s:”—social expectations regarding environmental conservation, intensi-

Expansion (rigorous in-depth cultivation and widening of markets),

fied competition among different sources of energy, changes in

Eco-friendly (creation of value emphasizing the environment), and

LNG procurement conditions, and the influence of the economic

Excellent service (improvement of value for customers). The three

slowdown on energy demand over the short term. In this setting,E’s will be supported on a foundation comprising two compo-

we will implement the Group medium-term management plan for

nents: “strengthening the LNG value chain” and “reinforcementfiscal 2009–2013 (from the year ending March 2010 to the yearof the synergy of All Tokyo Gas.”

ending March 2014), for which the theme is “evolution andStrategies

Overview of Medium-Term Management Plan

Further evolution and advancement of the integrated energy business with natural gas at its core
Priority approaches for evolution and advancement – the “three E’s”

Initiatives

Expansion
Rigorous in-depth cultivation andwidening of markets

Eco-friendly
Creation of value emphasizing
the environment

Excellent Service
Improvement of value for customers

Strengthening of operational foundation for realization of the three E’s
Strengthening of the LNG value chain

Reinforcement of the synergy of All Tokyo Gas

Target vision

Heightening natural gas value

Widening and deepening of business

A resilient corporate group that flexibly adapts to the future business environment in order to achieve sustained growth13

Priority Approaches – The Three E’s

Expansion – Rigorous In-Depth Cultivation and Widening of Markets

Approaches thus far
Diffusion of natural gas use over a
wider area within a 200-km radiusaround Tokyo in the Kanto region
One-stop supply of multi-energy
services (gas, electricity, etc.)

Priorities

Cultivation of new demand within the wide-area radius andaugmentation of the wide-area infrastructure
Demand development through rigorous in-depth cultivationof the residential market
Diffusion and expansion of natural gas use over a wider area
through locally rooted gas companies

Development and Expansion ofIndustrial Demand

Initiatives in the Residential-Use Market

Japan’s energy markets are presenting increasingly difficult

power will intensify. In response, we will strive for a further

conditions due to such factors as the economic slowdown and theincrease in the number of customers by stepping up marketing

declining population. Nonetheless, within the 200-km area

efforts targeting new residential units. Moreover, we will further

including Tokyo and surrounding prefectures, there is abundant

bolster Tokyo Gas Group-wide sales initiatives, targeting housedemand, mainly from the industrial sector. Accordingly, thorough-builders and other sub-users. Further, through strategic investment

going development and expansion of natural gas demand is thein pipelines, we will expand our supply areas and aim to secure

most important challenge in the Company’s medium-term man-new customers. We expect the number of customers to reachagement plan.

11.2 million by the end of fiscal 2013.

At this point, we believe that potential demand in the Kanto

In the residential sector, competition between gas and electric

Also, within the 200-km Kanto area radius, market charac-

area is about 9 billion m3, including thermal demand, which weteristics differ based on region. Accordingly, focusing on our

are targeting through conversion from other fuels, and electric

wide-area branches and related city gas companies, we will

power demand, which we are targeting through cogeneration andbuild an operational system closely linked to various regions,other systems. By securing that potential demand, over the course

cooperate with peripheral gas suppliers, and bolster our market-of the medium-term management plan, we forecast growth in gas

ing capabilities.

sales volume of more than 3% per annum. Thus, volume isforecast to reach ¥16.4 billion m3 in fiscal 2013.

9 Billion m3 Growth Potential
Potential Industrial and Commercial Demand
within a 200-km Radius around Tokyo
100–200 km radius area
2 billion m3
100 km radius area
7 billion m3

Total 9 billion m3

100 km Radius Area

100–200 km Radius Area

1.9 billion m3

0.3 billion m3

7 billion m3

5.1 billion m3

2 billion m3

1.7 billion m3

The Company’s estimate
Conversion from other fuels, etc.
Cogeneration / power generation use

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Conversion from other fuels, etc.
Cogeneration / power generation use

LNG tanker trucks

Tokyo Gas Yokosuka Power

Expand Integrated Energy Business—
Bolster Electric Power and Energy Services
Under the new medium-term management plan, we willfurther expand and boost the competitiveness of ourelectricity business, which supports our multi-energy supply
activities. In addition to the three large-scale power stations
already in operation, the plan foresees the startup of
Ohgishima Power by the end of fiscal 2009. As a result, asof fiscal 2010 our share of the capacity of these power
stations will be about 1,300 MW. In addition to conventional power retailing, we will work to expand operations
by establishing a sales portfolio that includes market transactions. We will also aim to expand gas business synergies.

Steady Growth in Operational Scale

Chiba-Kashima LineIn the energy service business, we will increase ourcompetitiveness by leveraging our ability to provide onestop solutions. Related issues include achieving the bestenergy mix, facility selection, operation, safety management, finance, support for energy saving, and regionalenergy services.

Outlook for Gas Sales Volume and Number of Customers

Expanding Electric Power Operations / Bolstering
Competitiveness(Billion m3, 45MJ/m3)

Major Electric Power Plants in Operation(Millions)Average annual
growth rate of 3%

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11.5

11.0
12
10.5

Plant

Capacity

Percentage ofshares held

Tokyo Gas Baypower

100 MW100%

In operation
since October 2003

Tokyo Gas Yokosuka
Power

240 MW

75%

In operation sinceJune 2006

Kawasaki Natural Gas
Power Generation

840 MW

49%

In operation sinceApril 2008

State of operation

10.0
6Large-Scale Power Plants under Construction
Plant

0
FY

0

08

09

10

11

12

Ohgishima Power

Capacity
1,220 MW

Percentage ofshares held
75%

State of operation
Commencing at endof fiscal 200913

ResultGas sales volume (left)

Residential
Industrial

Number of customers (right)

Commercial and others
Wholesale

Establishment of a system in which our share ofcapacity is about 1,300 MW

15

Priority Approaches – The Three E’s

Eco-friendly – Creation of Value Emphasizing The Environment

Approaches thus far
Contribution to reduced environmental burden in energy use
through the promotion of natural
gas utilization and the development
and diffusion of gas appliancesand systems

Priorities

Contribution to the realization of a low-carbon society throughincreased sales of natural gas, which has excellent environmental features; as well as aggressive initiatives in such areas as theprovision of goods and services that use new energy and theenhancement of energy-saving through the supply of newenergy and area-wide / networked energy usage.

Extensive Adoption of the “ENE-FARM”
Residential-Use Fuel Cell

Further Creation of Environmental ValueThe Group has developed, diffused, and expanded equipment

expected from the second half of the coming decade, as well as toand systems for the advanced use of environmentally friendly natu-

expansion of growth opportunities. With these factors in mind, we

ral gas, especially high-efficiency systems that reduce the burden

will take steps to integrate new sources of energy and natural gas

on the environment. In the residential sector, the “ENE-FARM”

as well as to achieve further reductions in environmental burden /We are giving careful consideration to patterns of energy usage

residential-use fuel cell, which represents these systems, will be

CO2 emissions. These will be key steps toward the realization of a

deployed to the market for a full-scale commercial roll out under

low-carbon society. Specifically, from the current fiscal year, we will

the medium-term management plan. In comparison with previous

implement full-scale initiatives in double power generation

systems, environmental friendliness is a strength of this system,

combining solar power with “ENE-FARM.” In addition to thewhich reduces CO2 emissions by 1.5 tons a year per household*.

optimization of individual appliances/energies, we will also target

We will leverage this strength and work to achieve further reduc-the construction of “smart energy networks” that integratetions in cost and size. We are aiming for sales of 42,000 units byelectricity, thermal, gas, and renewable energies to facilitate

the end of fiscal 2013. We will position “ENE-FARM,” which offers

optimal area-wide / networked energy usage.

a one-stop supply of electricity and heating, as our main strategic
product in order to realize a low-carbon society. Through its
adoption, we will take the initiative in working for a transition to ahydrogen-based society in the future.
* The Company’s trial calculation based on verification testing and assuming four
people per household.

Realization of a Low-Carbon Society

Smart Energy Networks

Reduction of CO2 Emissions through Diffusion andExpansion of the “ENE-FARM” Residential-Use Fuel Cell
(Thousand t/Year)80

Condominiums

63,000 t

60

60

45

LNG receiving terminals
Biogas supply

Electricity grid(Thousand units)

CO2 emissions reduction of
1.5 tons per household per year

Solar power generation /Solar heat collector

Solar power generation

Heat transmission line

District coolingplant

Fuel cells

42,000 units

City gas network
40

30

20

15

CGS

Steam absorption
chiller
0
FY

0

09

10

11

12

Fuel cells

13

Amount of CO2 reduction (left)
Number of units installed (cumulative total) (right)

16

Ordinary
power supply

Office buildings

Fuel cells

Hospitals and hotels, etc.

Priority Approaches – The Three E’s

Excellent Service – Improvement of Value for Customers

Approaches thus far
Establishment of new energy
service companies (Tokyo Gas
LIFEVAL) rooted in the local
community
Proposal of diverse solutions andvalue to customers through multienergy supply and energy services
Concentration on periodic inspection of customer gas facilities andsystematic renovation of gas pipes

Priorities

Improvement of customer satisfaction through the proposal ofvalue, the provision of timely services, and the proposal of higher quality solutions that cater to the needs of each customer
Further heightening of the value of the “safety, security, andreliability” brand by reinforcing gas appliance and pipeline
safety measures as well as countermeasures for earthquakes
and other natural disasters

Establishment and Promotion of the Setup
for Tokyo Gas LIFEVAL

Providing Added Value to Our Industrial
and Commercial Customers

As a measure to strengthen marketing in the residential sector, all

In response to the increasingly sophisticated and diverse needs offunctions, which used to be separated by type of service, haveour customers, we will take full advantage of the direct sales, tech-

been integrated into newly set-up Tokyo Gas LIFEVAL. Leveraging

nical, and engineering capabilities that we have cultivated in order

all points of contact with customers, such as periodic gas facility

to propose higher value.

safety checks and meter reading, we will provide various services
that offer thoroughgoing responses to diverse needs and imple-

Enhancing “Safety, Security, and Reliability”

ment one-stop value proposals. In this way, we will aim for even

We will take steps to improve the quality of assets throughhigher customer satisfaction. From April 2008, we have moved

ongoing investment in upgrading production and supply facilities,

ahead with the roll out of regionally linked marketing systems

such as replacement of aging pipes, together with the strengthen-through LIFEVAL. By October 2009, we plan to have LIFEVAL set

ing of measures to assure the safety of gas appliances. In this way,

up in some 65 service blocks in all, in line with our original plans.

we will strive to further heighten the brand value symbolized by
the words “safety, security, and reliability.”

Focused on Improving Customer Satisfaction
Tokyo Gas LIFEVAL One-Stop Services

Increasing Value Added through Tokyo Gas Group
Comprehensive Strengths
Provision of Value to Customers in Line with Facility Life Cycle
Needs / demands
Understanding of the latest customer needs / wishes

System selection
Periodic gas facility
safety checks

Opening / closing ofgas taps

Proposals regarding gas
appliances and facilities

Repair of gas
appliances

Installation of gas
appliances

Cooking classes
and events

Gas construction

Meter reading

Showrooms

Consultation utilizing technical/engineering capabilities
Proposal of optimal energy usage
Proposals utilizing energy-saving/new energy usage technologies
Finance services
Further sophistication in the safety of gas appliances

Operation / maintenanceOperational support / maintenance in line with customer needs
Monitoring of energy-saving diagnoses
Provision of operation / maintenance services
Risk management
Safety services (strengthening of periodic gas facility safety checks)

Delivery of solutions for customer needs

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INITIATIVES TO DEVELOP BUSINESS FOUNDATIONSStrengthening of the LNG Value Chain
Active Augmentation of the Trunk Infrastructure with a Focus on the Future
To achieve the evolution and enhancement of the integrated energy business through initiatives centered on the three E’s, key points will
include the augmentation of wide-area trunk infrastructure to secure long-term demand and to expand operations.
In addition to the Chiba-Kashima Line project, which is currently under construction, we will investigate and implement pipeline
construction projects with a focus on securing potential demand in the northern Kanto area. These projects include the new constructionof the Saito Line. With an eye to expanding natural gas demand and building a more stable supply system for the second half of thecoming decade and thereafter, we will begin to consider the construction of new LNG terminals and pipelines to link the new terminals
to existing networks.

Stable LNG Procurement that can Respond to Changes in the Environment
To realize stable procurement of competitive LNG, in addition to existing long-term contracts, we will participate in the start-up of new
projects, such as Pluto and Gorgon, and at the same time we will take steps to acquire upstream interests. In these ways, we will implement initiatives in overseas operations related to the LNG value chain. In addition, we will bolster our in-house fleet of LNG vessels, aiming
to reduce LNG transport costs and expand business in the transport of LNG for other companies.

Major Infrastructure Formation Plan

 Hitachi-Moka Line Hitachi

LNG Terminal

Gunma Line I

Gunma Line II (Plan) Saito Line

Central Line II Chiba-Kashima Line
Yokohama Line IINew Negishi Line Tokyo Gas high-pressuretransmission pipelines, etc.
High-pressure transmission
pipelines of other companies
Planned pipelines
Tokyo Gas Group service area

Ohgishima
Terminal,
No. 4 LNG Storage Tank


Pressure Increase at
the Negishi Terminal

Objectives

Line

1 Gunma Line I
Enhancement of wide-area
infrastructure

Enhancement of foundations
for stable supply

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2 Chiba-Kashima Line
3 Saito Line
4 Hitachi Terminal and
Hitachi-Moka Line
5 Ohgishima Terminal, No. 4
LNG Storage Tank
6 Pressure Increase at the
Negishi Terminal

Scheduled start of service

Fiscal 2009
Fiscal 2011
Around fiscal 2015
Around fiscal 2017
Fiscal 2013

7 Central Line II

Fiscal 2013
Fiscal 2010

8 New Negishi Line

Fiscal 2013

9 Yokohama Line II

Fiscal 2013

Reinforcement of the Synergy of All Tokyo Gas
Consolidated Group Management
Tokyo Gas conducts business in a wide range of areas within the LNG value chain, fromupstream to downstream. To realize the steady evolution and advancement of the integrated energy business, we must reinforce and consolidate the comprehensive strengths of

Outlook for Results ofConsolidated Subsidiaries

the Tokyo Gas Group and supporting companies.
In regard to our human resources base, we will take steps to enhance skills through(¥ billion)
800(¥ billion)
80

personnel exchange programs within the Group. Tokyo Gas LIFEVAL has an importantrole in the current medium-term management plan, and we will implement a human

600

60

400

40

200

20

resource development program especially for Tokyo Gas LIFEVAL in order to further
improve the quality of this system.
Regarding business execution systems, since the previous medium-term management
plan, we have been strategically investing funds in the fields of upstream operations,overseas projects, energy services, and the power supply business. During the period
covered by the current medium-term management plan, we expect to see a certain level ofresults from these investments, which will make a contribution to growth and higher
profitability within the Group as a whole. We are targeting an increase in operating income

0
FY

0

08

13
Outlookat consolidated subsidiaries in fiscal 2013 to more than ¥40 billion—more than double theSales (left)

Operating income (right)

results in fiscal 2008.

Financial Strategy and Key Indicators in the Medium-Term Management Plan
By steadily implementing the key initiatives under the medium-term management plan, we should generate cash flow of about¥1,070.0 billion yen over the five years from fiscal 2009 to fiscal 2013. We will aggressively invest this cash flow in upstream,
infrastructure, and demand development projects while providing appropriate returns to shareholders.
While investing vigorously to realize sustained future growth, we will implement a balanced financial strategy, with consideration for investment efficiency, financial soundness, and shareholder return, and in fiscal 2013 we expect an ROA of 3.7%, a D/E
ratio of 0.69, and an ROE of 7.7%. In providing returns to our shareholders, our aim is to avoid reducing dividends and to work
to increase dividends over the long term. We are targeting a total payout ratio of 60%, including treasury stock acquisitions.

Major Management Indicators (Consolidated)

Main Data (Consolidated)

Fiscal 2008

Fiscal 2013 (plan)

182.7

Five year plan: 1,060.0

ROA (%)

2.4

3.7

ROE (%)

5.4

7.7

Operating cash flow (¥ billion)*

TEP (¥ billion)(4.8)* TEP (Tokyo Gas Economic Profit) =net operating profit after tax prior to interest payments –cost of capital (invested capital x WACC)
WACC Fiscal 2008 results: 3.4%
WACC Fiscal 2013 outlook: 3.8%

18.0

Fiscal 2008

Fiscal 2013 (plan)

City gas sales volume(billion m3, 45MJ/m3)

13.9

16.4

Total net sales (¥ billion)

1,660.1

1,720.0

Total assets (¥ billion)

1,764.1

1,920.0

Interest-bearing debt (¥ billion)

593.2

640.0

Equity ratio (%)

43.8

48.4

D/E ratio (times)

0.77

0.69

1,225.7

1,180.0

Reference: Non-consolidated
gas sales (¥ billion)

PremisePlan for fiscal 2009–2013: Crude oil price: $70 per barrel; exchange rate:¥100 to the dollar

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