TOKYO GAS ANNUAL REPORT 2018

Business overview

Electric power businessNet sales and Operating Profit(¥ billion)

Net sales (LH)300(¥ billion)

Operating profit (RH)

30.0

225

22.5

150

15.0

75

7.500
2013.3 2014.3

2015.3 2016.3

2017.32018.3 2019.3(Planned)

Electricity Sales Volume and Number of Retail Costomers
Electricity sales volume (LH)
Number of retail customers (RH)

(billion kWh)20(million)

2.0

15

1.5

10

1.0

5

0.500
2013.3 2014.3

2015.3 2016.3

2017.32018.3 2019.3(Planned)

The era of single-source providers ofelectricity and gas

OutlineSince 2000, when the Tokyo Gas Group began to generate andsupply electric power, it has engaged in a comprehensive rangeof business activities that extend from fuel procurement to power
generation and sales. Among the new entrants to the sector
following the start of deregulation, we own one of the largest power
stations in the Greater Tokyo region, and sell generated power towholesale and large-lot customers. With the full deregulation of
the electric power retail sector in April 2016, we also began sellingelectricity to residential and commercial customers.
By providing customers with value such as value for money, peaceof mind, simplicity and convenience, we will continue to expand
our electric power business operations and thereby increase ourcorporate value.
Number of RetailCustomers

Electricity Sales
VolumeSegment profits

1,130 thousand

14.66 billion kWh¥9.6 billion

FY2017FY2017FY2017

For many years, customers in Japan were only able to buy
electricity from electric power companies, and gas from gas
companies. With the full deregulation of the electric powerand gas retail markets, consumers in Japan can nowpurchase both electricity and gas from a single supplier, justas in the EU and the US.
Based on this, the Tokyo Gas Group will aim to expand its
energy business through the proposal and deployment of
optimal energy systems.

Full Deregulated Market of the Electricity and gas

Risks
Decline in price competitiveness of LNG thermal powergeneration, associated with changes in prices of raw materials
and fuels
Potential damage to power generation facilities and supply issues ofraw materials and fuels, stemming from a large-scale disaster25

Approximate
potential customers(Million)

Approximate
market size(¥ trillion)

1085

8.0

WithinTEPCO’s domain

29

2.8

203

26

2.4

Electricity

Strengths
Some of the largest-scale, most highly-efficient power sourcesamong the new power suppliers in the Greater Tokyo region
Community-based sales network (operated by Tokyo Gas
Lifeval, Enesta, etc.) and over 11 million customers as a basePower source infrastructure, operational know-how andsystems aligned with both wholesale and retail sales

Number ofcompanies*

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

Hitachi LNG
Terminal

Achievements over the past two years since
the full deregulation of the electric power retailmarket

Moka Power Station(Kobelco Power Moka)(Scheduled for FY2019)

Kashima Waterfront Line

Ohgishima
LNG Terminal/
Ohgishima Power
Co., Ltd.

Chiba-Kashima Line

Sodegaura LNG Terminal
Negishi LNG Terminal

Electricity Sales Volume(billion kWh)40

Selling approximately 5% of electricity demand inthe Greater Tokyo Area

WholesaleNo. 1 amongst newmarket entrants

29.0%

20.7%108.27 billion
kWh12.65 billion
kWh14.66 billion
kWh0

FY2011FY2016FY2017

FY2020(Planned)

Number of Retail Costomers(million)3

2.2 million
21.13 million

00

2016.3
FY20162017.32018.3

FY2017

Initiatives Towards Achieving the Sustainable Development Goals (SDGs)

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

Financial data

Sustainable Development Goals

2021.3(Planned)

Invisible assets

0.667 million

1

Corporate governance

No. 1 amongst newmarket entrants

20Business overview

The Tokyo Gas Group launched its electric power business inthe year 2000. Seizing the opportunity of the full deregulationof the electric power retail market in 2016, the Group
expanded its sales to residential and commercial customers,in addition to the existing wholesale segment, selling anelectricity volume of around 14.7 billion kWh in fiscal 2017.
This volume is equivalent to around 5% of total demand in the
Greater Tokyo Area. By 2020 we plan to expand this volume
to 31.0 billion kWh, equivalent to around 10% of total demandin the Greater Tokyo Area.
Market Share Amongst
New Electric Power
Market Entrants(Low-Voltage Market)

31.00 billion
kWhRetail30

Overall image after
full deregulation

Tokyo Gas Baypower Co., Ltd.
Tokyo Gas Yokosuka
Power Co., Ltd.

GPS2020

Kawasaki Natural Gas Power
Generation Co., Ltd.

Message

We have marketed and provided the “Always Plan,” a onestop package that delivers gas, electric power, and various
other services, to support our expansion into the electric
power retail market. As of March 31, 2018, we are now
supplying electric power to 1.13 million customers. In fiscal
2017, following on from 2016, we again secured the No. 1market share position among new entrants in the low-voltage
market.
Moving forward, we will establish new payment rate plans anddevelop our range of services so that more customers may
continue to feel that they are receiving a service that
represents good value, with the aim of delivering Tokyo Gas
Group electric power services to 2.2 million customers by
fiscal 2020; and continue to increase the number ofcustomers to whom we provide gas, electricity and otherservices as a one-stop package.

Ibaraki Line

(Scheduled for FY2020)

Introduction

Kiyohara Industrial Park

*Scale of output from Tokyo Gas owned power sources: 1.6 million kW26TOKYO GAS ANNUAL REPORT 2018

Business overview

Electric power business

Expand power sources
Prompted by the full deregulation of the electric power retailmarket in 2016, Tokyo Gas began delivering electricity tolow-voltage residential and commercial customers, in addition
to serving the wholesale market.
To do so, and to match the growth of our sales stock with theaim of delivering electric power to 2.2 million retail customers
by fiscal 2020, we will continue to increase and expand ournetwork of Tokyo Gas owned power sources.
In line with our targets of achieving approximate total power
output of 3.0 million kW by fiscal 2020 and 5.0 million kW
during the coming decade, we are developing our own powersources while at the same time making effective use ofalliance power sources (electric power purchasing
agreements with power companies, etc.) and market sources.
In addition to the Tokyo Gas Group’s own power stations, it
has been agreed that electric power generated at Moka
Power Station, which is under construction by KOBELCO, oneof Japan’s largest Independent Power Producers (IPPs), will
be supplied to Tokyo Gas.

The Group’s Natural Gas-Fired Thermal Power Plants
Tokyo Gas Baypower Co., Ltd.
Generation
capacity

0.10 millon kW
0.1 million×1unit

Owned power

0.10 millon kW

Start of operations 2003 Tokyo Gas interest 100%
Tokyo Gas Yokosuka Power Co., Ltd.
Generation
capacity

0.24 millon kW
0.24 million×1unit

Owned power

0.18 million kW

Start of operations 2006 Tokyo Gas interest 75%
Kawasaki Natural Gas Power Generation
Co., Ltd.

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

In addition to our competitive natural gas-fired thermal
power sources and base load supply sources, we will also
promote initiatives aimed at expanding renewable powersources, in order to address the issue of preventing climatechange.

Aiming for the scopeof 5 million kW

Generation
capacity

0.84 millon kW
0.42 million×2unit

Moka Power Station
Start-up of operations

Owned power

0.40 million kW

Start of operations 2008 Tokyo Gas interest 49%(1.2 million kW)

Ohgishima Power Co., Ltd.

3 million kW

Generation
capacity

1.6 million kW

1.221 millon kW
0.407 million×3unit

20172020

2020s

Procurement of Group-owned power sources
and alliance power sources
Construction of the Moka Power Station (gas-fired power
generation, approximately 1.2 million kW, all to be purchasedby the Tokyo Gas Group) is progressing smoothly towards
starting operations in fiscal 2019.
To further expand our range of power sources, we arecontinuing our evaluations for the Chiba-Sodegaura Energy(joint investment with Kyushu Electric Power and Idemitsu
Kosan), and a thermal power plant project in Ibaraki
Prefecture, among others.

Owned power

0.90 million kW

Start of operations 2010 Tokyo Gas interest 75%

Development of renewable energy sources
By developing renewable energy technologies (such as
photovoltaic and wind power generation) with a sense ofurgency, and utilizing alliances with relevant companies,
Tokyo Gas will seek to bolster its renewable energy source
initiatives.
We will also engage in proactive investment anddevelopment projects with the aim of achieving a power
generation capacity of 0.4 million kW from renewable energy
sources by the early 2020s.

Renewable Energy Projects
Feb. 2017 Formed a business alliance with Shizen Energy Inc., withthe objective of acquiring around 60 thousand kW ofphotovoltaic solar power generation sources
May 2018 Acquired a partial stake in SFK Power LLC., which has a total
power generation capacity of 9.7 thousand kW
Jun. 2018 Signed an agreement with Photon Japan LLC., with the aimof jointly developing photovoltaic power stations with a power
generation capacity of 30 thousand kW

27

Moka Power Station (image)Tokyo Gas Electricity– Electric Power Retail Division

Customer Satisfaction

No.1

Community-based sales network

Corporate name ENNET Corporation
Established
July 7, 2000

Shareholders

Electricity trading andelectricity generation
NTT Facilities 40%; Tokyo Gas 30%,
Osaka Gas 30%

Corporate name Synergia Power Co., Ltd.
Established
October 1, 2015
Main business
Shareholders

Electricity retail supply to high-voltage
and extra-high-voltage customers in theKanto region, mainly in its northern area
Tohoku Electric Power 50%; Tokyo
Gas 50%

Always Reliable Services
Gas Fixture Troubleshooting Support
Gas Fixture Special Support
Electricity Fixture Troubleshooting Support
Emergency Home Assist Service
Residential Monitoring Services

Always Home Support

Power (Electricity)
Always Electricity 1S
Always Electricity 1
Always Electricity 2
Always Electricity 3

Plumbing trouble response
Minor home improvements, repairs andrenovations
Home safety measures
House cleaning and delivery cleaning“my TOKYOGAS” (the service for Web members)
Tokyo Gas Triple Discount Plan for gas,
electricity and internet

Message
Living Service Division
Energy Proposal Promotion
Department

Hideo Horikoshi

The entire Tokyo Gas Group is currently working together as a team,engaging in various initiatives, with the goal of delivering Tokyo Gas
Group electric power to 2.2 million customers by fiscal 2020.
Specifically, we are securing new customers by proposing thekey values—value for money, peace of mind, simplicity andconvenience—offered by our electric power services, through acombination of TV commercials, direct mail promotions and other PR
techniques, and individual home sales visits.
We also negotiate and form business partnerships (alliances) withreal estate management companies (which are responsible for themanagement of high rise condominiums and apartment buildings,etc.), as well as various business partners and companies in otherbusiness sectors with which the Group has formed relationships.
Through these alliances, these companies introduce our electricpower services to their customers, in some cases leading to us
securing new electric power contracts with those customers.
One thing that I feel keenly in my day-to-day duties as a sales
representative is the power of the Tokyo Gas brand. We are trusted bycustomers as a company that has extensive experience and expertisein the field of energy, and I feel that this is a major advantage when it
comes to selling electricity.
Moving forward, I will continue striving to propose our services
and solutions to customers in a sincere, detailed and easilyunderstandable manner, so as not to betray that trust.

Financial data

Main business

General Tariff
Always Gas
Tariffs for the specificgas equipments(“Danran Plan”etc.)

Services

Invisible assets

Through the establishment of Ennet in 2000, as a joint
venture with NTT Facilities and Osaka Gas, we have worked
to expand our electricity sales.
In October 2015, we established Synergia Power Co., Ltd.,
as a joint venture with Tohoku Electric Power Co., Ltd.
As of April 2016, Synergia began selling electricity tohigh-voltage and extra-high-voltage customers in the Kanto
region, primarily in the Northern Kanto area.

GasCorporate governance

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

Always Plan

Provide value for money, peace of mind,
simplicity and convenience

Business overview

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

(JCSI: Japanese Customer Satisfaction Index)
Companies surveyed: five new electric power
retail market entrants

Overall image after
full deregulation

Alliances with various industry partners

FY2017 JCSI Survey ofElectric Power Retail Divisions

GPS2020

The Tokyo Gas Group has established a community-based
sales network with around 200 outlets in the Kanto region(including Tokyo Gas Lifeval, Enesta and Enefit), enabling us totailor our services to fit the needs of individual customers.
Through its 10,000 employees, Lifeval has built strong
relationships of trust with over 11 million customers. As the“face” of Tokyo Gas Group, Lifeval employees interact directlywith customers and engage in a wide array of services ranging
from the sale and maintenance of gas appliances andopening/closing of gas fixtures when customers move house,to gas appliance safety checks and gas meter reading.
In retail sales of electricity, too, through push-type marketingmaking effective use of such opportunities for direct contact
with customers, we will continue to steadily accumulate more
contracts to enhance our customer base.

MessageThrough its city gas business, the Tokyo Gas Group has built
up an extensive network and customer base of 11 million
customers. Together with our key values of value for money,
peace of mind, simplicity and convenience, we supply optimalenergy services to match the the actual usage needs ofcustomers, in combination with a range of lifestyle services.

Expanding our services towards our goalof securing 2.2 million electric power retailcustomers

Introduction

Expand electricity sales to low-voltage
customers

28