Printed in Japan
Financial and Industry Data (EXCEL Spreadsheet Data Available)

Investors’ Guide

http://www.tokyo-gas.co.jp/IR/english/library/invguid_e.html

Quarterly Financial Results

Earnings Announcements
http://www.tokyo-gas.co.jp/IR/english/event/earn_e.html

Consolidated Financial Results Bulletin
http://www.tokyo-gas.co.jp/IR/english/library/earn_e.html

Details of Challenge 2020 Vision
The Tokyo Gas Group’s Vision for Energy and the Future~Challenge 2020 Vision~ (Released in November 2011)
http://www.tokyo-gas.co.jp/IR/english/manage/vision_e.html

Details of Corporate GovernanceCorporate Governance Report
http://www.tokyo-gas.co.jp/IR/english/gvnnc/index_e.html

CSR Activities

Tokyo Gas Group CSR Report
http://www.tokyo-gas.co.jp/csr/index_e.htm

Stock Code9531

IR Contact

E-mail:tgir@tokyo-gas.co.jp
Tel: +81-3-5400-3888
Fax: +81-3-5472-3849

1-5-20 Kaigan, Minato-ku, Tokyo
105-8527, Japan

http://www.tokyo-gas.co.jp/index_e.html
Published on August, 2016

For inquiries regarding planning and editing of this report:
Investor Relations Sect., Finance Dept., Tokyo Gas Co., Ltd.

This annual report is printed on Tokyo Gas Recycled Paper (made fromrecycled paper from Tokyo Gas offices, trimmings from afforestation
activities, and reused and unused wood materials) using vegetable oil ink
that contains low levels of organic solvents.

Tokyo Gas Co., Ltd. ANNUAL REPORT 2016TOKYO GASANNUALREPORT 2016
Tokyo Gas Co., Ltd.

The Tokyo Gas Group aims to bea true power source for people’s lives, and for society.
Over 130 years, our work kept
us in a kind of face-to-face relation with our customers.
Based on the accumulated experience and trust
derived from that history,
we want to help create a bright, safe, and pleasant tomorrow.
We will continue to be very close to our customers
and be deliberate in taking action on their behalf.
Our efforts will be group-wide as will
be our bold, confident approach to the challenges ahead.

TOKYO GAS ANNUAL REPORT 201601

Contents
03 Our history
05 President’s message
11 CFO’s message
13 LNG Value Chain for Value Creation
15 Deregulation
17 Challenge 2020 Vision
21 Gas business
25 Electric power business
29 Overseas business
31 Other business35 Corporate governance
45 Invisible assets
49 Financial data
54 Our potential

Forward-Looking Statements
This annual report includes various management goals and otherforecasts relating to the “Challenge 2020 Vision” announced in
November 2011 and other strategies. This information is based on
forecasts, assumptions, and available information when preparing the“Challenge 2020 Vision” and other strategies and does not guarantee
the achievement of goals and forecasts or future business results.
Further, this information may change due to changes in businessconditions. Therefore, placing undue reliance on this information is notadvised. In addition, the target figures for fiscal 2016 are based on the
judgment of management and the information available when the
figures were published (April 28, 2016). The company will disclose thelatest information to the Tokyo Stock Exchange in a timely manner andat the same time publish it in the investor relations section of its website(http://www.tokyo-gas. co.jp/IR/english/index.html).

02

TOKYO GAS ANNUAL REPORT 2016

(billion m3)
20

Tokyo Gas
continues to grow as“New Energy Frontier”

15

For generations of Japanese people the Tokyo Gas Group has provided a stable, reliable supplyof gas for industries and households, to support economic development of all, and ensure
comfortable home environments and desirable lifestyles. At the same time, we have raised thecorporate value of Group companies.
We believe we are in the midst of an era we call the second foundation of the company as thefull deregulation of the electric power and gas markets draws near. In this context, we arepledged to make our “Challenge 2020 Vision” adopted in 2011 a reality and ensure theunfaltering growth of the Tokyo Gas Group in the years to come.
* The numbers of gas customers and gas sales volumes are parent-based up to fiscal 2002 and consolidated-based from fiscal 2003.

10

1974

5 million

Number of customers

1966

3 million

Gas sales volume (LH)
Number of customers (RH)

The Tokyo Bay Underwater Linewent into service.
The Looped Line (Negishi- Sodegaura)
went into service.

5
1955
1885

Number of customers

Number of customers

1 million

LNG imports from Brunei started.

Number of customers

300

Sodegaura LNG Terminal started operation.
LNG imports from Alaska started.

Tokyo Gas was established.

Negishi LNG Terminal started operation.

Following the enactment of
the Commercial Code, namechanged to Tokyo Gas Co., Ltd.

0
1885

1890

1895

1900

1905

1910

1915

1920

1925

1930

1935

Main gas
resources

Coal

Gas usage

Lighting

HeatingStarted to supply gas for lighting

Developed household gas appliances for a more comfortable life

TOKYO GAS ANNUAL REPORT 2016

1945

Oil

1902 “Gas Kamado” oven went on sale.

Gas lamp

1940

Gas Kamado oven

03

Automatic gas rice cooker

Kuramae Kokugikan

The old Shinjuku District
Heating and Cooling Center

1957 “Automatic gas rice cooker” went on sale.

First natural gas
cogeneration system

Residential fuel cell
“ENE-FARM”

Our history

2013

2007

Hitachi LNG Terminal started operationand the Ibaraki-Tochigi Line went into service.

Number of customers(million)12

11 million

Number of customers

10 million

LNG imports of a non-conventional type from the
Queensland Curtis LNG Project started.
The Chiba-Kashima Line went into service.
The Chuo Line went into service.

9

LNG imports from Russia started.
"Tokyo Gas LIFEVAL" was established.
1995

Number of customers

8 million

Keihin Line and Yokohama Line went into
service (three LNG terminals were linked).
Ohgishima LNG Terminal started operation.
LNG imports from Qatar started.
LNG imports from Indonesia started.

6

LNG imports from Australia started.

Caloric value conversion to natural
gas completed.
LNG imports from Malaysia started.
1972-1988

Caloric value conversion was
carried out over 17 years.

3

0
1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

Natural Gas
Heating and electricity

Expansion in the commercial
and industrial user segment
1970 The first gas air-conditioning
unit was installed at Kuramae
Kokugikan sumo arena.
1971 District heating and cooling
service launched in the Shinjuku
district, Tokyo (first customer, Keio
Plaza Hotel).
1974 Use of industrial gas took off withadoption of gas boilers by Nisshin
Sugar Co., Ltd.

Promoted cogeneration
1981 The first cogeneration system wasinstalled at the National Stadium.
1987 “Gas heat pump” was launched.

Entered the electric powerbusiness

Promoted and expanded“ENE-FARM” residential fuel cells

2000 Ennet was established.
2003 Tokyo Gas Baypower Station went
into operation.
2006 Yokosuka Power Station went into
operation.
2008 Kawasaki Natural Gas Power
Station went into operation.
2010 Ohgishima Power Station went into
operation.
2016 Entered into the electric power
retail business.

2009 A model for detached homes went
on sale.
2014 A model for housing complexes
went on sale.
2015 A model with built-in selfsustaining power generation
function went on sale.

04

TOKYO GAS ANNUAL REPORT 2016

Toward realizing the “Challenge 2020 Vision”

Tokyo Gas will
confidently and boldly
persist dealing withchallenges
Michiaki Hirose
Representative Director, President

TOKYO GAS ANNUAL REPORT 201605

President’s message

My mission is to create new Tokyo Gas corporate value.
Since 1885, Tokyo Gas has provided a stable and reliable supply of gas to industries and households in
the Greater Tokyo Area to support its economic development and quality of life of its people. While doing
so the company has also raised its corporate value.
We believe we are in the midst of an era we call the second foundation of the company as the fullderegulation of the electric power and gas markets draws near. In this context, we are pledged to makeour "Challenge 2020 Vision" adopted in 2011 a reality and ensure the unfaltering growth of the Tokyo Gas
Group in the years to come.
Fiscal 2016 will be a year to form a solid base for
future growthIn fiscal 2015, ended March 31, 2016, we achieved a record
high in operating income, ¥192 billion (up 11.8% year-onyear). This was mainly due to a lagged benefit from lower oil
prices, and adjusted for such extraordinary factors,
operating income was estimated to be similar to that of theprevious year.
For fiscal 2016, ending March 31, 2017, assuming the exchange
rate of ¥115 per U.S. dollar and an oil price of $37.5/bbl ($35 in
the first half and $40 in the second half), operating income(initial forecast) is expected to be ¥48 billion (down 75% y-o-y).
Major factors for this profit decline will be an absence of thelagged benefit of last year, pension actuarial difference, and anincrease in depreciation burden following the start-up of
domestic large infrastructure projects. Excluding such
extraordinary factors, we do not think that our operating
performance is significantly deteriorating this year. With theadvent of completion of the deregulation of the electric powerand gas markets, we have identified this year to be a criticalyear for Tokyo Gas to become a “total energy” company and atruly global company. We will make investments and implement
measures for enhancing our mid- and long-term corporate
value to form a solid base for our future growth.

We are making steady progress in the second“Step” stage measures of our Challenge 2020 Vision
Fiscal 2015 was the first year of the second “Step” stage of our
Challenge 2020 Vision. We made steady progress in its threemain measures: to evolve into the total energy business ; toaccelerate global business development; and to reconstruct thecorporate group. We will continue our progress in fiscal 2016.

Evolving into the total energy businessTo evolve into the total energy business, we have established
our base for expanding sales of gas in the future. Specifically,
we began operation of our Northern Kanto Area
infrastructure, including the Hitachi LNG Terminal, our firstreceiving terminal located ouside of the Tokyo Bay area aswell as the Ibaraki-Tochigi Line. In addition, we have decided
to construct the Ibaraki Line to connect Hitachi area andKashima area, as a last component to complete ourinfrastructure in the Greater Tokyo Area. Upon completion of
the Ibaraki Line and pipeline loops, we can surely
accommodate future additional gas demand in the Greater
Tokyo Area.
Concerning the electric power business, the third unit of
Ohgishima Power Station (Tokyo Gas generation capacity:
300 MW) started operation in February 2016, ahead of the fullderegulation of the retail electric power market in April 2016.
In January, we commenced pre-order sales of electricity toresidential and commercial customers and have been steadilybuilding up the number of customers. Our plan for the initial
year is 400,000 customers but we are making group-wide
efforts to achieve and exceed the target as soon as possible,
with the aim of becoming the No. 1 new power entrant.

Accelerating global business development
In the context of accelerating global business development,
we have established new business operation sites andincreased our workforces in the past two years. Specifically,
our office in Houston, Texas increased the workforces toaround 20 persons, while we opened new offices in
Singapore, Jakarta, Bangkok, and Hanoi to make a fiveoffice network in Southeast Asia, including the existing
office in Kuala Lumpur. Having bases like these enables us
to collect valuable and timely information. From fiscal 2016,
we have launched two initiatives based on our enhanced
new network. First, leveraging our strength as an LNG
importer, we decided to get involved in upstream projects inNorth America. Making use of our past lesson in being
forced to record impairment loss in a downward phase of oil
and gas prices, we will cautiously select prime projects
while carefully focusing on commodity price trends. Second,
capitalizing our long-accumulated total energy businesstechnology and know-how, with an emphasis on LNG in
Japan, and through alliances with local energy companies inSoutheast Asian countries, we want to take up the challenge
of developing an LNG value chain business from receipt andsupply to use of LNG. We recognize that it will take time toestablish a deep-rooted local network. Nonetheless, with afocus on North America and Southeast Asia, we would liketo develop and promote business from a medium- to longterm perspective.

06

TOKYO GAS ANNUAL REPORT 2016

Reconstructing our corporate group
Concerning the reconstruction of our corporate group, we
aim to integrate functions and operations, including thoseat subsidiaries and affiliates, through the selection andconcentration of businesses. Specifically, we withdrew
from manufacturing and sales of gas appliances by sellingshares of Gastar Co., Ltd., our group company, to Rinnai
Corporation, and decided to enhance sales business,
which brings us closer to customers and leverages ourGroup’s strength. In April 2016, we established Tokyo Gas
Liquid Holding Co., Ltd. to control our liquid gas business,such as LPG gas and industrial gas. By having Tokyo Gas
Energy Co., Ltd., Tokyo Gas Chemicals Co., Ltd., andJapan Super Freeze Co., Ltd. under the new company, theliquid gas business structure has been restructured toenhance group management.
Triggered by the fully deregulating the retail electric powerand gas market, we are carrying out the reconstruction andconsolidation of the Tokyo Gas Group and other structuralreform, where none has been done up to now. The city gas
business will always be our core business. Going forward,
however, we will shift away from management focused on
one dominant business in city gas, corresponding to Mt. Fuji,
to management of several large businesses, including theelectric power business, overseas, engineering, liquid gas,and real estate businesses, corresponding to an entire
mountain range.
Going forward, to boldly and speedily promote our measuresof the “Step” stage, we expect that investment in resources
will temporarily have priority over establishing infrastructure,

TOKYO GAS ANNUAL REPORT 201607

acquiring customers in the electric power market, andachieving other objectives. This is a requisite, however, for
our next “Jump” stage. I firmly believe that Tokyo Gas willcontinue to grow by steadily implementing the measures,
looking toward the future beyond the Challenge 2020 Vision.

Deregulation of the retail electric power andgas markets is regarded as a major business
opportunity.
The electric power market is immense, at ¥3 trillion in the
Greater Tokyo Area alone, and we regard the opportunity toaccess this market as a major business opportunity for Tokyo
Gas. In addition to wholesale and large-scale customer
markets, we are focusing on the sale of electricity to households
and small commercial customers, the sectors that are subject
to deregulation. We have a very challenging objective of
satisfying 10% of demand for electricity, equivalent to 30 billion
kWh, in the Greater Tokyo Area by 2020. Regarding the power
supply required for electricity sale, the third unit of the
Ohgishima Power Station began operation in February 2016
and power generation capacity has been raised to 1,600 MW.
Moreover, due to purchase of the electricity generated at Kobe
Steel's Moka Power station and other factors, we plan toexpand our supply capacity to 3,000 MW by 2020. Further, in
addition to competitive gas-powered thermal power sources,
we will also implement renewable energy initiatives, withconsideration to addressing to the issues of the climate change.
As we have a clear prospect of securing adequate powersources, the next challenge is how to build a customer base,which we believe incorporates two important points. First isPresident’s message

Tokyo Gas is carrying out structural reforms,
looking ahead to the full deregulation of theelectric power and gas businessour policy on pricing. Tokyo Gas has long accumulated added
value, namely reliability, safety, and trust through its 130-year
history in the gas business. It is certainly important to makecertain competitive pricing relative to our competitors.
However, we believe a considerable strength of Tokyo Gas
lies in its direct contact with its customers with whom thesolid relationship of trust has been established and throughLifeval companies engaged in maintenance, inspection, saleof gas appliances, and others. We intend to get maximum
leverage out of it.
The second important point is how to think about earnings.
We hope to be widely recognized that Tokyo Gas will be theNo. 1 new power entrant from the beginning of the fullderegulation of the retail market and will steadily acquire asignificant market share. Then after a few years, we expectthat new players will be reorganized and consolidated into a
fewer number. Along with such scenario, at the initial stage,
costs to enter the small-scale-user electricity sales market
will temporarily increase. However, as the infrastructureindustry leverages economies of scale, at a stage when acertain scale of demand is acquired, our management focus
can be shifted into acquiring profitability.
In April 2017, the retail gas market will be deregulated. In myview, the purpose and objectives of the Gas System Reform
is slightly different from the Electricity System Reform. The
Electricity System Reform aims at 1) stable supply ofelectricity; 2) lower electricity prices; and 3) more options ofsuppliers for customers, while the Gas System Reform aims
at 1) stable supply and expansion of diffusion of gas use; 2)lower gas prices and higher customer satisfaction; and 3)
more options of suppliers for customers and enhanced
customer safety. Differences are to include “expansion ofdiffusion of gas,” “higher customer satisfaction,” and“enhanced customer safety” for the gas reform’s purposes.
Use of environmentally-friendly natural gas which generates
low CO2 emissions displaced other fuel and conversion togas use is still advancing. While electricity is relatively easy tohandle, gas requires safety to be secured up to the point of
use at customers. As safety know-how is indispensable forthe safe use of gas, we believe that now is precisely the timethat our accumulated relationship of trust with customers will
be tested. Moreover, in Japan, a country poor in natural
resources, Tokyo Gas can stably procure energy resources
by procuring as planned approximately 14 million tons of LNG
annually, equivalent to 15% of Japan‘s LNG procurement,
and can utilize its existing LNG terminals and othercomponents of its infrastructure.
As a managerial risk scenario, we need to prepare for the
possibility of a certain share to be taken away by ourcompetitors if the full deregulation triggers renewed
competition in the already-deregulated large-scale customer
segment of the market, in addition to competition in satisfying
household gas demand. This makes us even moredetermined to increase profits in absolute value terms by fully
utilizing our relationship of trust with customers andenhancing our unique services, and at the same time by
expanding our business in the electricity market, which isbigger in size than that of gas, at an early stage.

Gas Sales Volume

Electric Power Sales Volume(billion m3)(billion kWh)25

30

An increaseof approx.
3.4 billion m3

30.0

An increaseof approx.
19 billion kWh

22.0

20

Approx.

24
17.2

18.4

18.6

15

18

10

12

11.0
9.7

5

6

0

0
2014.32015.32016.32021.32014.3

10.6

2015.32016.3082021.3

TOKYO GAS ANNUAL REPORT 2016

customers’ trust, the metropolitan network of Lifeval as service
companies and others, and various business partners.
We are determined to enhance such “invisible value” andrealize a sustainable growth as a corporate group throughthree avenues of contribution.
First, as a progressive public-interest energy corporate groupin Japan’s energy sector, the Tokyo Gas Group stably
supplies internationally-competitive energy in Japan andmakes a constant contribution to people’s safe, reliable lives
and Japan’s economy.
Second, Tokyo Gas will evolve into a unique total energy
business to better respond to everyday needs for customers’
lives, by making use of its bonding with over 11 million
customers, maintenance system and know-how, ICT andother advanced technology, and over 200 Tokyo Gas Group
shops in the Greater Tokyo Area.
Third, we will contribute to economic development andpeople’s level of life elsewhere in Asia, by making use of ouraccumulated technology portfolio and know-how in Japan torespond to increasing demand for natural gas and otherenergy resources in Asia, and by establishing an intra-region
infrastructure and value chain.

Enhance “invisible assets” and take up challengesof our second round of foundation
In the midst of an era of the full deregulation of the retailelectric power and gas markets, we think of ourselves as beingin our second foundation era. Eiichi Shibusawa, a Japaneseindustrialist and financier in the 19th century, who foundedTokyo Gas and established its business base, wrote in his
book Rongo to soroban (The Analects and the Abacus) the
importance of balancing the pursuit of common good andprofit. For 130 years since foundation, we have kept thisforemost and consistently have endeavored to contribute tosociety by safely and stably supplying energy, which isindispensable to people’s lives, and have achieved sustainableprofit growth of the company. This dedication is shared by allof our employees and is the ultimate source of our corporate
value. This underlying principle will remain unchanged when
we handle not only gas but also electric power and otherenergy sources and when we do business not only in the
Greater Tokyo Area but also Japan and the World.
Since our foundation in 1885, we have accumulated “invisible
value” which do not appear on financial statements, while
being engaged in the stable supply of gas to industries andhouseholds and in supporting economic development andprosperous lives of people in the Greater Tokyo Area. Our
sources of competence include accumulated knowledge andknow-how, richly experienced human resources, a trackrecord in stable supply, LNG procurement capacity, ourGive our full attention to the stakeholders andcommitted to enhance corporate value
Tokyo Gas will be open to all of our stakeholders, including ourcustomers, shareholders, business partners, local communities,

Hitachi LNG Terminal
Ibaraki–Tochigi Line

Tokyo Gas Group pipelines
Tokyo Gas Group pipelines

Koga–Moka Line

(under construction and planning)(Scheduled for 2018.3)

Ibaraki Line (Scheduled for 2020)
North Kanto
Industrial Zone

Kashima Waterfront
Industrial Zone

Kashima Waterfront Line

Chiba–Kashima Line
Tokyo–Chiba
Industrial Zone

Sodegaura LNG Terminal
Ohgishima LNG Terminal
Negishi LNG Terminal

TOKYO GAS ANNUAL REPORT 2016

09

100km

Tokyo Gas Group Supply Area
Industrial zones

Saito Line

Tokyo–Yokohama
Industrial Zone

Tokyo Gas Group Supply Area

President’s message

and employees, and contribute to enhance value for each ofthem. This will ultimately enhance our own corporate value.
Concerning shareholder return, we intend to maintainunchanged the amount of dividend per share in fiscal 2016
despite expecting a significant decline in profit. Our policy
continues to be a gradual increase in dividends over time inline with earnings growth. In addition, by combining share
repurchase (assuming subsequent cancellation), our basic
policy to target a total payout ratio of approximately 60% will
be maintained up to 2020.
Given the strong public service nature of our business, ourmanagement stance to date has emphasized a well-balanced
approach to our customers, our most important stakeholders,in our returning the company’s achievements in management
efficiency. Our customers benefited from the lowering of gas
prices, in December 2013 and December 2015, and ourshareholders benefited in the form of an increase of ¥1 individend per share to ¥11 in fiscal 2015. Our corporate andbusiness philosophy will not change in principle even in thisera of deregulation. Nevertheless, we will continue to steadily
grow earnings after 2020 and seek to return our achievement
to our shareholders.
Lastly, I will manage Tokyo Gas to keep it a growth company.
First, the gas business is a growth business. While Japan’s
economic growth rate is now not as high as in the past, there
is a potential demand for natural gas in the Greater Tokyo
Area that waits to be satisfied, and continual sales growth
can be projected with a high degree of confidence.
Second, Tokyo Gas will evolve into a total energy company,
including the electric power business, and foster businesses
that have the potential to become earnings pillars alongside
the gas business.
Third, we will explore overseas business opportunities,
leveraging the strengths accumulated in Japan in the totalenergy business.
While the Gas System Reform in 2017, mainly the deregulationof the retail gas market, is likely to intensify competition, I am
convinced that Tokyo Gas will make continued growth by
evolving into a total energy company and by accelerating
global operations over time.
The full deregulation of the retail electric power and gas
markets is reshaping Japan’s energy industry. At the center ofthis tumultuous change, the Tokyo Gas Group is transforming
itself, and confidently and boldly faces challenges as theindustry enters virgin territory.
I ask for the continued understanding and support of our
stakeholders, including our customers, shareholders,business partners, and local communities.
Representative Director, President
Michiaki Hirose

10TOKYO GAS ANNUAL REPORT 2016

Tokyo Gas will maintain financial
health and appropriate andtimely shareholder returns, andsteadily implement growthdriven investments to achieve
continuous profit growth.
Isao Nakajima
Senior Executive Officer, CFO

As CFO, I participate in setting management strategy and am
also in charge of financial strategy, capital policy, and businessadministration. Based on the premise of assuring appropriate
shareholder returns each year, I firmly believe that the way torespond to this mandate by the company, it being entrustedwith capital from its shareholders, is to realize continuous profit
growth into the future. I therefore aim at well-balanced
allocation of operating cash flow to growth investments,
maintenance of a healthy financial position, and policy formedium- to long-term shareholder return.
For that purpose, return on equity (ROE) is an indicator we
focus on. As ROE is return on assets (ROA) multiplied byfinancial leverage (assets divided by equity), it is critical toraise ROA in order to improve ROE. Therefore, we regularly
assess the group’s assets and businesses, and try tocompress total assets by sale or disposal of assets orbusinesses which make less sense to own, when appropriate.
At the same time, we strictly review the purpose and businesspotential of our investments.
Financial leverage is another way to improve ROE but weshould not be short-term oriented. Rather we find it importantto balance “accumulated retained earnings to be used for
growth investments and in ensuring financial health” with“return to shareholders”. In order to secure fund sources for
medium- to long-term shareholder return, continuous growthinvestments are critical. Financial health is indispensable forsustaining high credit ratings (Aa3 by Moody’s and AA- by
S&P), and will eventually lead to restrain funding costs andbecome more trusted by our customers. By keeping thesethings in mind, we will continuously and aggressively strive fordividend payment and share repurchases.
From the viewpoint that it is important to clearly communicate
our views and policy on shareholder return to shareholders, wehave set a target for a total payout ratio (ratio of dividends andstock repurchases to consolidated net income) ofapproximately 60% and have steadily been implementing it. In
regard to dividend payment, we aim to maintain stable levels
while carrying out a gradual increase in dividends. Since fiscal
2000 when we raised the annual dividend from ¥5 per share to¥6, and we have gradually raised it to ¥11 in fiscal 2015, up ¥1from the previous year. In fiscal 2016, we intend to maintain ¥11
in dividend despite expecting a significant decline in profit
mainly due to an increase in gas resource costs.

Capital Expenditures and Gas Sales Volume

Shareholder Returns

Triple promotion of growth strategy, financial
health, and shareholder return(¥ billion)

Capital expenditures (LH)

Gas sales volume (RH)

(billion m3)

Share repurchases (¥ billion)

20

80

225

15

60

60.6

58.1

150

10

40

39.0

34.0

300

31.2

75

5

20

0

0

0

10.0

21.6

1994.3

2000.3

Ohgishima LNG Terminal,
Keihin Line, etc.

2005.32010.32016.3Chiba-Kashima Line,
Hitachi LNG Terminal, IbarakiTochigi Line, etc.

*1 Non-consolidated basis up to fiscal 1998; consolidated-basis from fiscal 1999

TOKYO GAS ANNUAL REPORT 2016

11

21.3

32.2
26.4
5.0
21.4

61.7

67.3

65.1
58.2

36.0

40.0

25.7

25.1

41.0
33.8

28.3

7.9

24.3

Dividends paid (¥ billion)

5.0

24.1

23.3

24.4

26.3

2007.3 2008.3 2009.3 2010.3 2011.3 2012.3 2013.3 2014.3 2015.3 2016.3
Total payout ratio

60.1% 73.6% 63.4% 60.1% 60.9% 61.4% 60.7% 60.0% 60.8% 60.1%*2 Gas sales volumes from fiscal 2011 are on a 2020 Vision basis. (Including the portion used in tolling and the LNG sales volume.)

CFO’s message

Basic Financial Policy

1

2

3

Steadily
implement growthinvestments

Ensure financial
healthClarify shareholder
return policies

Aiming to realize continuous profit
growth in the years ahead, growthinvestments are to be appropriately
prioritized and implemented from a
medium- to long-term perspective.

We will keep the D/E ratio at
approximately 0.8 and credit rating
at the AA-level to maintain funding
capacity and creditability.

Under the policy of aiming at a total
payout ratio of approximately 60%
to shareholders, profits are to be
distributed to them appropriately
and timely.

Continuous investment to grow as a total energy
company
Our focus for realizing sustainable growth is to evolve into thetotal energy business and to accelerate global businessdevelopment. We seek to move away from management
focused on one dominant business in city gas, corresponding
to Mt. Fuji, to management of several large businesses,
including the electric power business and the overseas
business, corresponding to an entire mountain range. While weare prudent in investment assessment, we will not hesitate to
make growth investment once it is determined to be needed.
With regard to the evolving into the total energy business, it isindispensable to establish and expand the production andsupply infrastructure of city gas. Investment recovery tends
to take substantial time in our business and we may have tobear temporary declines in profit if production and supply
capacity (increase in depreciation burden) exceeds demandacquisition (increase in revenues) for some time after
construction is completed.
Nevertheless, such investment will lead not only to acquire
hidden demand but also to stimulate and create new potential
demand. For example, Kobe Steel is currently constructing
Moka Power station with operation scheduled to commencefrom 2019 and Tokyo Gas will supply city gas to this state-ofthe-art 1,200 MW gas-fired thermal power station. This mega
project has been set up after the Hitachi LNG Terminal
construction was completed in fiscal 2015 and the IbarakiTochigi Line was scheduled to be built to connect thisterminal with Moka City in Tochigi Prefecture. Tokyo Gas
plans to purchase all of the electricity generated at thisstation and expects it to become our main electricity sourceand support our electricity business in the future.
In April 2016, we began doing retail electric power business.
Among about 300 new suppliers, we have so far received thehighest number of customers, which has given us someconfidence toward the future. The backdrop for this outcome
must include our long-nurtured bonding with our customers in thegas business and our brand power in reliability, safety, and trust.

Also, we believe that our careful and cautious advance in retailelectric power business will protect our city gas customers. As wehave identified fiscal 2016 as an important year to solidify our No.
1 position as a new power entrant, we are investing significant
management resources in establishing arrangements forcustomer services and sales. Although earning profits will bedifficult, we will heavily invest our group power in the retail electric
power business, with the spirit of “First come, first served.”
Regarding global business development, we will make carefulassessment of feasibility of each potential project and the oil andgas market trend, and intend to steadily expand our business toaccumulate favorable businesses. In addition to the LNG and shale
gas businesses in Australia and North America, we plan to invest
in power generation and energy service businesses in Southeast
Asia. In fiscal 2016, we decided to invest in a few projects, all ofwhich are joint projects with an excellent local partner. We thereby
intend to reduce risks and grow earnings from them.

Message to shareholders and dialogue withcapital markets
I think it is important to talk about our initiatives to investors
as accurately as possible, without pretending ourselves to bebigger than we actually are. In the last 12 months, we had
about 300 one-on-one meetings with institutional investors inJapan and overseas besides various analyst meetings andfacility visits.
The 130-year history of Tokyo Gas, which originated from gas
lamp business, is a history of continuous competition withelectricity, fuel oils, LPG, and other energy sources. By
providing pleasant living and working environments throughcity gas and our economical and eco-friendly energy system,
we are now supported by over 11 million customers and sell
natural gas which is on the order of magnitude of 18.6 billion m3.
Our customer-first mindset, proven by our long history, andour highly-reliable manufacturing and supply infrastructure,
are our greatest strengths. We will make best of thosestrengths and are determined to create growth opportunities
from the electric power and gas deregulation.

12

TOKYO GAS ANNUAL REPORT 2016

LNG Value Chain for Value Creation
The Tokyo Gas Group, since receiving the first cargo of LNG to Japan, in 1969, has been the nation’s leader in use of LNG
and a top company in natural gas. We have strived to establish an LNG value chain that encompasses procurement,
production and sales. We will continue to accumulate the technology and know-how of LNG and natural gas, improve
infrastructure and its competitiveness, and pursue both a safer and more reliable supply of energy and reduction in energy
costs. Through these activities, we will enhance our corporate value, on the basis of contributing to society.

LNG Value Chain

Procurement and transportation

Production, generation,and supply

LNG Value Chain Strengths and Managerial Assets

Stable and affordable LNG
procurement capacity
LNG procurement volume 13.87 million tons
(equivalent to approx. 15% of Japan’s total)

Reliable solid infrastructure
4 LNG terminals, 4 power stations, andgas pipelines

Track record of stable supply, relationships of trust with over 11 million customers;
Natural gas technology and maintenance know-how; employees sharing a common
management philosophy; and business partners in Japan and overseas
Healthy balance sheet that supports stable financing

TOKYO GAS ANNUAL REPORT 2016

13

LNG Value Chain for Value Creation

Value Creation

Sales and energy services

Social ValueContribution to economic development
through stable energy supply andreduction in energy costs
Provision of energy solutions (i.e.,
convenience, safety, economic efficiency,
reduction in CO2 emissions etc.)

Economic Value
Fiscal 2020 (target)

Operating cash flow¥250 billion
Community-based sales network andcapability to propose energy solutions

ROE

ROA

8%

4%

Shareholder return
Total payout ratio

60%

Shareholder return policy

Assets that do not appear on financial statements•Return profits to shareholders throughdividends and share repurchases, bysetting a target for a total payout ratio (ratioof dividends and stock repurchases toconsolidated net income) of approximately
60% for each fiscal year up to fiscal 2020.
•Stable dividend payment is maintained,
while a gradual increase in dividend has
been achieved.

14

TOKYO GAS ANNUAL REPORT 2016

Deregulation of the Electric Powerand Gas Markets
Meaning and Objectives of Electricity and Gas System Reforms and Schedule Milestones
Deregulation progress

26 %

40 %

62 %

Electricity

2,000kW or more
Large-scale factories, etc.

500kW or more
Medium-scale factories, etc.

50kW or more
Small factories, etc.

1999

2004

2005

1995

scheduleGas

2 million m or more
Large-scale factories andhospitals

1 million m or more
Manufacturers and large-scalecommercial facilities

500,000 m or more
Medium-scale factories, etc.

100,000 m3 or more
Small factories, etc.

49 %

53 %

57%

64 %

Deregulation progress

3

Major issues in Gas System Reform
As a preparatory measure for full deregulation of theretail gas market, the regulatory authorities defined thegas industry as consisting of three types: pipeline
business (general and dedicated); retail business; andproduction business. As a general gas business in the
Greater Tokyo Area, Tokyo Gas has provided a one-stop

3

service from production to supply and sales. However,after the full market deregulation, retail operators(new entrants) will be able to use the pipelines of Tokyo
Gas, upon payment of usage rates, and to sell gas tosmall-scale users.
The Tokyo Gas Group is preparing to address the full deregulation
as a priority issue and to ensure that it remains the preferredchoice of customers, by harnessing its unique strengths.

At present

After the full deregulation

No legal business restriction

Categories

Terminal
Section

Separated into
pipelinebusiness(general anddedicated);retail business;and production
business, as ameasure toprepare for thefull deregulationof the retail gas
marketGeneral gas
business
License system
Regional monopoly forsmall customers
Rate schedule is basedon the approved “fullcost principle”
Tokyo Gas

LNG terminals ofelectric powercompanies, etc.

Large-lot gas
business
Notification system
Large retail businessTrading companies, LPG
sales companies, etc.

1Terminal
SectionGas pipeline
business

Small-lot

LNG terminal business (gas production business)
Notification system

2Tokyo Gas, electric power companies, etc.

General gas
pipeline business

Dedicated gas
pipeline business

License system

Notification system

Tokyo Gas3
Gas retail businessElectric powercompanies, oilcompanies, etc.

Registration system

Gas appliances

Gas facilities

Gas appliances

Meter

Site
borderSiteborderGas
valvesGas
valvesGeneral gas operator

Regular checking
Emergency safety

User’s property site
Assetcategory

User

Safetyresponsibilities

Asset
category

User’s property site

Safetyresponsibilities

Tokyo Gas andnew entrants

All users

Meter

Business
operator

Electric powercompanies, oilcompanies, etc.

Notification system

Large-lotGas facilities

SafetyRegulations

2007

3

Business
operator

User
Gas pipeline business

Gas retail operator

Regular checking
Emergency safety

Safety responsibilities and responsible entity (Small–lot segment)
Emergency response
Inner-pipe leakage testing

General gas operator

Gas appliance inspection,risk prevention publicity

Tokyo GasTOKYO GAS ANNUAL REPORT 201615

General gas pipeline operator
Gas retail operator

Tokyo Gas

Tokyo Gas and new entrants4Deregulation

Meaning and Objectives ofElectricity System Reforms

100 %Full deregulation of theretail market

Establishment of anorganization for operating
Less than 50kW
wide-area electrical grid Residential and small commercial users

2015

2016

Securing a stable supply ofelectricity
Lowering electricity rates
Expanding choices for customers

April
Legal separation of the powertransmission and distributions networks

2017

2020
3

2022

Less than 100,000 m
Residential and small commercial users

Legal separation of the gas
pipeline network

Full deregulation of the retail market

April

100 %

Small-lot segment

Meaning and Objectives of Gas
System Reforms

Securing a stable supply of gas andincreasing its use
Lowering gas rates and higher
customer satisfaction
Expanding choices for customers
Enhancing safety at customer sites

Tokyo Gas

Before the full deregulation ofretail market

Production

SupplySales

After the full deregulation of
the retail market

Production

SupplySales

Tokyo Gas
New entrants

New entrants

1

LNG
terminalbusiness(gas production
business)

Tokyo Gas Group’s Strengths

Ensure maintenance of LNG terminals and operate
stable gas production

Maintain conveyance rate structure based on thefull cost principle and ensure sufficient investment
for safety2General gas
pipeline
operators

From the perspective of expanding the use of naturalgas, general gas operators are encouraged to further
extend a pipeline network. From a perspective toincrease benefits of users (i.e., to lower conveyanceservice rates) through enhanced efficiency, the regulation
providing for rates to be based on the full cost principle
will be maintained for conveyance by general gas
operators (such as Tokyo Gas).

Tokyo Gas
Responsible for emergency safety of gas facilities
and gas appliances

Responsible for regular inspection of gas facilities
Accountability to customers with regard to various
conditions for retail sales, such as rates; costburden; measurement method of consumption
volume; calorific value, components, and pressureof gas; and maintenance responsibility.

3
Gas retail
operators

4

Safety responsibility such as gas applianceinspection and publicity to make known preventionof risk occurrenceTokyo Gas andnew entrants

Gas supply capacity to sufficiently satisfy demand

Relationship of trust with customers for 130 years since foundation and know-how in gas businessBusiness Operators’ Major Roles

Stable and efficient terminal operation
The Tokyo Gas Group manages 4 LNG terminals in a stable and efficientmanner, based on its abundant experience in managing LNG terminals andhigh-level LNG technology.

Stable and reliable management of gas pipeline network
By accelerating to take measures such as for aged gas pipes, the groupaims at zero significant accidents and promotes more disaster-resilient safe
supply of gas.

Expand optimal new infrastructure to improve supply capacity
The Group decided to construct the Ibaraki Trunk Line that connects the
Ibaraki-Tochigi Trunk Line and Hitachi LNG Terminal with the ChibaKashima Line. Supply stability will be enhanced by having multiple pipeline
networks.

Emergency safety measures
Around 600 safety experts are assigned in 49 bases to ensure safe, stable,
affordable delivery of natural gas to approximately 11 million customers
around the clock for 365 days.

Community-based sales structure
The Tokyo Gas Group has more than 200 outlets (owned by Tokyo Gas
Lifeval, Enesta, and Enefit) in the Kanto Region and provide scrupulous
services to respond to needs of customers.

Capacity to propose energy solutions
Optimal energy solutions that combine gas, electricity, and added-value areproposed to customers.

LNG procurement capability of 14 million tons per year

(equivalent to approximately 15% of Japan’s procurement volume)
The Group is promoting more diversification in material suppliers, pricing
benchmarks, sales destinations, and other areas and will continue toflexibly collaborate with domestic and overseas players in LNG joint
procurement, accommodation, and sales.

16

TOKYO GAS ANNUAL REPORT 2016

Challenge
VisionToward Achieving the
Challenge 2020 Vision

In November 2011, we released “The Tokyo Gas Group’s Vision for Energy and the Future: Challenge 2020
Vision” as a guideline to lead us to what we aim to be up to 2020. It was based on extensive internal discussions
about the role of an energy company in society that can enable it to realize a prosperous, fulfilling way of life forpeople, contribute to the competitiveness of domestic industries, and be friendly toward the environment.

Gist of Challenge 2020 Vision

We will develop and expand our business structure and base, inorder to enhance the value of our LNG value chain, return profits tocustomers and shareholders, and contribute to society.
Five action plans to advance the LNG value chain
1

Reduce LNG purchasecosts and expand overseas
operations

2

Procurement andtransportation

Production and supply

Deliver safe and stablesupply of energy

LNG value chain: fromJapan to the world

Areal expansion

HOP
stage
Fiscal
2012-2014

Energy solution

5

Realize a leaner and stronger businessstructure

What we did in the “Hop” stage
Built a base to realize the Vision and evolved the Value Chain
The first three-year period (fiscal 20122014) was identified as a “Hop” stage
and we carried out activities for thefollowing major themes: (1) diversificationand expansion of LNG procurement andoverseas business; (2) infrastructurebuilding for safe and stable energy
supply; and (3) provision of energy
solutions that meet customer needs.

TOKYO GAS ANNUAL REPORT 2016

Provide energy
solutions adapted to avariety of needs

LNG value chain from the Greater
Tokyo Area to nationwide

Pursue technical development and IT utilization
with a focus on the future

4

3

17

1

Diversification and expansion of LNG procurement and overseas business

While taking into consideration the balance between supply stability, price, and flexibility, weemphasized acquisition of shale and other unconventional gas resources, and of interests in them.
We also made progress in making alliance with overseas LNG players.

Safe and stable energy supply

2
3

We endeavored to put in place an optimal infrastructure in step with the increased use of natural gas andbroadening of our service area by constructing the Hitachi LNG Terminal and establishing trunk line loops
in Northern Kanto. At the same time, we implemented countermeasures for earthquakes and otherdisasters to ensure safe and stable gas supply that is less susceptible to damage and interruption.

Energy solutions that meet customer needs

We released the world’s first residential fuel cell system for housing complexes, ENE-FARM. In
addition to securing additional power sources in order to expand the electric power business, we
worked to expand nationwide LNG sales.

Challenge2020 Vision

2020
Toward becoming the “total energy corporate group” and the “global corporate group”

Tokyo Gas will make further progress in its core city gas business and develop the electric power, engineering, wide-area gas supply,and other businesses into new sources of strength whereby to make being the “total energy corporate group” a reality. At the sametime, we will maintain our business base in the Greater Tokyo Area and develop business across Japan and overseas, aiming tobecome a “global corporate group” with about a quarter of earnings to be generated from overseas businesses in fiscal 2020.
Challenge Performance Indicators of Gas Supply
Volumes by Application
22.0 billion m3

15.0 billion m

3

3.5
2.7
3.4

3.5

Residential

3.3

Commercial

7.0

Industrial

5.2

Industrial

3.0

Wholesale

Reference values as of the time
the Vision was put in place

10 %(general use)

25 %As of the time
20 % the Vision was
adopted(Average for
FY2009-2011)

Targets for
FY2020

70 %

50 %

25 %

(power generation use)

3.5
1.9
2012.3Business Structure(Consolidated Net Income Ratio by Business)

Gas business
LNG sales, electric power, and other businesses
Overseas business2021.3

Milestones
Challenge 2020 Vision comprises of the following three periods or what we call“stages” with different themes and initiatives to implement for each stage.

Present
position

Main initiatives•Diversification and expansion of
LNG procurement and overseas
business•Safe and stable energy supply•Energy solutions that meetcustomer needs

STEP

stage

Fiscal 2015-2017
Main initiatives•Evolve into the total energy
business•Accelerate global businessdevelopment•Reconstruct the corporate
group

Review of the “Hop” stage
We made a smooth first step during the “Hop” stage. Various
initiatives in areas such as LNG procurement, overseas
business, infrastructure building and expansion, and energy
solutions were carried out.
Looking at the business environment, in Japan, the direction
and schedule of the electric power and gas system reforms
had become clearer. As electric power companies and gas
companies have begun to enter into each other’s markets andareas, and new companies have also begun to enter both

Fiscal 2018-2020
Our target

Advanced LNG value chain
Fiscal 2020
Consolidated operating
cash flow¥250 billion
D/E ratio

ROE

ROA

8%

4%

Total payout ratio

Approx. 0.8 Approx. 60%(each fiscal year)

markets, a new era of a choice of customers for their electric
power and gas suppliers has been emerging.
Overseas, increased needs for natural gas-related
infrastructure have become evident on the back of asustainable increase in demand for natural gas. The Tokyo Gas
Group is taking such changes in the energy industries in Japanand overseas as an opportunity for growth and is boldly andspeedily taking up challenges in the next “Step” stage.

“S

Fiscal 2012-2014

stage

ge
” sta
tep

Into the

HOPstage

JUMP

18TOKYO GAS ANNUAL REPORT 2016

Three years from fiscal 2015
STEP
stage
Fiscal2015-2017

Building a path toward achieving the Vision
The full deregulation offers an opportunity for growth
for the Tokyo Gas Group. Beyond enabling us to startin the electric power business it is facilitating our
evolution into the total energy corporate group. Ouremphasis continues to be on serving the Greater Tokyo
Area, where we seek for a style of evolution only the
Tokyo Gas Group can have, by leveraging its businessbase, know-how, history of 130 years duration.
We also find it critical to explore growth opportunities
overseas in order to achieve long-term growth. An

Changes in Business Environment

Energy policies

important part of accelerating our overseas
development at present is our management of theexisting upstream project in Australia. In addition, we
will focus on new projects in Southeast Asia andNorth America.
Moreover, we are reconstructing our group itself, inorder to better promote both the evolution into thetotal energy business and the accelerated global
development, not to overlook creating new sources of
earnings flows.

Two Growth Factors
Evolving into the total energy businessAccelerating global business development

Natural gas will continue to be
one of the key energy sources inJapan in the immediate future.

Regulations
Deregulation of the electric powerand gas industries led to moremarket interpenetration acrossbusiness and regional borders.

Shift from management focused on one dominant
Expand nationwide and overseas, based on
business in city gas, corresponding to Mt. Fuji, tothe business in the Greater Tokyo Area.
management of several large businesses, bydeveloping additional sources of income and growth,in electric power, engineering and other businesses,
corresponding to an entire mountain range.

Trend in the Greater Tokyo Area

Reconstructing our corporate group

Growth of the economy andenergy demand of the Greater
Tokyo Area is slowing down overthe long term.

Build an organization and a system tosupport the “total energy corporate group”
and the “global corporate group”

What we did in fiscal 2015

Evolving into
the total energy
business

City gas businessElectric power business

1. LNG procurement∙ Started LNG imports from Australia’s Queensland Curtis LNG Project.
∙ Signed an agreement on strategic mutual cooperation with Taiwan's CPC Corporation∙ Signed a basic agreement on LNG sale and purchase from the Cameron LNG Projectin the U.S.
2. Infrastructure∙ Saito Trunk Pipeline went into service.
∙ Onahama Satellite Terminal started operation.
∙ Hitachi LNG Terminal started operation and Ibaraki-Tochigi Line went into service.
3. Restructuring and integration∙ Completed the approval and notification procedures required for the integration of
Chiba Gas, Tsukuba Gakuen Gas, and Miho Gas
4. Energy Solutions∙ Started marketing for ENESINFO∙ Hydro Stations in Senju and Urawa went into service.
∙ Developed housing complexes fuel cell ”ENE-FARM,” jointly with Panasonic
Corporation

1. Sales of electric power to low-voltage customers∙ Started pre-order sales of the total energy service“Zuttomo Plan”∙ Entered into alliance with wholesale customers and
LPG companies
2. High-voltage and extra-high-voltage electric
power sales∙ Established Synergia Power Co. with Tohoku
Electric Power
3. Expansion of power generation capacity∙ Chiba-Sodegaura Energy Co. began preparation
for construction of a coal-fired power plant∙ Ohgishima Power Station Unit 3 went into
operation∙ Preparation began for an expansion plan of the
Kawasaki Natural Gas Power Plant Units 3 and 4

Real estate businessEngineering solution business
Consolidated the group’s engineering capability into Tokyo Gas Engineering Solutions

Started construction of the TGMM Shibaura Project(tentative name).

∙ Opened offices in Jakarta, Hanoi, Singapore, and Bangkok.
∙ Entered into a basic agreement with Toray Industries to provide energy services to its factoryin South Carolina, U.S.
∙ Withdrew from the energy service business in Brazil, in order to concentrate managerial
resources more effectively.

Accelerating
global businessdevelopment

Expansion of business bases andbusiness development in North America
and Southeast Asia

Reconstructing ourcorporate group∙ Decided to establish Tokyo Gas Liquid Holdings Co., Ltd. to control the liquid gas business.
∙ Signed agreement to transfer stock in GASTAR Co., Ltd. with the aim of transferring management control of GASTAR to Rinnai Corporation.

TOKYO GAS ANNUAL REPORT 201619

Challenge2020 Vision

Challenge 2020
VisionWhat we will do in fiscal 2016
Fiscal 2016 is an important year to ensure future growth of
the group, as the current year is in the middle of the nineyear Challenge 2020 Vision period (fiscal 2012-2020).
In the electric power business, we are committed toestablish ourselves as No. 1 among new electric power
entrants.

Concerning the gas business, the retail gas market will befully deregulated in April 2017. We will be fully prepared forthe change by having deepened our relationships with over
11 million customers and by leveraging such strength.

Evolving into the total energy business

1

City gas business

1. LNG procurement∙ Promote diversification∙ Enhance flexibility and pricecompetitiveness throughalliances with LNG players inJapan and overseas

2. Infrastructure expansion∙ Establish and expand thepipeline network, production
infrastructure, etc.

3. Restructuring and integration∙ Integrated Chiba Gas, Tsukuba
Gakuen Gas, and Miho Gas toTokyo Gas

4. Address the shift to full gas
deregulation
5. Optimal LNG value chain
6. Energy solutions

2

Electric power business

3

Developping engineeringsolution business, liquid gas
business, and real estatebusiness

1. Increase generation capacity∙ Expand competitive gas-fired
thermal power and base power
generation capacity∙ Implement initiatives for
expansion of renewable energy
generation, as an effort tosuppress climate change

Engineering solution business∙ Provide one-stop solutions thatsatisfy needs of customers inJapan and overseas

Liquid gas business
2. High-voltage and extra-highvoltage electricity sales∙ Expand sales through Ennet
and Synergia Power∙ Expand and rationalize via
alliances with LPG operators and
M&A∙ Provide electricity and value
added services to LPG
customers

3. Low-voltage electricity sales∙ Expand sales, aiming to becomea No. 1 new electric power
entrant∙ Expand sales via alliances withwholesale customers, LPG
companies, and various
industries.

Accelerating global business development

Participate in new projects in North America and Southeast
Asia by utilizing the enhanced overseas basis (organizationand personnel) and information network

Real estate business∙ Promote large-scale
development projects in areas
such as Tamachi and Toyosu anddo business in small- andmid-scale properties

Reconstructing our corporate group

The group management and structure will be enhanced tosupport growth strategies.

Schedule the start of providing energy services in the Toray
Group’s factories in Malaysia and North America

20

TOKYO GAS ANNUAL REPORT 2016

GAS

BUSINESS
Outline and Strength
The Tokyo Gas Group began its gas business with supply of gas
for lighting and since then has expanded applications of its gas
to residential cooking, heating, and hot water; commercial air
conditioning; industrial use; power generation; and other usage,by which we have increased the number of customers to over 11
million. In fiscal 2015, our consolidated gas sales volume was 15.4
billion m3, representing about 45% of Japan’s gas sales volume.
The Kanto Region, our Group’s service area, accounts for about
40% of Japan’s gross domestic products (GDP) and is expected tohave vigorous production and consumption activities. We therefore
anticipate sales volume growth particularly in the industrial sector.
These two aspects will continue to support our growth.
Our Group strengths include achievement in delivering“reliability” through stable supply of gas, and ensuring its safety.
While the completion of the deregulation program for retailgas in April 2017 is likely to further intensify competition in theTokyo area, the Tokyo Gas Group is carefully confident in facing
increased competition by making best use of its base of over
11 million customers, which have been accumulated over 130
years since its foundation, and relationship of trust with thosecustomers, the majority of which have been our customers foryears. This will be supplemented by benefits from the group’s
safety-related know-how and energy solution technology.

1
1 Of resource
suppliers

Anticipatory diversification to achieve
stable and affordable LNG procurement
Japan heavily relies on imports for natural gas procurements.
Prices for LNG imported are generally set under a frameworkthat is linked to the price of crude oil. Aiming for stable andaffordable LNG procurement with these given conditions in
the background, the Tokyo Gas Group has been using an
LNG procurement strategy that calls for diversified
procurement sources, varying contract terms and conditions,and developing its LNG network.

TOKYO GAS ANNUAL REPORT 201621

for stableprocurement22 Of contract
terms andconditions
for stable prices

Three Ways ofDiversification

3
3 Of the LNG
network
for more flexibility

Business outline

1 Diversify resource suppliers

Sakhalin

Tokyo Gas began to receive LNG from the Gorgon LNG Projectin Australia, which resulted in increasing the number of LNG
suppliers to 12 projects in 5 countries, and making Tokyo Gas
one of the foremost purchasers with diversified contracts inJapan. In our striving to enhance procurement stability we will beconsidering widening LNG procurement from Southeast Asia
and Australia to include North America and Africa. We will also
study adopting non-conventional gas such as shale gas.
LNG
suppliers

2002

2016

7 projects

12 projects

2 Diversify contract terms and conditions
By adding contracts linked to the United States natural gas
prices and other benchmarks, in addition to conventional
crude oil price-linked contracts, we aim to have a betterbalanced portfolio of contracts and thereby to stabilize
procurement costs. We also intend to increase the number ofcontracts which allow us freedom to determine shipment
destinations and other matters to enhance our flexibility.

3 Diversify our LNG network

Tokyo
Cove Point

Qatar

CameronBruneiMalaysia

New LNG Project
Existing LNG Project

Pluto

DarwinGorgonQC (Queensland Curtis)

NWS
IchthysPresent

FutureLinked to crude oil price

Mostly linked tocrude oil price

Linked to Henry Hub prices

Mostly long-term
contracts(National Balancing Point) prices

Forwarding withdestination clauses

Linked to NBPStablepricesDiversified contract periods
Free choice of shipment
destinations

Present

FutureMainly trade between Japan andits export-market countries

Network that connects places such as gas
fields and power plants across the globe

By establishing an LNG network that connects the markets in
Europe, Asia, and North America, we aim to reduce costdifferentials among regions and to position ourselves toflexibly adjust demand and supply.

Enhance and expand alliances with other LNG players forenhanced flexibility and economic efficiency
Tokyo Gas will enhance and expand alliances with LNG
players in Japan and overseas to achieve price-competitive
LNG procurement and ensured flexibility.
September Signed a memorandum of understanding on a2014
strategic alliance with Korea Gas Corporation,

South Korea

August2015

Signed a memorandum of understanding on a
strategic alliance with CPC Corporation, Taiwan

April
2016

Agreed on a strategic alliance with Kansai ElectricPower concerning LNG procurement and know-how
in power plant operation

22

TOKYO GAS ANNUAL REPORT 2016

Expansion of Natural Gas Usage through Infrastructure Development
Investment of ¥730 billion in nine years indomestic infrastructure

Northern Kanto, a region of significant
potential demand

Under the Challenge 2020 Vision, Tokyo Gas plans to invest
around ¥730 billion, equivalent to 35% of its total investment
budget, in domestic infrastructure upgrades over the nineyear period from fiscal 2012 to fiscal 2020.

Tokyo Gas puts particular strategic emphasis on Northern
Kanto which has strong potential demand growth for natural
gas owing to large-scale industrial zones.
We aim to expand gas sales volume from 15.0 billion m3 in fiscal
2011 to 22.0 billion m3 in fiscal 2020 by advancing on two fronts:

Kanto 100-200km radius

2.0 billion m3
Potential toincrease to 9.0
billion m3
Kanto 100km radius

7.0 billion m3

Total1) further enhancing the stability of supply through expanded
supply capacity for the development of potential demand andthe completion of its pipeline loop; and 2) promoting fuelconversion from heavy oil and kerosene as fuel to natural gas
and advanced utilization of natural gas. In particular, we aim todouble the sales volume of gas used by general industry, from
3.4 billion m3 in fiscal 2011 to 7.0 billion m3.

9.0 billion m3
General Industrial
Gas Sales Volume

7.0

3.4

billion m 3billion m3

Fiscal 2011

Fiscal 2020

Advantages of natural gas, superior in eco- friendliness and earthquake resistance
Benefits of fuel conversion

Eco-friendly; no need for storage; improved operability (noclean-up); labor saving; stable supply

CO2 emission reduction by conversion from A
heavy oil to natural gas

CO2 emission reduction by fuel conversion

A heavy oil+
Conventional
burners

Comparison of CO2 Emissions (Coal=100)
Natural gas

Oil

Coal

60

80

100

CO2 emission reduction by use of advanced(high efficiency) facilities

Gas processing facilities designed for high efficiency requireless energy for industrial heat sources and emit less CO2

CO2
Emissions

Fuelconversion

100

To natural
gas

Advancedutilization

Higherefficiencyof burners

75

45-70

Adoption of high efficiency burners; collection of
exhaust heat; improved heat insulation and reduced
heat loss at openings; improved combustible air ratio

Examples ofadvanced utilization
measures

Promoting the widespread use and expansion of distributed
energy systems
Tokyo Gas will promote diversification in use of natural gas by providing energy solutions centered on natural gas and continue toimprove its LNG value chain.

Residential fuel cell system “ENE-FARM”
The “ENE-FARM” residential fuel cell system is a type of
distributed energy system that is installed onsite at customers’
homes. This highly efficient system uses city gas to generate
electricity while also utilizing the heat created through thegeneration process to heat water. “ENE-FARM” is an important
strategic product in residential gas sales as customers using
this system also consume greater volumes of city gas.
Since the first unit was launched in 2009, “ENE-FARM” hascontinued to evolve to introduce smaller, lower-priced
models. In March 2016, our “ENE-FARM” installed base hadrisen to approximately 61,000 units.

TOKYO GAS ANNUAL REPORT 201623

“ENE-FARM” (Residential) Installation Plan(Thousands units)

400

300

300

200

100

0

9.6

17.2

29.4

2012.32013.32014.3

43.4

2015.3

61.4

2016.32021.3(Plan)

Business outline

Hitachi LNG Terminal
Moka Power Station(Kobe Steel)

GAS

Ibaraki Line (Scheduled for 2020)

Koga-Moka Line

BUSINESS(Scheduled for 2018.3)

Kashima Waterfront
Industrial Zone

Saito LineGas sales volume in the Kashima area
surged to represent 10% of total
As a first step toward capturing potent demand through thedevelopment of infrastructure, we completed the ChibaKashima Line in March 2012. Gas sales volume increased
dramatically in the Kashima Waterfront Industrial Zone toapproximately 1.8 billion m3, representing about 10% of our

Kashima
Waterfront Line

Chiba–Kashima Line

consolidated gas sales volume in fiscal 2015.

Tap Northern Kanto’s greater potential
market for gas by another fuel conversion
initiative
Sodegaura LNG Terminal
Ohgishima LNG Terminal
Negishi LNG Terminal
Gas Sales Volume in the Kashima Area
(Million m3)

2,000

1,794

1,869

1,500

1,000
765
500

405

0

The Saito Line (Soka City, Saitama Prefecture–Koga City,
Ibaraki Prefecture) started service in October 2015, followedby the start of service of the Hitachi LNG Terminal and theIbaraki-Tochigi Line (Hitachi City, Ibaraki Prefecture-Moka
City, Tochigi Prefecture) in March 2016. By linking with ourexisting three terminals in Tokyo Bay and our high-pressure
trunk line network, our supply infrastructure has become
more stable. Given our infrastructure building in Northern
Kanto, Kobe Steel has decided to construct a gas-fueled
thermal power plant in Moka City, Tochigi Prefecture. In
addition to the projection of an increased gas sales volume
by supplying gas to this power plant, we anticipate that it
will enable us to tap into more potential demand.
In order to complete our infrastructure base in Northern
Kanto, we have decided to construct an Ibaraki Line between
Hitachi City and Kamisu City. This will enable us to develop
further demand in the Kashima area and increase use ofnatural gas in the Kanto Region.

2013.32014.32015.32016.3

Commercial and industrial cogeneration systems
Cogeneration systems supply electricity and heat through power
generators and other means. In addition to the installation offacilities at the point of demand, cogeneration systems help toenhance energy efficiency, reduce the amount of CO2 emissions,

Cogeneration System

Cogeneration system(Commercial, Industrial)

Installation Plan
(MW)

5,000
LNG terminal

4,000

4,000

and improve economic efficiency through the conservation ofenergy by effectively utilizing both electricity and waste heat.
3,000
Against the backdrop of increased demand for energy security andbusiness continuity plans, we have been promoting sales of
2,000
1,790 1,850
commercial and industrial cogeneration systems, and the scale of
1,500
our cumulative installed base of these systems has reached 1,850
1,000
MW. Aiming at widespread adoption, we are increasing the productline-up by having commercialized 1MW gas engines with reduced0
low maintenance costs as well as an easy-to-install package type of
2012.3 2015.3 2016.3 2021.3
co-generation.
(Plan)

Pipeline*Energy efficiency
stated below
is calculated
based on certain
assumptions madeby Tokyo Gas.

Gas
Electricalenergy30-48%

Cogeneration

Waste heat that isdifficult to use
15-30%

24

Heat energy(steam)30-55%

Total energy
efficiency
70-85%*TOKYO GAS ANNUAL REPORT 2016

ELECTRIC
POWER
BUSINESS
Outline and Strength
Since 2000 when the Tokyo Gas Group started to generate andsupply the electric power, it has engaged in a comprehensive
range of business activities that extend from fuel procurement
to power generation and sales. Among the new entrants to thesector following the start of its deregulation program, we own thelargest power station in the Greater Tokyo Area and sell generated
power to wholesale and large-lot customers. With the completionof deregulation of the retail electric sector in April 2016, we started
electricity sales to residential and commercial customers. The
complete lifting of the restrictions on region of operations or original
business sector provided an enormous growth opportunity for ourGroup, which has a competitive power source portfolio and wellestablished sales power.
By our responding to customers’ needs for more affordable,
reliable, and safe energy, we aim to significantly expand our electric
power business and to raise corporate value (see details on the
deregulation of the electric power and gas industries on page 15).

Objective: Selling about 10%of electricity demand in the
Greater Tokyo Area
The Tokyo Gas Group has steadily increased its
electricity sales volume, mainly in the wholesalesegment. In the coming years we plan to expand sales
to residential and commercial customers and raise ourelectricity sales volume from around 10 billion kWh atpresent to about 30 billion kWh,equivalent to about 10% of demandin the Greater Tokyo Area, by 2020.

Approx.

(Billion kWh)

30 billion kWh30

Approx. 10% of theGreater Tokyo demand

An increaseof approx.
19 billion kWh

20Electricity Sales Volume
10.0

9.7

2013.32014.310.6

11.0

2015.32016.3108.3

02012.3

TOKYO GAS ANNUAL REPORT 201625

2021.3

Business outline

Toward realizing our Challenge 2020 Vision
Deregulation of the retail market, completing the program forelectric power and gas deregulation, can provide the impetus
for the Tokyo Gas Group to greatly advance toward
expanding as a “total energy” concern. While completion of
the deregulation program for retail gas in 2017 is likely tointensify competition in the gas business, we are expecting togain more earnings opportunities by entering the much bigger
retail electric power market. In the Challenge 2020 Vision, we
aim to evolve our total energy business including theelectricity retail business, and expand the ratio of “electric
power, LNG sales, and other business” from 20% ofconsolidated net earnings when the plan was adopted to
25% by fiscal 2020.

Full Deregulated Market of the Electric Power and Gas
Number ofcompanies

Approximate
potential customers(Million)

Approximate
market size(¥trillion)

10

85

8.0

WithinTEPCO’s domain

29

2.8

206

26

2.4

Electricity

City gas

Business Structure(Consolidated Net Income Ratio by Business)

Electric power, LNG sales,
and other business
Overseas business
Gas business

25%

20%

Tokyo Gas Group’s strengths
The largest-scale and highly-efficient power

Fiscal 2020
Targets

Fiscal 2009-2011
Averagesources among the new power suppliers in the
Greater Tokyo Area
The Tokyo Gas Group now has the largest scale of powersources (1,600MW from 4 bases) among the new power
suppliers servicing the Greater Tokyo Area. By adopting
highly efficient gas turbine combined cycle (GTCC)
generation, which offers superior energy savings, highly
efficient power generation has been realized (a record high of
58% realized at the Ohgishima Power Station). In addition,
close proximity to the LNG receiving terminals enables
efficient gas transportation.

Moka Power Station(Kobe Steel)

Hitachi LNG Terminal

Community-based sales network and over 11 million
customer base
The Tokyo Gas Group has established a community-based
sales network with over 200 outlets in the Kanto region(operated by Tokyo Gas Lifeval, Enesta, and Enefit) enabling
us to tailor services to individual customers’ needs. The
10,000 employees of Lifeval, through whom there is directinteraction with those customers on behalf of the Tokyo Gas
Group, are engaged every day in meticulous services thatencompass from sales calls and maintenance of gas
appliances to the opening and closing of gas fixtures in timeof moving, gas appliance safety checking, and gas meterreading. Our push-type marketing, involving contacts withover 11 million customers at their homes and places of work,
has benefitted us by enabling us to steadily gain contracts
toward becoming a No. 1 new electric power entrant in acompetitive and newly deregulated market.

Infrastructure and management know-how system
In addition to the owned city gas business assets such as
LNG terminals, pipelines, and LNG purchasing capacity, theTokyo Gas Group is capable of using distributed power
generations, including cogeneration and fuel cells, know-how
for management of electricity generation by use of LNG, andexperience in systematic business techniques from utility rate
calculation to billing and collection.

Kawasaki Natural Gas Power
Generation Co., Ltd.
Ohgishima LNG Terminal/
Ohgishima Power Co., Ltd.

Sodegaura LNG Terminal
Tokyo Gas Baypower Co., Ltd.

Negishi LNG Terminal
Tokyo Gas Yokosuka Power Co., Ltd.

Sales and Service Network(Number of Outlets Operated by Tokyo Gas
Lifeval, Enesta, and Enefit)

107
53

Tokyo
Kanagawa

24
11
8
8
3

Saitama
Chiba
Gunma
Ibaraki
Yamanashi

2

Tochigi

26

TOKYO GAS ANNUAL REPORT 2016

Future Initiatives Given Complete Deregulation of Retail Electric PowerIn light of the objectives of the electric power system reforms and of the needs of customers, Tokyo Gas intends toestablish a demand and supply structure that contributes to greater stability of supply, realize to supply affordable
energy, and help diversify services offered to customers by undertaking a variety of measures to expand its electric
power business.

Initiative

01

Plan to Expand Power Sources (Own Equity)

Expand power sources

Approx. 3,000 MW

Moka Power Station
Start-up of operations

Increase of approx.

(1,200 MW)

Aiming at delivering electricity to low-voltage residential andcommercial customers, in addition to the wholesale market,
we plan to expand generation capacity from the current levelof approximately 1,600 MW (company equity base) to around3,000 MW by 2020. In addition to the Tokyo Gas Group’s
power stations, it has been agreed that electric power
generated at Moka Power Station, which is underconstruction by Kobe Steel, one of the largest Independent
Power Producers (IPP), will be supplied to Tokyo Gas. Adding
to our competitive gas-fired thermal power sources and baseload supply sources, we will also promote initiatives aimed at
expanding renewable power sources in order to address tothe issue of preventing climate change.

1,400 MW(vs. Feb. 2016)

Ohgishima Power Station
Start-up of No. 3 unit
operations

Approx.
2,800 MW(300 MW)

Approx.

1,600 MW2016.22020

2019-2020(Plan)(Vision Targets)

Recent Initiatives
Sep. 2014

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

Jan. 2016

Submitted the “Environmental Impact Statement” for the construction plan of the coal-fired thermal power plant (power generation scale up to a maximum of
2,000 MW by mid-2020s) of Chiba-Sodegaura Energy Co., Ltd. (investment by Idemitsu Kosan, 33%; Kyushu Electric Power, 33%; Tokyo Gas, 33%)

Feb. 2016

Ohgishima Power (investment by Showa Shell Sekiyu, 25%; Tokyo Gas, 75%) started operation of the No. 3 of Ohgishima Power Station, expanding the Tokyo
Gas Group’s Power source to approximately 1,600 MW

Mar. 2016

Received the subsidy of Fukushima Prefecture’s wind power generation optimal location selection business and began a study of wind conditions.

Mar. 2016

Kawasaki Natural Gas Power Generation (investment by JX Nippon Oil & Energy, 51%; Tokyo Gas, 49%) submitted the Environmental Impact Statement for the
Kawasaki Natural Gas Power Plant Units No. 3 and No.4 Enlargement Plan (power output of approximately 550 MW X 2 units, scheduled to start operations
from 2021)

The Group’s Natural Gas-Fired Thermal Power Plants

Tokyo Gas Baypower Co., Ltd.
Tokyo Gas
generation capacity

Generation capacity

100MW

100MW
x 1 unit

Start of operations 2003

100MW
Tokyo Gas interest 100%

TOKYO GAS ANNUAL REPORT 201627

Tokyo Gas Yokosuka Power Co., Ltd.
Generation capacity

240MW

240MW
x 1 unit

Start of operations 2006

Tokyo Gas
generation capacity

180MW
Tokyo Gas interest 75%

Kawasaki Natural Gas Power Generation Co., Ltd.
Generation capacity

840MW

420MW
x 2 unit

Start of operations 2008

Ohgishima Power Co., Ltd.

Tokyo Gas
generation capacity

Generation capacity

Tokyo Gas
generation capacity

400MW

1,221MW 407MW
x 3 unit

900MW

Tokyo Gas interest 49%

Start of operations 2010

Tokyo Gas interest 75%

Business outline

ELECTRIC
POWER
BUSINESS

Initiative

02

Expand electricity sales tohigh-voltage and extra-highvoltage customers

In October 2015, we established Synergia Power Co., Ltd.,
jointly with Tohoku Electric Power Co., Ltd. Synergia began
electricity sales to high-voltage and extra-high-voltage
customers in the Kanto Region, mainly in its northern area.

Tokyo Gas Group’s Electricity Sales Companies

Corporate name
Address

1-9-12 Kita Ueno, Taito-ku, Tokyo
October 1, 2015

Main businessElectricity retail supply to high-voltage andextra-high-voltage customers in the Kanto
region, mainly in its northern area
¥495 million

Shareholders

Tohoku Electric Power 50%; Tokyo Gas 50%

Corporate name

ENNET Corporation

Address

July 7, 2000

Main businessElectricity trading and electricity generation

Shareholders

Following the full deregulation of the electricity retail sector in
April 2016, we began low-voltage electricity sales toresidential and commercial customers mainly in our supply
area, the Kanto Region. We sell electricity through the Tokyo
Gas Group companies, such as Tokyo Gas Lifeval, Enesta,
and Enefit, as well as through partnerships with companies invarious industries, including nearby city gas and LPG
suppliers and businesses in a range of other industries,
including housing, construction, equipment, andtelecommunications services.

Offer one-stop electricity, gas and othervalue-added services
The Tokyo Gas Group has established relationships of trustwith over 11 million customers through its community-based
sales network, which tailor services to individual customers’
needs at their homes and workplaces. The services include
gas appliance safety checking and gas meter reading, gasappliance repair and installation, and the opening and closingof gas fixtures in time of moving. In the electricity retailbusiness, we will leverage our existing sales structure andrelationships of trust with customers, provide more value
to them, and take up challenges that may arise, whereby toraise the Tokyo Gas Group’s corporate value.

The Front Tower Shiba Koen, 2-6-3 Shiba Koen,
Minato-ku, Tokyo

Established

Capital03

Expand electricity sales to
low-voltage customers

Synergia Power Co., Ltd.

Established

Capital

Initiative¥6.3 billion
NTT Facilities 40%; Tokyo Gas 30%,
Osaka Gas 30%

28

TOKYO GAS ANNUAL REPORT 2016

OVERSEAS
BUSINESS
Outline and Strength
The Tokyo Gas Group is participating in seven upstream projects
and four midstream and downstream projects with, investing
approximately ¥265 billion (as of March 2016). The upstream
business is to secure new sources of revenue through business
investment, and at the same time enable a higher level of stabilityof Group revenues against fluctuations in raw material prices, andimproving our ability to collect valuable information concerning
raw material procurement. The midstream to downstream
business is where our know-how in the domestic business can beutilized and stable income flows can be expected.
In implementing the Challenge 2020 Vision, we intend to expand
the overseas business and make it become another major
earnings source of the group. Looking ahead, from a perspectiveof efficient allocation of managerial resources, we intend to
more deliberately concentrate on certain areas and businesses.
Specifically, we will focus on participating in direct operation of
LNG and natural gas businesses in North America and Southeast
Asia. Through these operations, we plan to use our Group’s
accumulated experience and know-how, acquire new insights,
and expand business.

Accelerating global development
The Tokyo Gas Group has been accelerating its global
business development to add overseas business to ourearnings pillars. Our specific strategy is to develop natural
gas-related business, in which our experience and know-how
in the gas and electric power business in Japan can beutilized. For more efficient use of resources, we will also
concentrate managerial resources in North America andSoutheast Asia where demand for natural gas is increasing
and ample entry opportunities tend to be available.
IchthysDarwinPluto
GorgonCordova
Gas Malaysia
Eagle Ford (new)Queensland Curtis

Barnett

North America

Southeast Asia

Australia

Upstream

Operation and management of existing
projects; exploration of new projects-

Operation and management of existing
projects

Midstream anddownstreamGas-fired thermal power generation; gasand electricity supply

LNG terminal; gas-fired thermal power
generation; gas supply; energy service-

The Gorgon Project is a joint venture between the Australian subsidiaries of Chevron (47.3%),
ExxonMobil (25%), Shell (25%), Osaka Gas (1.25%), Tokyo Gas (1%) and Chubu Electric Power (0.417%).

TOKYO GAS ANNUAL REPORT 201629

Business outline

Forming an LNG Value Chain
We are focusing on the upstream, gas-fired thermal powerNorth
generation, and gas and electricity supply in North
America America. We envision forming a North America LNG value
chain, in which synergies can be generated among
businesses, such as by stably supplying gas from one of
our upstream projects to our operations in gas-fired
thermal power generation and gas supply.

Upstream BusinessBy monitoring the commodity pricetrends and carefully ascertaining the productivity andreserves of gas fields, we will form appropriate alliances withexperienced operators and invest in prime assets. In addition
to investments in the shale gas development projects in
Cordova, Canada and Barnett, Texas, U.S.A. and we acquired
rights in the Eagle Ford shale gas development project in
Texas in June 2016.
Project Name (Shale gas development)

CanadaCordova

Southeast Asia
Midstream- and Downstream BusinessBy building a
relationship with local governments and through allianceswith local companies, we intend to increase our participationin midstream- and downstream businesses. Particularly inIndonesia, Thailand, and Vietnam, we seek to participate in
LNG terminal, gas-fired thermal power generation, gas
supply, and energy service businesses, leveraging ourGroup’s know-how. Our ultimate target is to form a Southeast
Asia LNG value chain.

Bases in Southeast Asia

Start of Participation Tokyo Gas Interest(Equity Stake)May. 2011

3.75%

U.S.

Barnett

Mar. 2013

25%

U.S.

Eagle Ford

Jun. 2016

25%

When planninggas-fired power generation we will continue to use welldefined criteria to select projects in which to participate,giving due consideration to demand and supply of electricity,
competition with other power sources, regulations andbusiness environment by each regional government.
In gas supply business, we seek to participate in business, inwhich we can leverage our Group’s strength, such as demand
development, in the deregulated market.
Midstream- and Downstream Business

VietnamThailandSingapore

Malaysia

Indonesia

Focus on operation and management of existing projects
Australia
Due to the start-up of the Gorgon
Project in fiscal 2015, four LNG projects that we have invested
in, in Australia, are in operation today, while the Ichthys
Upstream Business

Project is still in preparation. We will continue to focus on
operation and management of those projects.

LNG Production Capacity(Million tons/year)

Start of
Participation

Tokyo Gas Interest

Start of Production

Darwin

3.0

2003

3.07%

Jan. 2006

Pluto

4.7

2008

5.00%

Apr. 2012

Gorgon

15.6

2009

1.00%

Mar. 2016

Queensland Curtis

8.5

2011

1.25% (Gas field) / 2.50% (No. 2 Liquefaction Plant)

Dec. 2014

Ichthys

8.9

2012

1.575%

2017 (Plan)

Project(Equity Stake)(Operation)

30

TOKYO GAS ANNUAL REPORT 2016

OTHER
BUSINESSThe Tokyo Gas Group is engaged in a number of businesses asa part of its efforts to the evolution of a total energy business.
Of those businesses, this section contains profiles about theengineering solution business, the LNG sales business, and thereal estate business.

Engineering Solution Business

Integrated previously-separate Group capabilities forengineering and energy solutions
In April 2015, Tokyo Gas Engineering Co., Ltd., engaged inconstruction, maintenance, and management of LNG
terminals and other energy infrastructure, merged with
Energy Advance Co., Ltd., which specialized in energy
service, district heating and cooling service, and electric
power-related engineering business, to establish Tokyo Gas
Engineering Solutions Corporation (TGES).

Tokyo Gas Engineering Solutions Corporation

Integrated engineering
capability of Tokyo Gas
Tokyo Gas Engineering Co., Ltd.

Energy Advance Co., Ltd.

Engineering business

Energy solution business

Energy infrastructure
construction
Energy infrastructure
maintenance and management

District energy services

Onsite energy services

By integrating capabilities in engineering and energy
solutions, which used to be separately available within thegroup, TGES is able to provide one-stop solutions that
better satisfy the needs of our customers in Japan andabroad in a wide range of domains, stemming from receiptof transported or conveyed resources and production of gas
to gas supply, power generation, and energy solutions in the
LNG value chain.

Diagram of Engineering Solution Supply
Gas network
Heat network
Electricity network
Utility network
ICT network

high-pressure
pipeline

LNG receiving
terminal

TOKYO GAS ANNUAL REPORT 2016

PlantsMiddle-pressure
pipeline

31

Valve station
Governor station

Medical facilities

Hotels and commercial
facilities

Energy (utility)
service center
Middle-pressure
pipeline

Smart energy center

Offices and housing
complexes

Business outline

Unique engineering solutions, leveraging
accumulated know-how
Japan

Established an energy supply system that
responds to Business Continuity Plan (BCP)
Kamatahigashi District Heating and Cooling Center, operated
by TGES since 1998, supplies thermal energy (steam, coolwater) and electricity in the Ota-ku, central Tokyo. In July
2015, in addition to the Center’s adoption of a gas
cogeneration system (CGS) with a blackout start function,
TGES integrated supply desinations with the center’s
electricity system to enable the whole district to use
electricity generated by CGS in times of blackout. Such
optimal management of electricity and heat by use of CGS
contributes to enhance the entire community’s disasterprevention capability.

Overseas

Energy service businessEngineering business

TGES’ overseas subsidiary will provide energy services to
the Toray Group’s plants in Malaysia and the U.S.
The energy services comprise construction of an energy
plant that has gas cogeneration systems, boilers, andequipment such as for air-conditioning and water treatment,
and efficient supply of a wide range of services involving
generated electricity, steam, water, and other resources.
Based on its proven achievement, TGES’ plant design andmaintenance will enable to realize energy savings from its
optimal systems and long-running cost reductions. In return,
TGES will receive energy service fees, based on its longterm customer contract.

TGES was awarded an order for assignment as a project
management contractor (PMC) of the capacity expansion
construction project of PPT LNG Map Ta Phut Receiving
Terminals, Thailand. This is the first PMC order of its
kind received by a Japanese company outside Japan.
These first LNG terminals in Thailand were planned in
anticipation of substantial growth in energy demand in
keeping with the nation’s economic development.
The Tokyo Gas Group intends to further promote overseas
business development, leveraging by its frontrunnerexperience and strengths in construction, operation,
maintenance, and management of LNG terminals.

32

TOKYO GAS ANNUAL REPORT 2016

LNG Sales Business

Expand LNG supply to nationwide range
and advance the LNG value chain through sales
channel expansion
We have been working on expanding our own LNG sales
channel so that it can be used by other gas operators
nationwide, beyond the Kanto region, by use of lorries andaccess to supply from ocean-going LNG tankers.
In October 2012, we started to supply LNG to the Ishikari
LNG Terminal of Hokkaido Gas. This was our Group’s firstuse of an ocean-going tanker to supply LNG we hadpurchased to a domestic gas operator outside the group.
For 11 years starting from that, we plan to supply
approximately 300,000-400,000 tons of LNG a year to
Hokkaido Gas.
From October 2014, we also started to supply
approximately 300,000 tons of LNG a year to Saibu Gas

Supplying LNG via Overseas
Ocean-Going Tankers

Ishikari LNG Terminal
Hokkaido Gas Co., Ltd.

Hibiki LNG Terminal
Saibu Gas Co., Ltd.

under a 16-year contract.

(Thousand t)

1,147

LNG liquid sales
volumes

1,200

920
784

800

604
545
400

0
2012.3

TOKYO GAS ANNUAL REPORT 201633

2013.32014.32015.32016.3

Business outline

OTHER
BUSINESS

Real Estate Business

Generating stable earnings by effective use ofhigh-potential sites owned by Tokyo Gas

Chiyodaku
Tokyo Station

The Tokyo Gas Group holds high-potential, large-scale sites
in locations as Tamachi and Toyosu in the Tokyo metropolitan
area. We are developing those real estate holdings, while
limiting the attendant risks, in order to improve asset value by
their effective use. We are also interested in installing a smart
energy network in those development projects as an initiative
to improve asset value.

Shibuya-ku

Shimbashi
StationKoto-kuChuo-ku

Minatoku
Setagaya-ku
Meguroku
Shinagawa
StationShinagawaku

Ota-kuTamachiToyosuLarge-scale development with direct connections to
JR Tamachi Station

Complex town planning project in the intended
locations of the Tokyo 2020 Oympics

Tamachi Station and its surrounding area are expected toplay the role of a gateway to Tokyo, as it is close to the Linear
Chuo Shinkansen Line route and has easy access to Haneda
Airport which has a plan for further development. Office andhotel buildings and commercial facilities are underconstruction on this 2.8ha site, and will be directly connected
to Tamachi Station.

The redevelopment area in Toyosu is a prime location, about
4km away from Tokyo Station. The Tokyo Bay area, including
Toyosu, is getting increased attention as it will be a major
location of the Tokyo 2020 Olympics and Paralympics events.
The Tokyo Gas Group is involved in construction of a
combination of residential, office, and commercial functionsin this widespread development area of approximately 20ha.

JR Tamachi Station

Intended location of the Tokyo 2020
Olympics andParalympics Athletes’ Village(Yamanote Line)

Hotel
B

Pedestriandeck

Minato Park Shibaura

Toyosu-ohashi Bridge(scheduled to open in fiscal 2016)

Harumi-ohashi
BridgeTokyo Gas Group site

StoresToyosu Market

A

SocialServices
Facility

Urban
Planning Park

Aiiku
Hospital

Redevelopment area
TGMM Shibaura Project (tentative name)
October

2015

Started construction of the A Tower, Hotel Tower, and Smart Energy Center

April

2018

Construction of the Smart Energy Center to be completed

May

2018

Construction of the A Tower and Hotel Tower to be completed

Shijoumae
StationToyosu Market

Shintoyosu
StationToyosuStationToyosu Market

Toyosu Smart Energy Center
Fujimi Bridge

Ariake North
BridgeYurikamome

Kiyari Bridge

Ariake Tennis noMori Station
Intended location of the Tokyo 2020
Olympics andParalympics Stadium

34

TOKYO GAS ANNUAL REPORT 2016

Corporate GovernanceTokyo Gas works to ensure continued development while consistently earning the trust of customers, shareholders, and society.
Based on this philosophy, we aim to achieve a continuous increase in our corporate value through enhancing corporate
governance systems. We are endeavoring to develop systems with a commitment to management legality, soundness, andtransparency. Tokyo Gas continues to emphasize the importance of accurate and prompt decision making, efficient business
operations, strengthening of auditing and monitoring functions, and clarification of management and executive responsibilities.

Board of Directors
In principle, the Board of Directors meets once a month todiscuss and decide important matters regarding business
operations. Directors must submit reports to the Board of
Directors regarding the status of execution of their duties
periodically and when deemed necessary, allowing the board
to monitor the performance of directors.
The Board of Directors comprises 11 directors, 3 of whom areoutside directors. In addition, the term of directors is set at one
year with the goal of further clarifying managerial responsibility.

Reasons for selecting Outside Directors
Name

Reason for selecting

Akihiko Ide

The company’s management will benefit from Akihiko
Ide’s cosmopolitan outlook he has acquired in overseas
businesses in the general materials industry, particularly
in Asia, as well as the strong management capabilities
and deep insight he has acquired through a wide range ofbusiness development in resource business and others.
The company’s management will benefit from Yoshinori

Yoshinori Katori Katori’s cosmopolitan and broad outlook as well as the deep
insight he has acquired over his many years as a diplomat.

Chika Igarashi

The company’s management will benefit from Chika
Igarashi’s advanced legal expertise, broad perspective,and deep insight she has acquired over her many years incorporate legal affairs.

Outside Directors
In accordance with their individual experience and knowledge,
the outside directors strive to secure the soundness andappropriateness of deliberations and decisions regarding
business execution. From an independent viewpoint, theoutside directors monitor the performance of duties by the
directors and exercise their authority at meetings of the Boardof Directors. In this way, the outside directors contribute to theimprovement of the rationality and objectivity of the company’sbusiness execution and of the deliberations and decisions of
the Board of Directors.
In making judgments about matters related to the
independence of outside officers, such as capital,transactions, and relationships, we comprehensively verify
that they are unlikely to have conflicts of interest with generalshareholders and they are in a position that enables them tobe objective and neutral, and on that basis we make a
judgment on their independence. (The company discloses the
Independence Standards for Outside Directors on its website:
http://www.tokyo-gas.co.jp/IR/english/gvnnc/pdf/
independence.pdf) The Advisory Committee has confirmedthat none of the outside officers has a material conflict ofinterest with the company—in regard to capital, transactions,or relationships—and has confirmed their independence inaccordance with the above standards. The committee’s
decision has been reported to the Board of Directors, which
has designated them as independent officers and reported
that designation to the stock exchanges on which thecompany is listed.

Realizing Accurate, Rapid Decision Making andEfficient Business Execution
The Corporate Executive Committee, which meets weekly asa general rule, deliberates on provisions stemming from
Board of Directors’ resolutions and important management-

TOKYO GAS ANNUAL REPORT 201635

Progress in GovernanceOutside Directors: 2

2002(Inside Directors: 9)

Outside Audit & Supervisory
Board Members: 2(Inside Audit & Supervisory Board
Members: 3)

Outside Directors: 3

2006(Inside Directors: 9)

Outside Audit & Supervisory
Board Members: 3(Inside Audit & Supervisory Board
Members: 2)

Outside Directors: 3

2016(Inside Directors: 8)

Outside Audit & Supervisory
Board Members: 3(Inside Audit & Supervisory Board
Members: 2)

related issues. The company has introduced an executive
officer system for business execution in accordance withdecisions of the Board of Directors.
Substantial authority has been delegated to executive officers
in their designated areas of responsibility, while directors, as
appropriate, receive reports on the status of execution fromexecutive officers and monitor the executive officers. In
addition, executive officers report to the Board of Directors
as needed. (To clarify management responsibility andexecutive responsibility, the terms of office of directors andexecutive officers have been fixed at one year.)Corporate GovernanceCorporate Governance System

Customers

Local Communities

Shareholders / Investors

General Shareholders’ Meeting

Appointment

ReportAppointment

Appointment

Report and proposal

ReportBoard of Directors1
Inquiry

Audit,
etc.

MonitorCollaboration

Collaboration

Audit
General Shareholders’Meeting
Stakeholders
Tokyo Gas Co., Ltd.
Business Operations

Internal Audit Department

Collaboration

Audit & Supervisory Board3

Independent Auditors

AnswerAdvisory Committee2

Report and proposal

Management Ethics Committee

President (Corporate Executive Committee4 )ReportApproval

Safety Committee

Deliberation
and report

Customer Satisfaction Promotion
Committee
Investment Evaluation Committee
Environmental Committee

Settlement andmonitorCorporate Communications Promotion
Committee

Report submission

Risk Management Committee
Other In-House Committees

Audit

Add to agenda
and report

Business Departments / Subsidiaries and Affiliates
Decision and monitoring

1 Board of Directors: 11 directors (3 outside directors and 8 internal directors), 5 Audit & Supervisory Board members (3 outside auditors and 2 internal auditors)
2 Advisory Committee: 3 representatives from outside directors and outside Audit & Supervisory Board members, Chairman (1), and President (1)3 Audit & Supervisory Board: 5 Audit & Supervisory Board members (3 outside auditors and 2 internal auditors)
4 Corporate Executive Committee: President, 2 Executive Vice Presidents, and 10 Senior Executive Officers (3 of the representative directors also serve as President and Executive Vice Presidents)

Overview of Corporate Governance System (As of June 29, 2016)
Number of directors
Average age of directors

11
61.7

Participation of outside directors in determination of
director candidates

Yes

Number of meetings of Board of Directors*

12

Number of outside directors

3

Attendance rate of outside directors at meetings ofBoard of Directors*

Number of Audit & Supervisory Board members

5

Term of office of directors

Number of outside Audit & Supervisory Board members

3

Results-linked remuneration

Yes

Number of independent officers

6

Share purchase system to reflect the perspective ofshareholders in management

Yes

Participation of outside directors / outside Audit &Supervisory Board members in determination of remuneration

91.7%
One yearYes* Total for the period from April 2015 to March 2016

Working to Promote Transparent Management and Create a Flexible and Open Corporate Culture
In fiscal 2002, the company established theManagement Ethics Committee, chaired by the
President. We also formed in-house committees toaddress issues that are important from amanagement perspective, such as compliance,

safety, customer satisfaction, and risk
management. This structure facilitates the sharing
of information within the group as well as
deliberations and adjustments regarding thegroup’s overall direction.

36

TOKYO GAS ANNUAL REPORT 2016

Audit & Supervisory Board Members
The Audit & Supervisory Board members meet once a month
as a general rule and otherwise as needed. The 5 membersof the board, which include 3 outside Audit & Supervisory
Board members, conduct deliberations and make reports.
In line with the Corporate Auditor’s Audit Standards, each
Audit & Supervisory Board member conducts effective audits
through the following principal initiatives.
The Audit & Supervisory Board members attend meetings of theBoard of Directors, the Corporate Executive Committee, and otherimportant meetings. They state their opinions relating to legality andother perspectives when necessary.
The Audit & Supervisory Board members conduct research into thestate of operations at the head office, business offices, andsubsidiaries and hold discussions with directors to exchange
opinions, both on a regular basis and otherwise as needed.
In regard to the internal control system for financial reporting, theAudit & Supervisory Board members receive evaluations of internal
control and reports on the status of audits from the Board of
Directors, etc., and KPMG AZSA LLC.

Outside Audit & Supervisory Board Members
The outside Audit & Supervisory Board members conduct
audits monitoring from an independent viewpoint andcontribute to improving the rationality and objectivity of thecompany’s business execution and of the deliberations of theBoard of Directors through their statements at meetings ofthe Board of Directors. In addition, through their statements
and the exercise of their majority voting rights at meetings of
the Audit & Supervisory Board, the outside Audit &Supervisory Board members contribute to assuring andimproving the legality, appropriateness, rationality, andobjectivity of the audits by the Audit & Supervisory Board
members. In addition, with the objective of assuring theeffectiveness of audits by the Audit & Supervisory Board
members, the company invites outside Audit & Supervisory
Board members who have a substantial degree of knowledge
about finance and accounting.
In making judgments about matters related to the
independence of outside officers, such as capital,transactions, and relationships, we comprehensively verify
that they are unlikely to have conflicts of interest with generalshareholders and they are in a position that enables them tobe objective and neutral, and on that basis we make a
judgment on their independence. The Advisory Committee
has confirmed that none of the outside officers has a materialinterest with the company—in regard to capital, transactions,or relationships—and has confirmed their independence inaccordance with the above standards. The committee’s
decision has been reported to the Board of Directors, which
has designated them as independent officers and reported
that designation to the stock exchanges on which thecompany is listed.

Reasons for Selecting
Outside Audit & Supervisor Board Members
Major concurrent
positionsReason for selecting

Outside Director of
Kawasaki Heavy
Industries, Ltd.

The company’s auditing will benefit
from Yoshihiko Morita’s expansive
international way of thinking anddeep insight nurtured throughwork in the fields of international
finance and overseas economic
cooperation.

Kojiro Otani-

The company’s auditing will benefit
from Kojiro Otani’s abundant
experience of organizational
management acquired in local
government as well as his deep
insight.

Wako Tojima-

The company’s auditing will benefit
from Wako Tojima’s wealth ofexpertise and deep insight as ascience journalist.

Name

Yoshihiko Morita

TOKYO GAS ANNUAL REPORT 201637

Corporate Governance

Officer Remuneration
In 2005, the company formulated the basic policy on officer remuneration, which outlines the method of remuneration for
directors, etc. At a meeting of the Board of Directors in February 2012, the policy was revised as follows.

1 Role of Officers and Remuneration(3) Remuneration of outside directors shall comprise monthly
remuneration and bonus. Monthly remuneration shallcomprise only fixed remuneration, while bonus shall be
the same as that of inside directors.

The role demanded of officers is to seek to enhance short-,
medium-, and long-term corporate value, and officer
remuneration shall serve as an effective incentive for them toperform that role.

4 Composition and Other Details of Remuneration
Paid to Audit & Supervisory Board Members

2 Level of Remuneration
The level of officer remuneration shall be suitable for the role,
responsibility, and performance of the officer.

(1) Remuneration of Audit & Supervisory Board members
shall be paid within the scope of the remuneration limit
approved at the General Shareholders’ Meeting anddetermined through discussions among Audit &Supervisory Board members.
(2) Remuneration of Audit & Supervisory Board members
shall comprise only fixed monthly remuneration.

3 Composition and Other Details ofRemuneration Paid to Directors(1) Remuneration of directors shall be paid within the scopeof the remuneration limit approved at the General
Shareholders’ Meeting.
(2) Remuneration of inside directors shall comprise monthly
remuneration and bonus. Monthly remuneration shallcomprise fixed remuneration paid in accordance with thepost of each individual and performance-linked
remuneration. A portion of fixed remuneration shall beallocated to the purchase of shares based on a sharepurchase guideline and from the standpoints of reflecting
the perspectives of shareholders on management andimproving shareholder value over the long term. The
amount of performance-linked remuneration shall be
determined after evaluating company-wide performanceand performance of operating units from the standpointsof motivating Inside Directors to execute management
strategies and reflecting their performance clearly in theirremuneration. The amount of bonus to be paid shall be
determined in accordance with the post of each insidedirector after performance evaluation.

5 Assurance of Objectivity and Transparency of
the Remuneration System
The company shall assure the objectivity and transparency ofthe system of officer remuneration by establishing andoperating the Advisory Committee comprising a number ofoutside directors, outside Audit & Supervisory Board
members, and inside directors to govern the system of
personnel affairs and remuneration of officers.

Composition of Remuneration for Directors
Performance-linked
remuneration

Fixed remuneration* Monthly remuneration of outside directors are fixed remuneration only.

Total Remuneration for Directors and Audit & Supervisory Board Members (Fiscal 2015)
Type (Thousands of U.S. dollars*2)

Type (Millions of Yen)

Remuneration for directors(excluding outside directors)

Remuneration for Audit & Supervisory
Board members

Number of
officers*1

Total value of
remuneration

Base

Bonuses

Total value of
remuneration

Base

Bonuses

10

¥ 460

¥ 397

¥ 63

$ 4,107$ 3,545

$ 563

3

¥ 74

¥ 74

-

$ 661

$ 661

-

8

¥ 64

¥ 58

¥6

$ 571

$ 518

$ 54

(excluding outside Audit & Supervisory Board members)

Remuneration for outside officers(outside directors and outside Audit & Supervisory
Board members)*1 The number of officers included in the total value of remuneration for directors, Audit & Supervisory Board members, and outside officers includes four directors and one Audit & Supervisory Board
member (of which two were outside officers) who retired upon the conclusion of the 215th Annual Shareholders’ Meeting.
*2 Equivalent U.S. dollar amounts are included for the convenience of readers outside Japan and are converted at a rate of ¥112 per U.S. dollar, the prevailing exchange rate at the end of March 2016.
These conversions should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

38

TOKYO GAS ANNUAL REPORT 2016

Advisory Committee

Independent Auditors

In February 2005, we established the Advisory Committee toassure objectiveness and transparency in management. It
has been defined that this committee will have no more than
6 members consisting of no more than 3 representatives fromoutside of the company and no more than 3 internal
representatives, and that one of the outside representatives
will serve as the committee’s chairman.
Today, the Advisory Committee has 5 members: 3
representatives from the outside directors and outside Audit& Supervisory Board members as well as the Chairman and
the President. In accordance with inquiries from the Board of
Directors, the Advisory Committee deliberates on officer
candidates and officer remuneration in a fair and appropriatemanner and makes reports to the Board of Directors. The
committee also deliberates on the independence of outside
officer candidates.

The company has concluded an auditing contract with KPMG
AZSA LLC for auditing services based on the Companies Act
and auditing services based on the Financial Instruments andExchange Act, as well as internal control audits based on the
Financial Instruments and Exchange Act, and the company isbeing audited on that basis. The company’s audits arehandled by 3 certified public accountants: Teruhiko Tanaka,
Shuichi Ikeya, and Yoshihiro Uehara. For each of theseauditors, the number of consecutive years of auditing service
is seven years or less (as of June 29, 2016).

Internal Control System
To secure management legality, soundness, and transparency
and to realize its management philosophy, the company has
formulated the “Basic Policy on Development of Corporate
Structures and Systems for Ensuring Appropriateness of
Operations (Internal Control System) for the Tokyo Gas
Group,” and the company is applying this policy in an
appropriate manner.
Specifically, the company has established systems to ensurethat directors and their assistants perform their duties in amanner that is compliant to relevant laws and regulations, thearticles of incorporation, and other rules. In addition, crisis
management provisions have been formulated to limit losses
from risks related to investments and natural disasters. The
company also defines guidelines for ensuring the independenceof Audit & Supervisory Board members and guaranteeing theeffectiveness of the Audit & Supervisory Board.

TOKYO GAS ANNUAL REPORT 2016

39

Compensation for Independent Auditors (Fiscal 2015)
Millions of Thousands ofyen
U.S. dollars*Compensation for auditing services¥ 268$ 2,395

Compensation for non-auditing services

¥ 31

$

Total

¥ 299

$ 2,672277* Equivalent U.S. dollar amounts are included for the convenience of readers outside Japan, andare converted at a rate of ¥112 per U.S. dollar, the prevailing exchange rate at the end of March2016. These conversions should not be construed as representations that the Japanese yenamounts have been, could have been, or could in the future be, converted into U.S. dollars at
this or any other rate of exchange.

Compliance
Compliance Structure
The company has identified the following three points as its
basic policy and is promoting compliance on that basis.
Fostering of a compliance oriented mentality
Compliance efforts through coordination among divisions based on
the fundamental policy
Establishment of the compliance PDCA cycle

We have established the Management Ethics Committee,
chaired by the President. This committee discusses at the
management level basic compliance policies and all aspectsof compliance initiatives by the company, monitors theimplementation of compliance-related measures, andconfirms activity programs from the following year andthereafter. We have also established the ComplianceDepartment to support compliance-related activities for each
unit. These include development of compliance promotion
systems, encouragement awareness and educational
campaigns about the code of conduct, compliance risk
reduction measures, maintenance of advisory systems, andbroad-based distribution of information within and beyond
the Tokyo Gas Group companies. To cultivate anunderstanding of compliance, we promote a thoroughawareness of ongoing activities related to our code of
conduct. We are also moving forward with a compliancecasebook designed for applying the code of conduct tovarious problems in the workplace, so as to achieve thepermeation of compliance.

Corporate GovernanceCompliance Risk Management
Through the effective operation of internal and external
advisory systems, we are endeavoring to ensure thatcompliance-related problems are discovered and resolved
quickly so that our corporate self-regulatory processes willcontinue to function effectively. We monitor the effectivenessof Group compliance promotion activities by conducting
regular compliance awareness surveys of all employees. The
results of these surveys are reflected in initiatives for thefollowing years. The Compliance Audit Sect. of the Internal
Audit Department conducts audits of the company, its
subsidiaries, and its affiliates focusing on the probability thatrisks will materialize and their degree of importance from theviewpoint of strict compliance with laws, corporate ethics,
and social norms. When concerns are identified, the groupconducts follow-up audits in the following year to verify
progress in tackling those concerns.

Enterprise Risk Management (ERM) System
Securities Markets and Other Stakeholders
Disclosure of risk information through Securities
Report, Financial results, CSR report
Reflection of results of risk assessment

Corporate Executive Committee
Confirmation of major Group risks

Report / proposal for plan for assessment of majorGroup risks / other essential matters

Clear statement of risk
management policies

Risk Management Committee(Executive Office: Corporate Planning Dept.)
Identifying and confirming Group risk management
Report regarding results of risk assessment, statusof implementation of countermeasures, status of
improvement, etc.

Feedback of evaluation
results / improvement
proposals
Clear statement of risk
management policies

Business Departments / Subsidiaries and Affiliates

Risk Management System
Enterprise Risk Management System
In fiscal 2003, the company established an enterprise risk
management (ERM) system and drew up risk management
regulations, which include documented rules concerning
major risks faced by the group.
The Risk Management Committee was established in fiscal
2008 with the aim of tracking progress regarding theestablishment and the operational status of the ERM system
as well as improving the level of ERM. The committee
periodically undertakes risk assessments and checks on thestatus of the ERM system. It also reports to the Corporate
Executive Committee and obtains the necessary approvals.
Moreover, in fiscal 2011, the risk management function wasmade the responsibility of the Corporate Planning Department,
and there has been a framework in place for implementing
unified ERM in conjunction with operational management.
Under the framework, around 120 Risk Management
Promotion Officers are deployed in the business departmentsof Tokyo Gas and its subsidiaries and affiliates in order topromote ERM. Each year, we assess risks and theimplementation and improvement status of countermeasures.
This system facilitates the steady implementation of the ERMPDCA (Plan-Do-Check-Act) cycle.

Crisis Management System
Because the company provides public services that comprisea lifeline, for many years it has also had a crisis management
system that serves as a response system in case an accident
or other risk-related event actually occurs. Specifically, we
have formulated Emergency Response Organization(1) Identifying and evaluating risks, formulating andimplementing risk countermeasures(2) Improvement of risk assessment, countermeasures

Emergency Response Organization
President

Executive Office*(Organization Leader)

Instructions /ordersReportSuggestion of
establishmentof Emergency
Response
Organization, etc.

Business Departments

Collaboration

Corporate Planning Dept.

* The organizational unit in charge of the executive office
is determined in advance in accordance with the type ofthe emergency.

(Group-wide coordination)

Regulations. In case of crises, including major natural
disasters, such as earthquakes, or production or supply
disruptions arising from major accidents at pipelines or
terminals, as well as influenza, terrorism, failures in missioncritical IT systems, and compliance problems, the Emergency
Response Organization responds to the situation immediately
in accordance with the Emergency Response Organization
Regulations. Periodic training is conducted in relation to
major risk response measures. Moreover, the company has
also formulated a business continuity plan (BCP), outlining its
responses in the event of a major earthquake of themagnitude assumed by Japan’s Cabinet Office, a major
accident disrupting gas supply, a widespread blackout, an
outbreak of influenza, etc. This plan is in place to reinforce
the company’s risk management system.

40

TOKYO GAS ANNUAL REPORT 2016

Board of Directors As of June 29, 2016

Tsuyoshi Okamoto

Michiaki Hirose

Yutaka Kunigo

Director, Chairman

Representative Director,
President

Representative Director

April1970 Joined the company

April1974 Joined the company

April1977 Joined the company

June

1997 Deputy Chief Executive of Northern Regional

April

2004 Executive Officer and Assistant to Chief Executive of

April

2004 General Manager of Gas Resources Dept. ofApril

2007 Executive Officer and General Manager of Gas

April

2008 Executive Officer and General Manager ofApril2010 Senior Executive Officer and Chief Executive of

April

2013 Senior Executive Officer and Chief Executive ofJune2013 Director, Senior Executive Officer and Chief

April

2014 Representative Director, Executive Vice President,

Business Div.
June
June

1998 General Manager of Documents Dept.

April
April

2004 Senior Executive Officer and Chief Executive of

April

2004 Director, Senior Executive Officer and Chief

Executive of Strategic Planning Div.
April

2006 Director, Senior Executive Officer, Chief Executiveof Corporate Communication Div. and in chargeof Compliance Dept. and Internal Audit Dept.
April

April

2009 Representative Director, Executive Vice President

and in charge of Personnel Dept., Secretary Dept.,
General Administration Dept. and Compliance Dept.
April

2010 Representative Director, President

April2014 Director and Chairman of the Board (Current

position)
June

April

2009 Senior Executive Officer and in charge of Corporate PlanningJune2009 Director, Senior Executive Officer and in charge of Corporate

Dept. and Affiliated Companies Dept.

Industrial Gas Sales Dept. of Energy Solution Div.
Energy Resources Business Div.
Energy Production Div.
Executive of Energy Production Div.
Chief Executive of Energy Solution Div. andGeneral Manager of Volume Sales Dept. of Energy
Solution Div.

Planning Dept., Corporate Communications Dept. and
Affiliated Companies Dept.

2007 Representative Director, Executive Vice President

and in charge of Personnel Dept., Secretary
Dept., General Administration Dept., ComplianceDept. and Internal Audit Dept.

Resources Dept. of Energy Resources Business Div.

2008 Senior Executive Officer and in charge of Corporate Planning

Dept., Investor Relations Dept., Finance Dept., Accounting
Dept., Affiliated Companies Dept. and Gas Industry
Privatization Research Project Dept.

Strategic Planning Div.
June

2007 Senior Executive Officer and in charge of Corporate

Planning Dept., Infrastructure Project Dept., Finance Dept.,
Accounting Dept. and Affiliated Companies Dept.

2002 Executive Officer and General Manager ofCorporate Planning Dept. of Strategic Planning Div.
April

2006 Executive Officer and General Manager of Corporate

Planning Dept. of Strategic Planning Div.

1999 Assistant to Director in charge of General

Administration Dept.
June

Energy Resources Business Div.

Corporate Communication Div.

January 2010 Director, Senior Executive Officer and in charge of Corporate

April

Planning Dept., Project Management Dept., Corporate
Communications Dept. and Affiliated Companies Dept.
April

2012 Representative Director, Executive Vice President and Chief

April2013 Representative Director, Executive Vice President and Chiefand in charge of Power Business Planning Dept.,
Business Restructuring Project Dept., Gas
Business Deregulation Project Dept., and Sales
Innovation Planning Dept.

Executive of Living Energy Div.
April

2016 Representative Director, Executive Vice President,

Head of Power Business, Chief Executive ofRegasification & Power Generation Div. and in
charge of Power Business Planning Dept. (Current
position)

Executive of Residential Sales and Service Div.
April

2015 Representative Director, Executive Vice President

2014 Representative Director, President (Current position)2016 Outside director of JAPAN POST BANK Co., Ltd

Takashi Uchida

Hiroaki Kobayashi

Satoru Yasuoka

Representative Director

Director

Director

April

1979 Joined the company

April1980 Joined the company

April1979 Joined the company

June

2006 General Manager of Pipeline Planning Dept. ofApril

2005 General Manager of Technology Development Dept.

April

2006 General Manager of Industrial Gas Sales Dept. ofApril

2006 General Manager of Product Development Dept.
2007 Assistant to Chief Executive of Living Energy Div.

April

2008 General Manager of Gas Resources Dept. ofApril

2010 Executive Officer and General Manager of Gas

April

2011 Executive Officer and General Manager of Sales

April

2012 Senior Executive Officer and Chief Executive of

April

2015 Senior Executive Officer and Chief Executive of IT

Pipeline Network Div.
April

2009 General Manager of Corporate Planning Dept.

April

April

2010 Executive Officer and General Manager ofOctober 2007 General Manager of Area Development

Corporate Planning Dept.
April

April

2012 Senior Executive Officer and in charge of

April

Personnel Dept., Secretary Dept., ComplianceDept. and Internal Audit Dept.

2008 General Manager of Customer Safety Dept.

April

2009 Executive Officer and General Manager of2013 Senior Executive Officer and Chief Executive of

April

2010 Executive Officer and General Manager ofApril

2012 Senior Executive Officer and Chief Executive ofEnergy Resources Business Div.
June

2015 Director, Senior Executive Officer and Chief

Executive of Energy Resources Business Div.
April

Planning Dept.

2016 Representative Director, Executive Vice President

and Chief Executive of Residential Sales andService Div. (Current position)

Residential Fuel Cell Business Development Dept.
Technology Development Div.
April

Resources Dept. of Energy Resources Business Div.
Marketing 1 Dept. of Living Corporate Sales andServices Div.

Technology Development Div. and in charge ofSmart Energy Business Development Dept.

April

Regional Development Marketing Div.
Div. and in charge of Environmental Affairs Dept.
and Fundamental Technology Dept.

2013 Senior Executive Officer, Chief Executive ofJune2015 Director, Senior Executive Officer, Chief Executive

April

2016 Director, Senior Executive Officer, Chief Executiveof IT Div. and in charge of Environmental Affairs
Dept. and Fundamental Technology Dept.

2014 Director, Senior Executive Officer, Chief Executiveof Technology Development Div. and in charge ofSmart Energy Business Development Dept.
2015 Director, Senior Executive Officer, Chief Executiveof Pipeline Network Div. (Current position)

41

Energy Resources Business Div.

Customer Safety Dept.

JuneTOKYO GAS ANNUAL REPORT 2016

Energy Sales and Service Div.

of Energy Solution Div. and General Manager
of Volume Sales Dept. of Energy Solution Div.
(Current position)

Corporate GovernanceFumio Murazeki

Masaru Takamatsu

Director

Director

April

1979 Joined the company

April1980 Joined the company

April2009 General Manager of Residential Sales Planning

April

2005 General Manager of Home Service Planning Dept.

April

2006 General Manager of Business Partnership

April

2010 General Manager of Lifeval Project Management

April2011 Executive Officer and General Manager of Lifeval

April

2012 Executive Officer and General Manager ofApril

2014 Senior Executive Officer and in charge ofApril

2015 Senior Executive Officer and in Charge ofDept. of Living Energy Div.
April

2010 Executive Officer and General Manager of Residentialof Home Service Div.

Sales Planning Dept. of Living Energy Div.
April

2013 Senior Executive Officer and Head of Sales

Support Dept. of Home Service Div.

Marketing of Energy Solution Div.
October 2014 Senior Executive Officer, Head of Sales Marketingof Energy Solution Div. and General Manager ofEnergy Sales & Service Planning Dept.
April

Project Management Dept. of Living Energy Div.
Corporate Planning Dept.

2015 Senior Executive Officer, Chief Executive ofEnergy Solution Div. and General Manager ofVolume Sales Dept.
April

Dept. of Living Energy Div.

Corporate Planning Dept. and AffiliatedCompanies Dept.

2016 Senior Executive Officer of the company

President, Representative Director of Tokyo Gas
Liquid Holdings Co., Ltd.

Corporate Planning Dept., Personnel Dept.,
Chiba-Ibaraki Project Dept., Group Management
Project Dept., and Group Personnel System
Project Dept.
2016 Senior Executive Officer and in Charge of

April

Personnel Dept., Secretary Dept., General
Administration Dept., Compliance Dept., andInternal Audit Dept.

April

Akihiko Ide

Yoshinori Katori

Chika Igarashi

Outside Director

Outside Director

Outside Director

1965 Joined Mitsubishi Metal Mining company Ltd.

(Current Mitsubishi Materials Corporation)
June

1994 General Manager of General Affairs &Administration Dept. at Mitsubishi Materials
Corporation
June

1997 Director of Mitsubishi Materials CorporationJune

2000 Managing Director of Mitsubishi Materials

Corporation
June

2002 Executive Vice President of Mitsubishi Materials

June2004 President of Mitsubishi Materials CorporationJune

2010 Chairman of Mitsubishi Materials Corporation

April

August 2005 Press Secretary/Director-General for Press andPublic Diplomacy of Minister’s Secretariat
August 2006 Ambassador Extraordinary and Plenipotentiary to

the State of Israel
October 2008 Ambassador for ASEAN, and Science andTechnology Cooperation, Ministry of Foreign Affairs
April2010 Director-General of Foreign Service Training

March

2011 Ambassador Extraordinary and Plenipotentiary to

Corporation

Director of Sakai Chemical Industry Co., Ltd.
April

2015 Senior Advisor of Mitsubishi Materials

Corporation
June

1973 Joined Ministry of Foreign Affairs

August 2004 Director-General of Consular Affairs Bureau

April1997 Registered as an attorney at law

April1997 Joined a law firm in Tokyo Metropolitan area

July

2006 Joined Asahi Law Office (Currently Nishimura &June2007 Registered as an attorney at law in New York

June

2016 Director of the company (Current position)

Asahi)
State, USA

Institute, Ministry of Foreign Affairs
the State of Indonesia
October 2014 Retired from Ministry of Foreign AffairsJune2015 Director of the company (Current position)2015 Advisor of Mitsubishi Materials Corporation

Director of the company (Current position)

42

TOKYO GAS ANNUAL REPORT 2016

Audit & Supervisory Board Members As of June 29, 2016

Tsutomu Oya

Hideaki Obana

Audit & Supervisory
Board Member

Audit & Supervisory
Board Member

April1975 Joined the company

April1978 Joined the company

June

2002 General Manager of the International Affairs Dept.

July

2003 General Manager of Marketing Dept., Living

2004 Executive Officer, General Manager of Urban Energy

April2004 General Manager of Home Service Planning Dept.,

Business Dept. of Energy Sales and Service Div.,and Acting General Manager of Volume Sales Dept.
of Energy Sales and Service Div.

April

2005 General Manager of Kanagawa Branch, Corporate

April

2006 Senior Executive Officer and Division Manager ofApril2007 General Manager of Corporate Communications

June

2009 Director, Senior Executive Officer, and Division

April2009 Executive Officer and General Manager ofApril2010 Director, Senior Executive Officer, and Division

April

2012 Senior Executive Officer and in charge ofApril

2013 Senior Executive Officer and in charge ofof the Strategic Planning Div.
Apri

Planning Div.
Home Service Div.
Communication Div.

Energy Resources Div.

Dept.

Manager of Energy Resources Div.

Corporate Communications Dept.

Manager of Energy Production Div. and in chargeof the Environmental Affairs Dept.
April

2012 Director, Senior Executive Officer, and Division

April

2013 DirectorJune2013 Audit & Supervisory Board Member

Purchasing Dept., Real Estate Management
Dept., Major Site Development Dept.

Manager of Energy Production Div.

Purchasing Dept., Real Estate Management
Dept., Personnel Dept., Internal Audit Dept.
March2015 Retired as Senior Executive Officer

June2015 Audit & Supervisory Board Member

Yoshihiko Morita

Kojiro Otani

Wako Tojima

Outside Audit &Supervisory Board
MemberOutside Audit &Supervisory Board
MemberOutside Audit &Supervisory Board
MemberApril

1969 Joined Export-Import Bank of Japan

March

1971 Joined Yokohama City Hall

April

1985 Joined The Yomiuri Shimbun,

October

1999 Full-time Auditor of Japan Bank for International

April

2003 Director General of General Affairs Bureau ofMarch1991 Retired from The Yomiuri Shimbun

April

2007 Part-time lecturer at School of Social andJune2014 Outside Audit & Supervisory Board Member of the

Yokohama City Hall

Cooperation
October

2000 Director of Japan Bank for International Cooperation

October

2004 Vice Governor of Japan Bank for International

Cooperation
October

2011 Retired as Deputy CEO of Japan Bank for International

Cooperation
December 2011 Advisor of Sumitomo Mitsui Banking CorporationJune

2012 President (Chief Executive Officer) of Japan Institute forOverseas Investment
Outside Audit & Supervisory Board Member of thecompany
June

2006 Director General of Waterworks Bureau ofJuly2008 Vice President of Kanagawa Water Supply

June2013 Outside Audit & Supervisory Board Member of the2013 Outside Director of Kawasaki Heavy Industries, Ltd.

Retired as Advisor of Sumitomo Mitsui Banking
Corporation
December 2014 Retired as President (Chief Executive Officer) of Japan

Institute for Overseas Investment

TOKYO GAS ANNUAL REPORT 201643

Freelance journalist

Yokohama City Hall
Authority

2008 Representative Director and Senior Managing Executive

Officer of Japan Finance Corporation Deputy CEO ofJapan Bank for International Cooperation
June

April

company
Retired from Kanagawa Water Supply Authority

International Studies of University of Tsukuba
companyCorporate Governance

Executive Officers
President

Michiaki Hirose

Executive Vice
Presidents

Yutaka Kunigo

Head of Power Business, Chief Executive of Energy Production Div., In Chargeof Power Business Planning Dept.

Takashi Uchida

Chief Executive of Residential Sales and Service Div.

Hiroaki Kobayashi

Chief Executive of Pipeline Network Div.

Satoru Yasuoka

Chief Executive of Energy Solution Div., General Manager of Volume Sales
Dept. of Energy Solution Div.

Fumio Murazeki

President, Representative Director of Tokyo Gas Liquid Holdings Co., Ltd.

Senior Executive
Officers

Executive
Officers

Fumihiko Hara
Kiyotada Den
Takahiro Saito
Shinichi Takagi
Toshiyasu Ishii
Nobuhisa Kobayashi
Tadashi Komiyama
Koki Hayakawa
Kentaro Kimoto
Yohei Nitta
Tomoyuki Yoshioka
Hiroshi Kishino
Shinichi Sasayama
Ayumi Shigitani

Executive
Specialists

Masami Takayanagi
Minoru Sanari

Masaru Takamatsu In Charge of Personnel Dept., Secretary Dept., General Administration Dept.,
Compliance Dept., and Internal Audit Dept.

Hideaki Arai

Chief Executive of Region Div.

Shin Yamagami

Chief Executive of IT Div., in charge of Environmental Affairs Dept., andFundamental Technology Dept.

Isao Nakajima

CFO, in Charge of Finance Dept., Accounting Dept., Purchasing Dept., andReal Estate Management Dept.

Kunio Nohata

President, Representative Director of Tokyo Gas Engineering Solutions Corporation

Satoru Sawada

In Charge of Corporate Planning Dept., Corporate Communications Dept., Gas
Business Deregulation Project Dept., Tokyo 2020 Olympic and Paralympic

Takashi Anamizu

Chief Executive of Energy Resources and Overseas Div.

Message from an Outside Director
Full liberalization of the gas retail market in Japan is scheduled to take placein April 2017, as determined one year earlier, following the full liberalization of
the electric power retail market in April 2016. Overseas, oil prices and otherfactors remain uncertain, while the requirements to invest in natural gas-related
infrastructure are rising. As such, Tokyo Gas is facing such significant changes
in its business environment.
Concerning corporate governance, the Tokyo Stock Exchange formulated
Japan’s Corporate Governance Code in June 2015, whereby listedcompanies are expected to make further efforts to ensure healthy corporate
entrepreneurship and transparency, and to enhance initiatives with the aim tocreate mid- to long-term corporate value.
As a lawyer, I have provided various legal services to many corporations.
In the current critical juncture, I felt deeply honored to be appointed as
an independent outside director of Tokyo Gas and was humbled by thesignificant responsibility and high expectations. According to the principlesof the Corporate Governance Code, independent outside directors are
expected to oversee management and reflect opinions of stakeholders tofulfill their roles as independent watchdogs and guides. I thus believe myfirst task is to encourage more active constructive discussions at the Boardof Directors meetings. Specifically, given my knowledge and experience asa legal professional, I will always be mindful of the interests of shareholders
and other stakeholders, and ask questions or express opinions at each stage
when management issues are formulated, and measures are developed andimplemented. In other words, I believe my first task is to play a monitoring
function. Second, I intend to review whether structures for compliance, risk
management, or internal control are properly established and are effectively
utilized. Moreover, human resource development and consideration formaintaining a good working environment are indispensable from theperspective of raising mid- to long-term corporate value. I am also hoping tocontribute to enhancement of corporate value from a viewpoint of promoting
diversity in terms of gender, age, nationality, physical condition, family
environment, and other factors.

Chika Igarashi
Outside Director

Tokyo Gas was early to start appointing outside directors. I think the company
is addressing corporate governance issues at a relatively high level. I put
great confidence in Tokyo Gas employees, who freely explain the company’sbusiness outline and issues to outside directors such as me and always
sincerely respond to questions.
In my view, corporate value of Tokyo Gas is based on its “reliability, safety, andtrust” branding power, which was accumulated during its 130-year history, andis driven by its vitality to capture growth opportunities in changing times andkeep facing challenges boldly. Value should be permanently created by wellbalanced functioning of those elements.
Corporate value also places a primary focus on shareholder-oriented
management. However, in case of Tokyo Gas, which plays a social missionof the supply of energy, I think it would be more appropriate to think of
its corporate value as an aggregate of value provided to all stakeholders,
including customers, employees, suppliers, local communities, andinternational society in general.
Vitality of Tokyo Gas is well presented in the context and progress of its
Challenge 2020 Vision, a 9-year plan established six months after the Great
East Japan Earthquake of March 2011. At present, the company is in the
midst of the second “Step” stage making steady progress in its threemain policies: to evolve into the Total energy business; to accelerate global
business development; and to reconstruct the corporate group. As thechanges accompanying liberalization appear, one by one, it appears that morebarriers in terms of business and regions are to be discarded and businessrestructuring could be accelerated, with repercussions overseas. I will makemy best efforts to accomplish my tasks by always keeping interests ofstakeholders in mind and helping Tokyo Gas shift into the third “Jump” stage.

44

TOKYO GAS ANNUAL REPORT 2016

Tokyo Gas Group's
Invisible Assets
Since its foundation in 1885, the Tokyo Gas Group has steadily supplied gas
to industrial and household customers in the Greater Tokyo Area,and cultivated "invisible assets" that are not shown on financial statements
while supporting economic development and a good life.
Amid the advancing full deregulation of the electricity and gas retail markets
as well, the group will realize sustainable growth and the enhancement of
its corporate value while improving these invisible assets.

TOKYO GAS ANNUAL REPORT 201645

Invisible assets

Tokyo Gas Group's Partner Companies

Business Outline of Lifeval, Enesta, and Enefit
Number of Outlets

Number of Staff

Over 200

Approx. 10,000

Lifeval, Enesta, and Enefit are service companies with strong local
community relationships that are engaged in meter reading, safety
inspection of gas shutoff taps and gas facilities, and sales,
installation and repair of gas appliances. Based on a marketingsystem with close connections to local communities, they have built
a strong relationship of trust with customers. Tokyo Gas has also
made a partial capital contribution to the companies and is
supporting their management.
Many staff that are involved in a full range of services have been
assigned to each outlet, and through operations spanning legal
inspections of gas facilities to sales and maintenance of gas
appliances, we have responded to customer needs. In the case ofsales of electricity to households and small commercial customers
as well, we have a marketing system that enables every single
customer to be visited individually, which has become a strength interms of the Tokyo Gas Group's electricity sales.
Lifeval and Enesta are fostering staff that not only specialize in gas
but also have specialist knowledge and qualifications related toelectricity such as electrical construction work qualifications. We
are thus making progress in the establishment of an organization
aimed at providing comprehensive energy services related to gas
and electricity.

In order to deliver natural gas safely and steadily to over 11 million
customers 24 hours a day and 365 days a year, we are continuallydeveloping human resources involved in safety. At a training facility
dedicated to developing safety staff in Tsurumi-ku, Yokohama City,a total of about 6,900 Tokyo Gas employees and employees at
Tokyo Gas Group partner companies a year are undergoingpractical training.
To support the stable supply of city gas, it is indispensable to havehuman resources that are equipped with advanced specializedskills in facility design, construction, and maintenance as well as
decision-making capabilities that enable the reliable execution ofgas supply and safety responsibilities at times of emergencies. The
trust of customers that has been earned as a result of expertise andefforts related to safety operations that we have accumulated
during the group's history of 130 years has also become a strengthof the Tokyo Gas Group. After full deregulation as well, we will strive
to maintain and enhance the level of safety through continuous
human resource development.

SkillsSafetyThe Group is continually endeavoring to share skills across theentire Group and further increase awareness regarding quality
enhancement in a wide range of areas related to customer safety
and services.
As part of initiatives aimed at improving skills, in the area of "gas tap
and gas appliance maintenance and regular safety inspection
operations," which represent an opportunity to come into contact
with our valued customers, we have held a practical skill
competition over a period of five years from 2011. Partnercompanies of Lifeval, Enesta and Enefit take part in this, and bycompeting in knowledge and skills that are required in daily
operations, it is refining its workplace skills.

Recent Skill Competitions' Details
Operational area

Number of participants

FY2013

Regular safety inspections

Approx. 750

FY2014

Gas taps

Approx. 800

FY2015

Gas appliance maintenanceApprox. 600

46TOKYO GAS ANNUAL REPORT 2016

Efforts toward Diversity

Basic Policy Regarding Promotion of Diversity

Strong commitment regarding diversity
The Tokyo Gas Group will promote diversity to ensuresustainable growth and development into the future
Amid increasingly fierce competition among companies in the energy
market, the Tokyo Gas Group aims to realize its Challenge 2020
Vision in order to continue to be selected by customers and achievesustainable growth and development in the future. One of theimportant challenges that we will tackle to this end on a groupwide
basis is the promotion of diversity. To continue to respond todiversifying customer needs, it is essential for every person working
in the group to make maximum use of their knowledge, ability, andexperience and excel. We aim to be a corporate group that willdevelop and expand systems that will support this aim and foster
awareness of it while also continuing to proactively create anorganizational culture where every working person can excel
regardless of their gender, age, or nationality, whether they are
disabled or not, or whether they are hired just after graduating or in
mid-career.

1 Active Promotion and Development of WomenTokyo Gas recognizes the critical need to promote the success of
a diverse pool of human resources and to create a workplaceenvironment that allows each and every employee to maximize hisor her various capabilities and strengths in order for it to secure
growth as a company. Guided by this understanding, we actively
recruit and promote women. As a result, our female employees
are excelling across a wide range of occupational fields, and theratio of women in management positions is also steadily
increasing. In April 2016, we appointed our first female executive

The Tokyo Gas Group will promote diversity in order tobecome a corporate group where every single working
person makes maximum use of their knowledge,
abilities, and experience and excels.

1 We aim to realize an organization (diverse working
styles and productivity enhancement) in which
every person accepts each other's working style
while enhancing productivity.
2 We regard promoting the success of women as the
beginning of the promotion of diversity, and willcontinue to undertake this proactively.
3 We will establish a "Group Diversity Promotion
Team" and promote diversity in the entire Group in
an integrated manner with management.

officer, and opportunities for female employees to excel are
steadily expanding. In addition to upgrading and expanding ourchild-rearing and nursing care systems, Tokyo Gas placesconsiderable weight on fostering employee awareness andcreating an organizational culture that is conducive to developing
the careers of the company’s female employees by promoting avariety of initiatives including seminars. Looking ahead, we willcontinue to actively promote measures that will broaden
opportunities for women to excel, with the aim of having womenaccount for 10% of management positions in 2020.
2 Employment of People with Disabilities

Ratio of Women in Management

(%)

10.0

10.0
8.0

4.6

5.1

5.3

5.8

6.3

6.5

6.0
4.0

2011.4 2012.4 2013.4 2014.4 2015.4 2016.4 2020.4 (Targets)

TOKYO GAS ANNUAL REPORT 201647

At Tokyo Gas, people with disabilities work alongside our other
employees and are performing a variety of duties. As of March
2016, 137 people with disabilities were in our employment,
achieving the statutory rate. To further expand employment ofpeople with disabilities and create opportunities for theirsuccess, we will newly establish a "Liaison Committee toPromote Employment of Disabled People," expand the locations
and scope of work opportunities in the company for people withdisabilities, and support initiatives by Group companies. At thesame time, we will promote the creation of an environment thatis safe and comfortable.

Invisible assets

Assigning personnel to strategic areas
We are prioritizing the deployment of personnel to the electricity powerbusiness and overseas businesses, which are strategic areas, in aneffort to promote their growth and expansion.

Electric power business

Human Resources

In tandem with the expansion of the electricity power business, weare emphasizing the deployment of personnel and developing
personnel in relation to this business. In addition, we are flexibly
engaged in mid-career recruitment of human resources withexperience and expertise.

Overseas businessTo expand overseas businesses, we increased the number ofoverseas employees by 2.5 times to about 100 during a period of five
years from 2011. We plan to increase the number of personnel to 200
in tandem with the scale and speed of business expansion.

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

LNG value chain
Using our technologies and know-how on its total energy business, we
provide energy solutions to customers which engage in business inSoutheast Asia and North America and contribute to projects such as
infrastructure building.
PetroVietnam Gas (Signed a memorandum of understanding to conduct a feasibility study onenergy solution businesses) ;PT Pertamina (Signing of a Memorandum of Understanding with Pertamina towards forming a
Strategic Alliance -Cooperation for Development of LNG Value Chain in Indonesia-)

Gas resource procurement
By enhancing and expanding alliance with LNG players in Japan andoverseas, we have flexibility and pricing competition in procurementof LNG.

Partners

Korea Gas Corporation; CPC Corporation, Taiwan; Kansai Electric PowerPower Generation
Expansion of competitive power generation capacity
JX Energy (Kawasaki Natural Gas Power Generation); Showa Shell Sekiyu (Ohgishima Power);
Kobe Steel (Electricity procurement from Moka Power Station); Idemitsu Kosan and Kyushu
Electric Power (Chiba-Sodegaura Energy)

Electricity Sales
Expand sales to high-voltage and extra-high-voltage customers
Tohoku Electric Power (Synergia Power); NTT Facilities and Osaka Gas (Ennet)

Expand sales to low-voltage customers
Business alliance with 18 companies including gas operators which are our city gas
wholesale customers (approx. 569,000 city gas customers)
Business alliance with 27 LP gas sales companies (approx. 310,000 city gas customers)
Making progress with talks about sales through partnerships with companies in housing,construction, equipment, telecommunication, information service, and other industries.

48

TOKYO GAS ANNUAL REPORT 2016

11-Year Consolidated Financial Highlights

As of March 31, 20162006.32007.32008.32009.3

1,266,501

1,376,958

1,487,496

1,660,162

112,345

162,31570,04865,204

8.87

11.79

4.71

3.93

Ordinary Income (¥ million)

98,689156,039

66,83258,337Net Income (¥ million)

62,114

100,699

42,48741,708Equity (¥ million)

728,231

795,101

769,072

772,365

1,693,898

1,692,635

1,703,651

1,764,185

Interest-bearing Debt (¥ million)

559,911525,467

558,716

593,230

Operating Cash Flow (¥ million)

198,490

233,841

184,908

182,791

Free Cash Flow (¥ million)

79,057109,285

46,90236,862

EBITDA (¥ million)

248,721295,457

212,469

206,287

Capital Expenditure (¥ million)

119,435

124,556

138,006

145,929

Depreciation (¥ million)

136,376

133,142

142,421141,083

EPS (Earnings per Share, fully diluted EPS) (¥)

21.70

35.69

15.50

15.37

BPS (Book Value per Share) (¥)

270.46293.11

289.49284.722,810,171

2,810,171

2,741,571

2,717,571

7

8

8

8

DOE (Dividends on Equity) (%)

2.71

2.83

2.72

2.78

Payout Ratio (%)

29.81

21.33

50.19

51.18

Total Payout Ratio (%)

84.29

60.14

73.56

63.35

Current Ratio (%)

102.91112.60106.76118.99D/E (Debt-Equity) Ratio (times)

0.77

0.66

0.73

0.77

Equity Ratio (%)

42.99

46.97

45.14

43.78

ROE (Return on Equity) (%)

9.02

13.22

5.43

5.41

ROA (Return on Assets) (%)

3.69

5.95

2.50

2.41

Total Asset Turnover (times)

0.75

0.81

0.88

0.96

TEP (¥100 million)

229

538

17

(48)

WACC (%)

3.7

3.8

3.6

3.4

Number of Customers (thousands)

10,016

10,207

10,38010,513Gas Sales Volume (million m3)

13,09813,315

14,215

13,942————Net Sales (¥ million)
Operating Income (¥ million)
Operating Income Margin (%)

Total Assets (¥ million)

Issued Number of Shares (Common Stock) (thousands of shares)
Dividend per Share (¥)

2020 vision basis** 2020vision basis…These numbers are the numerical results calculated by the same method when we planned our vision. Namely, it is the amount that added self-consuming volume and LNG sales volume(excluded volume for Nijio) to a Consolidated gas sales volume.
* Depreciation includes amortization of long-term prepaid expenses.
* Although unaudited, financial information in this investors’guide is based on certified financial statements.

TOKYO GAS ANNUAL REPORT 201649

Financial data

2010.32011.32012.32013.32014.32015.32016.3

1,415,718

1,535,242

1,754,257

1,915,639

2,112,117

2,292,548

1,884,656

85,229122,451

77,075

145,633

166,044

171,753

192,008

6.02

7.98

4.39

7.60

7.86

7.49

10.19

83,519121,548

75,620147,453

159,613

168,169

188,80953,781

95,46746,060101,678

108,451

95,828111,936

813,886

858,920

839,166

927,634

1,011,787

1,069,515

1,100,271

1,840,972

1,829,661

1,863,885

1,992,403

2,176,816

2,257,662

2,251,518

555,919584,169

625,830

642,550

713,823

730,739715,769

199,898

244,803

194,565

240,448

248,831237,680

257,12251,712

94,60048,15256,651827

13,08425,089231,346

271,788

225,580

284,403

306,424

313,605

337,194

148,186

150,202

146,413

183,797

248,004

224,596

232,033

146,117

149,336

148,505

138,770

140,380

141,852

145,187

19.86

35.63

17.70

39.52

43.10

39.15

46.68

301.58320.70324.67360.70402.91438.28460.352,703,761

2,684,193

2,590,715

2,577,919

2,517,551

2,446,778

2,396,778

9

9

9

10

10

10

11

3.07

2.88

2.74

2.91

2.59

2.34

2.58

45.32

25.26

50.85

25.30

23.20

25.55

23.57

60.11

60.87

61.36

60.70

60.00

60.80

60.10

120.93142.26156.89162.16

156.67150.63155.48

0.68

0.68

0.75

0.69

0.71

0.68

0.65

44.21

46.94

45.02

46.56

46.48

47.37

48.87

6.78

11.41

5.42

11.51

11.18

9.21

10.32

2.98

5.20

2.49

5.27

5.20

4.32

4.96

0.79

0.84

0.95

0.99

1.01

1.03

0.84

186

640

91

598

507

434

676

3.2

3.3

3.1

3.2

3.2

3.6

3.4

10,637

10,73910,855

10,978

11,111

11,263

11,39813,666

14,745

15,19015,39014,735

15,541

15,436——

15,833

16,741

17,22518,36018,587

Computations
Operating Cash Flow = Net Income + Amortization of Long-term Prepaid Expenses + Depreciation
Free Cash Flow = Net Income + Amortization of Long-term Prepaid Expenses + Depreciation – Capital Expenditure
Current Ratio = Current Assets (year-end) / Current Liabilities (year-end) x 100
Debt-Equity Ratio = Interest-bearing Debt (year-end) / Equity (year-end)
Equity Ratio = Equity (year-end) / Total Assets (year-end) x 100
Total Asset Turnover = Net Sales / Total Assets (average)
TEP (Tokyo Gas Economic Profit) = After-tax & pre-interest-payment profit – capital cost (cost of interest-bearing debt
+shareholder capital cost)

WACC calculation data (fiscal 2015 actual)∙ Interest-bearing debt cost: Real interest rate of 1.11% (after tax)
∙ Cost of shareholders’ equity∙ Risk-free rate: 10-year JGB yield of 0.44%∙ Risk premium: 5.5%, Beta coefficient of 0.75

50TOKYO GAS ANNUAL REPORT 2016

Consolidated Balance Sheet(Millions of yen)

Assets2015.3.31

2016.3.31

Production facilities

174,760

241,842

Distribution facilities

479,060

550,713Service and maintenance facilities

60,52559,560

Other facilities

326,424

351,950

Non-current assets
Property, plant and equipment

Inactive facilities
Construction in progress
Total property, plant and equipment

387

316

223,821

107,685

1,264,979

1,312,068

Intangible assets
503

841

Other

Goodwill

134,937

136,348

Total intangible assets

135,441

137,189

Investment securities

199,166

179,410Long-term loans receivable

16,14924,013Net defined benefit asset

5,541

229

Deferred tax assets

24,73140,447

Other

30,33534,741

Investments and other assets

Allowance for doubtful accounts

(444)

(394)

275,480

278,447

1,675,901

1,727,705

Cash and deposits

86,493

170,262

Notes and accounts receivable - trade250,326

201,344

Lease receivables and investment assets

26,37924,054

Securities

43,010—

Merchandise and finished goods

3,189

3,501

Total investments and other assets
Total non-current assets
Current assets

Work in process

14,046

10,784

Raw materials and supplies

71,63046,525

Deferred tax assets

12,637

8,004

Other

74,63259,808

Allowance for doubtful accounts

(584)

(472)

581,761

523,8122,257,662

2,251,518

Bonds payable

312,697

284,997

Long-term loans payable339,214363,393

Deferred tax liabilities

11,436

11,321

Net defined benefit liability

75,071

89,405

Provision for gas holder repairs

3,421

3,455

Provision for safety measures

868

466

3,675

9,538

Total current assets
Total assets
Liabilities

Non-current liabilities

Provision for appliance warranties
Provision for loss on guarantees

1,562

1,678

Asset retirement obligations

11,448

10,695

Other

24,79824,490Total non-current liabilities

784,193

799,443

Current portion of non-current liabilities

58,02047,044

Notes and accounts payable - trade108,948

82,352

Short-term loans payable

18,547

16,512

Income taxes payable

43,64028,914

Deferred tax liabilities

2

1

3,839

—

Current liabilities

Provision for safety measures
Asset retirement obligations
Other
Total current liabilities

53
162,023

386,206

336,903

1,170,400

1,136,346

Capital stock

141,844

141,844

Capital surplus

2,065

1,878

855,776

910,353

Total liabilities
Net assets—
153,208

Shareholders' equity

Retained earnings
Treasury shares(3,715)(4,441)

Total shareholders' equity

995,971

1,049,634
26,298

Accumulated other comprehensive income
Valuation difference on available-for-sale securities

34,455

Deferred gains or losses on hedges(1,820)(2,573)Foreign currency translation adjustment

43,071

44,945Remeasurements of defined benefit plans(2,163)(18,033)

Total accumulated other comprehensive income

73,54350,636

Non-controlling interests

TOKYO GAS ANNUAL REPORT 2016

51

17,747

14,900Total net assets

1,087,262

1,115,172

Total liabilities and net assets

2,257,662

2,251,518

Financial data

Consolidated Statement of Income(Millions of yen)

2014.4.1 - 2015.3.31

2015.4.1 - 2016.3.31

Net sales

2,292,548

1,884,656

Cost of sales

1,668,041

1,239,020

Gross profit

624,506

645,636

Supply and sales expenses

383,749

385,572

General and administrative expenses

69,00368,054

Total selling, general and administrative expenses

452,752

453,627

171,753

192,008

Selling, general and administrative expenses

Operating income
Non-operating income
Interest income

770

615

Dividend income

3,891

1,878

Rent income

1,622

2,177

148

1,733

Share of profit of entities accounted for using equity method

3,313

2,122

Miscellaneous income

7,796

7,043

Total non-operating income

17,542

15,570Foreign exchange gains

Non-operating expenses
Interest expenses

12,65912,158Adjustments of charges for construction of distribution facilities

2,054

2,189

Miscellaneous expenses

6,413

4,421

Total non-operating expenses

21,126

18,769168,169

188,809

Gain on sales of non-current assets

6,134

—

Gain on sales of investment securities

5,062

—

Total extraordinary income

11,197—30,98728,293

Ordinary income
Extraordinary income

Extraordinary losses
Impairment loss
Loss on reduction of non-current assets

505—

Loss on valuation of investment securities

622

4,747

Total extraordinary losses

32,11533,040

Profit before income taxes

147,251

155,768

Income taxes - current

51,451

43,782

Income taxes - deferred

(847)

(991)

Total income taxes

50,60342,791

Profit96,647112,977

Profit attributable to non-controlling interests
Profit attributable to owners of parent

819

1,040

95,828111,936

Consolidated Statements of Comprehensive Income(Millions of yen)

2014.4.1 - 2015.3.31

2015.4.1 - 2016.3.31

96,647112,977

Valuation difference on available-for-sale securities

8,603(8,363)

Deferred gains or losses on hedges(447)(1,062)

ProfitOther comprehensive income

Foreign currency translation adjustment

20,537

3,614

Remeasurements of defined benefit plans, net of tax(3,402)(15,904)

Share of other comprehensive income of entities accounted for using equity method

3,887(1,387)

Total other comprehensive income

29,179(23,102)125,826

89,874

124,981

89,029845

844

Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

52

TOKYO GAS ANNUAL REPORT 2016

Consolidated Statements of Cash Flows

Factors Affecting Revenues
and Expenses(Millions of yen)

2014.4.1 - 2015.3.31

2015.4.1 - 2016.3.31

Cash flows from operating activities
Profit before income taxes

147,251

155,768

Depreciation and amortibation

138,635

141,930

Impairment loss

30,98728,293

Amortization of long-term prepaid expenses

3,217

3,256

Loss on retirement of property, plant and equipment

2,001

3,050

Loss (gain) on sales of investment securities(5,062)(1,156)

622

4,747

Loss (gain) on valuation of investment securities
Increase (decrease) in provision for gas appliancewarranties

3,675

5,863

Increase (decrease) in net defined benefit liability(4,810)(1,110)

Increase (decrease) in net defined benefit asset(4,474)(1,384)

Increase (decrease) in Provision for safety measures

2,995(4,242)

Interest and dividend income(4,661)(2,494)

Interest expenses

12,65912,158

Share of (profit) loss of entities accounted for using
equity method(3,313)(2,122)

Decrease (increase) in notes and accounts
receivable - trade

2,355

47,350Decrease (increase) in inventories(12,008)

28,117

Increase (decrease) in notes and accounts payable trade(7,305)(22,993)

Decrease (increase) in consumption taxes refund
receivable(4,371)

2,940

Increase (decrease) in accrued consumption taxes

1,137(2,436)

Decrease (increase) in accounts receivable - other(5,603)

12,864

(42)

2,273

Other, net(21,005)(1,253)

Subtotal

272,878

409,422

Interest and dividend income received

13,512

11,954

Interest expenses paid

(12,649)(12,547)

Income taxes paid

(50,515)(54,170)

Net cash provided by (used in) operating activities

223,225354,658

Net decrease (increase) in lease receivables andinvestment assets

Cash flows from investing activities
Proceeds from withdrawal of time deposits

1,846

1,945

Purchase of investment securities(147)(1,850)

Proceeds from sales and redemption of investment
securities

8,705

3,616

Purchase of property, plant and equipment(180,097)(195,060)

Purchase of intangible assets(25,313)(26,131)

Purchase of long-term prepaid expenses(3,276)(10,683)—(1,250)

Payments of long-term loans receivable(2,954)(9,776)

Collection of long-term loans receivable

6,485

1,726

Payments for transfer of business

Other, net
Net cash provided by (used in) investing activities

9,913

1,057

(184,838)(236,406)

241(2,011)

Cash flows from financing activities
Net increase (decrease) in short-term loans payable(975)(1,243)

Proceeds from long-term loans payable

Repayments of lease obligations

29,35951,701

Repayments of long-term loans payable(30,891)(18,012)

Redemption of bonds(20,000)(43,800)

Repayments to non-controlling shareholders—(3,581)

Purchase of treasury shares(40,132)(33,939)

Cash dividends paid

(24,774)(24,173)

Other, net

19,432(356)

Net cash provided by (used in) financing activities(67,741)(75,418)

Effect of exchange rate change on cash and cash
equivalents

6,769(1,065)

Net increase (decrease) in cash and cash equivalents(22,585)

41,769Cash and cash equivalents at beginning of period

150,918

128,333

Cash and cash equivalents at end of period

128,333

170,102

Gas Rate Adjustment System’s Medium- to
Long-Term Neutralizing Effect on Crude Oil
Price and Exchange Rate Fluctuations
Gas prices are determined using the gas rateadjustment system. Through this system, average
raw material prices over a three-month period
according to trade statistics are compared withthe raw material cost that is used as the standard(standard average raw material cost), and the gas
rates are adjusted using a defined calculation
method based on the differences. A time lag offour months on average (called a sliding time lag)exists between the payment of raw material costs
and the reflection of such changes in gas rates.
Consequently, fluctuations in crude oil prices andexchange rates may result in the under-recovery
or over-recovery of raw material costs if this lag
cuts across a fiscal year, thereby affecting
income. Looking at the medium- to long-term,
however, the gas rate adjustment system has aneutralizing effect on the income impacts offluctuations in raw material costs.

Timing of the Standard Average Raw Material
Cost Calculation and Reflection in Gas Rates
Timing of standard average raw material cost calculation
Jan.

Feb.

Mar.

53

May.

Jun.

Jul.

Aug.

Jun.

Jul.

Aug.

Sep.

Dec.

Average raw
material price
Average raw
material price
Average raw
material price

Reflection in gas rates

The average raw material price over the past
three months is calculated every month and thenreflected in the gas rate three months later.

How the Sliding Time Lag in Rates Works
All Japan LNG price
Average raw material price reflected in gas rate

Under
recoveryFY N

TOKYO GAS ANNUAL REPORT 2016

Apr.

Over
recoveryFY N+1

Ibaraki–Tochigi Line

North Kanto
Industrial Zone

Hitachi LNG Terminal

Koga–Moka Line
(Scheduled for 2018.3)

Ibaraki Line (Scheduled for 2020)
Saito Line

Kashima Waterfront
Industrial Zone

Kashima Waterfront Line

Chiba–Kashima Line

Tokyo Gas Group pipelines

Tokyo–Yokohama
Industrial Zone

Tokyo–Chiba
Industrial Zone

Tokyo Gas Group pipelines(under construction and planning)

Other companies' pipelines(existing)Tokyo Gas Group Supply Area
Industrial zones
Factories

Sodegaura LNG Terminal
Ohgishima LNG Terminal

Negishi LNG Terminal

Our Potential

Energy demand concentration in the
Kanto Region
100km

Potential for Industrial and Commercial Demand in the
Kanto Region (200-kilometer radius around Tokyo)
100~200-km area

100-km area

2.0 billion m3

7.0 billion m3

Cogeneration system /Power generation
0.3 billion m3

Fuel conversion
5.1 billion m3
Cogeneration system /Power generation
1.9 billion m3

Fuel conversion
1.7 billion m3
Total

9.0 billion m3

The Kanto region, the company’s service area, is ripe with latentdemand for natural gas present in such areas as industrial zones
populated by factories using heavy fuel oil. By extending ourpipeline network into these areas, we will be well placed tocapture this latent demand.

“Challenge 2020 Vision” Targets :Gas Supply Volumes by Application

1.5 times

22.0 billion m

3

3.5

Residential

3.3

Commercial

7.0

Industrial

5.2

Industrial

1.9

3.0

Wholesale2012.32021.315.0 billion m

3

3.5
2.7
3.4
3.5

(general use)(power generation use)

Reference value as of the time
the Vision was put in place

54

TOKYO GAS ANNUAL REPORT 2016

Printed in Japan
Financial and Industry Data (EXCEL Spreadsheet Data Available)

Investors’ Guide

http://www.tokyo-gas.co.jp/IR/english/library/invguid_e.html

Quarterly Financial Results

Earnings Announcements
http://www.tokyo-gas.co.jp/IR/english/event/earn_e.html

Consolidated Financial Results Bulletin
http://www.tokyo-gas.co.jp/IR/english/library/earn_e.html

Details of Challenge 2020 Vision
The Tokyo Gas Group’s Vision for Energy and the Future~Challenge 2020 Vision~ (Released in November 2011)
http://www.tokyo-gas.co.jp/IR/english/manage/vision_e.html

Details of Corporate GovernanceCorporate Governance Report
http://www.tokyo-gas.co.jp/IR/english/gvnnc/index_e.html

CSR Activities

Tokyo Gas Group CSR Report
http://www.tokyo-gas.co.jp/csr/index_e.htm

Stock Code9531

IR Contact

E-mail:tgir@tokyo-gas.co.jp
Tel: +81-3-5400-3888
Fax: +81-3-5472-3849

1-5-20 Kaigan, Minato-ku, Tokyo
105-8527, Japan

http://www.tokyo-gas.co.jp/index_e.html
Published on August, 2016

For inquiries regarding planning and editing of this report:
Investor Relations Sect., Finance Dept., Tokyo Gas Co., Ltd.

This annual report is printed on Tokyo Gas Recycled Paper (made fromrecycled paper from Tokyo Gas offices, trimmings from afforestation
activities, and reused and unused wood materials) using vegetable oil ink
that contains low levels of organic solvents.

Tokyo Gas Co., Ltd. ANNUAL REPORT 2016TOKYO GASANNUALREPORT 2016
Tokyo Gas Co., Ltd.