TOKYO GAS CO., LTD.

5-20, Kaigan 1-chome, Minato-ku, Tokyo 105-8527, Japan
http://www.tokyo-gas.co.jp/index_e.html

ANNUAL REPORT 2001

At
The Frontier
Of Change
TOKYO GAS CO., LTD.

Annual Report 2001
For the year ended March 31, 2001

Printed in Japan on Recycled Paper

Corporate Information

ProfileTokyo Gas, Japan’s largest gas company, is the dominant player in the greater Tokyo/Kanto Plainmarketplace, where demand potential is enormous. Capital investments we have made have

Tokyo Gas Co., Ltd.

Asia Pacific Regional Office

Head Office

Level 30, Menara Shahzan lnsas

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

No. 30 Jalan Sultan lsmail, 50250 Kuala Lumpur, Malaysia

Tel: +81-3-5400-7561

Tel: +60-3-2144-2928

Fax: +81-3-5472-5385

Overseas Representative Offices
New York Representative Officepositioned us to capitalize on this potential as well as on business opportunities being spawned

The Chrysler Building, 405 Lexington Avenue, 33rd Floor

by deregulation in Japan’s energy sector. Technology will also drive growth. We intend to actively

New York, NY 10174, U.S.A.

propose new technologies for using gas to spur demand. Furthermore, Tokyo Gas is striving toTel: +1-646-865-0577

transform into a diversified energy services company, supplying heat and electricity as well as

Paris Representative Officegas, with natural gas as the core energy source. “Energy Frontier,” the new corporate slogan,

Fax: +1-646-865-0592

Fax: +60-3-2144-2930

Beijing Representative Office909 Beijing Fortune Building
No. 5 DongSanHuanBei-Lu, Chao Yang-Qu
Beijing 100004, People’s Republic of China
Tel: +86-10-6590-8450/8451

Fax: +86-10-6590-8452

102, Avenue des Champs-Elysées, 75008 Paris, France
Tel: +33-1-45-62-00-59

Fax: +33-1-42-25-96-85

embodies this drive. Tokyo Gas believes this strategy is the best way to maximize corporate
value and meet the expectations of its customers and shareholders.

Investor Information

Date of Establishment

Publications

October 1, 1885

The following English-language publications are available:

Authorized Number of Shares

Contents

6,500,000,000 shares

[1]
[2]
[4]
[8]

Issued Number of Shares (as of March 31, 2001)

[10]
[12]
[14]
[16]
[18]
[19]
[20]
[22]
[24]
[25]
[50]
[52]
[53]

Financial Highlights
Our Position in the Market
Message From Management
At the Frontier of ChangeEntering New Fields—Toward Becoming a Diversified Energy Services Company
More Reasons to Choose Tokyo Gas
Building a More Powerful Supply Infrastructure and Strengthening Procurement
A Focus on Technological Innovation
Environmental Conservation
SafetyOn the cover:
Corporate Citizenship
Upper Middle: The Shinjuku Park Tower, located in a
International Operations
Shinjuku redevelopment district, uses a
Diversification
DHC system.
Board of Directors
Financial Statements
Energy Statistics
Organization
Corporate Information/Investor Information

Lower Middle: The flame represents a source of energy.
Left:
LNG carriers like this one ensure a stablesupply of natural gas.
Right:
This artificial diamond was created using
natural gas.

2,810,012,006 shares
Number of Stockholders (as of March 31, 2001)
202,328• Annual Report 1999
• Annual Report 2000

53

• TG Minutes (Quarterly Newsletter)• Environmental Report 2001
Internet Address
http://www.tokyo-gas.co.jp/index_e.html
Further Information

Cash Dividends Applicable to the YearFor further information and additional copies of this report¥6.00

and other publications, please contact:

Securities Traded

IR Section, General Administration Dept.

Common stock: Tokyo, Osaka and Nagoya stock exchanges

Planning Section, International Affairs Dept.

Independent Auditors

Tel: +81-3-5400-7561

Asahi & Co. (A Member Firm of Andersen Worldwide SC)

Fax: +81-3-5472-5385

Transfer Agent

E-mail: tgir@tokyo-gas.co.jp

Japan Securities Agents, Ltd.
2-4, Nihonbashi Kayabacho 1-chome, Chuo-ku
Tokyo 103-8202, Japan

Units

Forward-Looking Statements
Statements made in this annual report with respect to Tokyo Gas’ plans, strategies and beliefs, and other statements that are not expressions of fact are forwardlooking statements about the future performance of the company. As such, they are based on management’s assumptions and opinions stemming from currently
available information, and therefore involve risks and uncertainties. These risks and uncertainties include, without limitation, general economic conditions in Japan, theexchange rate between the yen and the U.S. dollar, and Tokyo Gas’ ability to continue to adapt to rapid technological developments and deregulation.

1 metric ton = 2,204.62 lb.
1 kilocalorie (kcal) = 4.187 kJ = 3.968 Btu
1 megajoule (MJ) = 239 kcal = 948 Btu
1 British thermal unit (Btu) = 0.252 kcal = 1.055 kJ
1 kilowatt-hour (kWh) = 860 kcal = 3.6 MJ = 3,412 Btu

Annual Report 2001 TOKYO GASFinancial Highlights
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31

Thousands of
U.S. dollars except
per share amounts

Millions of yen
except per share amounts
2001

For the YearNet sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥1,086,771
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
103,659
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,595
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
146,420
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
109,899
Amounts per share of common stock (Yen and U.S. dollars):
Net income (Basic) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.82
Net income (Diluted) . . . . . . . . . . . . . . . . . . . . . . . . . .
9.13
Net income and depreciation . . . . . . . . . . . . . . . . . . . .
61.9

2000

1999

2001

¥ 992,255
69,233
26,698136,214
121,806¥ 997,767
72,303
17,764
132,568
142,030$8,835,537
842,756
224,350
1,190,407
893,448

9.50
8.84
58.0

6.32
5.94
53.5

0.08
0.07
0.50

$14,615,195
5,758,772
4,494,228

At Year-end
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt due after one year . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . .

¥1,797,669
708,329552,790¥1,805,086
843,634
484,239¥1,707,446
820,753
421,442

Ratios
Net income/Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ROE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ROA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.5%
5.3%
1.5%
30.8%

2.7%
5.9%
1.5%
26.8%

1.8%
4.2%
1.0%
24.7%

Note: U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥123=U.S.$1, the approximate Tokyo foreignexchange market rate as of March 31, 2001.

Net Sales

Operating Income

Net Income(Billion ¥)(Billion ¥)(Billion ¥)Net Income per Share(Basic)
(¥)

1,200

120

30

1,000

100

25

800

80

20

10

8

6

600

60

15

400

40

10

200

20

5

4

0
Mar. 310
97 98 99 00 01

Mar. 31200
97 98 99 00 01

Mar. 3197 98 99 00 01

Mar. 3197 98 99 00 01

Annual Report 2001 TOKYO GAS

1Our Positionin the Market

Tokyo Gas’ Service Area
(As of March 31, 2001)

Tokyo Gas is Japan’s largest gas company both in termsof the number of customers—roughly 8.9 million in
total—and gas sales volume. Our service area covers
KANTO PLAIN

approximately 3,100 square kilometers in Tokyo andneighboring prefectures. It is located in the heart of the
Kanto region, the largest and most densely populated
region in Japan with a total of some 40 million people.
Tokyo’s position as the locus of Japanese commerce—TOKYOmany companies are headquartered here—makes ourservice area even more vibrant.
What’s more, the Kanto region

TOKYO BAY

Ohgishima
LNG Terminal

is Japan’s most industrialized
area, accounting for 38% of

YOKOHAMA

Japan’s GDP. Gas demand in

NegishiLNG Terminal

this enormous and economically diverse service area is2

Sodegaura
LNG Terminal

expected to increase even in
the future.
0

5

10 15 20（km）

Gas Sales Volume in Japan andTokyo Gas by Sector

Growth in Tokyo Gas
Gas Sales Volume by Sector

Number of Gas Customers in Japanand Tokyo Gas Customers(Year ended March 31, 2001)
Unit: thousands of m3 (46.047 MJ/m3)

Unit: million m3 (46.047 MJ/m3)(As of March 31, 2001)

12,000Wholesale933,148

10,000Wholesale
15

8,000

Industrial
24,729

6,000
4,000

Industrial
2,538,343

Residential
3,120,315

2,000

Commercial
2,280,3360Commercial
575,108

Mar. 31 97 98 99 00 01 02 03 04 05 06

Japan ...................... 22,742,310

Residential

Tokyo Gas .................... 8,872,142

WholesaleCommercial

Industrial

Note: 2002~2006 are projected figures.
* The above three graphs represent non-consolidated data.

TOKYO GAS Annual Report 2001

Japan ...................... 25,995,909
Tokyo Gas .................... 8,872,449

Residential
8,272,597

Natural Gas—Energy of the Future

Malaysia, Australia, Indonesia and Qatar. Tokyo Gas has

Natural gas has emerged as a main source of energy because

considerable expertise and knowledge concerning LNG,

it is both environmentally friendly and reserves are spread

having been the first Japanese company to import this energy

throughout the world. Compared to oil reserves, roughly 60%

resource from Alaska in 1969. Moving forward, Tokyo Gas

of which are concentrated in the Middle East, natural gas isintends to continue to supply competitively priced natural

found worldwide, including North America, Southeast Asia,

gas in response to diversifying market needs.

Australia and Russia. Natural gas reserves are also expectedto last longer than those of oil.

Complementing this procurement capability are our
production systems—centering on the world’s largest and

The Ministry of Economy, Trade and Industry revised its Longterm Energy Demand and Supply Outlook for Japan this year.

most technologically advanced LNG receiving terminals—andour transmission and distribution network.

The new outlook projects that natural gas demand will grow by

By leveraging the sum of these parts, we aim to carve out

10.7%, as compared to the year ended March 2000, by the year

an even stronger position in Japan’s energy sector. Prospects

ending March 2011. Overall energy demand, by comparison,

are bright. Average growth in demand of 6.5% per annum

is predicted to increase by 1.5%. Natural gas continues to play

is forecast for Tokyo Gas’ gas sales volume until the year

a major role in achieving the basic aim of the Japanese

ending in March 2006. This represents a high growth rate ingovernment’s energy policy—to attain energy efficiency and pro-comparison to growth forecasts for other energy sources andmote environmental protection while providing energy security.

the Japanese economy as a whole.
At Tokyo Gas, natural gas is positioned as the corner-

Tokyo Gas’ Role in the Market

Ensuring a stable, diverse and long-term energy supply
centered on natural gas is our main corporate mission. We
are presently importing LNG based on long-term contracts
from six major natural gas exporting areas: Alaska, Brunei,stone of the company’s energy and energy-related operations.
Building on this strong foundation, Tokyo Gas is aiming topower steady growth by evolving into a diversified energy
services company, supplying heat and electricity as well as gas.

Tokyo Gas LNG Imports
Japan imported approximately 54.1 million tons of LNG in the year ended March 31, 2001. Tokyo Gas accounted for roughly 6.5 million tonsof those imports.

AlaskaTokyo
Qatar
Tokyo Gas LNG Imports(Year ended March 31, 2001)(Million tons)

BruneiMalaysia

Indonesia

Australia

Alaska .......................................... 0.29
Australia ....................................... 0.78
Brunei .......................................... 0.98
Indonesia ..................................... 0.78
Malaysia ...................................... 3.31
Qatar ........................................... 0.36

(4%)
(12%)
(15%)
(12%)
(51%)
(6%)

Total ..................................... 6.50 (100%)

Annual Report 2001 TOKYO GAS

3

Message From Management

RIGHT: Kunio Anzai

Chairman
LEFT:

Hideharu Uehara
President

4

Full-fledged competition in Japan’s energy sector is upon us.

higher gas sales volume and increased gas rates based on

Gas and electricity retailing to large-volume customers has been

the “gas cost adjustment rate (sliding rate)” system. Accord-

liberalized, and electricity and gas companies are crossing into

ingly, consolidated net sales climbed 9.5% to ¥1,086.7 bil-each other’s fields. In this era of full-scale competition, Tokyo

lion and operating income surged 49.7% to ¥103.6 billion.

Gas has adopted a new corporate slogan called Energy Fron-

Net income was held to a slight rise of 3.4%, to ¥27.5 bil-tier. This slogan embodies our drive to grow as a diversified

lion, principally by the recording of a one-off charge of ¥21.9

energy services company, delivering heat, electricity and gas,billion for the shortfall in Tokyo Gas’ corporate pension fundswith natural gas as our core energy source. Four key strengths

following the adoption of new accounting standards. Return

underpin our drive: positioning the outwardly expanding greateron assets (ROA) was 1.5%. We also generated free cash flows

Tokyo/Kanto plain area as our central sales base; an extensiveof ¥66.5 billion, up ¥24.5 billion year on year.

natural gas infrastructure linking LNG receiving terminals andReturning value to shareholders is a central element ofcustomers; cutting-edge engineering capabilities; and strong,

our medium-term management plan. As such, we are pleased

trusting relationships with our customers. As the 21st century

to announce that cash dividends applicable to the year weredawns, we are determined to continue to play a leading role at¥6.00 per share, a ¥1.00 increase over previous years.

the forefront of Japan’s energy sector.

Progress of Deregulation

The Year in Review

Japan’s gas industry underwent partial deregulation in

In February 2001, we reduced our gas rates by an average ofNovember 1999, with the lowering of the threshold at which

3.02%, bolstering price competitiveness and responding toregulations on gas supply areas and rate-setting restrictions

the needs of our customers. Having also reduced rates infor large-volume customers are set, from those consuming 2

December 1999, our rates have fallen by a total of 5.02% inmillion m3 or more per year to 1 million m3 or more. March

the last 2 years.

2000 saw the liberalization of electricity sales to large-volume

Gas sales volume in the Tokyo Gas Group increased 5.4%
3

customers, with revisions to the Electricity Utility Industry

to 8,879 million m . Gas sales in monetary terms also

Law. The new regulations apply to users with a capacity ofincreased, up ¥68.6 billion to ¥740.7 billion, reflecting theover 2,000 kW and using a supply of 20 kV or above. The

TOKYO GAS Annual Report 2001

scope of deregulation in both industries is expected to widen.
In the gas industry, at the end of January 2001, theAgency of Natural Resources and Energy formed a privategroup for the study of basic issues regarding the conditionof the gas market, including LPG, over the next decade. The
council will report on its finding later this year.

The actions outlined below will be instrumental to achieving our revised targets.
Stepping Up the Efficiency Drive
Personnel Reductions
We had planned to reduce the parent company head countto 10,000 by the end of March 2006. We now aim to achieve

Tokyo Gas welcomes deregulation. We view it as an excellent opportunity to increase corporate value. Deregulation willallow us to advance into the electricity market. It will also enable
us to capture demand beyond our service area. We also want
to seize upon other business opportunities, including the natural gas transportation business using our powerful pipelines.

this goal by March 2004, 2 years ahead of schedule, byundertaking a rigorous review of work processes across all
operations. We have decided to transfer 1,500 contract
employees connected with meter reading, bill collection andother customer-service duties to a new outsourcing company
at the end of March 2004. These actions are expected toTokyo Gas’ Medium-Term Plan

yield labor cost savings of ¥37.0 billion from the year ending

Our basic strategy is to increase free cash flows and ROA. In

March 2002 through the year ending March 2005.

the year ended March 2001, the first year of our 5-year

Controlling Operating Expenses

medium-term plan, we achieved encouraging results. BasedWe have revised our initial goal of holding operating expenses

on this progress, we announced new projections in May

to the level in the year ended March 1999 of ¥224.2 billion,

2001. By stepping up our drive to raise efficiency, we aim tofrom the year ended March 2001 to the year ending Marchachieve our goals a year ahead of our initial plan.

2003, through cost cutting and operational reforms. We have

1. Increase Free Cash Flows

lowered our target to an average of under ¥221.0 billion

Our plan initially called for free cash flows totaling ¥250.0

over the 5 years of the plan. This includes the increase inbillion over 5 years. We have revised our target upward to

fixed expenses in line with expansion of our customer base,¥287.9 billion. In the year ended March 2001, we gener-

but excludes an increase in outsourcing costs of ¥27.0 bil-ated free cash flows of ¥53.9 billion, far above our initial

lion from the year ending March 2002 to the year ending

target of ¥32.0 billion.

March 2005.
Internal Financing of Capital Expenditures

2. Raise ROA
Here, we were originally forecasting to raise ROA to an

We will continue to invest aggressively in new pipelines toaverage of 1.9% over the term of the plan. Now we areboost gas demand and meet rising gas demand in the future.

aiming for an average of 2.6% per year, with ROA of 3.8%

However, we intend to hold capital expenditures to aroundin the year ending March 2005, the plan’s final year. The¥100 billion, within the limits of internal financing, throughresult in the year ended March 2001 of 1.8%, on a non-cost-cutting measures.

consolidated basis, again exceeded our initial goal of 1.1%.
Medium-Term Management Plan Progress Report and Outlook (As of May 2001)<Non-consolidated>
Mar. 31
Net sales
Free cash flows
Total assets
Interest-bearing debt
ROA
Total asset turnover
Equity ratio¥ billion¥ billion¥ billion¥ billion
%
times
%

00
869.9
26.0
1,493.6
761.9
1.5
0.60
29.7

01
965.6
53.9
1,490.1
685.5
1.8
0.65
34.1

02
976
51
1,450
635
2.1
0.66
35.9

03
1,005
49
1,465
627
2.4
0.69
36.7

04
1,036
62
1,462
610
2.8
0.71
38.3

05
1,065
72
1,460
570
3.8
0.73
40.9

00
992.2
42.0
1.5

01
1,086.7
66.5
1.5

02
1,100
67
2.0

03
1,136
51
2.3

04
1,167
65
2.6

05
1,196
75
3.5

1.19

1.01

1.13

1.14

1.12

1.09

<Consolidated>
Mar. 31
Net sales¥ billion
Free cash flows¥ billion
ROA%
Consolidated net income tonon-consolidated net income
times

Note: Figures for the years ended March 31, 2000 and 2001 represent actual figures. Other figures are estimates.

Annual Report 2001 TOKYO GAS

5Structural Reforms (Organizational and System)

March 31, 2005. Of this cash, roughly 20% is earmarked for

In January 2001, we established the Energy Solution Busi-

new business investments, approximately 20% will beness Department within the Energy Sales and Service Divi-

returned to shareholders, and about 60% will be used tosion, to advance into the electricity business. In July 2001,

strengthen our balance sheet.

the Inter-Regional Sales and Service Division was launched to

Regarding new business investments, when we formu-

augment our sales strategy outside the Tokyo metropolitan

lated our plan, we focused on building LNG carriers with aarea and to develop effective sales activities. In another move,view to entering the LNG transportation business. This area

we merged two functions—experimental research andof business has the potential to generate handsome profits.

development of product technologies—into the newly

Thereafter, we established a specialist section, responsible

formed R&D Division. This division strives to apply in-housefor planning and launching new businesses, to oversee thedeveloped technologies both in and outside the company.

launch of businesses outside the gas field, as well as to forge

With these actions, we have increased the number of strate-business alliances. These efforts led us to establish new

gic business divisions from 6 to 8. This new framework also

companies and to take equity stakes in others (See FAQ on

heralds the start of a virtual in-house company system,

page 33). Moreover, in June 2001 we established Tokyo Gas

whereby each division has been assigned free cash flow and

Bay Power to sell electricity generated from a 100,000kW

ROA targets. Each division is striving to maximize profits.

power station to be constructed within the grounds of theWe have also carried out reviews of the remuneration system

Sodegaura LNG Terminal. Operations are slated to start into provide added incentive to employees to improve their

the year ending March 2004.

performance. Senior managers and above are subject to an

Our investment in new businesses does not mean that weannual salary system and regular employees are increasingly

are sacrificing our core gas business. We are aggressively

compensated by a results-based pay system.

investing in new pipelines to capture new demand in the future.

Strategy to Expand Sales Volumes
Gas sales volumes drive sales and earnings. Our medium-term
6plan calls for an average annual increase in volumes of about
6.4%. To this end, we are executing a detailed strategy to
expand sales in each user customer category. Our overwhelming market shares of 95% and 80% in the residential market
for water heating and cooking, respectively, underpin ourefforts there. Building on this base, we are popularizing gas
floor heating for the home, and in the commercial sector,
gas-fired air conditioning for office buildings. Furthermore,this year we launched sales of micro turbines for cogeneration for small-scale commercial use. Another focus is development of small-scale fuel cell systems for residential use. Our

For shareholders, we plan to sustain the dividend in theyear ended March 31, 2001 of ¥6.00 per share in the year
ending March 31, 2002 and thereafter. We expect there to
be a dilutive effect on shares due to the conversion of convertible bonds into shares in line with the strong recovery in
our stock price. As such, we are considering share buybacks
to create shareholder value.
We hope to quickly strengthen our balance sheet by stepping up the repayment of interest-bearing debt. We aim toachieve our target of bringing interest-bearing debt down
to ¥610.0 billion by the end of March 2005, a year ahead ofschedule in March 2004. Our new target is to reduce interestbearing debt to ¥570.0 billion as of March 31, 2005.

plan is to begin sales of these systems in 2004 and to makeResponding to Risk

them commonplace by about 2010. Moreover, while expand-Our medium-term plan factors in business risk accompany-ing demand primarily for cogeneration, a strategic product,

ing deregulation. This mainly constitutes the risk of compe-

we will aggressively enter new fields. Target areas are electric-

tition, which can be broken down into two categories. One

ity retailing, electricity and heat supply to specific areas suchis the risk of losing customers to new players. The other is

as redevelopment zones, and power generation businesses.

the risk that sales might fall as a result of having to reduce

Expanding and Allocating Free Cash FlowsAs highlighted above, we expect to generate free cash flowsof ¥287.9 billion during our medium-term plan, ¥38.1 billion above the initial target. Combined with cash on hand,
we expect to have total cash of ¥343.8 billion to invest fromthe year ended March 31, 2001 through the year ending

TOKYO GAS Annual Report 2001

rates to remain competitive.
With regard to the former, we see our main rivals aselectric utility companies. Like gas companies, they have theinfrastructure in place, in the form of LNG receiving terminals, and have positioned entry into gas operations as animportant strategy. Competition is expected to heat up

quickly as electric utility companies attempt to drive

manufacturing plant sites and to take whatever actions wereexpansion in demand by using the pipelines of other com-appropriate. We will report on all our environmental actions,panies in addition to their own pipelines. To counter this risk

believing that full disclosure is the hallmark of a responsibleof lost business, we will offer increased value to new andcorporate citizen.

existing customers. For new customers, we will leverage oursophisticated engineering capabilities to cement a strong
market position. For existing customers, we will compete on
the basis of our price. Price competitiveness is underpinnedby cost-reduction efforts. Therefore, we will accelerate costcontainment efforts to achieve cost reductions above thoseof electric utility companies. To hedge this risk, we aim to
unlock new demand by enlarging our service area, taking
maximum advantage of our pipeline infrastructure.
Regarding the second risk category, in December 1999
and February 2001 we lowered ordinary gas rates for residential and other customers. As a result, our gas rates are
now among the lowest in Japan, and we feel confident that
we can hold our own against other forms of energy. As such,
we do not plan further rate reductions in this mid-term plan
period. However, price competition with new entrants in thelarge-volume user domain, as well as cogeneration and air
conditioning demand, may force us to reduce rates, thereby

Promoting Activities Overseas
At the threshold of an era of full-scale competition in theenergy sector, overseas activities are taking on greater
importance for the Tokyo Gas Group. Heretofore, our four
representative offices overseas have focused mainly on gathering information and on management and technologicalexchanges with foreign energy-related companies and institutions. While continuing these activities, we also intend touse these offices as conduits for disseminating information
to investors abroad.
Leveraging our experience and successes in overseas
projects, we intend to develop overseas operations. In particular, we can point to our joint venture projects in Malaysia
to demonstrate our capabilities. These included the construction and operation of a natural gas distribution system. This
was the first such overseas project undertaken by a Japaneseenergy utility company. Gas Malaysia Sdn. Bhd., the joint
venture company, started paying dividends in 1999.

impacting sales. Reducing costs is the key to remaining pricecompetitive and maintaining and expanding earnings.

In Conclusion

7

Deregulation heralds the arrival not just of competition, but
Contributing to Local Communities
One of our greatest assets is our broad base of about 8.9
million customers. To enlarge this base we are upgrading
customer services and maintaining and enhancing the safety
and stability of supply. Furthermore, R&D is being emphasized to respond to diverse customer needs in an aging society which is being fundamentally altered by advances in
information technology. IT is an important area of focus.

of business opportunities. It promises to spur growth innatural gas businesses in Japan. With a core business model
focused primarily on natural gas, we are well positioned tobenefit. Taking on the challenges of deregulation, we aim to
expand sales and to maximize earnings through top-line
growth, structural reforms and cost cutting.
As always, your support will serve as inspiration andencouragement for our actions.

A Leader in Environmental Management
The 21st century is being hailed as the century of the envi-

July 2001

ronment. In the new era, corporations’ actions to addressenvironmental issues will fall increasingly under the spotlight.
In 2000, Tokyo Gas revised its comprehensive environmental strategy for the first time in eight years. With this review,

Chairmanaddressing environmental issues is one of the most important items on our management agenda. Our aim is to be aleader in environmental management. In addition to expanding the use of clean-burning natural gas—a long-standing
focus—we are actively promoting environmental protection

President

initiatives across the Tokyo Gas Group. For example, weannounced our intention in January 2001 to determine theextent of possible soil contamination at several former gas

Annual Report 2001 TOKYO GASAt the Frontier of ChangeEntering New Fields–Toward Becoming
a Diversified Energy Services Company
The Japanese energy sector has crossed the threshold into a new era. Liberalization of the energy market, spurredby deregulation, has removed the borders demarcating the territories of electricity and gas companies. In addition, players from other industries are joining the fray. The sector is starting to take on a different look altogether. In response, Tokyo Gas is developing various businesses in the greater Tokyo area, where energy demandis huge. The company sees deregulation as an excellent business opportunity, which it is determined to takeadvantage of by entering into new businesses, particularly in the electricity domain. This resolve is representativeof Tokyo Gas’ drive to transform itself into a diversified energy services company with natural gas at its core.

Electricity and Heat Supply in Roppongi Redevelopment Area
Tokyo Gas is making steady progress with a new retail electricity business that will supply heat and electricity for a redevelopment area in Roppongi, a thriving part of central Tokyo. The Roppongi redevelopment project is one of the largest of its kindin Japan, and is attracting considerable attention because it will be the first in a major Japanese city to embrace a retailelectricity business. Operations are being carried out by Roppongi Energy Services Co., Ltd., which was jointly established by
Tokyo Gas and Mori Building Co., Ltd. This operation will use a large-scale cogeneration system to generate electricity, and will
provide heating and cooling by effectively using the exhaust heat from electricity generation. The use of natural gas suppliedby Tokyo Gas for generating electricity makes the system ideal from two perspectives: energy conservation and environmental
preservation. Moreover, the system could be used to provide electricity in the event of an emergency, such as a natural disaster.
8

System construction is progressing toward a scheduled start up date in the spring of 2003. Redevelopment projects similar to
Roppongi are being planned and Tokyo Gas intends to capture these projects, thereby promoting the efficient use of energy.

Expanding Operations by Advancing Into Electricity Retailing
In April 2001, operations commenced at ENNET Corporation, which was established by Tokyo Gas, NTT Facilities Inc. andOsaka Gas Co., Ltd. to develop an electricity retailing business. These three parties bring energy procurement and supply

Electricity Retailing Business

Power producers
Surplus privately
generated electricity

ENNET
Users affected by deregulation

Control station
Monitoring
and control(Simultaneous balancing systemfor power supply and demand)

Monitoring
Monitoring
and control

Privately generated electricity
supplied under contract

Purchasing

Sale

Own electricity generating facilities(new and acquired)
Wheeling

Wheeling

Wheeling
Power Utilities’ GridsTOKYO GAS Annual Report 2001

< Roppongi Redevelopment Project >This project to redevelop a district of Roppongi,
Tokyo, will comprise a broad range of facilities, including offices, housing, hotels, theaters
and a broadcasting center. Tokyo Gas will supply the electricity and heating for this district
through Roppongi Energy Services Co., Ltd.

capabilities as well as related operational expertise and information technologies to the joint venture. ENNET will capitalize on
these synergies to create a business model that will be highly valued in the energy supply marketplace. Electricity will be
procured from generating facilities owned by the partners and from Independent Power Producers (IPPs). ENNET will play a
key role in assisting customers in the rationalization of their overall energy costs.

9

In June 2001, Tokyo Gas established Tokyo Gas Bay Power Co., Ltd., a wholly owned subsidiary, to construct a 100,000
kW-class power plant within the grounds of our Sodegaura LNG Terminal to generate electricity for sale to ENNET. The plantis scheduled to come on line in the fall of 2003. The use of company-owned facilities will facilitate the efficient investment of
capital, thereby making possible the generation and supply of electricity at competitive prices. Electricity will also be produced
at other facilities. One is a 21,000kW power plant owned by ENNET in Ibaraki Prefecture that started operations in July 2001.
Furthermore, plans are in hand to purchase electricity from E-Square Co., Ltd., a joint venture established by ENNET and Ebara
Corporation, starting in April 2003.

Department Created to Spearhead New Business Drive
Revisions to the Electricity Utility Industry Law have liberalized electricity retailing to large-volume customers. Targeting thisstrategic area, Tokyo Gas has unified related operations within the company under the newly created Energy Solution Business
Dept., which was established in January 2001. The Energy Solution Business Dept. integrates electricity generation and energy
service operations, from business planning to operations and management. In this capacity, it is overseeing the operations of
ENNET and the supply of heat and electricity in the Roppongi redevelopment area.
Tokyo Gas expects to encounter stiff competition as it enters the electricity marketplace. However, Tokyo Gas has garneredin-depth knowledge of the energy industry, refined its engineering capabilities and developed powerful sales capabilities
through its gas operations. Deregulation is creating opportunities for Tokyo Gas to tap these strengths to expand its scope ofbusiness to encompass power generation and wholesaling, as well as retailing.
In energy service operations, Tokyo Gas is preparing to use gas cogeneration systems with various exhaust heat recovery devices,
gas-fired absorption chillers/heaters and other innovative proposals to provide comprehensive solution packages to meet customers’
energy requirements. Such packages will include consultation, financing, engineering, procurement, construction, operation
assistance and maintenance of the facilities at a customer’s site. In addition, various business mechanisms will be employed toreduce total energy consumption and costs. These range from energy-related Private Finance Initiatives (PFIs)—public works
supplying electricity and heat by leveraging capital and expertise contributed by the private sector—to an Energy Service
Company (ESCO) and an Energy Service Provider (ESP) business format. Tokyo Gas intends to tap its sophisticated expertise todevelop businesses in fields extending from gas, electricity and heat to energy conservation, including emission rights trading.

Annual Report 2001 TOKYO GASAt the Frontier of Change

More Reasons to Choose Tokyo Gas
Tokyo Gas has two fundamental corporate missions. One is to deliver customers the best possible services.
The other is to offer customers comfortable living environments by effectively utilizing gas for floor heating, cogeneration and other technologies that are both economically and environmentally sound. To raise
the level of customer satisfaction and the competitiveness of natural gas, our core product, Tokyo Gas isenhancing services from various angles and offering customers more options.

Residential Customers—Our Largest Client Category
Numbering more than 8 million, and accounting for 90% of Tokyo Gas’ customers, are residential customers. Our 18 branches
offer total consulting solutions, including meter reading and inspections of appliances in homes once every 3 years, to ensurethat customers are using gas safely. Tokyo Gas aims to spur demand among this massive customer pool and enable residential
users to lead more comfortable lives by aggressively promoting gas floor heating. This system circulates hot water beneath thefloor to warm a room’s occupants from the feet up. Most customers have responded enthusiastically to gas floor heating.
Tokyo Gas’ goal is to make this system the de facto standard in households in Japan.

Spurring Commercial and Industrial Demand
As environmental concerns deepen, customers are seeking ways to protect the environment and also reduce their total energy
10

costs. Cogeneration solves both issues. A highly efficient system, cogeneration uses natural gas to simultaneously generate electricity
and provide heat.
In the gas-fired air conditioning field, Tokyo Gas has a proven track record in GHPs (gas engine-driven heat pumps) andabsorption-type gas air conditioning. Gas sales volumes in this field are expected to rise by a yearly average of 6.1% throughthe year ending March 2006.
Tokyo Gas is conducting aggressive sales activities targeted at hotels, hospitals and other institutions, as well as industrial
users, by promoting the advantages of these natural gas systems.

Cumulative number offloor heating systems
installed

Gas sales volume forcogeneration
Unit: million m3 (46.047 MJ/m3)

Unit: thousands of homes

700

2,000

600
1,500

500
400

1,000
300
200

500

100
0
Mar. 31000 01 02 03 04 05

PlannedTOKYO GAS Annual Report 2001

Mar. 3100 01 02 03 04 05

PlannedDemand for gas floor heating is expanding. Not only is floor heating clean andcomfortable, but it boasts superiorenergy efficiency and cost advantages.

The Saitama New City Center district heating and cooling systemcovers an area of 27.3 hectares
and services 1 cabinet office and
12 ministries. The system supplies
heat in an energy-efficient and environmentally friendly manner.

11

District heating and cooling (DHC) systems, which incorporate cogeneration, have already been installed in well known
urban projects in central Tokyo, Yokohama and Chiba. These DHC projects have won plaudits for their environmental friendliness and economic soundness. In April 2000, the Saitama New City Center district heating and cooling system was completed
in Saitama Prefecture, becoming Tokyo Gas’ 15th DHC operation. We intend to take full advantage of the expertise, technological capabilities and engineering skills we have acquired from such projects to power growth in gas demand.
Power generation is another area where expectations for growth in gas demand are high. Tokyo Gas is working to promotesales in this field while actively proposing energy solutions that incorporate cogeneration systems.

In the Limelight—Micro Turbines
On-site electricity generation systems, particularly that produced by micro
turbines, is attracting attention as interest in small, distributed power generation systems grows. Tokyo Gas has already tested the largest number ofmicro turbines in Japan and in June 2001, the company began sales of 28kW
Capstone Turbines.
Tokyo Gas has also successfully developed and tested a dry, low NOx combustor for a 270kW cogeneration system (right) together with Toyota Turbine
and System Inc. The turbine is scheduled to go on the market in 2001.
In November 2000, Tokyo Gas invested in MyEnergy Corp., which was established by Tokyo Electric Power Co., Inc. and others. Tokyo Gas aims to champion an on-site energy business using micro turbines.

Annual Report 2001 TOKYO GASAt the Frontier of Change

Building a More Powerful Supply Infrastructureand Strengthening Procurement
Our gas operations are supported by Japan’s largest gas supply infrastructure. Terminal and pipeline construction over many years has given us the capability of meeting increases in demand over the next decade.
To clinch demand in areas in the Kanto region where demand is expected to increase, we will construct two
new pipelines: the Tochigi Pipeline and the Minamiashigara Pipeline. Moreover, the ownership of LNG carriers will facilitate the efficient transportation of feedstock. All our actions are focused on the achievementof the dual goals of ensuring a stable supply and efficient management.

Backed by a Powerful Production and Supply BaseTokyo Gas’ 48,000km pipeline system supplies a customer base of 8.9 million. Our service area, metropolitan Tokyo andneighboring prefectures, has the highest gas demand in Japan.
Tokyo Gas has made strategic investments to bolster its supply capability to cater to this demand. In 1998, the Ohgishima
LNG Terminal came on stream, and this was followed in 1999 with the completion of the Keihin Transmission Pipeline and the
Yokohama Transmission Pipeline. Today, Tokyo Gas has in place a 300km-long supply loop encircling the greater Tokyo areathat is connected by high-pressure pipes to our three LNG terminals: Negishi, Sodegaura and Ohgishima. This loop-system hasbolstered our ability to provide customers with a reliable supply of gas.
Our pipeline infrastructure will also underpin our expansion beyond our traditional service area, as deregulation opens
12

windows of opportunity. We intend to take maximum advantage of our strengths as a leading presence in the industry to
expand our customer base.

New Pipelines to Cater to New Demand
Having evaluated the potential returns on its investment, Tokyo Gas intends to aggressively enter regions where gas demandis expected to increase and to build and extend its supply infrastructure in this vein. Tokyo Gas has been building pipelines toservice the northern part of the Kanto region. In the Utsunomiya area of Tochigi Prefecture, a rising population is predicted tospur a further increase in gas demand. Our new Tochigi Pipeline will ensure a stable supply to this area. Currently, domesticallyTokyo Gas will become the firstutility company in Japan’s powerand gas industry to independently
own an LNG carrier.

The Sodegaura LNG Terminalis the world’s largest LNG
receiving terminal.

TOKYO GAS Annual Report 2001

Utsunomiya Line

Other Company Line

Utsunomiya

Tochigi
Tochigi Line (2006)
Sano
Kumagaya-Sano Line (2004)
Kumagaya

Saihoku Line (2001)

IbarakiSecond Joso Line (2003)
Other Company Line

SaitamaTokyo
Head
Office

Chiba
Tokyo
Bay

The Keihin Transmission Pipeline and the
Yokohama Transmission Pipeline, both completed in 1999, link Tokyo Gas’ three LNG terminals in the Tokyo Bay area with a loop of
high-pressure pipes. This has enabled Tokyo Gas
to respond to rising industrial demand in the
Keihin district near Yokohama, provide a morereliable supply of gas in the greater Tokyo areaand meet rising demand in the future. Plans callfor constructing new pipelines in Tochigi,
Minamiashigara and other areas to further
expand and strengthen Tokyo Gas’ supply system.

Second Chiba Line
YokohamaShonan Line
(2002)

Ohgishima
LNG Terminal

Sodegaura LNG Terminal

Tokyo Gas’ Pipelines
High-pressure transmission pipelines
Under construction
PlannedMedium-pressure transmission pipelines( ) Proposed year of completion
Tokyo Gas service area

Negishi LNG Terminal

Minamiashigara(Length of pipeline: 47,908km)

13

produced natural gas is used as a feedstock in the Utsunomiya service area. When complete, the new Tochigi Pipeline will
sharply increase our transportation capacity to this area, enabling the supply of gas derived using LNG from terminals in Tokyo
Bay. Our objective is to also capture large-volume demand from industrial areas neighboring the new pipeline. About 70 km
in length, the new pipeline is slated for completion in 2006.
The Minamiashigara area in Kanagawa Prefecture is another service area we will extend our reach to with the new
Minamiashigara Pipeline that is scheduled for completion in 2003. Deregulation has opened the way to the start of supplies tolarge-volume customers in this area. The development of demand through advancement into deregulated areas outside ourservice area will be a key corporate theme moving forward. We thus intend to continue extending the reach of our pipelines.
On the sales front, July 2001 saw the establishment of the Inter-Regional Sales and Service Division to promote widerranging supply and development of demand. An integrated structure will allow us to grasp customer needs and present bestfit proposals for using gas in an expanding service area.

Constructing an Efficient Procurement System Centered on Company-Owned LNG Carriers
As part of our efforts to strengthen procurement, a Tokyo Gas subsidiary, Tokyo LNG Tanker Co., Ltd., is building two LNG
carriers. Up to now, Tokyo Gas has jointly owned two LNG carriers with shipping companies and other gas companies. Tokyo
Gas will have full ownership of the two new carriers which will lower freight charges and consequently lower feedstock costs.
Thus procurement efficiency will be raised and Tokyo Gas’ competitiveness bolstered. Tokyo Gas will also be able to takeadvantage of short-term contracts and spot trading, as well as long-term contracts with the two new LNG carriers. In the
future, we plan to expand our scope of operations by offering transportation services to third parties.

Annual Report 2001 TOKYO GASA Focus on Technological Innovation

At Tokyo Gas reseach and development is positioned as a major corporate theme as a means of driving
growth in existing businesses and creating business opportunities. Our main goal is to ensure that Tokyo
Gas maintains its position as the preferred energy supplier. To this end, we must stay on top of a dynamically changing business environment, while placing emphasis on efficiency and profitability through selection and concentration of resources. Three areas have been singled out for R&D in line with this policy.

The Tokyo Gas R&D Organization

R&D Division

Top Management

R&D Planning
Dept.

R&D Planning Section
Frontier Research InstituteTechnology Policy
Committee

Corporate
Planning Dept.

Technical Planning
Section

Others:Energy Systems
Engineering Dept.
Production Dept.
Information andCommunication
Systems Dept.
etc.

Urban Life Research InstituteIntellectual Property Office
Technology
Development Dept.

Strategic Management Group
Technical Research Institute
PEFC/Hydrogen Project Group14

Gas Appliance Technology Center
Energy Conversion Technology Center
Customer Service Technology Center
Pipeline Technology Center

Developing PEFC Cogeneration Systems
Polymer electrolyte fuel cell (PEFC) cogeneration systems for residential use are seen as a promising new application for
natural gas, but raising thermal efficiency has been a stumbling block. Now Tokyo Gas’ efforts have resulted in thedevelopment of a compact natural gas integrated fuel reformer (a key component of PEFC systems), which achieves
extremely high thermal efficiency of 90% (HHV base). This is the highest documented efficiency in the world. Tokyo
Gas is already supplying this type of reformer to PEFC system manufacturers.
Tokyo Gas is also working to develop technology that will make possible the supply of hydrogen for fuel-cell
powered vehicles of the future.

Handy Remote Methane Detector
Tokyo Gas has developed the world’s first remote methane gas detection equipment that uses supersensitive infraredabsorption spectrophotometry with a semiconductor laser light source. This sophisticated equipment was developed
to make the process of detecting gas leaks more efficient and to raise safety levels. Facilitating simple, instantaneous
inspection, this equipment can detect leaks in confined spaces, at high altitudes and in dark areas where detection
was previously problematic. Tokyo Gas put this detector into operation in the year ending March 2002.

TOKYO GAS Annual Report 2001

Fuel cell systems for residential use
Micro gas turbines technologies
High-performance, gas-fired air conditioning
Highly efficient cogeneration systems
Highly reliable, low-cost, space-saving gas appliances
Technologies with low environmental impact
High-value-added engineering technologies

R&D Targets and Themes

PromoteAdvanced Gas
Utilization

Enhance customer services by taking advantage of the latest
information and communications technologies to enable thedelivery of wide-ranging high-value-added services and gas
and electricity
Development of high-value-added technologies such as
13
C-Methane and technologies that lead to the creation of new
businesses such as hydrogen generators
Research into pioneering technologies that will drive expansion
within the Tokyo Gas Group, including new materials,
electronic devices and biotechnology

Increase Customer
Satisfaction andCreate Profitable
Businesses
Enhance theSupply andOperation
Infrastructure

Technologies to develop more efficient production, storage,transmission and distribution systems
Technologies to increase the safety of existing production anddistribution infrastructures and lower the cost of maintenanceTechnologies such as cutting-edge information technology (IT)that contribute to higher operational efficiency
Technologies for constructing efficient production and supply
systems to prepare for the possibility of using natural gas
sources other than LNG

Promote Advanced Natural Gas Utilization
Prevailing in an era of intensifying competition in the energy sector in Japan will require Tokyo Gas to bolster its engineering
abilities and technological development to assure the continued loyalty of our customers. This will involve developing technologies to make gas appliances increasingly efficient, compact and reliable, safer, less costly, and more environmentally friendly.

Enhance the Distribution and Operation Infrastructure
Meeting society’s demands for the increased use of natural gas as the primary source of energy and strengthening our customer base are our main priorities. To this end, we are developing essential technologies to construct an efficient production,
storage, transportation and distribution system.

Increase Customer Satisfaction and Create Profitable New Businesses
In an era of mega-competition in the energy sector, ensuring that customers continue to choose Tokyo Gas as their energy
supplier is a key management goal. It is the driving force behind our push to develop essential technologies to make possible
the far-reaching delivery not just of electricity and gas but also of value-added services that both anticipate customer needs andsatisfy them quicker than other energy providers.

LEFT
Tokyo Gas is using Walk Map, a cutting-edge gas pipeline mapping
system. This system can be used with mobile information terminals.

RIGHT
Tokyo Gas is continuing basic research on methane hydrate as an
option for a future natural gas source.

Annual Report 2001 TOKYO GAS

15

Environmental Conservation

At COP3 held in Kyoto in December 1997, targets were set by industrialized countries for the reduction ofgreenhouse gas emissions. The Japanese government has embraced Japan’s goal of a 6% average cut inemissions between 2008 and 2012, compared with 1990 levels. Natural gas—one of the cleanest burning of
all fossil fuels—is seen in many quarters as an important energy source for achieving this. As part of its
ongoing environmental stewardship and to show leadership in environmental management, Tokyo Gas
formulated a new environmental policy in June 2000. Our basic aim is continuous reduction of the environmental impact of energy use by our customers as well as by our own business activities.

ISO Certification
agement priority. In 1997, both the Negishi and Sodegaura

NOx

SOx

Obtaining ISO certification has been positioned as a high man-Natural Oil
Gas

Coal

Natural Oil
Gas

Coal

CO2
Natural
Gas

Oil

Coal

LNG terminals obtained ISO 14001 certification; and in 2000,
the Ohgishima LNG Terminal obtained the same certification.

16

70

100

70

100

Also in 2000, the Shinjuku District Heating and Cooling Cen-0

ter became the first supplier of heat in Japan to attain ISO

Source: IEA, Natural gas prospects to 2010, 1986.

14001 certification.

The Unique Strengths of Natural Gas

Recycling Initiatives
Recycling and decreasing waste volumes are other ways wereduce the environmental impact of our activities. SRIMS (Saving

40

60

80

100

Natural gas is a clean energy resource. Compared with oil and coal,natural gas, when burned, produces less carbon dioxide (CO2) andnitrous oxide (NOx) emissions, both of which are major factors inglobal warming and acid rain. Furthermore, it produces no sulfur oxides(SOx) whatsoever.

Tokyo Gas Group Environmental Policy (Formulated in June 2000)
Philosophy
The Tokyo Gas Group will promote the harmonious
use of energy to contribute to the preservation ofregional and global environments as well as to thesustainable development of society.
Policies
Reduce the environmental impact of customers’ energy use
Tokyo Gas will actively and on an ongoing basis attempt
to reduce the environmental impact of customers’ energy use. We will do this by promoting the use of environmentally friendly natural gas and providing highly
efficient products and systems with minimal environmental impact.
Reduce the total environmental impact of Tokyo Gas’
business activities
Tokyo Gas will continuously reduce per unit energy andresource use in its business activities through the development of increasingly efficient and effective environ-TOKYO GAS Annual Report 2001

mental management activities to contribute to the realization of a sustainable society. At the same time, Tokyo
Gas will reduce overall environmental impact by aggressively promoting “green” purchasing and the reduction,
reuse and recycling of industrial waste.
Strengthen environmental partnerships with local areas
and the international community
Tokyo Gas will strengthen its environmental partnerships
with both the local areas in which it operates and theinternational community by engaging in a wide varietyof activities. These activities will range from participation in regional environmental activities to international
sharing of technological developments, starting withstrategies to prevent global warming.
Promote environment-related technology R&D
Tokyo Gas will proactively research and develop environmental technologies, including renewable energy, topreserve regional and global environments.

Overview of Tokyo Gas Environmental Accounting
Environmental Preservation Benefits
Investments and Expenses
for Environmental Preservation by Tokyo Gas
Tokyo Gas Operation

Customer Utilization● Pollution prevention● Global environmental● Environmental R&D● Recycling of used gas

preservation● Resource recycling● Environmental management● Other measuresappliances● Reduction in substances with environmental impact(emissions in relevant units)➔➔

Contributions to Society● Reduction of waste● (Reference) Reduction of substances with an environmental

impact at customers’ level

Actual Economic Benefits● Cost savings● Profits on sale of items of value derived from ordinary

business activities
Tokyo Gas has compiled parent-company environmental accounting results for the year ended March 31, 2001, as it did in the previous fiscal
year. The figures show that the parent company invested approximately ¥1.1 billion and incurred expenses of roughly ¥4.6 billion forenvironmental preservation. There are two central features of Tokyo Gas’ environmental accounting. One is the extremely low environmental
impact of gas production, supply and other activities due to the completion of a switch to natural gas. The other is an emphasis on research
into methods to reduce the environmental impact of gas utilization by customers, mainly through the development of highly efficient gas
appliances and systems such as micro cogeneration systems. More detailed information concerning Tokyo Gas’ environmental accounting iscontained in our Environmental Report 2001.

and Recycling Innovative Model System) is at the heart ofIn the fuel cell field, Tokyo Gas is developing an on-site generationthese efforts. This system facilitates the efficient collection,system that boasts high generation and energy efficiency andseparation, management and disposal of used gas equipment,emits almost no atmospheric pollutants. High hopes are held

pipes and other industrial waste. In a similar vein, we are radi-for the use of fuel cells in future residential cogeneration systems.

cally reducing the amount of earth removed from pipeline

Natural gas vehicles (NGVs) are also playing an integral

construction sites.

Countermeasures Against Soil Contamination at Sites
of Former Gas Manufacturing Plants
Since fiscal 1999, Tokyo Gas has, in accordance with guidelines stipulated by Japan’s Ministry of the Environment, beenrole in reducing environmental impact. The Japanese government has set a target of having 1 million NGVs on Japan’sroads by 2010. In addition, with an eye on the future, we arealso seeking new, environmentally friendly forms of energy,
such as methane hydrate.

continuously carrying out voluntary site inspections and surveys of company-owned land, namely sites of former gas

International Efforts to Improve the Environment

manufacturing plants, where there is a possibility of soil con-

In fiscal 2000, Tokyo Gas was commissioned by the

tamination. Where it is clear that there is soil contamination,

Japan External Trade Organization (JETRO) to conduct
feasibility studies in two cities overseas. In Beijing,

Tokyo Gas has promptly made a full report to the relevant

China, Tokyo Gas studied the feasibility of establishingauthorities and undertaken whatever measures were necessary.

a high-efficiency, large-scale CHP system, as well as

Development and Application of Technologies toimporting LNG.
In Tehran, Iran,Reduce Environmental Impact

Tokyo Gas con-Tokyo Gas feels that it has the responsibility to further reduce

ducted a study

the environmental impact of natural gas. That’s why we areon converting

developing new ways to increase energy efficiency. Gas
cogeneration systems and gas-fired air conditioning are just acity buses to run
on CNG.

few of the many technologies that are being widely adopted.

Annual Report 2001 TOKYO GAS

17

Safety

Since commencing operations in 1885, we have been steadfast in our commitment to safety. We believethat safety is an important element in increasing the convenience of gas and in winning over customers.
Safety is not an issue that one can take for granted, especially in Japan, where earthquakes are common.
Consequently, we are striving to raise safety levels even further.

A Total Commitment to Safety

Gaslight 24—Responding to the Unexpected

Most gas-related accidents occur not during production or

Gaslight 24 is a 24-hour emergency response system capable ofsupply, but when gas is being used—often as the result of

responding to gas leaks and other situations affecting main gas

carelessness. To lower the accident rate to zero, we have imple-

pipelines and service pipes as well as customers’ gas equipment.

mented a multi-faceted approach. First, we are developing

Using EAGLE24, a mobile computer-based emergency opera-

technologies such as Micon Meters. These are safety systems

tions support system, emergency vehicles and personnel can becomprising gas meters with embedded microcomputers.

mobilized quickly and accurately in accordance with the type

Micon Meters enable 24-hour monitoring of gas use and canand scale of the problem, as well as other circumstances.

automatically shut off gas when they detect leaks, earthquakes
or irregularities in use. Tokyo Gas is also educating customers
about the correct use of gas and carrying out regular inspections. Moreover, an emergency response system to prevent18

accidents has been set up.

Three-Stage Earthquake Safety System
Tokyo Gas has a three-stage safety system to ensure stablesupply in the event of an earthquake. The first stage is prevention to minimize damage. Our production and supply
facilities are designed to the latest earthquake-proofing stan-Intelligent Service System
We also have an intelligent service system that links customers’gas meters with Tokyo Gas’ monitoring station by telephonelines to monitor gas usage. The system is triggered whensensors detect irregularities, sending a message to Station 24,
a 24-hour control center. This network facilitates 24-hourmonitoring of gas use.

dards. The second stage is our emergency response. The aim
here is to prevent secondary damage such as fires and explosions. Finally, we are prepared to move quickly to restore
service should it be interrupted and to continue supply to
areas largely unaffected. To take our system up to the nextlevel, we will install 3,700 state-of-the-art seismic intensity
sensors at locations throughout our roughly 3,100km2 service
area. These sensors will be monitored by SUPREME, the world’s
most advanced disaster prevention system.

LEFT
Center for Supply Control and Disaster Management
RIGHT
This compact, sophisticated sensor not only features ahighly reliable shut-off mechanism, but also is capable ofmeasuring seismic intensity and rate of acceleration andboasts the world’s first liquefaction sensor.

TOKYO GAS Annual Report 2001

Corporate CitizenshipTokyo Gas touches the lives of just about everyone living in the greater Tokyo area on a daily basis. Our
growth is dependent on deepening this symbiotic relationship with our customers. Based on this fact, weare taking an active—and visible—role in the communities we serve.

Our disparate activities fall into three categories: environmental

Leave System Encourages Volunteerism

protection, philanthropic, and cultural and sports. Programs

To encourage volunteerism, we have a Volunteer Leave

are deeply rooted in our service areas. Activities range from

System. Employees are given up to 5 days a year of paid leavetree planting, recycling programs and seminars that raise

to participate in volunteer activities. In the year ended March

environmental awareness to sponsorship of soccer clinics. In

31, 2001, 44 employees took advantage of the system.

this section, some of the major activities undertaken during
the year under review are profiled.

Promoting Tokyo’s First Professional Soccer TeamIn November 1999, FC Tokyo, Tokyo’s first J League profes-

Earth Vision Film Festival

sional soccer team, gained promotion to Japan’s “premiership”

Tokyo Gas has been a special sponsor of the Earth Vision Filmleague. Tokyo Gas is one of the team’s main sponsors. FC

Festival since 1992. The event raises environmental aware-Tokyo was established in 1998 as the successor to the Tokyo

ness through films. Submissions are solicited in Japan, Asia

Gas Football Club. Indeed, Tokyo Gas’ involvement in sup-and Oceania. The best films are selected for public showing

porting soccer in the Tokyo area dates back a number of years.

at the festival. The 9th Earth Vision Film Festival was held overBy supporting FC Tokyo and running soccer clinics, Tokyo

three days in Tokyo in March 2001 and was attended by nearlyGas will continue to encourage regional sports.

2,000 people.

LEFT ABOVEThe FC Tokyo eleven
LEFT BELOW
The Earth & Energy Exploratorium was opened in 1998 topromote greater understanding of the environmental issues
associated with energy use. In the year ended March 31,
2001, the exploratorium was visited by approximately
100,000 people.
© FC Tokyo

RIGHT
Poster for the 9th Earth Vision Film Festival

Annual Report 2001 TOKYO GAS

19

International Operations

Tokyo Gas is tapping its wealth of knowledge in natural gas and the supply of gas to contribute to thedevelopment of gas infrastructures and economic growth in other countries, particularly those in Asia.
Additionally, we have forged partnerships with companies similar to our own and with various institutions overseas for the purposes of technological and managerial information exchanges. Coordinatingthese efforts are our four representative offices in New York, Paris, Kuala Lumpur and Beijing. They arealso our contact points for overseas investors.

20

Tokyo Gas’ Overseas Activities

infrastructure. In 1999, Gas Malaysia started paying dividends.

Tokyo Gas has a proud track record of helping other coun-

The gas-fired cogeneration district cooling project was anothertries to build gas supply infrastructures. Recently, Tokyo Gas

joint venture with Petronas through Gas District Cooling (M)and its group companies have been instrumental in a number

Sdn. Bhd. Thanks to this project, Malaysia’s Kuala Lumpurof successful projects. In Malaysia, we have been active in a

International Airport (KLIA), which opened in June 1998, boasts

natural gas distribution system project and a gas-fired

the world’s largest class of gas district cooling supply, basedcogeneration district cooling project—both firsts in that coun-on gas absorption chillers. Kuala Lumpur City Center (KLCC),

try. The former was conducted through a joint venture com-

including the Petronas Twin Towers have benefited as wellpany, Gas Malaysia Sdn. Bhd., with Petronas, Malaysia’s

from the company’s gas cooling technologies. Meanwhile,state-owned oil company, and other local partners. Tokyo Gas

Tokyo Gas Engineering Co., Ltd. has been providing technicalwon the international contract in 1991, its management andconsultation, for example, for the establishment of LNG

technical expertise being highly rated by the project tender

receiving facilities in Korea, Taiwan, Thailand, and Portugal.

committee. The project—the first full-fledged overseas project

Tokyo Gas is leveraging experience and technology from its

by a Japanese energy utility company—is now regarded as a

Negishi, Sodegaura and Ohgishima LNG terminals. Moving

model for other Asian countries hoping to build a similar

forward, Tokyo Gas intends to identify and develop business

Natural Gas Distribution System in Malaysia
Lawit

JernehResakThailand

Bekok

Duyong

KertihKemamanAndingPENINSULAR
MALAYSIA

Kuantan

Kuala Lumpur (KLCC)
Port Klang
Shah Alam

Putrajaya
SerembanNilai (KLIA)
KluangPasir Gudang
Senai

The Petronas Twin Towers, the tallest buildings in
the world, are supplied with chilled water by a gas
district cooling (GDC) system.

TOKYO GAS Annual Report 2001

LegendGas Field
Gas Malaysia Supply Area
PGU Line

Singapore

TOKYO GAS’ OVERSEAS REPRESENTATIVE OFFICES AND COLLABORATING PARTNERS
GIIGNL (International Groupof Importers of Liquefied Natural Gas)

Beijing Gas Group Co., Ltd.
Korea Gas Corporation
SK Corporation

Gaz de France
Lattice Group plc

Gas Technology
InstituteInternational Gas Union

Shell International
Gas Limited
KeySpan Energy Delivery
Ruhrgas AG
Paris

New York

Beijing
Tokyo

SNAM S.p.A.

AmericanGas Association
Chongqing
Natural Gas Co., Ltd.
Kuala Lumpur(Asia Pacific Regional Office)Interstate Natural Gas
Association of America

Southern California
Gas Company
Trunkline LNG Company

Petroliam Nasional Berhad(PETRONAS)

Overseas Representative Offices
Collaborating Partners

Woodside Energy Ltd.

21

opportunities in which it can capitalize on extensive techno-

research and the exchange of information on managerial

logical expertise built up in Japan in gas production and supply

and technical issues, as well as staff. Drawing on this infor-

as well as fields such as gas usage technologies and IT.

mation, we are working to improve our operations, includ-

Information Exchanges Lead to Better Operations
We have four representative offices overseas: New York, Paris,
Kuala Lumpur and Beijing. Through these offices we are
forging closer ties with energy-related companies andinstitutions—some we have been associated with for over
20 years—around the globe. Collaboration involves joint

ing our gas supply facilities and services. As deregulation
sweeps through the Japanese energy industry, such tie-ups
will take on added meaning. The offices also play a vital rolein communicating information to shareholders and in gathering information from the capital markets, which is reflected
in management policy.

LEFT
Malaysian trainees
RIGHT
Mr. Gerald Doucet, Secretary
General of the World Energy
Council, on a visit to Tokyo Gas.

Annual Report 2001 TOKYO GASDiversification

The Tokyo Gas Group is determined to increase earnings as a diversified energy services company by carryingout core gas operations as well as operating energy-related businesses that complement and add value tothose operations. Furthermore, to respond to the IT revolution and Japan’s “graying” society as well as contribute to environmental protection, Tokyo Gas is actively promoting various new businesses such as urban
development and information-related businesses that transcend the bounds of the energy sector. In respectof our 49 subsidiaries, we are working to raise their profitability and foster autonomy with a view to taking
them public in the future. These actions are being taken in line with our Medium-Term Management Plan.
This plan also calls for the streamlining of unprofitable businesses to maximize consolidated earnings.

Subsidiaries and Affiliate
Company

22

EquityArea
Interest (%)

Tokyo Gas Energy Co., Ltd.
Tokyo Gas Chemicals Co., Ltd.

100
100

Energy sales
LNG cryogenic energy

Tokyo Oxygen and Nitrogen Co., Ltd.
Tokyo Gas Urban Development Co., Ltd.
Park Tower Hotel Co., Ltd.
KANPAI CO., LTD.

54
100
100
93.2

LNG cryogenic energy
Urban development
Urban development
General facility construction

Gastar Co., Ltd.
TG Credit Service Co., Ltd.

66.7
100

Home equipment services
Home equipment services

Chiba Gas Co., Ltd.

99.9

Gas distribution

Tsukuba Gakuen Gas Co., Ltd.
Tokyo Gas Engineering Co., Ltd.

100
100

Gas distribution
General engineering

TG Information Network Co., Ltd.

100

IT

TG Enterprise Co., Ltd.

100

New businesses

Tokyo LNG Tanker Co., Ltd.
Gas Malaysia Sdn. Bhd.*

100
20

LNG transportation businesses
Overseas businesses

Business
Sales of LPG and coke
Sales of gas for industry and chemicals, LNG cryogenic
energy technologies
Production and wholesale of liquefied oxygen and nitrogen
Real estate leasing, management and brokerage, etc.
Management of Park Hyatt Tokyo
Construction of gas, water and air conditioning facilities,
as well as gas pipelines
Production and wholesale of gas appliances
Leasing of gas appliances and information and communications equipment, construction loans
Gas supply for Yachiyo and Narita City and surroundingareas
Gas supply for Tsukuba Science City and surrounding areas
Comprehensive engineering services with a particular focus
on Gas production and supply, environmental protection
and IT
System design; construction, operation and maintenanceof networks; and sales of computer equipment, etc.
Financial administration and building leasing for Tokyo
Gas and related companies
Ownership of LNG and LPG carriers
Supply of gas in Malaysia* Equity-method affiliate

LEFT
A room at the Park Hyatt Tokyo, managed by Park Tower
Hotel Co., Ltd. The modern interior and superb view of
the Shinjuku district make a stay a truly memorable
experience.
RIGHT
This ultra-low-temperature, deep-freeze warehouse fortuna is one example of the cryogenic utilization of LNG.

TOKYO GAS Annual Report 2001

Topics
Branching Out Into the Information & Communications Business
In June 2000, Tokyo Gas reached an agreement with Marubeni Corporation and Vectant, Inc.,a wholly owned Marubeni subsidiary, to deliver next-generation high-speed broadband communications over the “last-mile.” As part of the agreement, Tokyo Gas acquired an equity
stake in MetroAccess Co., Ltd., a Type 1 telecom carrier established by Marubeni and Vectant.
Drawing on and fusing their collective infrastructures, expertise and client networks, the threecompanies expect to derive dramatic synergies in developing infrastructure for broadband
networks. Since high-capacity optical fiber cables can be laid in channels owned by Tokyo Gas
for district heating and cooling conduits, cost-competitive networks will be realized. In April
2001, MetroAccess launched broadband data communications services for companies in the
Shinjuku metropolitan area, Tokyo.
Energy providers in the future must be more dimensional than simply supplying energy.
They must also develop innovative business models that harness information and communications technologies. From the perspective of acquiring new expertise, Tokyo Gas’ entry into
this business marks a first step toward formulating new strategies in the information andcommunications industry.

Home Reform Agency Services for Comfortable Living Environments
In April 2001, Tokyo Gas teamed up with INAX Corporation and other companies to establish
HomeClip Corp., which offers online home reconstruction agency services. In recent years,
23

there has been a groundswell of interest toward creating comfortable living environments, particularly developing barrier-free housing as Japanese society ages. There is also a need to refurbish antiquated living accommodation. The size of the home reform market is estimated ataround ¥10 trillion. Consumers are demanding services that give them easy access to comprehensive information on construction firms, products, price and other areas. HomeClip operates
a one-stop portal site that “clips” various information on the “home” onto the Internet. The siteallows users to gather information, select construction firms and even request estimates. It plays
the instrumental role of introducing consumers to reliable refurbishing companies.
HomeClip’s earnings are derived from registration charges and annual fees from refurbishing companies, agency commissions, and advertising revenues. The site aims to register(http://www.homeclip.co.jp)

10,000 firms and serve 200,000 registered members in the next 5 years.

Key Ingredient for Breakthrough Diagnostic Method
Tokyo Gas has been working on the world’s first process to separate and condense 13C-Methane from LNG. The first shipments were made in May 2000, following completion of a plant toproduce 13C-Methane for commercial use using this technology. The 13C-Methane is being
processed into 13CO2 by Tokyo Gas Chemicals and sold to Otsuka Pharmaceutical Co., Ltd. foruse in a breakthrough drug that we developed with them. The drug diagnoses the existenceof Helicobacter pylori, a common cause of gastritis and gastric ulcers, and makes for morepatient-friendly diagnosis of these ailments. The drug was awarded the Japanese Prime Minister’sAward of the Japan Industrial Technology Grand Prize in fiscal 2000. This drug is currently
marketed in Japan, the Republic of Korea, Taiwan, Australia and Spain, and Otsuka Pharmaceutical has obtained sales licenses for at least 10 other countries.
Looking ahead, Tokyo Gas intends to develop diagnostic drug applications using 13CMethane to detect, for example, diabetes and pancreatic disease. By aggressively promoting
13

C-Methane in the pharmaceutical raw materials field, Tokyo Gas will develop new value-

added businesses for LNG.

Annual Report 2001 TOKYO GASBoard of Directors

24

Norio Ichino

Yasuyuki Yamaguchi

Soichiro Akimoto

Senior Managing Director

Executive Vice President

Senior Managing Director

Fumio Ohori

Toshiyuki Takasuna

Haruno Ito

Senior Managing Director

Executive Vice President

Senior Managing Director

Kunio Anzai

Hideharu Uehara

ChairmanPresident

Managing Directors

Directors

Corporate Auditors

Norihiro Takuma

Yoshihito Imura

Akira Ogawa

Tohru Itoh
Hideo Nishiwaki

Hiroshi Urano
Takeo Kuno

Shigeru Ogasawara
Kenshiro Koto

Shouzou Ohno
Kouya Kobayashi

Takeo Ishikawa
Tadashi Sakurai

Shoh Nasu
Masayuki Sato

Masahiro Ishiguro
Mitsunori Torihara

Tadashi Zemba
Tadaaki Maeda

Shigero Kusano
Minoru Yokouchi

Ieaki Uemura
Takashi Kunitomi
Tsunenori Tokumoto
Tokio Imazawa(As of June 28, 2001)

TOKYO GAS Annual Report 2001

Financial Statements
25

Contents
[26]
[27]
[31]
[34]
[36]
[37]
[38]
[39]
[49]

Six-Year Summary
Management’s Discussion and Analysis of Operations
Frequently Asked Questions
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Public Accountants

Annual Report 2001 TOKYO GASSix-Year SummaryTokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31

Thousands of
U.S. dollars

Millions of yen
2001

Net sales . . . . . . . . . . . . . . . . . . .

2000

1999

1998

1997

1996

2001

¥1,086,771 ¥ 992,255 ¥ 997,767 ¥1,009,155 ¥ 988,077 ¥ 958,662$ 8,835,537

Gas sales . . . . . . . . . . . . . . . . . .

740,731

672,070

674,997

686,649

663,066

633,253

6,022,203

Gas appliance sales . . . . . . . . . .

145,435

126,747

132,749

126,840

134,174

135,669

1,182,398

Related construction . . . . . . . . .

67,611

63,94963,63066,69569,966

68,825549,683

Real estate rental business . . . . .

15,602

14,95915,617

16,495

18,423

18,468

126,846

Others . . . . . . . . . . . . . . . . . . . .

117,392

114,530

110,774

112,476

102,448

102,447

954,407

Operating income . . . . . . . . . . . .

103,659

69,23372,30376,48562,163

67,109842,756

Income before income taxes
and minority interest in
net income of
consolidated subsidiaries . . . . . .

45,08543,73840,96436,261

32,601

39,473366,545

Net income . . . . . . . . . . . . . . . . .

27,595

26,69817,764

17,241

15,432

16,762

224,350

Depreciation . . . . . . . . . . . . . . . .

146,420

136,214132,568

114,893

123,569

120,569

1,190,407

Capital expenditures . . . . . . . . . .

109,899

121,806

142,030

159,433

162,282

180,080

893,488

Net income (Basic) . . . . . . . . . .

¥9.82

¥9.50

¥6.32

¥6.14

¥5.49

¥5.97

$0.08

Net income (Diluted) . . . . . . . .

9.13

8.84

5.94

5.76

5.37

–

0.07

6.00

5.00

5.00

5.00

5.00

5.00

0.05

¥1,797,669 ¥1,805,086 ¥1,707,446 ¥1,720,684 ¥1,772,132 ¥1,657,176$14,615,195

Per share (Yen and U.S. dollars):

26

Cash dividends applicableto the year . . . . . . . . . . . . . . .
At Year-end
Total assets . . . . . . . . . . . . . . . . .
Long-term debt due
after one year . . . . . . . . . . . . . . .

708,329

843,634

820,753765,304

878,674

743,177

5,758,772

Total stockholders’ equity . . . . . .

552,790484,239

421,442

417,755

414,906

413,725

4,494,228

Notes: 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥123.00=U.S.$1, the approximate Tokyo
foreign exchange market rate as of March 31, 2001.
2. Net sales for gas included by-products up to the year ended March 31, 1997. By-products are included in “other” beginning in the year
ended March 31, 1998.

TOKYO GAS Annual Report 2001

Management’s Discussion and Analysis of Operations
The business activities of Tokyo Gas Co., Ltd. and its 14 consolidated subsidiar-Gas Sales Volume by Sector(Million m3, 46.047 MJ/m3)

ies are broken down into 5 categories: gas sales, gas appliance sales, related
construction, real estate rental business, and other. Please refer to Notes 1 and

10,0002 of the Notes to Consolidated Financial Statements for an explanation of themain accounting policies.

8,000

6,000

OVERVIEW OF CONSOLIDATED BUSINESS RESULTS
4,000

Gas Sales Volume
The volume of gas sold by Tokyo Gas in fiscal 2000, the year ended March 31, 2001, increased

2,000

5.4% to 8,879 million m3. Demand increased steadily in all sectors. Residential gas volumerose 4.2% due to efforts to win new customers and to popularize gas appliances. Industrial use
also rose, by 4.5%, due to higher capacity utilization rates of existing customers and efforts tosecure new customers. Gas sales volume to commercial and other business users climbed
7.5%, again thanks to efforts to win new customers.
Net Sales

0Mar. 3197 98 99 00 01

Residential
Commercial
Industrial
WholesaleNote: Non-consolidated

Consolidated net sales increased 9.5% over the previous year to ¥1,086.7 billion. This principally reflected the climb in gas sales volume and adjustments to gas rates based on the “slidingrate” system, as well as higher sales of gas appliances.
Operating Expenses and Operating Income
The cost of sales increased 16.0% to ¥561.0 billion due to the higher cost of raw materials. In

Net Sales by Segment(Billion ¥)particular, the price of crude oil was approximately US$7 higher per barrel than the previous
year. However, efforts to pare expenses such as operating and personnel expenses yielded a

1,200

27

3.9% decrease in selling, general and administrative expenses, bringing them to ¥422.1 billion.
Total costs and expenses thus increased 6.5% to ¥983.1 billion. As a result of the foregoing
factors, operating income surged 49.7% to ¥103.6 billion.
Other Income (Expenses)
Other expenses deteriorated by ¥33.0 billion to ¥58.5 billion. The main factors were a ¥21.7
billion charge for unfunded obligations arising from an amendment of accounting standards

1,000
800
600
400

for retirement benefits, and a ¥5.5 billion charge for environmental conditioning costs to
respond to soil contamination at sites of former gas manufacturing plants.

200

Income Before Income Taxes and Income Taxes0

Income before income taxes was held to an increase of 3.1%, to ¥45.0 billion, despite the riseMar. 31

in operating income. This was mainly attributable to the write-off of unfunded obligations
arising from the amendment of accounting standards for retirement benefits. Income taxes
were ¥25.4 billion.

97 98 99 00 01

Gas Sales
Gas Appliance Sales
Related Construction
Real Estate Rental Business
Other

Net Income
Net income rose 3.4% to ¥27.5 billion due to the above factors as well as a tax adjustment
resulting from the adoption of tax-effect accounting. Basic net income per share accordingly increased to ¥9.82 and diluted net income per share rose to ¥9.13. ROE for fiscal 2000
was 5.3%.

Annual Report 2001 TOKYO GASSEGMENT INFORMATION

Gas Sales

Net Income(Billion ¥)30

Gas sales increased 10.2%, or ¥68.6 billion, to ¥740.7 billion due to efforts to expand gas sales
volume and an increase in gas rates based on the “sliding rate” system. These factors wereoffset somewhat by downward rate revisions implemented in fiscal 1999 and fiscal 2000. Gas
sales accounted for 68.2% of total net sales. Costs and expenses increased 11.3%, or ¥60.0

20

billion, as a result of higher raw materials costs. The net result was that segment operating
income climbed 6.1%, or ¥8.5 billion, to ¥149.9 billion.
Gas Appliance Sales

10

Segment sales increased 14.7%, or ¥18.6 billion, to ¥145.4 billion due to efforts to develop
and market gas-fired cooking ranges, water-heating systems and air conditioners. Gas appliance sales accounted for 13.4% of total net sales. Costs and expenses climbed in line with the0

increase in sales. However, efforts to reduce supply costs, such as by streamlining distribution,

Mar. 3197 98 99 00 01

and operating expenses held the overall increase to 11.8%, or ¥14.7 billion. Operating income
accordingly soared 138.6%, or ¥3.8 billion, to ¥6.6 billion.
Related Construction
Highers numbers of orders for new construction projects and extension projects were themain contributor to a 5.7%, or ¥3.6 billion, increase in segment sales to ¥67.6 billion. Sales inthis segment represented 6.2% of total net sales. Costs and expenses increased 1.9%, or ¥1.2
billion. As a result, operating income surged 102.7%, or ¥2.0 billion, to ¥3.9 billion.

28

Real Estate Rental BusinessTotal Assets andEquity Ratio

Sales increased 4.3%, or ¥0.6 billion, to ¥15.6 billion, representing 1.4% of total net sales.

(Billion ¥)(%)

Costs and expenses were virtually unchanged from the previous year. A decline in intersegment

2,000

40

1,500

30

1,000

20

500

10

sales, however, led to a 2.0%, or ¥0.1 billion, decrease in operating income to ¥8.0 billion.
Other
Segment sales climbed 2.5%, or ¥2.8 billion, to ¥117.3 billion. Other sales accounted for
10.8% of total net sales. Costs and expenses rose 1.4%, or ¥2.1 billion, while intersegment
sales decreased. The result was a decline of 11.9%, or ¥1.3 billion, in operating income to¥10.1 billion.
FINANCIAL POSITION

Total assets as of March 31, 2001, stood at ¥1,797.6 billion, down 0.4%, or ¥7.4 billion, froma year ago.
Fixed Assets
Fixed assets increased 1.8% to ¥1,517.3 billion. Plant, property and equipment decreased
3.1% to ¥1,292.1 billion reflecting the peaking out of large-scale capital expenditures by
Tokyo Gas, as well as depreciation. Fiscal 2000 saw the introduction of new accounting standards for financial instruments. As such, investment securities with a market value were appraisedon the basis of fair value. The resulting increase in investment securities led to a 49.6% rise ininvestments and other non-current assets to ¥205.9 billion.
Current Assets
Current assets stood at ¥280.3 billion, a decrease of 10.7%, as of March 31, 2001. This primarilyreflected a decline in cash and cash equivalents following redemption of corporate bonds.

TOKYO GAS Annual Report 2001

00Mar. 3197 98 99 00 01

Fixed assets
Current assets
Equity ratio (%)

Long-Term Liabilities
As of March 31, 2001, long-term liabilities had decreased 12.8% to ¥874.2 billion. This mainlyInterest-bearing Debt
(Billion ¥)

(%)

1,000

100

800

80

600

60

400

40

200

20

reflected the redemption of corporate bonds, as well as the transfer to current liabilities of
convertible bonds due within one year.
Current Liabilities
Current liabilities totaled ¥366.9 billion as of March 31, 2001, up 16.6% from a year earlier.
The increase reflected the transfer of debt from long-term liabilities.
Interest-bearing Debt
As of March 31, 2001, interest-bearing debt was ¥870.1 billion, a 9.1% decline from a year
ago. The rate of dependence on interest-bearing debt, which is defined as interest-bearing
debt as a percentage of total assets, decreased from 53.0% to 48.4%. These decreases highlight Tokyo Gas’ committed efforts to strengthen its balance sheet.

00Mar. 31

Stockholders’ Equity

97 98 99 00 01

Interest-bearing debt
Dependency on interest-bearing
debt (%)

Total stockholders’ equity increased 14.2% to ¥552.7 billion. In addition to an increase inconsolidated retained earnings, this also reflected the application of new accounting standards for financial instruments effective fiscal 2000, which generated ¥55.1 billion in net
unrealized holding gains on securities. Efforts to strengthen the balance sheet contributed toa higher equity ratio of 30.8%, up from 26.8% in the previous year.

Capital Expenditures
and Depreciation
CAPITAL EXPENDITURES

Tokyo Gas has expanded facilities to put in place a more stable supply system for gas. With

(Billion ¥)200

respect to production facilities, Tokyo Gas built a second tank and an LNG vaporization facility
at the Ohgishima LNG Terminal, as well as other facilities. In regard to supply facilities, Tokyo

150

29

Gas focused capital expenditures on investments in pipelines to accommodate new demand,the planned replacement of existing pipelines, and measures to prevent earthquake damage.
Capital expenditures in fiscal 2000 decreased 9.8% to ¥109.8 billion.
CASH FLOWS

100

50

Net cash provided by operating activities increased ¥32.8 billion to ¥187.5 billion. This mainlyreflected higher depreciation of property, plant and equipment, as well as an increase in retire-0

ment allowance.

Mar. 31

Net cash used in investing activities decreased ¥8.4 billion to ¥115.8 billion. This mainlyreflected lower capital expenditures, which peaked in the previous term. The company has
now entered a period in which it is recovering on its investments.
Financing activities, which provided net cash of ¥22.8 billion in the previous fiscal year,
used net cash of ¥104.4 billion. This reflected cash used for repayments of long-term debt of

97 98 99 00 01

Capital expenditures
Depreciation

Net Cash Provided byOperating Activities(Billion ¥)200¥53.5 billion and for the redemption of bonds of ¥94.4 billion, as the company pushed ahead
with the repayment of interest-bearing debt. Cash of ¥14.0 billion was also used for paying
dividends.

150

As a result of the foregoing items, cash and cash equivalents at the end of the year were¥64.5 billion, ¥32.7 billion lower than a year ago.

100

50

0
Mar. 3197 98 99 00 01

Annual Report 2001 TOKYO GASInterest Coverage Ratio

FINANCIAL POLICY(times)Tokyo Gas has made capital expenditures in excess of the total of net income and depreciation
over the past 10 years to build a comprehensive production and supply infrastructure to respond4

to an escalation in demand for gas. As a result, interest-bearing debt increased. However,Tokyo Gas has now entered a period in which it will recover on past investments. Consequently,

3

Tokyo Gas is now able to conduct capital expenditures within the bounds of depreciation. The
free cash flows that the company generates will be used to pay dividends and for investments
in new businesses, as well as for the repayment of interest-bearing debt. In this way, Tokyo Gas

2will streamline and strengthen its balance sheet and pare financial expenses.
Tokyo Gas is thus placing emphasis on reducing interest-bearing debt and raising asset

1

efficiency. This will include thoroughly examining the profitability of new capital expenditures
as well as reviewing the profitability of existing facilities and investments to raise ROA.
0
Mar. 31Mar. 31, 2001 to Mar. 31, 2005 Targets
Free cash flows

Average of ¥64.9 billion a year for 5 years(Total of ¥324.5 billion over 5 years)

ROA

2.4% (5-year average)

Interest-bearing debt (Non-consolidated)¥570.0 billion as of March 31, 2005

97 98 99 00 01

Note: Interest coverage ratio=(net income+income
taxes+interest expense)/
interest expense

MARKET RISK EXPOSURE

ROE and ROA

Stock Price Risk
Equities held by Tokyo Gas are for the most part held to maintain corporate relationships
needed to conduct business operations. Stock price risk relates to stock of listed companies.
30

(%)

6

Tokyo Gas has formulated a management policy and rules for the handling of such stock.
5

Foreign Exchange Risk
LNG, the main raw material used by Tokyo Gas for the supply of gas, is purchased based on

4

U.S. dollar-denominated agreements. As such, these agreements are subject to fluctuations in
the yen-dollar exchange rate. Furthermore, because the U.S. dollar-denominated LNG price is3

determined by the “sliding rate” system with reference to crude oil prices, fluctuations in themarket price of crude oil are another risk factor. The hypothetical effect of these fluctuations
on annual raw materials costs is as follows:2
1

Fluctuation of ¥1 to U.S.$1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Approx. ¥1.5 billion0

Fluctuation of U.S.$1 per barrel in crude oil price . . . . . . . . . . . . . . . .

Approx. ¥4.0 billion

Mar. 31

However, the above fluctuations are automatically passed on to gas users in regulated areas
only, under the “sliding rate” system. First-half crude oil prices are reflected in gas rates in thesecond half of the year, while second-half crude oil prices are reflected in gas rates in the firsthalf of the following year. Consequently, there is a neutral effect on Tokyo Gas’ business overthe medium to long term.
Interest Rate Risk
Tokyo Gas only has fixed-rate short- and long-term interest-bearing debt. Therefore, there isno risk from fluctuations in interest rates during the borrowing term. However, Tokyo Gas
does become subject to interest rate risk when refinancing.

TOKYO GAS Annual Report 2001

97 98 99 00 01

ROA
ROE

Frequently Asked Questions
Q1: What is Tokyo Gas’ policy on future rate reductions?
Tokyo Gas has reduced rates by a total of 5.02% through reductions carried out in December
1999 and February 2001. Tokyo Gas’ rates are now among the lowest gas rates for the residential market in Japan. In offering these rates, Tokyo Gas believes that it has sufficiently staved offcompetition from other forms of energy. Accordingly, additional rate cuts are not planned
during the course of Tokyo Gas’ medium-term management plan, which runs through to thefiscal year ending March 31, 2005.
However, in the building complex air conditioning and cogeneration markets, where competition with electric power is intense, Tokyo Gas will respond to the future lowering of power
charges by electric utilities. This will be achieved by maintaining competitive rates using a rate
system that can be strategically and freely set.
Q2: How does Tokyo Gas plan to pare costs?
Tokyo Gas is focusing on three areas: personnel reductions, controlling operating expenses, andinternal financing of capital expenditures.
Regarding personnel reductions, Tokyo Gas will lower the company’s head count by approximately 1,500 over the next 4 years, from 11,197 people as of March 31, 2001 to approximately
9,700 people at March 2005 year-end. This will be achieved by outsourcing meter-reading,collection and other customer-service duties, stepping up dispatchment of employees, andreducing the number of staff employed in administration by one-fifth. Tokyo Gas’ efficiency
drive is expected to shave ¥37.0 billion off personnel expenses over this period.
In respect of controlling operating expenses, Tokyo Gas will hold operating expenses to theircurrent level. The company aims to implement streamlining measures to offset the increase in
fixed expenses that is expected as the number of customers expands (by 6% over the next 4
years). This discussion excludes a ¥27.0 billion increase in outsourcing costs over the next 4
years as outlined above.
Tokyo Gas will continue to invest in facilities to meet future increases in demand, but theseinvestments will be kept within cash flows from operations (including depreciation expenses).
This will strengthen Tokyo Gas’ balance sheet.
Tokyo Gas expects the above cost-cutting initiatives to yield a 21% reduction in fixed
expenses per 1m3 of gas, from ¥54.1 at March 31, 2001 to ¥42.6 at March 31, 2005.
Q3: Where do Tokyo Gas’ strengths lie as deregulation advances?
Tokyo Gas has four key strengths: leading-edge engineering expertise in the gas field, strong
marketing capabilities, a powerful 48,000km-long pipeline network, and a strong relationshipbuilt on trust with customers. Each of these has been nurtured over many years. For example,
for customers to adopt cogeneration, it is crucial to propose the most appropriate facilities andtechniques for achieving efficient use of electricity and heat for each customer. Tokyo Gas’
strengths have enabled it to compete effectively with oil and electricity.
The advance of deregulation presents Tokyo Gas with more opportunities to leverage its
strengths, including the customer loyalty it has garnered in over a century of business.
In the event that other companies sell gas in the Tokyo metropolitan area, they will use Tokyo
Gas’ pipeline and Tokyo Gas will accordingly receive a transportation fee. As such, Tokyo Gas
will be able to increase its earnings with this gas transportation business.
Q4: How does Tokyo Gas procure LNG?
The price of LNG is determined largely by crude oil prices.
Regarding contracts, Tokyo Gas has in the past procured LNG under long-term contracts,
typically of about 20 years duration. Recently, however, Tokyo Gas has also been taking advantage of short-term contracts and spot trading.

Annual Report 2001 TOKYO GAS

31

Tokyo Gas already has contracts for the LNG it needs through to about 2006. Based on current extrapolations of demand, Tokyo Gas expects to have to participate in new LNG projects
from 2007 onward.
On the supply side, new LNG projects are expected. Tokyo Gas signed letters of intent for the
Malaysia III Project and Western Australia Expansion Project in June 2000 and September 2000,
respectively. With the view to starting purchases in 2004, Tokyo Gas is presently negotiating
toward signing sales and purchase agreements. Likewise in other projects, Tokyo Gas placesemphasis on the stability of supply, price and contract flexibility. Based on the premise that it ispossible to secure more advantageous supply terms, Tokyo Gas is considering a wide range ofpotential projects, taking into consideration such factors as timing of the start-up of the projectand diversification of supply sources.
In addition, Tokyo Gas will actively employ the two LNG carriers that are presently under construction. These new vessels will be instrumental in lowering transportation costs, as well as forincreasing the flexibility of LNG contracts, facilitating for example, LNG spot trading.
Q5. What did Tokyo Gas base its gas sales volume plan on?
Regarding regulated fields, such as residential demand, the company used macroeconomic indicators, such as the number of housing starts and building starts. In the non-regulated field,
defined as large-volume customers consuming one million m3 or more per year, sales representatives in charge of individual customers, such as factories and large buildings, ascertained thefacility-operating rate for each customer, and determined when facilities would be likely to needrenewal. Based on the information gathered, Tokyo Gas compiled a gas sales volume plan foreach large-volume customer. Tokyo Gas therefore believes that the target figures have a highdegree of accuracy.
32

Q6: Does Tokyo Gas have any plans to acquire local gas companies through mergers and acquisitions?
Tokyo Gas is currently supplying gas on a wholesale basis to 15 city gas companies surrounding
its service area. Wholesale sales account for approximately 10% of Tokyo Gas’ gas sales volume.
Tokyo Gas expects wholesale volumes to rise by an annual average of 9.2% over the 5-year
period from April 1, 2000 through March 31, 2005, the duration of the medium-term management plan. Tokyo Gas does not intend to aggressively merge or acquire such city gas companies
for two main reasons:(1) There is no guarantee that M&As will necessarily result in earnings above those that can begenerated from wholesale supply.
(2) Hostile takeovers could potentially have a detrimental effect on wholesale supply activities.
As such, in Tokyo Gas’ judgment the best way to maximize shareholder value at present is tocontinue wholesale activities.
However, Tokyo Gas does not rule out the possibility of M&As. The company is prepared to
explore the possibility in optimal cases where corporate value can be increased as a result of an
M&A.
Q7: What is Tokyo Gas’ policy on returning profits to shareholders?
Tokyo Gas’ medium-term management plan earmarks approximately 20% of the free cash flows
generated during the course of the plan to be returned to shareholders. Based on the plan,
Tokyo Gas increased dividends for the year ended March 31, 2001, and plans to maintain thislevel of dividend (an annual dividend of ¥6 per share) in the future.
Tokyo Gas will also consider share buybacks as part of its policy of returning profits to shareholders. In doing so, Tokyo Gas will give due regard to the dilutive effect of the conversion of the
5th and 6th issues of convertible bonds at a conversion price of ¥339.00.

TOKYO GAS Annual Report 2001

Q8: What are the major risk factors in Tokyo Gas’ business model?
Deregulation-induced marketplace competition poses the greatest risk. In other words, the riskthat new market entrants might lure away existing demand and capture new demand. Tokyo
Gas sees its main rivals at present as being electric utilities companies importing LNG. Tokyo Gas
will meet the demands of new customers with its sophisticated engineering capabilities, and use
its ability to offer competitive rates to cater to existing customers. The company will also aggressively push ahead with its strategy of expanding beyond its present service area to secure moredemand than it loses through competitive forces.
Another factor is the risk of falling rates and lower sales due to stiff price competition. TokyoGas has lowered general rates in residential and other markets twice over the last few years—
once in December 1999 and again in February 2001. Its rates are now among the lowest inJapan. Tokyo Gas considers its rates to be competitive against other forms of energy. The
company does not believe that additional rate reductions are necessary.
Cogeneration and air conditioning are two fields in which competition with electricity is
becoming severe. Electricity companies are also moving into the gas business. Price competition
will thus inevitably stiffen in these fields. By reducing costs as far as possible, Tokyo Gas is
resolved to remain price competitive and to maximize earnings.
Q9. Please give an update of Tokyo Gas’ new business activities.
Listed below are new fields of business that Tokyo Gas is currently engaged in. The company has
earmarked investments totaling ¥48.7 billion over the 5-year period from April 1, 2000 throughMarch 31, 2005 for these businesses.
• LNG Transportation Business
Two LNG carriers are being built at consolidated subsidiary Tokyo LNG Tanker Co., Ltd. at a
total cost of ¥36.0 billion.
• Electricity Business• Invested ¥1.89 billion to acquire a 30% interest in ENNET Corporation, an electricity
retailing company• Invested ¥0.17 billion to acquire a 35% interest in Roppongi Energy Services Co., Ltd.,
which will supply electricity to specific areas such as redevelopment zones• Invested ¥0.15 billion to acquire a 15% stake in MyEnergy Co., a Tokyo Electric Power Co.,
Inc. subsidiary operating in the field of small distributed power generators• Invested ¥0.45 billion in a new company, Tokyo Gas Bay Power Co., Ltd. for electricity generation• Communications Business• Invested ¥0.08 billion to acquire a 20% stake in MetroAccess Co., Ltd.
• Other Businesses• Tokyo Gas invested ¥0.09 billion to acquire a 30% stake in East Japan Housing Evaluation
Center Co., Ltd.
• Tokyo Gas invested ¥0.22 billion to acquire a 41% stake in HomeClip Corp.
Furthermore, Tokyo Gas will aggressively invest in new pipelines to attract emerging demandand expand its gas business. This investment, combined with the ¥48.7 billion investment in
new businesses outlined above, is expected to total ¥67.4 billion over the 5-year period from
April 1, 2000 through March 31, 2005.

Annual Report 2001 TOKYO GAS

33

Consolidated Balance Sheets
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
March 31, 2001 and 2000

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS
Property, plant and equipment (Notes 3 and 6):
Production facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and maintenance facilities . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2001

2001

702,146
1,772,491
203,473
587,183
96,121¥

669,151
1,696,315
207,957
583,642
123,954$

3,361,414(2,069,235)

3,281,019(1,947,467)

27,328,569(16,823,049)

1,292,179

1,333,552

10,505,520

Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,252

19,820156,520

Investments and other non-current assets:
Investments in unconsolidated subsidiaries
and affiliated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment securities (Notes 4 and 6) . . . . . . . . . . . . . . . . . .
Deferred income taxes (Note 9) . . . . . . . . . . . . . . . . . . . . . . .
Other investments and non-current assets . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . .

14,009111,632
19,35962,068(1,145)

11,661
20,521
41,56065,289(1,382)

113,894
907,577
157,390504,619(9,309)205,923

137,649

1,674,171

Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥

2000

5,708,504
14,410,496
1,654,252
4,773,845
781,472

34

Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marketable securities (Note 4) . . . . . . . . . . . . . . . . . . . . . . . .
Receivables:
Trade notes and accounts . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . .
Inventories (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes (Note 9) . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64,575332

97,3282,310

525,000
2,699

127,037(1,098)27,4198,260
53,790125,512(1,505)27,0607,560
55,8001,032,821(8,927)
222,919
67,154437,318

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

280,315314,065

2,278,984¥ 1,797,669¥ 1,805,086$ 14,615,195

See accompanying notes.

TOKYO GAS Annual Report 2001

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-term debt due after one year (Note 6) . . . . . . . . . . . . . . .
Employees’ severance and retirement benefits (Note 8) . . . . . .
Allowance for repairs of gas holders . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities:
Bank loans (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt due within one year (Note 6) . . . . . . . . . . . .
Notes and accounts payable:
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable (Note 9) . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .

2001

2000

2001

¥ 708,329
134,216
3,324
28,363¥ 843,634
106,393
3,341
49,162$ 5,758,772
1,091,187
27,024
230,593

39,921
121,874

41,642
71,810324,561
990,846

43,28644,29022,00945,03450,57639,28554,416
14,73345,08547,727

351,919
360,081
178,935
366,130
411,187

366,990314,698

2,983,659

3,657

3,619

29,732

Commitment and contingent liabilities (Note 13)
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholders’ equity (Note 10):
Common stock, par value ¥50 per share:
Authorized — 6,500,000,000 shares
Issued — 2,810,012,006 shares . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized holding gains on securities . . . . . . . . . . . . . . .
Foreign currency translation adjustments . . . . . . . . . . . . . . . .

141,817
2,038
353,794
55,1404

141,8172,038
340,387––

1,152,984
16,5692,876,374
448,292
33

Treasury stock, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

552,793(3)

484,242(3)4,494,252(24)

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .

552,790484,2394,494,228¥1,797,669¥1,805,086$14,615,195

35

Annual Report 2001 TOKYO GASConsolidated Statements of Income
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2001 and 2000

Thousands of
U.S. dollars (Note 1)

Millions of yen

Net sales (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses (Notes 8 and 11):
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . .

2001

2000

2001

¥1,086,771¥992,255$8,835,537

561,006
422,106

483,814439,208

4,561,025
3,431,756

983,112923,022

7,992,781

103,659

69,233

842,756

1,396(22,867)

1,283(23,366)

11,350(185,911)(6,272)(21,777)(1,265)349(8,138)(7,838)
–
2,637
393
1,396

(50,992)(177,049)(10,285)
2,837(66,161)(58,574)(25,495)(476,211)

45,08543,738366,545

25,436(8,027)

16,064714

206,797(65,260)

27,676(81)

26,960(262)

225,008(658)

27,595¥ 26,698$ 224,350

Operating income (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expenses):
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments of charges for construction of
distribution facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net transition obligation . . . . . . . . . . . . . . . .
Exchange gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net income of an affiliated company . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36

Income before income taxes and minority interestin net income of consolidated subsidiaries . . . . . . . . . . . . . . . .
Income taxes (Note 9):
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interest in net income of consolidated subsidiaries . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥

Yen
2001

Amounts per share of common stock:
Net income (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends applicable to the year . . . . . . . . . . . . . . . . . .
See accompanying notes.

TOKYO GAS Annual Report 2001

¥9.82
9.13
6.00

U.S. dollars (Note 1)
2000

¥9.50
8.84
5.00

2001

$0.08
0.07
0.05

Consolidated Statements of Stockholders’ Equity
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2001 and 2000

Millions of yen
Number ofshares ofcommon stock(Thousands)

Balance at March 31, 1999 . . . . . . . .
Cumulative effect of adopting
deferred income tax accounting . .
Net income . . . . . . . . . . . . . . . . . .
Treasury stock . . . . . . . . . . . . . . . .
Cash dividends paid(¥5.00 per share) . . . . . . . . . . . . .
Bonuses to directors . . . . . . . . . . . .
Increase due to addition of
consolidated subsidiaries . . . . . . .
Increase due to addition ofcompany on equity method . . . . .

2,810,012

Balance at March 31, 2000 . . . . . . . .
Net income . . . . . . . . . . . . . . . . . .
Adoption of new accounting standard
for financial instruments . . . . . . . .
Adjustments from translation offoreign currency
financial statements . . . . . . . . . . .
Treasury stock . . . . . . . . . . . . . . . .
Cash dividends paid(¥5.00 per share) . . . . . . . . . . . . .
Bonuses to directors . . . . . . . . . . . .

2,810,012

Balance at March 31, 2001 . . . . . . . .

2,810,012

Commonstock

Additional
paid-in
capitalRetainedearnings¥141,817¥2,038¥277,589

Foreign
Net unrealized currency
holding gains translation Treasury
on securities adjustments
stock

¥

–

¥–

¥(2)

49,233
26,698(1)(14,050)
(151)
494
574
141,8172,038

340,387
27,595––(3)

55,1404
0(14,050)37(138)¥141,817¥2,038¥353,794¥55,140¥4¥(3)

Thousands of U.S. dollars (Note 1)

Commonstock

Additional
paid-in
capitalBalance at March 31, 2000 . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adoption of new accounting standard
for financial instruments . . . . . . . . . . . . . . . . . .
Adjustments from translation offoreign currency financial statements . . . . . . . .
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid ($0.04 per share) . . . . . . . .
Bonuses to directors . . . . . . . . . . . . . . . . . . . . . .

$1,152,984$16,569

Balance at March 31, 2001 . . . . . . . . . . . . . . . . . .

$1,152,984

Retainedearnings$2,767,374
224,350

Foreign
Net unrealized currency
holding gains translation Treasury
on securities adjustments
stock

$

–

$ –

$(24)

448,292
33
0(114,228)(1,122)$16,569$2,876,374$448,292

$33

$(24)

See accompanying notes.

Annual Report 2001 TOKYO GASConsolidated Statements of Cash Flows
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2001 and 2000

Thousands of
U.S. dollars (Note 1)

Millions of yen
2001

Cash flows from operating activities:
Income before income taxes and minority interest in net income of
consolidated subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile income before income taxes
and minority interest in net income of consolidated subsidiaries
to net cash provided by operating activities:
Depreciation (Note 11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of long-term prepayments . . . . . . . . . . . . . . . . . .
Loss on disposals of property, plant and equipment . . . . . . . . .
Loss on bond redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (Decrease) in employees’ severance
and retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Increase in notes and accounts receivable . . . . . . . . . . . . . . .
Increase (Decrease) in inventories . . . . . . . . . . . . . . . . . . . . .
Decrease in notes and accounts payable . . . . . . . . . . . . . . . .
Increase (Decrease) in consumption taxes payable . . . . . . . .
Bonuses paid to directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38

2001

45,085¥ 43,738

146,420
3,955
3,348
3,369

136,214
4,092
4,331
8

1,190,407
32,15427,22027,3906,463(1,396)22,867(3,748)(1,283)23,36652,545(11,350)
185,911

(149)
(360)
(1,673)(4,562)
(141)
4,245

(10,591)657(10,639)
7,397
(154)
3,279

(1,211)(2,927)(13,602)(37,089)(1,146)
34,511

Cash received for interest and dividends . . . . . . . . . . . . . . . . .
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

227,471
1,465(23,232)(18,191)

196,667
1,310(23,149)(20,187)

1,849,358
11,910(188,878)(147,894)

Net cash provided by operating activities . . . . . . . . . . . . . . .

187,513

154,641

1,524,496

Cash flows from investing activities:
Purchases of marketable and investment securities . . . . . . . . . . .
Purchases of property, plant and equipment . . . . . . . . . . . . . . . .
Purchases of intangible fixed assets . . . . . . . . . . . . . . . . . . . . . . .
Expenditure of long-term prepayment . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of tangible and intangible fixed assets . . . . . .
Increase in other investments and other non-current assets — net . .

(4,580)(103,609)(7,599)(1,499)
926
515

(965)
(115,325)(5,176)(3,170)227
76(37,236)(842,350)(61,780)(12,187)
7,528
4,188

Net cash used in investing activities . . . . . . . . . . . . . . . . . . .

(115,846)(124,333)(941,837)

Cash flows from financing activities:
Repayments of short-term bank loans . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,721)
59,359(147,969)(14,096)(10,280)
94,699(47,525)(14,092)(13,992)
482,594(1,203,000)(114,602)

Net cash provided by (used in) financing activities . . . . . . . .

(104,427)

22,802(849,000)

Effect of exchange rate changes on cash and cash equivalents . . . .

7

–

56

Net increase (decrease) in cash and cash equivalents . . . . . . . . . . .
Increase due to addition of consolidated subsidiaries . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . .

(32,753)–
97,32853,1107
44,211(266,285)–
791,285

64,575¥ 97,328

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . .
See accompanying notes.

TOKYO GAS Annual Report 2001

¥

2000

¥

$

$

366,545

525,000

Notes to Consolidated Financial Statements
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries

1. Basis of consolidated financial statements

is generally stated at cost. Depreciation is determined mainlyTokyo Gas Co., Ltd. (the “Company”) and its consolidated

by the declining-balance method based on estimated usefuldomestic subsidiaries maintain their accounts and records inlives, except that buildings acquired after March 31, 1998 areaccordance with the provisions set forth in the Japanese

depreciated using the straight-line method.

Commercial Code and the Securities and Exchange Law and

Software costs — The Company included software in intan-

in conformity with accounting principles and practices gener-

gible assets and depreciated it using the straight-line method

ally accepted in Japan, which are different from theover the estimated useful lives.

accounting and disclosure requirements of International

Cash and cash equivalents — Cash and cash equivalents

Accounting Standards.

include cash on hand, readily-available deposits and short-

The accompanying consolidated financial statements are atranslation of the audited consolidated financial statements ofterm highly liquid investments with maturities not exceeding
three months at the time of purchase.

the Company which were prepared in accordance with

Securities — Prior to April 1, 2000 listed equity securities

accounting principles and practices generally accepted inincluded in current assets and non-current assets were carried

Japan from the accounts and records maintained by theat the lower of moving-average cost or market value. Other

Company and its consolidated subsidiaries and were filed

securities were stated at moving-average cost.

with the appropriate Local Finance Bureau of the Ministry of
Finance as required by the Securities and Exchange Law.
In preparing the accompanying consolidated financial
statements, certain reclassifications have been made in the

Effective April 1, 2000, the Company and its consolidated
subsidiaries adopted the new Japanese accounting standard
on accounting for financial instruments.
(a) Debt securities intended to be held to maturity (hereafter,

consolidated financial statements issued domestically in order“held-to-maturity debt securities”) are stated at amortized

to present them in a form which is more familiar to readers

cost. (b) Equity securities issued by non-consolidated subsid-

outside Japan. The consolidated statements of stockholders’iaries and affiliated companies are stated at moving-average

equity have been prepared for the purpose of inclusion in thecost. (c) Available-for-sale securities with market value areaccompanying consolidated financial statements, althoughstated at fair market value. Unrealized gains and unrealized

such statements are not customarily prepared in Japan andlosses on these securities are reported, net of applicable income

are not required to be filed with the regulatory authorities.

taxes, as a separate component of shareholders’ equity.

The translation of the Japanese yen amounts into U.S. dollars
are included solely for the convenience of the reader, using

Available-for-sale securities with no available fair market value
are stated at moving-average cost.

the prevailing exchange rate at March 31, 2001, which was

The effect on the consolidated statement of income of¥123 to U.S.$1. The convenience translations should not be

adopting the new accounting standard for financial instru-

construed as representations that the Japanese yen amounts

ments is immaterial. At April 1, 2000, securities in current

have been, could have been, or could in the future be, con-assets decreased by ¥1,999 million ($16,252 thousand) andverted into U.S. dollars at this or any other rate of exchange.

investment securities increased by the same amount.
Derivative financial instruments — The Company and its con-

2. Significant accounting policies

solidated subsidiaries use interest rate swap and foreign

Consolidation — The consolidated financial statements

exchange forward contracts only for the purpose of mitigating

include the accounts of the Company and substantially all of

the risk of fluctuations in interest rates and foreign exchange

its significant subsidiaries. All significant intercompany trans-

rates. The Companies do not use derivative financial instru-

actions and account balances are eliminated in consolidation.

ments for speculative trading purposes. The derivative

Equity method — Investments in unconsolidated subsidiaries

financial instruments are executed with creditworthy financial

and affiliates over which the Company has the ability to exer-

institutions, and the Company’s management believes there

cise significant influence over operating and financial policies

is little risk of default by counterparties.

of the investees, are accounted for by the equity method.

Inventories — Inventories are stated at cost, cost being deter-

Property, plant and equipment — Property, plant and equipment

mined by the moving-average method.

Annual Report 2001 TOKYO GAS

39

40

Allowance for doubtful accounts — The Company and its con-ten years, by estimating future expenditures and charging

solidated subsidiaries provide for doubtful accounts at anthem to income in equal annual amounts. The difference

estimated amount of probable bad debts.

between the actual expenditure and the amount provided is

Employees’ severance and retirement benefits — The Company

charged to income in the year repair is completed.

and its consolidated subsidiaries provide two post-employment

Accounting for certain lease transactions — Finance leases

benefit plans, an unfunded lump-sum payment plan and awhich do not transfer ownership to lessees are accounted forfunded non-contributory pension plan, under which allin the same manner as operating leases under accounting

eligible employees are entitled to benefits based on the level

principles generally accepted in Japan.

of wages and salaries at the time of retirement or termination,

Income taxes — Income taxes comprise corporation tax andlength of service and certain other factors.

inhabitants taxes. The Company adopted the accounting

At March 31, 2000, the Company and its consolidated

standard, which recognizes tax effects of temporary differ-subsidiaries accrued a liability for lump-sum severanceences between the financial statement basis and the tax basis

payments equal to 100% of the amount required had allof assets and liabilities.

eligible employees voluntarily terminated their employment

Enterprise tax — Enterprise tax normally constitutes income

at the balance sheet date. The Companies recognized pension

taxes. However, in the case of companies engaged in gas

expense when, and to the extent, payments were made tobusinesses, enterprise tax is levied not only on income but

the pension fund.

also on net sales. In the accompanying statements of income,

Effective April 1, 2000, the Companies adopted the newenterprise tax levied on net sales is accounted for in “Selling,accounting standard, “Opinion on Setting Accounting Stan-general and administrative” expenses in the amount of

dard for Employees’ Severance and Pension Benefits”, issued¥9,923 million ($80,675 thousand) and ¥9,006 million forby the Business Accounting Deliberation Council on June 16,

the years ended March 31, 2001 and 2000, respectively.

1998 (the “New Accounting Standard”).

Enterprise taxes calculated based on profit of certain

Under the New Accounting Standard, allowance andconsolidated subsidiaries are included in income taxes.

expenses for severance and retirement benefits are deter-

Foreign currency translation — Short-term receivables andmined based on the amounts actuarially calculated using

payables denominated in foreign currencies are translated

certain assumptions.

into Japanese yen at the year-end rates. Prior to April 1,

The Company and its consolidated subsidiaries provided
allowance for employees’ severance and retirement benefits

2000, long-term receivables and payables denominated inforeign currencies were translated at historical rates.

at March 31, 2001 based on the estimated amounts of theEffective April 1, 2000, the Company and its consolidated

projected benefit obligation and the fair value of the plansubsidiaries adopted the Revised Accounting Standard for

assets at that date.

foreign currency translation.

The excess of the projected benefit obligation over the fairDue to the adoption of the Revised Accounting Standard,value of pension assets as of April 1, 2000 and the liabilities

the Company reports foreign currency translation adjust-for severance and retirement benefits recorded as of April 1,

ments in shareholders’ equity. The prior year’s amount,2000 (the “net transition obligation”) amounted to ¥21,777

which is included in assets, has not been reclassified.

million ($177,049 thousand), all of which was recognized as
expense in the year ended March 31, 2001.

The effect on the consolidated income statement of
adopting the Revised Accounting Standard was immaterial.

As a result of the adoption of the New Accounting Standard,

Amounts per share of common stock — The computations ofin the year ended March 31, 2001, income before income

net income per share are made based on the weighted-averagetaxes decreased by ¥8,430 million ($68,536 thousand) com-

number of shares outstanding during each fiscal year.

pared with what would have been recorded under the

Cash dividends per share have been presented on anprevious accounting standard.

accrual basis and include dividends approved or to be

Allowance for repairs of gas holders — The Company andapproved after the balance sheet dates, but applicable to thecertain of its consolidated subsidiaries provide for futureyear then ended.

repairs of gas holders, which occur once approximately every
TOKYO GAS Annual Report 2001

3. Property, plant and equipment
Property, plant and equipment is generally recorded at cost.

contributed amount is offset against the acquisition cost of the

However, in cases where the Company receives contributions

subject asset. Such offset amount accumulated to March 31,

towards the cost of construction from customers, such

2001 was ¥222,972 million ($1,812,780 thousand).

4. Securities
The following tables summarize acquisition costs, book values and fair values of securities with fair value as of March 31, 2001:(a) Held-to-maturity debt securities:
Millions of yen

Securities with fair value exceeding book value:Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥29
31
¥ 2

Thousands of
U.S. dollars

$236
252
$ 16

(b) Available-for-sale securities:
Millions of yen
Acquisition
cost

Book
value

Difference¥13,405
4¥100,475
6¥87,0702

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other securities:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,409100,481

87,072

1,302

1,251

(51)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥14,711¥101,732¥87,021

Securities with fair value exceeding book value:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41

Thousands of U.S. dollars
Acquisition
cost

Book
value

Difference$108,984
32$816,870
49$707,886
17

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other securities:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

109,016

816,919

707,903

10,585

10,170(415)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$119,601$827,089$707,488

Securities with fair value exceeding book value:
Equity securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost of sales, sales amount, and gain on sale for held-to-

Available-for-sale securities with no available fair values

maturity debt securities sold in the year ended March 31,

were stated at moving-average costs, which amounted to2001 were ¥100 million ($813 thousand), ¥101 million¥9,271 million ($75,374 thousand) at March 31, 2001.

($821 thousand) and ¥1 million ($8 thousand), respectively.

Annual Report 2001 TOKYO GASBook value, market value and net unrealized gains of quoted securities included in current assets and investments at March
31, 2000 were as follows:
Millions of yen

Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 13,726
131,196¥117,470

5. Inventories
Inventories at March 31, 2001 and 2000 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Finished products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2001

2000

2001

¥ 3,127
16,991
7,198
103¥ 2,434
16,322
8,245
59$ 25,423
138,138
58,520838¥27,419¥27,060$222,919

6. Bank loans and long-term debt
At March 31, 2001 and 2000, bank loans consisted of short-term notes, bearing interest at an average annual rate of 0.64%
and 0.52%, respectively.
Long-term debt at March 31, 2001 and 2000 comprised the following:
42

Thousands of
U.S. dollars

Millions of yen

Domestic unsecured notes due 2002 at a rate of 5.6% . . . . . . . . . .
Domestic unsecured notes due 2014 at a rate of 5.1% . . . . . . . . . .
Domestic unsecured notes due 2015 at a rate of 4.1% . . . . . . . . . .
Domestic unsecured notes due 2016 at a rate of 4.0% . . . . . . . . . .
Domestic unsecured notes due 2018 at a rate of 2.625% . . . . . . . .
Domestic unsecured notes due 2009 at a rate of 1.68% . . . . . . . . .
Domestic unsecured notes due 2009 at a rate of 1.73% . . . . . . . . .
Domestic unsecured notes due 2010 at a rate of 2.01% . . . . . . . . .
Domestic unsecured notes due 2004 at a rate of 1.03% . . . . . . . . .
Domestic unsecured notes due 2009 at a rate of 1.18% . . . . . . . . .
Domestic unsecured convertible bonds:
1st issue due 2003 at a rate of 1.5% . . . . . . . . . . . . . . . . . . . . .
2nd issue due 2000 at a rate of 1.5% . . . . . . . . . . . . . . . . . . . . .
3rd issue due 2005 at a rate of 1.5% . . . . . . . . . . . . . . . . . . . . .
4th issue due 2002 at a rate of 1.5% . . . . . . . . . . . . . . . . . . . . .
5th issue due 2009 at a rate of 1.2% . . . . . . . . . . . . . . . . . . . . .
6th issue due 2007 at a rate of 1.1% . . . . . . . . . . . . . . . . . . . . .
Swiss franc notes due 2002 at a rate of 4.5% . . . . . . . . . . . . . . . . .
DM bearer bonds due 2005 at a rate of 7.0% . . . . . . . . . . . . . . . . .
Domestic secured notes due 2003 at a rate of 2.0% . . . . . . . . . . . .
Loans from banks, insurance companies and government agencies
due through 2028 at rates of 0.88% to 7.80%:
Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less — Amounts due within one year . . . . . . . . . . . . . . . . . . . . . . .

TOKYO GAS Annual Report 2001

2001

2000

–
30,00027,90030,00040,00030,00030,00020,0003,000
4,000¥ 35,000
30,00030,00030,00040,00030,00030,000–––55,247–
90,207
95,73649,99849,993
14,81018,333800

58,79139,80897,594
98,95849,99849,993
14,81018,333800

449,163–
733,390778,342
406,488406,447
120,407
149,049
6,504

14,695
225,484

15,201
246,158

119,471
1,833,203

830,203
121,874

915,444
71,8106,749,618
990,846¥708,329¥843,634$5,758,772

¥

2001

$

–
243,902226,829
243,902
325,203
243,902
243,902
162,602
24,391
32,521

The indentures covering the first through sixth (except thesecond) domestic convertible bonds provide, among other($192,561 thousand) were pledged as collateral for securedloans and notes issued by consolidated subsidiaries.

conditions, for (1) conversion into shares of common stock at

As is customary in Japan, a lending bank has the right tothe current conversion prices per share of ¥1,267.90

offset cash deposited with it against any debt or obligation($10.31), ¥1,105.70 ($8.99), ¥1,105.70 ($8.99), ¥339.00

that becomes due and, in the case of default or certain other($2.76) and ¥339.00 ($2.76), respectively (subject to adjust-specified events, against all debt payable to the bank. To

ment in certain circumstances), (2) conversion periods

date no such offset request has been made to the Company

through September 2003, March 2005, March 2002, Marchand its consolidated subsidiaries.

2009 and March 2007, respectively, and (3) redemption

Certain of the loan agreements provide, among otherat the option of the Company, commencing in Octoberthings, that, upon request, the Company and domestic sub-1996 for the 1st issue, April 1998 for the 3rd and April 1996

sidiaries submit to the lenders for approval of their proposed

for the 4th, at prices ranging from 106% to 100% of theappropriation of income (including dividends) before suchprincipal amount.

appropriation is submitted to the stockholders. Neither the

At March 31, 2001, investment securities and property,
and equipment at book value amounting to ¥23,685 million

Company nor any of its consolidated subsidiaries has everreceived any such request.

The annual maturities of long-term debt at March 31, 2001 were as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars¥121,874
41,547
95,979112,280
48,933
409,590¥830,203$ 990,846
337,780
780,317912,846
397,829
3,330,000$6,749,618

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. Derivative transactions
The Company and its consolidated subsidiaries use interest rate swap and foreign exchange forward contracts only for the
purpose of mitigating the risk of fluctuations in interest rates and foreign exchange rates.
Contract amounts, market values and recognized gains on the interest rate swap contracts at March 31, 2001 are as follows:
Millions of yen

Currency option contracts:
Purchased cap option . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap contracts:
Floating rate to fixed rate . . . . . . . . . . . . . . . . . . . . . . . .

Contract
amounts

Beyondone yearMarketvalue

Recognizedgains¥3,000¥3,000

¥10

¥10

3,000

3,000

11

11

Thousands of U.S. dollars

Currency option contracts:
Purchased cap option . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap contracts:
Floating rate to fixed rate . . . . . . . . . . . . . . . . . . . . . . . .

Contract
amounts

Beyondone yearMarketvalue

Recognized
gains$24,390$24,390$81$81

24,39024,39089

89Annual Report 2001 TOKYO GAS

43

Contract amounts, market values and unrealized gains on the interest rate swap contracts at March 31, 2000 were as follows:
Millions of yen

Currency option contracts:
Purchased cap option . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swap contracts:
Floating rate to fixed rate . . . . . . . . . . . . . . . . . . . . . . . .

Contract
amounts

Beyondone yearMarketvalue

Unrealized
gains (losses)¥3,000¥3,000

¥93

¥93

3,000

3,000

(4)

(4)

Prior to April 1, 2000, derivative financial instruments were not stated at fair value, and the changes in fair values were notrecognized as gains or losses.

8. Employees’ severance and retirement benefits
As explained in Note 2, effective April 1, 2000, the Company

under which allowance and expenses for severance andand consolidated subsidiaries adopted the new accounting

retirement benefits are determined based on the amounts

standard for employees’ severance and retirement benefits,obtained by actuarial calculations.

Allowance for severance and retirement benefits included in the liability section of the consolidated balance sheet as of March
31, 2001 consists of the following:

44

Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized actuarial differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less fair value of pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for severance and retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . .

Millions of yen

Thousands of
U.S. dollars¥ 302,989(16,595)(152,178)¥ 134,216$ 2,463,325(134,919)(1,237,219)$ 1,091,187

Included in the consolidated statement of income for the year ended March 31, 2001 is severance and retirement benefit
expense comprised of the following:

Service costs – benefits earned during the year . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost on projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
One-time amortization of all net transition obligation . . . . . . . . . . . . . . . . . . . . . .
Severance and retirement benefit expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Millions of yen

Thousands of
U.S. dollars¥ 9,939
8,967(4,557)(3,950)24
21,777¥32,200$ 80,805
72,902(37,049)(32,114)
195
177,049$261,788

This discount rate and the rate of expected return on plan

years. Past service costs are recognized as expense in one

assets used by the Company are approximately 3%, respec-

year, and actuarial gains and losses are recognized as income

tively. The estimated amount of all retirement benefits to be

and expense using the straight-line method over approxi-

paid at the future retirement date is allocated equally to eachmately 10 years commencing with the next year.

service year using the estimated number of total service

TOKYO GAS Annual Report 2001

9. Income taxes
The Company is subject to a number of taxes based on income, which, in the aggregate, indicate statutory rate in Japan ofapproximately 36.2% for the years ended March 31, 2001 and 2000, respectively.
The following table summarizes the significant differences between the statutory tax rate and the Company’s effective tax rate
for financial statement purposes for the years ended March 31, 2001 and 2000:
Statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax rate difference between gas business (36%) and others (42%) . . . . . . . . . .
Unrecognized net operating loss of consolidated subsidiary . . . . . . . . . . . . . . .
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2001

2000

36.2%
0.4
0.4
1.6
38.6%

36.2%
1.2
.–
1.0
38.4%

Significant components of deferred tax assets and liabilities as of March 31, 2001 and 2000 are as follows:
Thousands of
U.S. dollars

Millions of yen
2001

2000

2001

¥36,842
26,093¥33,637
19,659$299,528
212,138

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities:
Net unrealized holding gains on securities . . . . . . . . . . . . . . . . . .
Reserve for tax-purpose cost reduction of certain pipelines . . . . .
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62,93553,296511,666

31,872
2,508
3,604

–
2,509
1,989

259,122
20,39029,301

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

37,984

4,498

308,813

Net-total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥24,951¥48,798$202,853

Deferred tax assets:
Liabilities for retirement benefits . . . . . . . . . . . . . . . . . . . . . . . . .
Other-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10. Stockholders’ equity
At the current conversion prices, 529,762 thousand shares of

to at least 10% of cash dividends and bonuses to directors

common stock were issuable at March 31, 2001 upon full

until the reserve equals 25% of common stock. This reserve isconversion of the outstanding convertible bonds (see Note 6).

not available for dividends but may be used to reduce a deficit

Under the Commercial Code of Japan (the “Code”), atby resolution of the stockholders’ meeting or transferred toleast 50% of the issue price of new shares, with a minimum

common stock by resolution of the Board of Directors. Legal

equal to par value thereof, is required to be designated as

reserve is included in retained earnings in the accompanying

stated capital. The portion which is not transferred to statedconsolidated balance sheets.

capital is determined by resolution of the Board of Directors.

The maximum amount that the Company can distribute

Proceeds not transferred to stated capital are credited toas dividends is calculated based on the unconsolidated

additional paid-in capital.

financial statements of the Company in accordance with

Under the Code, the Company is required to appropriate

the Commercial Code of Japan.

as legal reserve a certain amount of retained earnings equal

Annual Report 2001 TOKYO GAS

45

11. Segment information
The Company’s primary business activities include (1) gas sales, (2) gas appliance sales, (3) related construction, (4) real estate
rental business and (5) other business.
A summary of net sales, costs and expenses, operating income, identifiable assets, depreciation and capital expenditures is as follows:
Millions of yen
Gas appliance
RelatedReal estate
sales
construction rental business

Gas sales

For 2001:
Sales:
Outside customers . . . . . .
Inside group . . . . . . . . . . .

46

Other

Elimination or
corporate

Consolidated¥ 740,731–¥145,435
1,082¥67,611
4,297¥ 15,602
21,999¥117,392
42,186¥–(69,564)¥1,086,771–
1,086,771

740,731

146,51771,90837,601

159,578(69,564)

Costs and expenses . . . . . . .

590,785

139,889

67,95229,515

149,451

5,520

Operating income . . . . . . . .

¥ 149,946

¥

6,628

¥ 3,956¥

8,086¥ 10,127¥(75,084)¥

Identifiable assets . . . . . . . . .
Depreciation . . . . . . . . . . . .
Capital expenditures . . . . . .

¥1,125,541
119,704
98,101¥ 58,026
651
548¥22,713138
104¥240,975
12,7272,049¥224,972
14,320
10,181¥125,441(1,120)(1,084)¥1,797,669
146,420
109,899

For 2000:
Sales:
Outside customers . . . . . .

¥ 672,070¥126,747¥63,949¥ 14,959¥114,530¥–¥ 992,255

Inside group . . . . . . . . . . .

–

1,169

4,703

22,88344,290(73,045)–

Costs and expenses . . . . . . .

672,070
530,686

127,916
125,139

68,652
66,70037,84229,588

158,820
147,323(73,045)
23,586992,255
923,022

Operating income . . . . . . . .

¥ 141,384

¥

2,777

¥ 1,952¥

8,254¥ 11,497¥ (96,631)¥

Identifiable assets . . . . . . . . .
Depreciation . . . . . . . . . . . .
Capital expenditures . . . . . .

¥1,148,758
109,108
107,388¥ 53,311754
482¥22,451
169
115¥252,016
12,991
2,283¥224,176
14,16012,741¥104,374(968)(1,203)¥1,805,086
136,214
121,806

Elimination or
corporate

Consolidated

983,112103,659

69,233Thousands of U.S. dollars
Gas sales

Gas appliance
sales

RelatedReal estate
construction rental business

For 2001:
Sales:
Outside customers . . . . . .
Inside group . . . . . . . . . . .

$6,022,203–$1,182,398
8,797$549,683
34,935$ 126,846
178,853$ 954,407
342,976

Costs and expenses . . . . . . .

6,022,203
4,803,130

1,191,195
1,137,309

584,618
552,455

305,699
239,959

1,297,383
1,215,050

Operating income . . . . . . . .

$1,219,073$

53,886$ 32,163$

Identifiable assets . . . . . . . . .
Depreciation . . . . . . . . . . . .
Capital expenditures . . . . . .

$9,150,740
973,203797,560$ 471,756
5,293
4,455

$184,659
1,122
846$1,959,146
103,472
16,65965,740Other$82,333$1,829,041
116,423
82,772$– $ 8,835,537(565,561)–(565,561)
44,878

8,835,537
7,992,781$ (610,439) $842,756$1,019,846 $14,615,195(9,106)
1,190,407(8,813)
893,488

Assets in the corporate column mainly comprise current andCompany having no overseas consolidated subsidiaries.

non-current securities and deferred tax assets of the Company.

Information for overseas sales is not disclosed due to overseas

Geographic segment information is not shown due to thesales being immaterial compared to consolidated net sales.

TOKYO GAS Annual Report 2001

12. Information for certain leases
Finance leases which do not transfer ownership to lessees are accounted for in the same manner as operating leases.
Thousands of
U.S. dollars

Millions of yen

Information as lessee:

2001

2000

2001

Lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 858¥1,053$ 6,976

Future minimum lease payments inclusive of interest:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 709
1,539

¥ 776
1,032

$ 5,764
12,512¥2,248¥1,808$18,276

The Company uses certain production facilities, distribution facilities, service and maintenance facilities and other assets underlease arrangements. An analysis of equivalent amounts of leased assets under non-capitalized finance leases is as follows:
Millions of yen
Acquisitioncost

For 2001:
Production facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and maintenance facilities . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For 2000:
Production facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and maintenance facilities . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accumulated
depreciation

Net book
value

¥ 105
692
371
3,488

¥

75
370
273
1,690

¥

30
322
98
1,798

¥4,656¥2,408¥2,248

¥ 110
758
425
4,415

¥

55
377
261
3,207

¥

¥5,708¥3,900¥1,808

47

55
381
164
1,208

Thousands of U.S. dollars
Acquisitioncost

For 2001:
Production facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and maintenance facilities . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$Accumulated
depreciation

854
5,626
3,016
28,358

$

610
3,008
2,219
13,740$$37,854$19,577$18,277

244
2,618
797
14,618

Thousands of
U.S. dollars

Millions of yen

Amount representing lease depreciation . . . . . . . . . . . . . . . . . . . . .

Net book
value

2001

2000

2001

¥858

¥1,053$6,976

Annual Report 2001 TOKYO GASThousands of
U.S. dollars

Millions of yen

Information as lessor:

2001

2000

2001

Lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 4,326¥ 4,359$ 35,171

Future lease payments to be received:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 3,847
11,422¥ 4,243
10,107$ 31,276
92,862¥15,269¥14,350$124,138

Some of the consolidated subsidiaries use assets under direct finance leases of other assets. An analysis of leased assets under
direct finance lease is as follows:
Millions of yen
Acquisition
cost

Accumulated
depreciation

Net bookvalue

For 2001:
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥23,961¥14,571¥9,390For 2000:
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥24,532¥16,081¥8,451Thousands of U.S. dollars

48

For 2001:
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquisition
cost

Accumulated
depreciation

Net book
value$194,805$118,463$76,342
Thousands of
U.S. dollars

Millions of yen

Lease depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2001

2000

2001

¥2,307¥2,684$18,756

13. Commitment and contingent liabilities
The Company and its consolidated subsidiaries were contin-

1999. At the same date, some consolidated subsidiaries were

gently liable (1) to banks in the amount of ¥4,411 million

contingently liable with respect to trade notes receivable($35,862 thousand) at March 31, 2001 with respect to joint

discounted with banks in the amount of ¥223 million

and several liabilities upon default of debtors and (2) as guar-($1,813 thousand).

antors for the in-substance defeasance of domestic

At March 31, 2001, the Company had several long-term

unsecured notes in the amount of ¥65,000 million

purchase contracts for the supply of LNG. The purchase price($528,455 thousand) issued by the Company, which were

determinable under such contracts is contingent uponassigned to certain banks under the debt assumption agree-

fluctuations in the market price of crude oil.

ments made through the years ended March 31, 2001 and
14. Subsequent events(A) Debt assumption agreements(B) Appropriation of retained earnings

On June 28, 2001, the Board of Directors decided to enter

At the annual meeting held on June 28, 2001, the Company’s

into a debt assumption agreement with certain banks fromstockholders approved (1) payment of year-end cash divi-

July 1, 2001 to July 31, 2001 to transfer ¥ 10,000 million

dends of ¥3.5 ($0.03) per share aggregating ¥9,835 million($81,301 thousand) of domestic unsecured notes due 2014($79,959 thousand) to the stockholders of record as of Marchat a rate of 5.1%.

31, 2001, and (2) payment of bonuses to directors totaling¥79 million ($642 thousand).

TOKYO GAS Annual Report 2001

Report of Independent Public Accountants

To the Stockholders and the Board of Directors of TOKYO GAS CO., LTD. :We have audited the accompanying consolidated balance sheets of TOKYO GAS CO., LTD. (a Japanese corporation) and subsidiaries as of March 31, 2001 and 2000, and the related consolidated statements of income, stockholders’ equity and cash flows
for the years then ended, expressed in Japanese yen. Our audits were made in accordance with generally accepted auditing
standards in Japan and, accordingly, included such tests of the accounting records and such other auditing procedures as we
considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above present fairly the consolidated financial position ofTOKYO GAS CO., LTD. and subsidiaries as of March 31, 2001 and 2000, and the consolidated results of their operations andtheir cash flows for the years then ended in conformity with accounting principles generally accepted in Japan applied on aconsistent basis during the periods, except as noted in the following paragraph.
As explained in Note 2, in the year ended March 31, 2001, TOKYO GAS CO., LTD. and subsidiaries adopted new Japanese
accounting standards for financial instruments and employees’ severance and retirement benefits and the revised accounting
standard for foreign currency translation.
Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated financial statements have been translated fromJapanese yen on the basis set forth in Note 1.

Tokyo, Japan
June 28, 2001

Statement on Accounting Principles and Auditing Standards
This statement is to remind users that accounting principles and auditing standards and their application in practice may vary
among nations and therefore could affect, possibly materially, the reported financial position and results of operations. The
accompanying financial statements are prepared based on accounting principles generally accepted in Japan, and the auditing
standards and their application in practice are those generally accepted in Japan. Accordingly, the accompanying financial
statements and the auditors’ report presented above are for users familiar with Japanese accounting principles, auditing
standards and their application in practice.

Annual Report 2001 TOKYO GAS

49

Energy Statistics

Share of Natural Gas in Total Primary Energy Supply (2000)
Japan
Coal 19.3%

U.S.A.
Coal 24.8%

Petroleum 49.6%

Hydro
1.6%

EuropePetroleum 39.4%

Coal 19.1%

Hydro
2.9%

Hydro
1.0%

Nuclear
16.1%

Petroleum 41.4%

Nuclear13.9%

Nuclear
9.0%
Natural Gas
13.4%

Natural Gas
22.7%

Natural Gas
25.8%

Source: BP Amoco Statistical Review of World Energy 2001

Use of Gas* by Sector (1999)
Japan

U.S.A.

Electricity
65.6%

OECD Europe

Electricity
27.8%

Residential &Commercial
20.6%

Electricity
24.6%

Residential &Commercial
36.0%

Residential &Commercial
42.1%

Industrial
13.8%

50

Industrial
33.3%

Industrial
36.2%* Includes manufactured gas
Source: IEA, Energy Balances of OECD Countries, 1998–1999

Japan’s City Gas Supply by Feedstock Type
Units: million MJ
Figures in vertical bars: % of total
1,200,000

1,000,000

800,000

600,000 601,219
7.0
6.0

632,280
5.5
5.9

664,681

720,849
2.2

2.9

5.8

762,706
2.0

892,398
1.4

821,0871.8

828,369
1.5

5.6

5.5

73.6

75.3

75.7

5.4

923,946
1.3

952,9451.0
5.5

967,564
1.0

1,021,645
1.0

1,061,045
0.9
5.8

5.6

5.6

5.4

5.7

6.0
77.5

79.2

80.1

80.6

81.5

72.3
71.3

400,000

66.6

69.8

64.7

Coal and Coke
Indigenous Natural Gas
LNG
LPG
NaphthaOthers
Source: Japan Gas Association

200,000

17.2

18.1

17.8

17.1

16.6

15.8

14.8

14.4

13.1

12.0

11.2

10.8

10.3

0

2.7
2.4

1.8
2.1

1.4
2.1

1.6
2.0

1.5
1.9

1.5
1.7

1.3
1.6

1.5
1.6

1.2
1.5

0.9
1.4

0.5
1.6

0.5
1.5

0.3
1.2

Mar. 31

89

90

91

92

93

94

95

96

97

98

99

00

01

TOKYO GAS Annual Report 2001

Share of Japan’s GDP by Area
(For year ended March 31, 1999)

Japan’s
GDP

Tokyo
Area
38.3%

Population of the Tokyo, Osaka,
and Nagoya Areas

Comparison of Tokyo Gas, OsakaGas, and Toho Gas Sales Volumes(As of October 1, 2000)(in thousands)(For year ended March 31, 2001)(Millions of m3, 46.047 MJ/m3)
Tokyo Area
40,547

Japan
126,999

Tokyo Gas
8,872

All of Japan
22,742
Toho Gas
2,226

Osaka
Area
16.6%

Nagoya Area
9.3%

Nagoya Area
11,008Source: Cabinet OfficeOsaka Area
20,856

Osaka Gas
7,407

Source: Ministry of Public Management, Home Affairs,
Posts and Telecommunications

Notes: 1. The Tokyo Area includes Tokyo, Kanagawa, Saitama, Chiba, Ibaraki, Tochigi, Gunma, Yamanashi and Nagano prefectures.
The Osaka Area includes Osaka, Hyogo, Kyoto, Shiga, Nara and Wakayama prefectures.
The Nagoya Area includes Aichi, Gifu and Mie prefectures.
2. The GDP for each of the above areas is the sum of the GDP of the prefectures listed.

METI’s Long-term Energy Supply Outlook for Japan (2001)(Unit: Million kl crude oil equivalent)
800

700

1.6
1.1

600
500

0.2

3.6
13.0
12.7

0.2

3.0

Hydro
14.0

21.9

NuclearNatural Gas

19.0

300
200

Geothermal

15.0
13.2

Coal
Oil
52.0

45.0

45.0

100
0
1999 (Actual)

2010 (Status Quo)

1999
(Actual)2010(Status Quo)

2010
(Target)Primary Energy Supply

593

622

602

New Energy Sources

7

10

20

Geothermal

1

1

1

Hydro

21

20

20

Nuclear

77

93

93

New Energy Sources

3.0

15.0

400
17.4

0.2

3.2

Natural Gas

75

82

83

Coal

103

136

114

Oil

308

280

271

51

Source: Advisory Committee for Natural Resources and Energy
Coordination Subcommittee / Energy Supply and Demand Subcommittee2010 (Target)

Status Quo: Current energy policy framework.
Target:
The composition of energy sources that will contribute to reduced CO2 emissions if energy conservation measures are taken and new energy sources developed.

Imports of LNG: Japan and Tokyo Gas(Units: thousands of tons)

60,00054,10052,11250,00048,34949,47846,44543,68940,00039,98537,952

33,041

30,00029,67827,831

20,00020,642
16,99814,85810,000
8,247
5,005

Japan
Tokyo Gas

2,364

0Mar. 31

182 84

70

970

242

72

629

74

1,039

76

1,441

78

1,587

80

1,677

82

2,312

84

2,840

86

3,182

88

3,598

90

4,202

92

4,991

94

5,484

96

5,999

97

6,004

98

6,149

99

6,192

00

6,500

01

Annual Report 2001 TOKYO GASOrganization

Service Planning Dept.

Customer Service Division

Board of Directors

Service Promotion Dept.

11 Service Branches
Chairman of the Boardof Directors

Residential Market Planning Dept.

President
Executive Vice Presidents
Senior Managing Directors

Residential Sales
and Service Division

Managing Directors

Residential Sales Promotion Dept.
Residential Market Development
Dept.
Residential Service Dept.

Energy Sales and Service Planning
Dept.
Air-conditioning and Commercial
Customer Development andService Dept.

Secretary Dept.
Audit Dept.
Corporate Planning Dept.

52

Energy Sales
and Service Division

Industrial Gas Sales Dept.

Environmental Affairs Dept.

Energy Solution Business Dept.

International Affairs Dept.

Natural Gas Vehicle Dept.

General Administration Dept.

Energy Systems Engineering Dept.

Corporate Communications Dept.

Volume Sales Dept.

Personnel Dept.
Accounting and Finance Dept.
Purchasing Dept.
Gas Resources Dept.

Inter-Regional Planning Dept.
Inter-Regional Sales
and Service Division

7 Service Branches

Information and Communication
Systems Dept.
Center for Supply Control andDisaster Management
Land Renewal Dept.

Inter-Regional Marketing &Sales Dept.

Pipeline Dept.
Pipeline and Safety
Management Division

Appliance and Facility Dept.
5 Pipeline Regional Offices

Negishi LNG Terminal

Corporate Auditors
Production Division

Sodegaura LNG Terminal
Ohgishima LNG Terminal
Production Dept.

Corporate Auditors’ Office
Affiliated Companies
DivisionR&D Division

Affiliated Companies Dept.
(Affiliated Companies)

R&D Planning Dept.
Technology Development Dept.

(As of June 28, 2001)

TOKYO GAS Annual Report 2001

Corporate Information

ProfileTokyo Gas, Japan’s largest gas company, is the dominant player in the greater Tokyo/Kanto Plainmarketplace, where demand potential is enormous. Capital investments we have made have

Tokyo Gas Co., Ltd.

Asia Pacific Regional Office

Head Office

Level 30, Menara Shahzan lnsas

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

No. 30 Jalan Sultan lsmail, 50250 Kuala Lumpur, Malaysia

Tel: +81-3-5400-7561

Tel: +60-3-2144-2928

Fax: +81-3-5472-5385

Overseas Representative Offices
New York Representative Officepositioned us to capitalize on this potential as well as on business opportunities being spawned

The Chrysler Building, 405 Lexington Avenue, 33rd Floor

by deregulation in Japan’s energy sector. Technology will also drive growth. We intend to actively

New York, NY 10174, U.S.A.

propose new technologies for using gas to spur demand. Furthermore, Tokyo Gas is striving toTel: +1-646-865-0577

transform into a diversified energy services company, supplying heat and electricity as well as

Paris Representative Officegas, with natural gas as the core energy source. “Energy Frontier,” the new corporate slogan,

Fax: +1-646-865-0592

Fax: +60-3-2144-2930

Beijing Representative Office909 Beijing Fortune Building
No. 5 DongSanHuanBei-Lu, Chao Yang-Qu
Beijing 100004, People’s Republic of China
Tel: +86-10-6590-8450/8451

Fax: +86-10-6590-8452

102, Avenue des Champs-Elysées, 75008 Paris, France
Tel: +33-1-45-62-00-59

Fax: +33-1-42-25-96-85

embodies this drive. Tokyo Gas believes this strategy is the best way to maximize corporate
value and meet the expectations of its customers and shareholders.

Investor Information

Date of Establishment

Publications

October 1, 1885

The following English-language publications are available:

Authorized Number of Shares

Contents

6,500,000,000 shares

[1]
[2]
[4]
[8]

Issued Number of Shares (as of March 31, 2001)

[10]
[12]
[14]
[16]
[18]
[19]
[20]
[22]
[24]
[25]
[50]
[52]
[53]

Financial Highlights
Our Position in the Market
Message From Management
At the Frontier of ChangeEntering New Fields—Toward Becoming a Diversified Energy Services Company
More Reasons to Choose Tokyo Gas
Building a More Powerful Supply Infrastructure and Strengthening Procurement
A Focus on Technological Innovation
Environmental Conservation
SafetyOn the cover:
Corporate Citizenship
Upper Middle: The Shinjuku Park Tower, located in a
International Operations
Shinjuku redevelopment district, uses a
Diversification
DHC system.
Board of Directors
Financial Statements
Energy Statistics
Organization
Corporate Information/Investor Information

Lower Middle: The flame represents a source of energy.
Left:
LNG carriers like this one ensure a stablesupply of natural gas.
Right:
This artificial diamond was created using
natural gas.

2,810,012,006 shares
Number of Stockholders (as of March 31, 2001)
202,328• Annual Report 1999
• Annual Report 2000

53

• TG Minutes (Quarterly Newsletter)• Environmental Report 2001
Internet Address
http://www.tokyo-gas.co.jp/index_e.html
Further Information

Cash Dividends Applicable to the YearFor further information and additional copies of this report¥6.00

and other publications, please contact:

Securities Traded

IR Section, General Administration Dept.

Common stock: Tokyo, Osaka and Nagoya stock exchanges

Planning Section, International Affairs Dept.

Independent Auditors

Tel: +81-3-5400-7561

Asahi & Co. (A Member Firm of Andersen Worldwide SC)

Fax: +81-3-5472-5385

Transfer Agent

E-mail: tgir@tokyo-gas.co.jp

Japan Securities Agents, Ltd.
2-4, Nihonbashi Kayabacho 1-chome, Chuo-ku
Tokyo 103-8202, Japan

Units

Forward-Looking Statements
Statements made in this annual report with respect to Tokyo Gas’ plans, strategies and beliefs, and other statements that are not expressions of fact are forwardlooking statements about the future performance of the company. As such, they are based on management’s assumptions and opinions stemming from currently
available information, and therefore involve risks and uncertainties. These risks and uncertainties include, without limitation, general economic conditions in Japan, theexchange rate between the yen and the U.S. dollar, and Tokyo Gas’ ability to continue to adapt to rapid technological developments and deregulation.

1 metric ton = 2,204.62 lb.
1 kilocalorie (kcal) = 4.187 kJ = 3.968 Btu
1 megajoule (MJ) = 239 kcal = 948 Btu
1 British thermal unit (Btu) = 0.252 kcal = 1.055 kJ
1 kilowatt-hour (kWh) = 860 kcal = 3.6 MJ = 3,412 Btu

Annual Report 2001 TOKYO GASTOKYO GAS CO., LTD.

5-20, Kaigan 1-chome, Minato-ku, Tokyo 105-8527, Japan
http://www.tokyo-gas.co.jp/index_e.html

ANNUAL REPORT 2001

At
The Frontier
Of Change
TOKYO GAS CO., LTD.

Annual Report 2001
For the year ended March 31, 2001

Printed in Japan on Recycled Paper