Contents

Tokyo Gas will invest in growth areas while
ensuring asset efficiency and financial soundness
We have increased sales and profits by better
procurement of raw materials and expansionof overseas business
In FY2021 (ended March 31, 2022), the businessenvironment was severe especially due to rising raw
material costs. However, we made fastidious adjustments
in supply and demand conditions of LNG, such as
improving the accuracy of demand forecasts and utilizing
the flexibility of the assets we hold, and we were able tocontrol to a high degree the procurement of LNG in the spot
market where prices were rising. As raw material prices
and demand are fluctuating more dramatically at this time,
management of these risks has become a major issue.
We believe that we benefited from our procurement
portfolio being centered on long-term contracts and throughour efforts of the past few years to improve the optimizingof operations through supply and demand adjustments, andthis has led to the superiority of raw material procurement.
In the overseas segment, rising resource prices led tohigher profits from the upstream business in Australia andalso to higher profits from the shale gas business in North
America due to a company that became a consolidated
subsidiary in the 3Q of FY2020. This resulted in asignificantly high increase of 625.2% in profits over theprevious fiscal year.
Consequent to these results, our profits and revenues
in FY2021 increased from the previous fiscal year andfrom the initial plan.

We will consolidate efforts for success of theMedium-term Management Plan, including
optimization of LNG supply and demand, andimplement cost structure reforms, to achieve
our profit targets
In FY2022, the final year of the three-year Medium-termManagement Plan, our latest plan of 143.5 billion yen insegment profit (operating profit + equity method profit)
exceeds the target in our Mid-term Management Plan.
We know that we are facing similar challenges as in theprevious year, such as the rise in crude oil and LNG
prices caused by the destabilization of the internationalsituation. However, we believe that our profit forecast is
sufficiently achievable, given that the efforts over theMedium-term Management Plan period such as
optimization of LNG supply and demand as well as cost
structure reforms are already bearing fruit.
As a driving factor behind the profit increase, our initial
forecast of 25.3 billion yen in segment profit for the ElectricPower Business exceeds its profit level of the past few
years, due mainly to an increase in wholesale electricity
sales volume. The Overseas Business is also expected toincrease profit to 37.4 billion yen, with a contribution by
an increase in profit from the upstream business inAustralia, mainly due to the rise in crude oil prices.
On the other hand, ROE and ROA—the financial
indicators set forth in our Medium-term ManagementPlan, are currently expected to be below our targets. Themain reason for this is the increased size of the assetsthat have been driven by aggressive business
investments over the past few years. As we aim tobalance profit growth and asset efficiency improvement,
we will introduce new management controls at each of
our internal companies and business corporations under
the holdings type group structure, which was launched inApril. In FY2022 we will start using an advanced Profit/Loss (P/L) management approach designed to improvethe earning power of companies and businesscorporations. From the next fiscal year onwards, we
intend to develop this into a Balance Sheet (B/S)
management arrangement and aim for each company
and business corporation to improve asset efficiency
through changing the makeup of its own business assets
and other means.

Introduction
CEO’s Message
How We Create Value

Compass2030
Overall Strategy

CFO’s Message
Progress of the Medium-termManagement Plan and KPIs
Challenge 1: Leadership in the effort
to achieve Net-Zero CO2
Challenge 2: Establishment a value
co-creation ecosystem
Challenge 3: Transformation of theLNG value chain

Invisible Assets
Information Disclosure Basedon TCFD Recommendations
Corporate GovernanceBusiness Overview
Financial DataManaging Executive Officer and CFO

SATO Hirofumi

Web Site

Investor Relations Website
Investors’ Guide (Financial
Data and Industry Data)
Financial Results
Presentation Materials
Financial Results Bulletin
Corporate Governance
ReportTokyo Gas Group Integrated Report 2022

21

Sustainability ReportContents

By 2030, we will invest approximately 2 trillion
yen in decarbonization and other growth toraise profits to approximately 200 billion yen
Compass Action, which is a detailed roadmap for achieving
Compass2030, states the plan calls for investing around 2
trillion yen in growth areas by 2030, including approximately
700 billion yen in the decarbonization area, such as forrenewable energy and hydrogen-related technology
development. In order to carry out these investments, wemust simultaneously address many challenges, including
the financial arrangements, ensuring financial soundness,and improving asset and capital efficiency.
Above all, we need to increase operating cash flow, orin other words, earning power. It is essential to nurturebusinesses to compensate for the decrease in gas sales
profits caused by liberalization, and we have made many
strategic moves to achieve this. For example, one move
was to enable the Electric Power Business to reach 30
billion kWh in electricity sales volume and 3 million in thenumber of retail customers. The Overseas Business andthe Urban Development Business have also grown tobecome profit pillars. In addition, the Network Business,
which was spun off in April this year, is expected to makemore bold efforts than ever to improve work efficiency viaDX and to review operations in line with the changingtimes, thereby enhancing its earning power. Based onthese initiatives, we will add investment opportunities thatearly contribute to profitability, and aim to achieve the 200
billion yen profit target for 2030.
Some of the investment capital will be externallyfinanced. In recent years, we have been actively making
use of low interest rates but as interest rates have shiftedto a rising phase, we need to devise various newmeasures. We intend to try new methods such as thefurther utilization of transition bonds, which was firstissued in March of this year, and the liquidation of assets
to ensure financial soundness and improve asset efficiency.

We aim to improve corporate value over themedium to long term by allocating 10% of thereturn to investment in the decarbonization area

(early investments in decarbonization + active investment in other growth areas)

By 2030:
Invest approx. JPY2 trillion in decarbonization & other growth areas

1,000

2021

Overall Strategy

CFO’s Message
Progress of the Medium-termManagement Plan and KPIs
Challenge 1: Leadership in the effortto achieve Net-Zero CO2
Challenge 2: Establishment a value
co-creation ecosystem
Challenge 3: Transformation of theLNG value chain

Invisible Assets
Information Disclosure Basedon TCFD Recommendations
Corporate GovernanceBusiness Overview
Financial Data

Gain profits fromgrowth investing

Investment efficiency
1) Disciplined investment: elective investment to maintain financial
Ssoundness
T horoughly evaluate risks and returns in eachproject2) Business portfolio management:
 ell/replace assets with little prospect for selfS
sustained growth
Concentrate resources on targeted business areasWeb Site

Targeted investment in growth areas

Implement reforms tostrengthen businessbaseCompass2030

 upport growth investing by enhancing investment/capital efficiency and by
Semploying effective cash flow management to secure sufficient investment capital trengthen business platform by implementing reforms in first half of 2020s,
S
achieve profit growth from investments in the second half

FY2021
profit actual:
JPY121.5 bln

How We Create Value

Financial strategy supporting investment

 hift investment to decarbonization & other growth areas,
Sand place capital aggressively2,000

CEO’s Message

In response to the Japanese government’s 2050 Carbon
Neutral Declaration in October 2020, we decided to makeTargeted investment in growth areas

Profit(JPY100 mln)

Introduction

our target year of achieving Net-Zero CO2 earlier, to 2050.
In line with this, we have revised our shareholder return
policy and have lowered our target for total return ratio
from 60% to 50%. The reduction of 10% will be used as
quickly as possible as a source for investment inhydrogen and methanation. We are committed tosustainable development by contributing to therealization of a decarbonized society, and to rewarding
our shareholders through the improvement of medium- tolong-term corporate value. We will continue our efforts togain the understanding of our shareholders.
Going forward, various SDGs beyond the preventionof global warming need to be addressed but what we
think critically important is to align these with thesustainable development and corporate value
improvement of the Tokyo Gas Group. We will further
strengthen the disclosure of non-financial information
through integrated reports, etc., so that our efforts andcorporate value will be properly evaluated.

3) Financing:

FY2030 profit:
approx.
JPY200 bln

M onitor total interest-bearing debt vs. cash flow
 ctively use green financing and other newA
financing methods

Financial soundness

4) Shareholder returns:
 rovide timely returns to shareholders on shortP
term performance

Investor Relations Website
Investors’ Guide (FinancialData and Industry Data) rovide returns driven by medium-termP
enterprise value improvements

Financial Results
Presentation Materials

Capital efficiency

Financial Results Bulletin
Corporate Governance
Report2030Tokyo Gas Group Integrated Report 202222Sustainability Report