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Introduction

ManagementMessage

How We Create Value

Compass2030
Vision and Strategy

Invisible
Assets

TCFD

Corporate
GovernanceBusiness
Overview

CEO’s message

Advancing corporate transformation
toward Net-Zero CO2
Taking up the Challenge ofNet-Zero CO2
The novel coronavirus pandemic has shaken theworld in an unprecedented way, and has
threatened the security and safety that we tookfor granted. These circumstances have made us,
as a major energy business operator, even moreaware of our mandate, namely to “never everstop the energy supply.” We have made every
effort to ensure a stable supply of gas andelectricity. At this time of a national crisis, TokyoGas has served its customers as faithfully andreliably as in the past.
The world is steadily moving toward a moresustainable society, despite being shaken by the
COVID-19 pandemic. In particular, the trend
toward decarbonization is accelerating, and sincePrime Minister Suga declared in October 2020
that Japan aims at becoming carbon neutral,widespread efforts to achieve decarbonization
have begun and are gaining momentum. This

trend can be said to be a paradigm shift that will
significantly change the economy and society. Itis incumbent on Tokyo Gas to be alert to this andact accordingly.
In November 2019, Tokyo Gas announced inits statement of its future management vision,Compass2030, a goal of “taking leadership in theeffort to achieve Net-Zero CO2 emissions” as oneof the company’s management issues and has
started to take up this challenge.

Reducing CO2 emissions duringtransition to Net-Zero CO2
We foresee several stages before reaching NetZero CO2. We are now in a transition period
toward full energy transition anddecarbonization, during which an emphasis isassigned to the reduction of CO2 emissions. Thisis just a beginning; we know it will be a long haulon the road to decarbonization. That journey will
require innovation and large-scale investment
extending across diverse areas and over a long

Representative Corporate Executive Officer,
President and CEO

UCHIDA Takashi

Tokyo Gas Integrated Report 2021
12Financial Data

Back To Contents

Introduction

Management
Message

How We Create Value

Compass2030
Vision and Strategy

Invisible
Assets

TCFD

Corporate
GovernanceBusinessOverview

Financial Data

CEO’s messagetime. In the near term, our emphasis is on
reduction of CO2 emissions, and of the amount of
CO2 stored in the atmosphere. Tokyo Gas
considers the transition period to last to around2030, and is working on the following initiatives.
The first is the advanced use of natural gas.
For example, we anticipate use of energy inurban redevelopment areas and industrial parks
will be advanced by adopting smart energy
network technology. We also introduce highefficiency gas equipment, such as our residentialuse fuel cell ENE-FARM and promote replacementof industrial fuels from heavy oil and coal withnatural gas. By doing so, our customers will beable to significantly reduce CO2 emissions.
The second initiative is the separation andrecovery of CO2. Carbon dioxide capture andstorage (CCS) and carbon dioxide capture,utilization and storage (CCUS), which separate,
collect, and bury deep in the ground or reuse
emitted CO2, can effectively reduce CO2 emissions
without them being directly dispersed in the air.
The third is the expanded use of carbon neutral
LNG (CNL). Inevitably, the process from theextraction of natural gas to its burning generatesgreenhouse gases, but they will be offset by CO2emissions reduction through support of reforestationand other renewable projects. In March 2021, theTokyo Gas Group established the Carbon Neutral
LNG Buyers Alliance with 14 other companies withthe aim of advancing toward a sustainable societyby this third initiative. Specifically, Tokyo Gas willprocure and supply CNL and the Alliance companies
will purchase and use it as fuel for office buildings
and factories, with the aim of spreading the use ofCNL and increasing its utility value.

What I want to tell you
By positioning a period to around 2030 a transition period, we are promoting (1) advanced use of natural gas, (2) separation andrecovery of CO2, and (3) expanded use of carbon neutral LNG (CNL).
We are also developing the production of hydrogen at an affordable cost by using electricity generated from renewables as well as
energy methanation technology for producing synthetic methane by reacting hydrogen with CO2. Synthetic methane may potentiallyhelp us economically achieve decarbonization through supply using our existing facilities.
Acquisition of overseas large-scale photovoltaic power generation projects and domestic biomass power generation projects
has resulted in increasing our volume of renewable energy power transaction volume to approximately 1.4 million kW. Offshore
wind power generation is another area we seek to promote.
We have moved to a “Company with a Nominating Committee, etc.” and will establish a holding company-type group structure
in order to achieve Group growth even in an uncertain environment.
We are determined to adequately respond to market changes, achieve the Medium-Term Management Plan, and realize our greater vision.
I would like us to become a corporate group that continues to actively contribute to society by supporting individual growth
while emphasizing diversity. While respecting our founder Shibusawa Eiichi’s book, Rongo to Soroban, we aim at becoming a
new type of a public utility business.

has the prospect of substantially reducing
hydrogen prices by manufacturing the cell stack,which is central to the electrolysis process, at anaffordable cost. Based on the assumption thatelectricity generated by renewable energy will be
sufficiently inexpensive, we are currently working
on the development of such a hydrogenproducing device in an alliance with SCREEN
Holdings, Co. We are hoping this will help
achieve the government’s 2030 hydrogen pricetarget by the mid-2020’s.
We are also developing methanation technology
for producing synthetic methane by reactinghydrogen with CO2. The synthetic methane emits
CO2 when burned, but because it takes in a similar

Strengthening the development ofhydrogen technology
The ultimate decarbonization of city gas is zeroCO2 emission when city gas is burned. Hydrogen
has our attention as it can be used as anindustrial fuel, as a power generation fuel, or as atransportation fuel. However, its use is limited atpresent due to high production cost and the factthat its production generates CO2. As such, weare developing a device that produces hydrogenby electrolysis of water, using electricity
generated by sunlight and renewable energy. Thisis a way we can apply fuel cell technology — that
we have developed and applied for years — andTokyo Gas Integrated Report 2021
13

amount of CO2 during manufacturing, this carbon
recycling results in Net-Zero CO2.
The main component of LNG is methane. Thismeans that feasible synthetic methane produced
by using inexpensive renewable energy powersources overseas can potentially be conveyed,
stored, and provided to customers by using ourexisting equipment such as LNG liquefaction
facilities, shipping facilities, LNG tankers,
receiving facilities and pipelines. While hugeinvestment is said to be required fordecarbonization, we can foresee thatdecarbonization may potentially be economicallyachieved by replacing some city gas withsynthetic methane.

Back To Contents

Introduction

ManagementMessage

How We Create Value

Compass2030
Vision and StrategyInvisible
AssetsCorporate
Governance

TCFD

BusinessOverview

Financial Data

CEO’s message

We established a Hydrogen & Carbon
Management Technology Strategy Dept. in April
2021 to accelerate the development of hydrogenand methanation technologies.

Expanding the use of renewableenergyAugmented promotion of ESG
management
Our initiative on decarbonization is one of the“Three Challenges” of our management vision
Compass2030: “Leadership in the effort toachieve Net-Zero CO2,” “Establishment of a value
co-creation ecosystem,” and “Transformation ofthe LNG value chain.” It is also identified as oneof the key components of ESG management.
Acceleration of Net-Zero CO2 efforts is a priority
area for solving not only environment [E] but

Holding company-type group structureengineering and real estate businesses are being
given attention so that they can grow better andat a faster rate. Also important is that we havedecided to significantly expand the range ofdelegation power of the execution, to expedite
decision-making, and to reinforce the supervisory
function of the Board of Directors. In otherwords, these changes mean the establishment ofa holding company-type group structure and thetransition to a “Company with a NominatingCommittee, etc.”
We believe that this will intensify management
and provide a governance system that is easy tounderstand for international investors.

Transition to a Company with a Nominating Committee, etc.

Tokyo Gas

(business holdingcompany)

Internalcompany(Quasisubsidiary)

Beforetransition

Group Head Office*1
Internalcompany(Quasisubsidiary)Newpipeline
networkcompany

Businesssubsidiary

Utilize connections of the LNG value chain
Exercise Group synergies
Subsidiary

Subsidiary

Subsidiary

Subsidiary

Autonomous growth ofbusiness subsidiaries andinternal companiesAccelerates autonomous growth through the creation and provision ofdiverse value by business subsidiaries and internal companies, and theexpansion of business areas

Structure of a Company with
an Audit & Supervisory Board

Appointment/
dismissal ofDirectors

Shareholders
Meeting

Determine andsupervise businessexecution

Representative
Directors
Directors

Achieve Compass2030

Structure of a Company with aNominating Committee, etc.
Shareholders
Meeting

Appointment / dismissalof Directors

Board ofDirectors
Nominating
Committee*

Outside Audit &Supervisory
Board Members

OutsideDirectors
Business
execution

Appointment/
dismissal of Audit& Supervisory
Board Members

Aftertransition

Audit &Supervisory
Board

Board ofDirectors

Audit

Expansion of renewable energy supply is anotherarea of high concern to us. As an electric powercompany, we own high-efficiency combined cycle
natural gas-fired power stations. We plan toexpand our renewable energy supply to 5 million
kW in sum of Japan and overseas. In 2020, weacquired full ownership of the Aktina Solar Projectin Texas, U.S.A. which will have a maximum
output of 630,000 kW when development iscompleted. The Tokyo Gas Group will manage theproject from construction to commercialoperation. In Japan, we acquired biomass power
generation projects in Takaoka City, Toyama
Prefecture, and Ichihara City, Chiba Prefecture.
These efforts have resulted in increasing ourvolume of renewable energy power supply
handled to approximately 1.4 million kW.
We will also promote offshore wind power
generation with a particular focus on the floatingtype of installation. This focus was decided upon
because the floating type system can be locatedeven in deep water and have high potential inJapan, where there are few shallow areas inlittoral locations. In 2020, we invested in
Principal Power, Inc. in the U.S.A. and beganacquiring its technology. We intend to use thatcompany’s technology to develop floating-type

also social [S] problems, such as by improving
resilience. The “Establishment of a value cocreation ecosystem” is also an effort to createsocial value together with our stakeholders.
Further, from the governance [G] perspective, wewill carry out group formation reforms in orderto achieve group growth even in an uncertain
environment. By doing so, we intend to makethe “Transformation of the LNG value chain”
effective and ensure the steady growth of theTokyo Gas Group.
Specifically, all functions, from acceptance ofLNG to its transportation and sales, arepositioned as profit centers. At the same time

offshore wind power generation projects in both
domestic and foreign sea areas.

Audit
Committee*

Compensation
Committee*

Audit of execution
Determination of
Determination of of duties by Directors remuneration forand Corporate
Directors andproposal for election
Executive Officers, Corporate Executiveof Directors, etc.
etc.
Officers, etc.
* Majority of members of each committee areStanding Audit& Supervisory
Board Members

Outside Directors
Appointment/
dismissal of Executive
Officers

Supervise businessexecution

Business execution*1 The group governance system will be developed by clarifying the roles (formulatingGroup’s management strategies, allocating managerial resources, managing risks,etc.) of the Group Head Office*2 Complies with conduct control of the Gas Business Act

Tokyo Gas Integrated Report 2021
14

Representative
Corporate
Executive Officers

Corporate
ExecutiveOfficerBack To Contents

Introduction

Management
Message

How We Create Value

Compass2030
Vision and Strategy

Invisible
Assets

TCFD

Corporate
GovernanceBusiness
Overview

Financial Data

CEO’s message

Seeking growth by incorporating aparadigm shift toward
decarbonization into our business
The business results for fiscal 2020 – the firstyear of the fiscal 2020-22 Medium-Term
Management Plan, were quite disappointing witha year-on-year decrease in ordinary profit. A

decrease in sales volume due to COVID-19
effects, a significant fluctuation in LNG prices inthe spot market, and a surge in prices in thewholesale power trading market during thewinter were main culprits. Since volatility indomestic and overseas markets is expected tostay high, we are determined to adequatelyrespond to market changes, achieve our Medium-Term Management Plan, and realize our greatervision.
Some of our shareholders may ask us “Can
you achieve Net-Zero CO2 and grow at the sametime?” Indeed, various players have entered theenergy business in connection withdecarbonization, and competition in the
renewable energy business is becoming severer
every day. As I said at the beginning, a paradigm
shift toward decarbonization is currently underway, and I believe that only companies that areable to incorporate this paradigm shift into theirbusinesses can grow as energy providers. In order
to become one of them, it is necessary toincrease investment aimed for Net-Zero CO2 while
maintaining financial soundness. In November
2020, we announced that we are considering areview of our shareholder return policy from theviewpoint of raising source funds through allmeans available to us. Please give us a little moretime to make our decision on this matter.

Aiming to become a new utility
business
In our management vision Compass2030 we
make “Three Promises” to our current and futurecolleagues who are and will be working on the“Three Challenges”. The promises are (1) to“produce work that will have a major impact onsociety,” (2) to “create a venue for encounterswith diversity and friendly competition,” and (3)to “emphasize the self-fulfillment of eachperson.” I believe the delivery of these promises
would lead to steady implementation of the vision.
The Tokyo Gas Group is indeed in a period ofreforms. It is up to each and every member of theTokyo Gas Integrated Report 2021
15Group to overcome the challenges of this periodof dramatic changes and open the way to thefuture. I would like us to become a corporategroup that continues to actively contribute tosociety by supporting individual growth whileemphasizing diversity. To that end, we will also
work to restructure our corporate philosophy.
While respecting our founder Shibusawa Eiichi’sbook, Rongo to Soroban (The Analects and theAbacus), Tokyo Gas is determined to make a leap
forward, toward becoming a new type of a public
utility business.
We are ahead of other companies indeclaring our position on Net-Zero CO2 and havebegun efforts for decarbonization. We willcontinue to contribute to the future of the Earthand the future of energy, and will do what isnecessary to ensure the company’s sustainablegrowth. I hope that our stakeholders will lookforward to the future development of the Tokyo
Gas Group and continue to support us for years
to come.