CEO's message

TOKYO GAS INTEGRATED REPORT 2020

06

Leading energy companies
around the world in the effort
to achieve Net-Zero CO2“Never ever stop the energy supply.”
We are committed to fulfilling this mission tosupport our customers’ normal lives.
First, I would like to express my sincerest condolences tothe families and friends of those who have lost their lives
due to the novel coronavirus (COVID-19), and my profoundsympathies to those that are suffering from it. I would also
like to express my heartfelt gratitude to the medical
professionals and others dedicated to stopping the spreadof infection.
“Never ever stop the energy supply.” This is the phrasethat immediately came to mind as the CEO as the COVID-19
outbreak began, and the slogan that I shared with all Group
employees. I think that we as a utility company have threeduties to meet in unusual or emergency situations, beyond
just this ongoing pandemic, to ensure that all customers
can lead normal lives.
The first is the duty we have as an energy provider that
supplies electric power in addition to gas. Our Groupsupplies gas and electricity not only to general households

Uchida Takashi
Representative Director,President and CEO

but to medical institutions, public facilities, factories andother facilities that cannot close down. We have aresponsibility to stably supply energy, even during
emergencies like the one we are now experiencing. To fulfill
this responsibility, we must procure raw materials without
disruption, safely produce gas and electric power andthoroughly maintain and manage our supply and safetysystems under any circumstances. These are the greatest,
fundamental duties that we must meet as an energy
supplier. Lifeval, the outlets of Tokyo Gas, have to serve
customers using gas and electric power at home. Gaslight
24 bases must deal with a gas leak on site. I feel grateful forthe staff of our Group, for their contribution to the stablesupply of energy despite the mounting strain on themselves
and their families.
The second duty is a social responsibility that we haveas a corporate citizen to build a community where people
can live safely, without worries. The current pandemic has
caused many people to experience financial difficulties. OurGroup has swiftly introduced a special measure extending
bill payment due dates by up to three months for ourcustomers who are having temporary difficulties making billpayments. To aid households experiencing financial
difficulties, we donated food to food banks. We also
provided 15,000 N95 face masks that we had stockpiled for* This interview took place on May 18, 2020.
The state of the spread of COVID-19, our Group’s actions, the status of announcement of
the consolidated forecast for the fiscal year ending March 31, 2021, and other details arecorrect as of the interview date.

CEO's message

TOKYO GAS INTEGRATED REPORT 2020

a novel influenza to medical workers. We are thus carryingout support activities positively.
And the third duty is our responsibility to increase
corporate value as a public stock company. We will not stop
the implementation of our management vision Compass
2030, or the FY2020 - 2022 Medium-Term Management
Plan (hereafter, the new Medium-Term Management Plan).
We will soundly announce our financial results and hold themeeting of shareholders to present our Group’s policy andgain the support of stakeholders. These are a part of theresponsibilities that our Group has to meet. While the closingof the financial statements was disrupted by the COVID-19
outbreak, as a result of the concerted efforts of the group
staff, we were able to report our financial results on schedule.
The COVID-19 outbreak impacts customers inmany different ways

been deemed difficult to accurately understand andestimate specific circumstances and the severity of theirimpact. To date, we are aware that, among our commercial
customers, hotels and restaurants are severely affected. In
addition, demand for air conditioning energy and electricity
at schools that have been closed for a long time fell sharply.
With regard to industrial customers, it has been successively
reported that some automobile factories have suspended
operations and that steel manufacturers have suspended
the operation of blast furnaces or closed them. It is thoughtthat gas and electricity sales volumes will change considerably
depending on the future moves of these large customers.
We will also need to closely watch the trends ofcrude oil and LNG prices that are vulnerable tosevere fluctuationinternational trade of crude oil. In addition, there are a pileof questions regarding crude oil prices, such as how long
OPEC Plus will maintain its coordinated reduction ofproduction and how the United States, which is now
effectively the world’s largest oil producer, will respond.
Some forecast that the market will remain unstable for theforeseeable future.
Our Group uses LNG and LPG as raw materials for citygas. Raw material expenses depend on foreign exchange
rates and crude oil prices. The decline in raw material prices
is expected to produce a positive effect on our Group’s
domestic gas business and a negative impact on theoverseas business, since we own upstream interests inAustralia and in North America. In view of future trends of
crude oil and LNG prices, we will assess the extent of
positive and negative effects, and we will announce ourfinancial forecast at the earliest possible timing.

Our commercial and industrial customers running storesand other commercial facilities, hotels, schools, offices,
factories and other facilities are affected in many differentways by the COVID-19 outbreak. As we begin the fiscal
year, we have yet to determine the consolidated forecast
for the fiscal year ending March 31, 2021, because it has

Now, the outlook for not only energy demand but also LNG
prices is uncertain. Late in April, the New York Mercantile
Exchange saw the West Texas Intermediate (WTI) crude oil
futures for May delivery plunge sharply and temporarily
mark a negative figure for the first time in history amid
concern about the deterioration of the Chinese and otherworld economies. The WTI futures are a benchmark for theAs I have mentioned, the current business environment isvery harsh and uncertain for reason of the COVID-19

Profit level

Number of customer accounts

Natural gas transaction volume(billion yen)

Approx. 200

200

25%

20

20

118.5

25%

(million)

20

20

16.7
1510%

We have formulated a long-term management
vision by means of backcastingfrom 20 to 30 years in the future

Overseas150

100(million)

07

15

12.2Solutions, etc.
10105527%

50 %50Energy

63%002019*2030

02019*2030

2019*2030*FY2019 forecast at the time of formulating the medium-term management plan

CEO's message

TOKYO GAS INTEGRATED REPORT 202008

We have formulated our management vision Compass 2030 by backcasting from 20 to 30 years in the future.
The management vision Compass 2030 spelled out our Group's policy aiming Net-Zero CO 2 with an eye to2050 and beyond. In the effort to achieve Net-Zero CO 2 , we will lead energy companies around the world.

What I want to tell you

Our awareness of changes in the market environment presented in the new Medium-Term Management Plan
has not changed following the beginning of the COVID-19 pandemic. Rather, it is anticipated that thesechanges will speed up. We will accelerate the actions specified in the new Medium-Term Management Plan.
We will develop our personnel into a force driving corporate development.
We have set a target for a total payout ratio of around 60% for each fiscal year up to fiscal 2022.
Our DNA drives us to seek coexistence with multiple stakeholders and a balance between social and economic value.

outbreak. Our Group’s management vision Compass 2030
and the new Medium-Term Management Plan for FY2020
to 2022 formulated in March 2020 referred to ourawareness of changes in market environment in the mediumto long-term future. This view has not been changed.
Rather, it is anticipated that the changes will speed up.
In the past, when our group formulated its long-term
management vision, it had a forecast for the coming 10years. For the latest vision, we started by foreseeing thesituation 20 to 30 years into the future, and carried out
backcasting from that future time to identify the things weshould be doing now. Ten years from now, natural gas fired
thermal power generation and natural gas as its fuel will
have a greater role to play in line with the expansion ofrenewable energy, since it can make up for variation in theoutput of renewable energy power generation methods
that depend on weather conditions. However, we thoughtthat if we had only thought of the target for 10 years fromnow, the resulting plan would have failed to deal with thesocial change that will occur beyond that time, in the formof decarbonization.

We have selected four words starting with the letter D
as key terms that represent changes in the businessenvironment and in the trends of the times that we project.
We believe that we cannot picture the future of our company
without devising measures to address these four D challenges.
The first is Decarbonization. Today, society seeks
decarbonization as well as low carbonization. In Japan aswell, there are increasing discussions about whether it isreally appropriate for businesses to merely seek low carbon
emissions and whether they need to aim for
decarbonization in the future. It is the top priority challenge
for us. We have made it clear how our Group will respondto this demand.
The second is Digitalization. This change is gaining
momentum. In recent years, some companies started todisruptively change society and the economy using thelatest digital technologies. In the future, similar moves will
emerge in the energy sector as well. Our Group has thepolicy of strongly pushing ahead with digitalization.
The third is Diversity, particularly in value. Many
customers are no longer in favor of the conventional mass

production of single items. They now choose items that arematched to their own sense of value. Meanwhile,increasingly people are happy to share goods instead ofowning them. It is presumable that the way of using energy
at households may change given that they can achieveself-sufficiency by effectively using renewable sources ofenergy, such as solar power generation, and storage
batteries. Another important challenge is to address thediversification of our customers and their sense of value toimprove the services of our Group.
The fourth is Deregulation. To survive the increasingly
intense competition between operators, we will takeactions, including the formulation of strategies involving
not only our competitors but also other businesses beyond
the boundaries of the industry.
In the effort to achieve Net-Zero CO2 , we will leadenergy companies around the world
Our Group launched its policy aiming Net-Zero CO2 with aneye to 2050 and beyond in our management vision
Compass 2030. This created a great reaction, not only from

CEO's message

TOKYO GAS INTEGRATED REPORT 2020

the energy industry but also from many different businesssectors. The term of Net-Zero CO2 embodies our aspiration
to lead energy companies around the world, our sense of
the crisis regarding the survival of companies that do nottake action and see results for decarbonization and oursense of mission as an energy company. Personally, I felt
obliged to provide an answer through the Management
Vision to our young employees who nervously feel thechanges in society and feel strongly uneasy about survivalof the Tokyo Gas Group in its present state.

comments. For example, one said, “We would like to be acompany achieving decarbonization,” and another said,“We aspire to create new value in relationships withcustomers.” The Management Vision declares that we will
establish a value co-creation ecosystem that creates value
together with customers, the local community, local
governments, and business partners that include companies
in different industries and venture firms.
This new attempt is based on these comments from ouryoung employees.

We will develop our personnel into a force driving
the company

We will seek to attain a balance between growthinvestments and return to shareholders

I see our employees as key stakeholders who invest theirown lives in our Group. Personnel are the driving force behind
corporate development. No matter how brilliant the vision
we make is, it is personnel who carry it out. I realize thatthe biggest management issue is to motivate the personnel.
For our Group, dedication to the maintenance of thestable supply of energy and safety is an important part ofour corporate culture that has taken root since ourfoundation. While it is a good thing, emphasis on protection
may have led to excessive prudence regarding the changes
required in the coming era of shifting paradigms.
I believe that in order for people to change, thecorporate culture must change. It is the young personnel
who can change the corporate culture. As these young
personnel grow, the company will change significantly.
Therefore, I hope that they will try many new things, even if
they make mistakes. Without this progressive spirit, nocompany can develop.
That is why we established Engagement with Currentand Future Colleagues at the end of Management Vision
Compass 2030. In the process of formulating theManagement Vision, we introduced two totally newapproaches. One was backcasting. The other was to holddiscussions with around 20 young employees. They are theclosest to the future generations. They gave vigorous

Our Group has paid dividends at a total payout ratio of 60%
since 2006. We are proud to have taken measures topositively return profit to shareholders since our early days
as a Japanese energy firm. The new Medium-Term
Management Plan set a total payout ratio target atapproximately 60% in each fiscal year through fiscal 2022,
since we judged that we would be able to attain a total
payout ratio of 60% as in the past while making growthinvestments. We will continue to regard treasury shareacquisition as part of shareholder returns and maintain ourpolicy of stably paying dividends according to our growth.

09

We will follow the principle of The Analects andthe Abacus by our founder Shibusawa Eiichi
In 1885, Tokyo Gas was established by Shibusawa Eiichi, theFather of Japanese Capitalism. The principles discussed in
his book, Rongo to Soroban (The Analects and the Abacus),
coexistence with multiple stakeholders and the balancing
between social and economic value, has been passed down
through the generations to us. In our history, there weretough times following the emergence of new energy andequipment. I think that we were able to maintain ourbusiness because he set a process for development.
However, we must open the way towards the future
ourselves and hand it down to the next generation.

Now, our Group stands on the cusp of a new age ofinnovation towards 2030. Thinking of the coming days as
an opportunity to take a big leap, we will develop into a
corporate group that will be capable of continuously
creating value while leading energy in the next generation. I
hope that our stakeholders will look forward to the future
development of Tokyo Gas Group and continue to support
us for years to come.