TOKYO GAS CO., LTD.

5-20, Kaigan 1-chome, Minato-ku, Tokyo 105-8527, Japan
Tel : +81-3-3433-2111
Fax : +81-3-5472-5385
http://www.tokyo-gas.co.jp

TOKYO GAS CO., LTD.

Annual Report 2000
For the year ended March 31, 2000

ANNUAL REPORT 2000

A
Multifaceted Energy
Growth Strategy

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, a market where demand potential is enormous. Capital investments we have madeTokyo 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: +81-3-3433-2111

Tel: +60-3-244-2928

Fax: +81-3-5472-5385

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

280 Park Avenue, New York, NY 10017, U.S.A.

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

Tel: +1-212-818-1210

tively propose new technologies for using gas to spur demand. An even more ambitious goal we

Paris Representative Officehave set is to turn Tokyo Gas into a diversified energy services company, supplying heat and102, Avenue des Champs-Elysées, 75008 Paris, France

electricity as well as gas by taking maximum advantage of our powerful infrastructure. Achieve-

Tel: +33-1-45-62-00-59

Fax: +1-212-818-1218

Fax: +60-3-244-2930

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

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

ment of these goals will translate into higher profits, which we intend to return to customers
and shareholders.

Investor Information

Date of Establishment

Publications

October 1, 1885

The following English-language publications are available

Authorized Number of Shareson written request:• Annual Review 1998

51

Contents

6,500,000,000 shares

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

Number of Stockholders• TG Minutes

211,705• Environmental Report 2000

Cash Dividends Applicable to the Year

Internet Address¥5.00

http://www.tokyo-gas.co.jp

Securities Traded

Further Information

Common stock: Tokyo, Osaka, Nagoya and Kyoto stock

For further information and additional copies of this reportexchanges

and other publications, please contact:

Independent Auditors

IR Section, General Administration Dept.

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

Planning Section, International Affairs Dept.

Transfer Agent

Tel: +81-3-5400-7561

Japan Securities Agents, Ltd.

Fax: +81-3-5472-5385

2-4, Nihonbashi Kayabacho 1-chome, Chuo-ku

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

[10]
[12]
[14]
[16]
[18]
[19]
[20]
[22]
[24]

Financial Highlights
Our Position in the Market
Message From Management
A Multifaceted Energy Growth Strategy
Toward an Increasingly Diversified
Energy Services Company
Spurring Residential Gas Demand
A Focus on Technological Innovation
Powerful Supply Infrastructure—
the Foundation of Our Competitiveness
Environmental Conservation
SafetyCorporate Citizenship
International Operations
Diversification
Board of Directors• Annual Report 1999

Tokyo 103-8202, Japan

[25]
[48]
[50]
[51]

Financial Statements
Energy Statistics
Organization
Corporate Information/Investor Information

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.

Units
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(As of June 29, 2000)

Annual Report 2000 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
2000

For the YearNet sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 992,255
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69,233
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,698Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
136,214
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121,806
Amounts per share of common stock (Yen and U.S. dollars):
Net income (Basic) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.50
Net income (Diluted) . . . . . . . . . . . . . . . . . . . . . . . . . .
8.84
Net income and depreciation . . . . . . . . . . . . . . . . . . . .
58.0

1999

1998

2000

¥ 997,767
72,303
17,764
132,568
142,030¥1,009,155
76,485
17,241
114,893
159,433$ 9,360,896
653,142
251,868
1,285,038
1,149,113

6.32
5.94
53.5

6.14
5.76
47.0

0.09
0.08
0.55

$17,029,113
7,958,811
4,568,292

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

¥1,805,086
843,634
484,239¥1,707,446
820,753
421,442¥1,720,684
765,304
417,755

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

2.7%
5.9%
1.5%
26.8%

1.8%
4.2%
1.0%
24.7%

1.7%
4.1%
1.0%
24.3%
1

Note: U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥106=U.S.$1, the approximate Tokyo foreignexchange market rate as of March 31, 2000.

Net Sales

Operating Income

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

80

1,200

10

30
25

8

60

20

800

6
40

15
4

10

400
20

2

5
0

0
Mar. 31

96 97 98 99 00

Mar. 3100
96 97 98 99 00

Mar. 31

96 97 98 99 00

Mar. 31

96 97 98 99 00

Annual Report 2000 TOKYO GASOur Positionin the Market

Tokyo Gas’ Service Area
(As of March 31, 2000)

Tokyo Gas is Japan’s largest gas company both in termsof the number of customers—over 8.7 million in total—and gas sales volume. Our service area covers approxiKANTO PLAIN

mately 3,200 square kilometers in Tokyo and neighboring
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—many companies areheadquartered here—makes ourTOKYO

service area even more vibrant.
What’s more, the Kanto region isTOKYO BAY

Ohgishima
LNG Terminal

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

YOKOHAMA

GDP. This enormous and economically diverse service area is thus

NegishiLNG Terminal

unquestionably a key strength.

Sodegaura
LNG Terminal

20

10 15 20（km）

5

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, 2000)
Unit: thousands of m3 (46.047 MJ/m3)

Unit: million m3 (46.047 MJ/m3)(As of March 31, 2000)

12,000Wholesale
848,499

10,000Wholesale
14

8,000

Industrial
24,862

6,000
4,000

Industrial
2,430,787

Residential
2,993,891

2,000

Commercial
2,144,400

0Commercial
578,532

Mar. 31

96 97 98 99 00 01 02 03 04 05

Japan ...................... 21,773,667

Residential

Tokyo Gas .................... 8,417,577

WholesaleCommercial

Industrial

Note: 2001~2005 are projected figures.
* The above three graphs represent non-consolidated data.

TOKYO GAS Annual Report 2000

Japan ...................... 25,614,006
Tokyo Gas ...................... 8,715,256

Residential
8,111,848

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 expected

Complementing this procurement capability are ourto last longer than those of oil. Demand for natural gas is

production systems—centering on the world’s largest andprojected to grow by 18%, as compared to 1996, by 2010

most technologically advanced LNG receiving terminals—andaccording to the Ministry of International Trade and Industry

transmission and distribution network.

(MITI) report entitled Long-term Energy Demand and Supply

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

Outlook for Japan (1998). Overall energy demand, by

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

comparison, is predicted to increase 3%. Presently, MITI is

are bright. Average growth in demand of 6.6% per annum

revising this outlook due to a forecast decrease in supply ofis forecast for Tokyo Gas’ gas sales volume until the year

nuclear power following a recent accident at a nuclear facility

ending in March 2005. This represents a high growth rate inin Japan and growing opposition to the construction ofcomparison to growth forecasts for other energy sources andnuclear power plants. This trend spells a likely increase in

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

demand for natural gas.

stone of the company’s energy and energy-related operations.

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

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.

from six major natural gas exporting areas: Alaska, Brunei,

Global Natural Gas Procurement
Japan imported approximately 52 million tons of LNG in the year ended March 31, 2000. Tokyo Gas accounted for roughly 6.2 million tonsof those imports.

AlaskaTokyo
Qatar
Tokyo Gas LNG Imports(Year ended March 31, 2000)(Million tons)

BruneiMalaysia

Indonesia

Australia

Alaska .......................................... 0.28
Australia ....................................... 0.67
Brunei .......................................... 1.02
Indonesia ..................................... 0.73
Malaysia ...................................... 3.13
Qatar ........................................... 0.36

(5%)
(11%)
(16%)
(12%)
(50%)
(6%)

Total ..................................... 6.19 (100%)

Annual Report 2000 TOKYO GAS

3

Message From Management

RIGHT: Kunio Anzai

Chairman
LEFT:

Hideharu Uehara
President

4

Mega-competition is knocking at the door of Japan’s energy

down ¥2.9 billion at ¥672.0 billion due to two main factors:

sector. And deregulation is unlocking it. This movement is being

reduction in gas rates based on the gas cost adjustment ratefurther accelerated by the worldwide information technology

system, and implementation of a downward rate revision in

revolution. Gas and electricity companies are entering eachDecember 1999. Consequently, consolidated net sales

other’s fields. Even companies from other industries are

declined 0.6% to ¥992.2 billion. Operating income alsoannouncing their arrival. We welcome this new era. Withdecreased, down 4.2% to ¥69.2 billion. An improvement“deregulation” and “change” comes “opportunity.” Bring it

in other income (expenses) and the effect of a reduction

on. We believe we have what it takes to seize the opportunities

in Japan’s statutory tax rate, however, led to growth ofand grow. That was our message last year—and it hasn’t

net income.

changed. If anything, we’re more convinced than ever that
we have what it takes to drive growth. In November 1999, wereleased a new medium-term management plan covering
fiscal 2000, the year ending March 31, 2001, through fiscal
2004. In this message, and throughout this report, we will
explain how we aim to accomplish our goals over the next five
years and beyond.

Deregulation
Major strides were made in energy sector deregulation in
fiscal 1999.
In the Japanese gas industry, revisions to the Gas Utility
Industry Law were enacted in November 1999. Those revisions
lowered the threshold at which regulations on gas supply areas
and rate-setting were removed for large-volume customers—

The Year in Review

from those consuming 2 million cubic meters or more per

Consolidated net income for fiscal 1999, the year ended

year to 1 million or more. In addition, the process for reduc-March 31, 2000, increased 50.3% year on year to ¥26.6

ing gas rates was simplified. Companies can now lower rates

billion. As a result, return on assets (ROA) improved from

simply by filing a report with the Ministry of International Trade

1.0% to 1.5%.

and Industry (MITI). Previously, it was necessary to navigate a

Gas sales volume in the Tokyo Gas Group increased 3.2%

complex system to obtain permission. Furthermore, we gained

from a year ago. Gas sales in monetary terms, however, weremore management independence. Gas companies are now

TOKYO GAS Annual Report 2000

free to use part of their profits from business activities tohands down in terms of its minimal environmental impact

strengthen their balance sheets and return profits to share-and energy efficiency.

holders, rather than solely for the reduction of gas rates as in

2. A powerful and reliable network—connecting a broad baseof customers exceeding 8.7 million in total—with an

the past.
In the electricity industry, revisions to the Electricity Utility
Industry Law in March 2000 opened the door to liberalized
electricity sales to large-volume customers, defined as users
with a capacity of over 2,000 kW and using a 20 kV supply

enhanced supply capability ready to meet growing future
demand with minimum additional investment.
3. Strong marketing capabilities backed up by engineeringexpertise and price competitiveness.
4. The technological competency to meet market needs.

or more.
We view the advancing deregulation in both the gas

By leveraging these strengths to the maximum, we will

and electric utility industries positively. As mentioned in the

expand existing business domains and advance into new

opening of this letter, deregulation is creating new andones, including electricity retailing.

exciting business opportunities. Natural gas, which is environmentally friendly and for which there are stable supply
sources, is the cornerstone of our strategy to seize theseopportunities. By promoting its advantages, we will fortify
our position in the greater Tokyo market and transform Tokyo
Gas into a diversified energy services company. That means
we will supply heat and electricity, as well as gas. Gas-fired
cogeneration systems, which provide electricity and thermalenergy, will be a core driver of growth.

Medium-Term Management Plan Offers Blueprint for Success
The medium-term management plan we formulated in
November last year is grounded on these strengths. This plan
aims to maximize corporate value and thereby earn us highmarks from customers, shareholders and other stakeholders.
To this effect, we will increase free cash flows—net income
plus depreciation expenses less capital expenditures—andimprove asset efficiency.
Maximizing Free Cash Flows to Maximize Corporate Value

What Are Tokyo Gas’ Competitive Advantages?

We have set increasing free cash flows as a yardstick by which

We believe the following core strengths will give us a competi-

we will measure our success at creating corporate value. By

tive edge amid intensifying competition in the energy sector.

implementing measures to streamline management and1. Natural gas, our core product, beats other energy sources

increase gas sales volume by enhancing our competitiveness,

Profitability and Financial Position Improvement Targets[Non-Consolidated]

March 31, 2000

March 31, 2005

Net sales¥869.9 billion

Total assets¥1,493.6 billion¥1,440 billion¥761.9 billion¥610 billion

Interest-bearing debt
Equity ratio

29.7%
March 31, 2000

Free cash flows
ROA¥26.0 billion¥1,020 billion (Average growth rate of 3.2%)

39.0%
5-Year Average(Year ending March 31, 2001 through year ending March 31, 2005)¥50 billion (5-year total: ¥250 billion)

1.5%

1.9%

Total asset turnover

0.60 times

0.65 times[Consolidated]

March 31, 2000

Net sales

Free cash flows
ROA
Consolidated net income tonon-consolidated net income

March 31, 2005

¥992.2 billion¥1,170 billion (Average growth rate of 3.3%)

March 31, 2000

(Year ending March 31, 2001 through year ending March 31, 2005)¥42.0 billion¥61.5 billion (5-year total: ¥307.5 billion)

5-Year Average

1.5%

1.7%

1.19 times

1.13 times

Annual Report 2000 TOKYO GAS

5

we aim to achieve non-consolidated free cash flows totaling¥215.3 billion in operating expenses recorded in fiscal 1999,¥250 billion, an average of ¥50 billion per year, over the 5-

reflecting our expectation that fixed expenses will increase

year period from fiscal 2000 through fiscal 2004. Free cash

in line with steady expansion of our customer base, we aim

flows in fiscal 1999, by comparison, were ¥26 billion.

to keep a lid on operating expenses by implementing

These free cash flows are to be earmarked for reducing
interest-bearing debt, returning value to shareholders either

Internal Financing of Capital Investment

by repurchasing and retiring treasury stock and/or increas-

Tokyo Gas is close to putting the finishing touches on several

ing dividends and investing in new businesses.

large-scale infrastructure projects. While using existing assets

Regarding interest-bearing debt, we increased debt overeffectively, we aim to keep future capital expenditures ona number of years to finance the construction of core facilities

production and supply facilities within the limits of free cash

to meet predicted expansion in demand. As of March 31,

flows in the 5-year period through fiscal 2004. This will be

2000, this debt stood at just over ¥760 billion, representing

achieved by reviewing construction methods and specifications

approximately 50% of total assets. Tapping the additional

as well as rationalizing purchasing to find ways to slash costs.

free cash flows we expect to generate, we plan to bringinterest-bearing debt down to ¥610 billion by the year ending
March 31, 2005.
Improving Asset Efficiency
A little under 10% of our total assets of roughly ¥1.5 trillion
as of March 31, 2000, will be accounted for by production
and supply facilities that are presently under construction
and will help us to meet higher demand in the future. When
6

streamlining measures.

these facilities come on line and demand increases, we will
start recovering these investments. By working to improve
our top line and earnings at the same time as reducing total
assets and using existing assets more effectively, we intend
to raise ROA and total asset turnover. Specifically, our goal is
to raise ROA to an average of 1.9% from 1.5% in fiscal 1999

Introduction of a Strategic Management Structure
In July 1999, we reduced the number of divisions and departments by approximately 30%. At the same time, we
carried out reforms to put in place a strategic divisional systemcomprising six divisions aligned in terms of functions andmarkets. These changes are intended to drive administrative
efficiencies. They are also designed to strengthen our marketing capabilities and enhance customer services and safety.
Augmenting this new strategic framework is an innovative
business management system introduced in April 2000. The
new system, in a sense, entails each division and department
working like an independent company, and clearly spells out
the responsibilities of each section as well as the targets andresults that are expected of them.

over the 5-year period from fiscal 2000 through fiscal 2004;
total asset turnover will be raised from 0.60 times in fiscal

First of Two Rate Reductions Implemented

1999 to 0.65 times over the same period.

Tokyo Gas had announced plans to reduce rates by a total of

Achievement of these goals will call for greater

4-5% through two reductions. In December 1999, we carried

management efficiency to strengthen operations, and rate

through on that promise, reducing rates by an average ofreductions and organizational reforms to bolster our

2%. The second rate reduction, planned for the current fiscal

competitiveness. Here’s what we intend to do in this regard.

year, will be in the order of 2-3%. The rate reductions are intended to make gas an even more attractive energy alternative.

Driving Efficiency
Personnel Reductions

Expanding Demand by Strengthening CompetitivenessWe plan to lower our head count at the parent company to

Based on these strategies to bolster our competitiveness, we

10,000 people by the end of fiscal 2005. We will accomplish

plan to expand gas sales volume. The most promising area isthis personnel reduction through organizational reforms,

the gas market for electricity generation, including gas-fired

systematization, retooling of administrative processes andcogeneration, whose share in our gas sales volume is expected

fostering staff potential to reduce personnel. Putting limita-

to increase from 15% at present to 27% by the year ending

tions on new recruitment is also part of our strategy.

in March 2005.

Controlling Operating Expenses

One major supply contract will contribute to the

We plan to hold operating expenses to the fiscal 1998 level

achievement of this target. Starting in fiscal 2001, we planof ¥224.2 billion for the next 3 years. While higher than theto supply upwards of 1.0 billion cubic meters of gas per year

TOKYO GAS Annual Report 2000

to The Tokyo Electric Power Company’s Shinagawa thermal

Leveraging our experience and successes in overseas

power station. That equates to about one-tenth of all the

projects, we intend to develop overseas operations. We cangas we supply.

point to our joint venture projects in Malaysia in particular to

Recent trends are working in our favor. We are seeing ademonstrate our capabilities. These included the construction

shift from large-scale power generation to distributed power

and operation of a natural gas distribution system. This was

generation and on-site electricity generation. This promises

the first such overseas project undertaken by a Japanese en-

to lead to higher demand for gas from IPPs (independent

ergy utility company. Gas Malaysia Sdn. Bhd., the joint ven-

power producers) and electricity supply in specific areas such

ture company, started paying dividends in 1999.

as redevelopment zones. Micro turbines will also likely spurgas demand. They have attracted attention in recent times
as a major step toward the introduction of cogeneration
systems for small-scale, private-sector users. This market has
been difficult for gas companies to penetrate until now
because of the lack of suitable products. Moreover, recognizing the importance of alliances in this changing businessenvironment, we are conducting feasibility studies with aview to entering the electricity retailing sector ourselves withNTT Facilities and Osaka Gas.

Focusing on Consolidated Management
Japanese companies were required to start reporting consolidated financial information starting in the fiscal year ended
March 31, 2000. Tokyo Gas, however, has been practicing
consolidated management for some time now. In 1993, forexample, we reorganized the Tokyo Gas group into 10 business fields, including energy sales, cryogenic energy use andchemicals businesses. One company was established in eachfield to take the leading role. Their goals were to drive management efficiencies within their fields and grow earnings.

Contributing to Local Communities

In fiscal 1999, we undertook a review of each of our busi-

One of our greatest assets is our broad base of 8.7 million

nesses. At the same time, we formulated guidelines for whencustomers. To enlarge this base we are upgrading customer

to withdraw from unprofitable businesses and for when toservices and stressing maintenance and improvement of the

reduce and consolidate group companies. We intend tostability of supply and safety. Furthermore, research andclearly delineate the strategic position of each group com-development is being emphasized to respond to diversepany to raise the value of the Tokyo Gas Group.

customer needs in an aging society which is being fundamentally altered by advances in IT. Information technology
is an important area of focus. We are planning to establish,
for example, two-way communication with customers via
the Internet. Tokyo Gas is also actively involved in environmental issues. Expanding the use of clean-burning natural
gas is one example. Moving forward, we intend to promote
the use of energy-efficient equipment and systems as well as
the reduction of industrial waste volumes and greater

In Conclusion
As deregulation takes hold, we are likely to see more andmore entrants into Japan’s gas and electricity businesses fromboth within Japan and overseas as well as from other industries. We are determined, however, to grow as a leading company in this climate of change. We are committed to
executing the plan we have formulated to produce the results you expect of us, and to continue to be a major player
in the “natural gas era” of the twenty-first century.

recycling. By doing so, we will play our part in contributing
to the realization of a sustainable society.

July 2000

Stepping up Overseas Activities
Overseas activities are taking on greater importance for the
Tokyo Gas Group. Heretofore, our four representative offices

Kunio Anzai

overseas in New York, Paris, Kuala Lumpur and Beijing have

Chairmanbeen used mainly for gathering information and for
management and technological exchange with foreignenergy-related companies and institutions. While continuing

Hideharu Ueharathese activities, we also intend to use these offices as conduits

President

for disseminating information to investors abroad.

Annual Report 2000 TOKYO GAS

7

A Multifaceted Energy Growth Strategy — Facet 1

The Saitama New City Center district heating and cooling system covers an area of 27.3 hectares that is home to 10 government departments and 17 government
offices. The system supplies heat in an energy-efficient and environmentally friendly manner using gas-fired cogeneration.
8

Toward an Increasingly
Diversified Energy Services Company
Japan’s energy sector stands on the threshold of an era of mega-competition. Regulations are being torn down, gas andelectric utilities are entering one another’s fields and major overseas energy companies have signaled their intention toenter the electricity industry in Japan. Tokyo Gas regards this industry realignment as an opportunity to expand its sphereof business. And natural gas will be the core energy source propelling our growth. Tokyo Gas has set its sights on growing
into a diversified energy services company, supplying heat and electricity as well as gas.

The Superiority of Cogeneration
Society is demanding energy that is both environmentally friendly and for which there is a stable supply. Natural gas meets thesedemands. As such, its importance to society is increasing. Furthermore, in recent times, small and medium users, as well as largevolume customers, have grown more conscious of reducing energy costs. Gas cogeneration systems that supply both electricity
and thermal energy are coming into their own both as an answer to environmental issues and to raise energy efficiency. Tokyo Gas
plans to leverage its competitive edge in gas cogeneration systems to aggressively develop these operations and capitalize on an
expected increase in demand for natural gas for power generation and cogeneration in the greater Tokyo/Kanto Plain area.

Expanding Existing Businesses
As a result of revisions to the Japanese Gas Utility Industry Law in 1999, Tokyo Gas can now supply customers outside its service area
who consume 1 million or more cubic meters of gas per year. Previously, the threshold was twice that. This legislative change isTOKYO GAS Annual Report 2000

Configuration of Residential Fuel Cell Cogeneration System

This energy-efficient household cogeneration system generates electricity through fuel cells, which
use hydrogen produced by innovative fuel processing equipment. The thermal energy emitted
when electricity is generated is captured bya recuperator and used for water
heating and floor heating.

Utility grid

PEFC stack
InverterElectricity
Air supplying
systemElectricity
Recuperator

Air
Hot water
City gas

Fuel processing
systemFloor heating

City gas

Hot water

Tokyo Gas intends to couple its proprietary recuperator technology with micro turbines developed by Capstone Turbine Corporation to offer
cogeneration solutions.

expected to spark fierce competition. Heretofore, Tokyo Gas has devoted itself to introducing and popularizing gas cogeneration
systems, mainly to large-volume users. In April 2000, the Saitama New City Center district heating and cooling system started
operations in Saitama Prefecture, as Tokyo Gas’ 15th district heating and cooling operation. We intend to take full advantage of theexpertise, technological capabilities and engineering skills we have acquired from such operations to power growth in gas demand.

Entering New Businesses
In March 2000, revisions were enacted to the Electricity Utility Industry Law, opening the door to unrestricted electricity sales to largevolume customers. The enactment of these revisions is expected to have a profound effect on the energy sector and spark further
deregulation of the generation and sale of electricity. In response, Tokyo Gas is considering entering the electricity retailing field withNTT Facilities and Osaka Gas. Furthermore, with demand expected to increase for natural gas as a fuel for electricity generation,
Tokyo Gas sees a new business opportunity to transport gas to power producers, leveraging its gas pipeline network.

Small Distributed Power Generators—A Technology for the Future
Amid the accelerating shift from large-scale power generation to small distributed power generators, the spotlight is falling on
small-scale, on-site electricity generation. Micro turbines, in particular, are stealing the limelight. Leading the market at present
are two U.S.-based manufacturers of micro turbines. Tokyo Gas is looking to package their leading-edge technology with its
energy-efficient cogeneration systems for commercialization in Japan. We are targeting commercial demand such as small andmedium-size hospitals, hotels, shops and other establishments, as well as small and medium-size industrial demand, where thediffusion rate of gas cogeneration systems is relatively low. In April 2000, Tokyo Gas formed the Micro Cogeneration Section
to formulate a strategy and carry out feasibility studies.
A fuel cell cogeneration system for residential use is another in which we project success. This system generates electricity
as well as hot water through Polymer Electrolyte Fuel Cells (PEFC), using hydrogen reformed from gas.
PEFCs are attracting attention for their potential contribution to environmental preservation and energy conservation.
Compactness and simplicity of operation are among their outstanding features. Tokyo Gas estimates that the introduction ofthese cells will lead to the consumption of about 50% more gas for home electricity and hot water than a typical household
currently requires for hot water alone. That spells growth for Tokyo Gas. To tap this potential, we are working toward commercializing these systems.
In the year ending March 31, 2001, a large-scale national project for the development of these fuel cells will be initiated.
Manufacturers and gas suppliers are expected to team up to develop this technology. Joining this project as a member of theJapan Gas Association, Tokyo Gas will work to bring PEFCs to market as soon as possible.
Annual Report 2000 TOKYO GAS

9A Multifaceted Energy Growth Strategy — Facet 2

The residential sector accounts for over 90% of Tokyo Gas’ gas customers. As such, this sector will be an important source of stable demand in the future.

10

Spurring Residential Gas Demand
In terms of absolute numbers, residential customers account for over 90% of Tokyo Gas’ customers. This makes the residential market an important pillar of the company’s business. To expand demand here, Tokyo Gas has adopted a twopronged strategy. One strategy focuses on marketing activities, in particular the expansion of heating demand. The otheraims to raise customer satisfaction.

Marketing Initiatives to Spur Residential Gas Consumption
Already, we are the preferred energy supplier for water heating and cooking in our service area with market shares of 96% and76%, respectively. We aim to maintain this preferred status by developing highly efficient, high-quality products. In the extremely competitive heating sector, where gas heating accounts for only 30% of the market, we are aiming to spur demand by
popularizing gas floor heating and gas fan heaters. Floor heating has many strong selling points. For one, it is ideally suited to
the Japanese custom of sitting on the floor at home. Floor heating is also a clean and comfortable heating alternative and helps
control house dust and mold that can cause allergies. These advantages suggest that floor heating could become establishedas the de facto standard for heating in Japanese homes. Newly constructed houses are an obvious target, but we are also
marketing products for existing homes. To cater to customers with homes where floor heating is not an option, we arepromoting the virtues of fan heaters, which are highly efficient, environmentally friendly and inexpensive.

TOKYO GAS Annual Report 2000

Demand for gas floor heating is expanding. Not only isfloor heating clean and comfortable, but it boasts
superior energy efficiency and cost advantages.

Through 370 Enesta and Enefit service outlets nationwide, Tokyo
Gas is providing a broad range of services to make gas evenmore user friendly.

A Customer-Based Approach
Customer satisfaction is an important key to becoming the preferred energy supplier. That’s why we are stepping up ourefforts to offer better services from various angles. Improved safety, more attractive rates, low-maintenance appliances andlifestyle ideas are just some of the ways we are working to spur residential gas consumption—and build stronger bonds oftrust with our customers.
Playing a significant role here is our customer service network. Our 18 branches offer total consulting solutions, including
inspections of appliances in homes once every 3 years and meter reading. To further deepen relationships with residential
customers, we have established 12 call centers to handle inquiries from customers.
Augmenting our customer service network are roughly 370 Tokyo Gas franchise-based service outlets. Operating under
the names Enesta and Enefit, these outlets provide a broad range of services ranging from gas pipeline works to installation andrepair of gas appliances and household renovations.

Percentage of New Housing
With Gas Floor Heating
Systems in the Tokyo Gas
Service Area

25

20

(%)
15

10

5
Tokyo Gas visits customers’ homes0Mar. 31

once every three years to carry out
96 97 98 99 00

inspections of gas appliances.

Annual Report 2000 TOKYO GAS

11

A Multifaceted Energy Growth Strategy — Facet 3

A 1,000 kW class steam-injected gas turbine with a variable heat-to-power
ratio for cogeneration systems: Tokyo Gas is first in the world to develop
and commercialize a turbine in this class for cogeneration systems.
Methane hydrate combustion: Tokyo Gas is pushing ahead with research into technologies for using methane hydrate, which is expected
to become a major source of energy in the 21st century.
12

A Focus on Technological Innovation
Research and development is positioned as a major corporate theme at Tokyo Gas as a means of driving growth in existing
businesses and creating business opportunities. Our main goal is to make gas the preferred form of energy by ensuring astable supply of low-cost, safe natural gas. To this effect, we are emphasizing speed and profitability and allocating resources selectively. Three areas have been singled out for research and development in line with this policy.

Appliances and Pipeline R&D Department

The Tokyo Gas R&D Organization

Residential Appliances andInstallation R&D Center
Top Management

Technology Policy Committee

System Control and Meter
Technology R&D Center
Commercial Appliances R&D Center

Corporate R&D Dept.
Fuel Cell Development Center
Fundamental Technology
Laboratory
Energy and Environmental
Technology Laboratory
Frontier Technology Laboratory

Pipeline Engineering andDevelopment Center
Infill Development Sect.
Production Division
Production Engineering Dept.
Production Engineering
Development Sect.

R&D Divisions
OthersTOKYO GAS Annual Report 2000

R&D Targets and Themes

PromoteAdvanced Gas
Utilization

Residential-use fuel cell systems
Technologies for micro gas turbines
High-performance, gas-fired air conditioning
Highly efficient cogeneration systems
Low-cost, space-saving gas appliances
Technologies with low environmental impact

Increase Customer
Satisfaction andCreate Profitable
Businesses
Enhance theSupply andOperation
Infrastructure

Enhance customer services by taking advantage of IT, including
the Internet.
Development of high-added-value technologies such as 13CMethane 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.

Technologies to build more efficient production, storage,transmission and supply systems.
Technologies to increase the safety of existing production andsupply infrastructures and lower the cost of maintenance.
Technologies such as cutting-edge information technology (IT)that contribute to higher operational efficiency.
Technologies to open the way to the use of other energy
feedstocks in the future such as those related to methane hydrate.

Promote Advanced Gas Utilization

13

We are developing products that enable customers to use environmentally friendly gas more efficiently, cheaply and easily.
These products include residential gas appliances, commercial kitchen equipment, gas-fired air conditioners, cogeneration
systems and equipment for industrial use.

Enhance the Supply and Operation Infrastructure
We are conducting research to supply gas to even more customers at attractive rates and with long-term reliability. This willallow us to meet society’s demand for the increased use of natural gas, an environmentally benign fuel, as a primary source ofenergy. At the same time, this research will drive growth in our customer base.

Increase Customer Satisfaction and Create Profitable Businesses
To meet our customers’ diverse needs, Tokyo Gas is carrying out R&D that will broaden customer services by using the latest
information and communications technologies, including the Internet. Furthermore, we are working on research that will leadto new businesses rooted in unique Tokyo Gas technical expertise.

Tokyo Gas Makes Breakthrough With Diamond Ultraviolet Light-Emitting Device
Tokyo Gas has developed the world’s first diamond ultraviolet light-emitting device capable of operating atroom temperature. The device uses a high-quality semiconductor diamond made from carbon powder.
Significantly, the carbon powder is extracted from LNG. This technology has the potential to increase therecording density and capacity of optical disks. What’s more, it doesn’t use harmful substances like mercury
making it an environmentally friendly lighting alternative.

Annual Report 2000 TOKYO GASA Multifaceted Energy Growth Strategy — Facet 4

December 1999 saw the completion of the Keihin and Yokohama transmission pipelines. Tokyo Gas now boasts a 300km-long supply loop encircling the greater Tokyo
area. Pictured is the Tsurumi River Bridge, which was built for the Keihin Transmission Pipeline.
14

Powerful Supply Infrastructure—
the Foundation of Our Competitiveness
Demand for natural gas has risen as alternative energy sources other than petroleum are sought and the government looks
for solutions to environmental problems. Tokyo Gas was quick to recognize this trend. We reacted by constructing the
Ohgishima LNG Terminal, the Keihin Transmission Pipeline and other facilities to bolster our supply capacity. With thesemajor projects having largely been completed by the end of March 2000, we will start recovering our investment in theyear ending March 2001. Leveraging this powerful supply infrastructure, Tokyo Gas hopes to expand demand and increase
profits. We also expect to generate higher free cash flows.

Unrivaled Natural Gas Supply Capacity
Just how powerful is Tokyo Gas’ supply infrastructure? Tokyo Gas has Japan’s largest natural gas supply capability and is
progressively increasing capacity. Three LNG terminals—each of which plays a prominent role in Japan’s gas industry—are at
the heart of this strength. Our Negishi LNG Terminal received Japan’s first shipment of LNG in 1969. Our Sodegaura facility is
the world’s largest LNG receiving terminal. And then there is the new Ohgishima LNG Terminal, the first phase of which cameon stream in October 1998. Boasting the most sophisticated technologies, Ohgishima is of particular strategic importance. The
terminal’s location in the high-demand Keihin district near Yokohama means lower costs because a new long-distance pipeline
was not required. Ohgishima will eventually have a production capacity of approximately 4 billion m3 per annum to respondto increasing demand.

TOKYO GAS Annual Report 2000

Capital Expenditures and Depreciation in
Relation to Gas Sales Volume(1993~2005)(Left scale: billion ¥)(Right scale: million m3, 46.047 MJ/m3)

KANTO PLAIN

TOKYO

200

20,000150

15,000100

10,00050

5,000

Head OfficeTOKYO BAY

00Mar. 31 93

Ohgishima
LNG Terminal
YOKOHAMA

Sodegaura
LNG Terminal

NegishiLNG Terminal

94 95 96 97 98 99 00 01 02 03 04 05

Capital expenditures
Gas sales volume

Depreciation

Note: 2001~2005 are projected figures. The abovegraph represents non-consolidated data.

Length of pipeline: 46,285 km(As of March 31, 2000)

0

5

10

15

20（km）

High-pressure transmission pipelines
Planned or under construction
Medium-pressure transmission pipelines
Tokyo Gas service area

The Negishi, Sodegaura and Ohgishima LNG terminals are now connected by a loop of highpressure pipes following the December 1999 completion of the Keihin and Yokohama transmission
pipelines. This means Tokyo Gas can start responding to rising industrial demand in the Keihin

15

district near Yokohama, provide a more reliable supply of gas in the greater Tokyo area andmeet rising demand in the future.

The Sodegaura LNG Terminal is the world’s
largest LNG receiving terminal.

Extensive Transmission and Distribution Network
Investments to bolster our transmission capacity are allowing us to take maximum advantage of our competitive edge inproduction. With the completion of the Keihin Transmission Pipeline and the Yokohama Transmission Pipeline in December
1999, Tokyo Gas now has in place a 300km-long supply loop encircling the greater Tokyo area that is connected by highpressure pipes to the Negishi, Sodegaura and Ohgishima LNG terminals. Why is this significant? Because it means we can now
cater to rising industrial demand in the Keihin district near Yokohama where industrial demand is expected to increase markedly.
It also means we have built a mutual backup system for our three LNG receiving terminals. In short, we have bolstered ourability to provide customers with a reliable supply of gas. And we will continue to extend our pipeline network to meetpotential demand outside of our existing service area.

With these enhanced infrastructures we will be able to meet growing demand during the next few decades with minimum
additional investment.

Annual Report 2000 TOKYO GAS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, Tokyo Gas formulated a new environmental policy in June 2000. And
in July, Tokyo Gas made public its environmental accounting results. Our basic aim is continuous reductionof the environmental impact of energy use by our customers as well as by our own business activities.

NOx

SOx
The Inherent Advantages of Natural Gas

Natural
Gas

Oil

Coal

Natural
Gas

Oil

Coal

CO2
Natural
Gas

Oil

Coal

The environmental advantages of natural gas are clear. Factsbear this out. In terms of carbon dioxide (CO2) emissions,the leading cause of the greenhouse effect, natural gas produces fewer emissions than oil or coal to generate the same

0

70

100
40

70

100
60

80

100

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

amount of energy (see diagram). Furthermore, unlike oil andespecially coal, natural gas does not produce any sulfur oxides

16(SOx), which cause acid rain. Nitrous oxide (NOx) emissions,with oil or coal. This makes natural gas the cleanest burning

another cause of acid rain, are lower with natural gas thanfossil fuel currently available.

Tokyo Gas Group Environmental Policy(Formulated in June 2000)

PHILOSOPHYThe Tokyo Gas Group will promote the harmonious use of energy to contribute to the preservation of regional andglobal environments as well as to the sustainable 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 withminimal environmental impact
Reduce the total environmental impact of Tokyo Gas’ business activities
Tokyo Gas will continuously reduce per unit energy and resource use in its business activities through the development of
increasingly efficient and effective environmental 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 the international
community by engaging in a wide variety of activities. These activities will range from participation in regional environmental
activities to international sharing of technological developments, starting with strategies to prevent global warming.
Promote environment-related technology R&D
Tokyo Gas will proactively research and develop environmental technologies, including renewable energy, to preserve regionaland global environments.
TOKYO GAS Annual Report 2000

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)➔➔● Reduction of waste● (Reference) Reduction of substances with an environmental

impact at customers’ level

Actual Economic Benefits
Contributions to Society● 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, 2000, based on Environmental
Accounting Guidelines for Three Gas Companies issued in May this year. The figures show that the parent company invested approximately¥0.8 billion and incurred expenses of roughly ¥3.7 billion for environmental 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 thecompletion of a switch to natural gas. The other is 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. Moredetailed information concerning Tokyo Gas’ environmental accounting is contained in its Environmental Report 2000.

ISO Certification

developing new ways to increase energy efficiency. Gas

Obtaining ISO certification has been positioned as a high man-cogeneration systems and gas-fired air conditioning are just aagement priority. In 1997, both the Negishi and Sodegaura LNG

few of the many technologies that are being widely adopted.

terminals obtained ISO 14001 certification; these facilities were

In the fuel cell field, Tokyo Gas is developing an on-site generation

the first in Japan’s gas industry to obtain this international certi-

system that boasts high generation and energy efficiency andfication, which attests to the high quality of our environmental

emits almost no atmospheric pollutants. High hopes are held

management systems. The Ohgishima LNG Terminal obtained

for the use of fuel cells in future residential cogeneration systems.

ISO 14001 certification in January 2000. And in March 2000,

Concern over dioxin emissions has also been increasing. To

the Shinjuku District Heating and Cooling Center became theaddress this issue, Tokyo Gas has developed natural gas

first supplier of heat in Japan to attain ISO 14001 certification.

“reburning technology” for municipal solid waste incinerators.

Recycling Initiatives
Recycling and decreasing waste volumes are other ways wereduce the environmental impact of our activities. SRIMS (Saving Recycling Innovative Model System) is at the heart of these
efforts. This system facilitates the efficient collection, separation,
management and disposal of used gas equipment, pipes andNatural gas vehicles (NGVs) are also playing an integralrole 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.

other industrial waste. In a similar vein, we are radically reducing the amount of earth removed from pipeline
construction sites.

The Earth & Energy Exploratorium
was opened in November 1998 topromote greater understanding of
the environmental issues associatedTechnologies to Reduce Environmental Impact
Tokyo Gas feels that it has the responsibility to further reduce
the environmental impact of natural gas. That’s why we arewith energy use. In the year ended
March 31, 2000, the exploratorium
was visited by approximately
100,000 people.

Annual Report 2000 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.

tions support system, emergency vehicles and personnel can be

These are safety systems comprisingmobilized quickly and accurately in accordance with the typegas meters with embedded microcom-

and scale of the problem, as well as other circumstances.

puters. Micon Meters enable 24-hourmonitoring of gas use and can automatically shut off gas when they detect18

Micon Meter

leaks, earthquakes or irregularities in use.

Tokyo Gas is also educating customers about the correct use ofgas and carrying out regular inspections. Moreover, an emergency response system to prevent 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 standards. The second stage is our emergency response. The aim
here is to prevent secondary damage such as fires and explo-Intelligent Service Systemsions. Finally, we are prepared to move quickly to restore

We also have an intelligent service system that links customers’

service should it be interrupted and to continue supply togas meters with Tokyo Gas’ monitoring station by telephoneareas largely unaffected. To take our system up to the nextlines to monitor gas usage. The system is triggered whenlevel, we will install 3,700 state-of-the-art seismic intensity

sensors detect irregularities, sending a message to Station 24,

sensors at locations throughout our 3,200km2 service area.

a 24-hour control center. This network facilitates 24-hour

These sensors will be monitored by SUPREME, the world’s

monitoring of gas use.

most advanced disaster prevention system.

LEFT
Center for Supply Control and Disaster Management
RIGHT
A state-of-the-art seismic intensity sensor

TOKYO GAS Annual Report 2000

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 to raise envi-

to participate in volunteer activities. In the year ended Marchronmental awareness to sponsorship of soccer clinics. In this31, 2000, 38 employees took advantage of the system.

section, some of the major activities undertaken during theyear 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 aims to raise environmental

Tokyo was established in 1998 as the successor to the Tokyo

awareness through films. Submissions are solicited in Japan,

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

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

ing at the festival. The 8th Earth Vision Film Festival was held

By supporting FC Tokyo and running soccer clinics, Tokyo

over two days in Tokyo in March 2000 and was attended by

Gas will continue to encourage regional sports.

nearly 1,200 people. The festival was also held for the second
time in Paris, attracting over 300 people.

They have always enjoyed, such as
great music, memorable films.

LEFT
The FC Tokyo eleven
CENTERThe Tokyo Gas “Gas Science Center”
was visited by about 100,000 people
in the year ended March 31, 2000.
RIGHT
Poster for the 8th Earth Vision Film
© FC Tokyo

Festival
Annual Report 2000 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 various institutions overseas for the purposes of technological and managerial information exchanges. Coordinating these efforts
are our four representative offices in New York, Paris, Kuala Lumpur and Beijing. They are also our contact
points for overseas investors.

20

Tokyo Gas’ Overseas Activities

and technical expertise being highly rated by the project

Tokyo Gas has a proud track record of helping other coun-tender committee. The project—the first full-fledged over-tries to build gas supply infrastructures. Recently, Tokyo Gas

seas project by a Japanese energy utility company—is now

and its group companies have been instrumental in a number

regarded as a model for other Asian countries hoping toof successful projects. In Malaysia, we have been active in abuild a similar infrastructure. In 1999, Gas Malaysia started

natural gas distribution system project and a gas-fired

paying dividends. The gas-fired cogeneration district cool-cogeneration district cooling project—both firsts in thating project was another joint venture with Petronas throughcountry. The former was conducted through a joint venture

Gas District Cooling (M) Sdn. Bhd. Thanks to this project,company, Gas Malaysia Sdn. Bhd., with Petronas, Malaysia’s

Malaysia’s Kuala Lumpur International Airport (KLIA), whichstate-owned oil company, and other local partners. Tokyo

opened in June 1998, boasts the world’s largest class of gas

Gas won the international contract in 1991, its management

district cooling supply based on gas absorption chillers. Office

Natural Gas Distribution System in Malaysia

JernehThailand
Bekok

DuyongSotongKertehKemamanPENINSULAR
MALAYSIA

Kuantan

Kuala Lumpur (KLCC)
Port Klang
Shah Alam
Nilai (KLIA)

Putrajaya
SerembanKluangLegendGas Field
Gas Malaysia Supply Area
PGU Line

Pasir Gudang

Senai

Singapore

The Petronas Twin Towers, the tallest buildings in the world, are supplied with chilledwater by a gas district cooling (GDC) system.
TOKYO GAS Annual Report 2000

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
BG GroupInternational Gas Union

Gas Technology
Institute

Shell International
Gas Limited
KeySpan Energy Delivery
Ruhrgas AG
Paris

Pacific Gas andElectric Company

Beijing
Tokyo

SNAM S.p.A.

New York
AmericanGas Association

Chongqing
Natural Gas Co., Ltd.
Kuala Lumpur(Asia Pacific Regional Office)Southern California
Gas Company

Interstate Natural Gas
Association of America

Trunkline LNG Company

Petroliam Nasional Berhad(PETRONAS)

Woodside Petroleum Limited

Overseas Representative Offices
Collaborating Partners

21

buildings, hotels and other facilities in central Kuala Lumpur

forging closer ties with energy-related companies andhave benefited as well from the company’s cooling systems.

institutions—some we have been associated with for over

Meanwhile, Tokyo Gas Engineering Co., Ltd. has been pro-

20 years—around the globe. Collaboration involves joint

viding technical consultation, for example, for the establish-

research and the exchange of information on managerial

ment of LNG receiving facilities in Korea, Taiwan, Thailand,

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

and Portugal. Tokyo Gas is leveraging experience and tech-mation, we are working to improve our operations, including

nology from its three LNG terminals, including the recently

our gas supply facilities and services. As deregulation sweeps

completed Ohgishima facility. Moving forward, Tokyo Gas

through the Japanese energy industry, such tie-ups will takeintends to identify and develop business opportunities in whichon added meaning. The offices also play a vital role in com-it can capitalize on technological expertise built up in Japan.

municating information to shareholders and in gathering

Information Exchanges Lead to Better Operations
We have four representative offices overseas: New York, Paris,

information from the capital markets, which is reflected inmanagement policy.

Kuala Lumpur and Beijing. Through these offices we are

Mr. Gerald Doucet, Secretary
General of the World Energy
Malaysian trainees

Council, on a visit to Tokyo Gas.

Annual Report 2000 TOKYO GASDiversification

The Tokyo Gas Group is aiming to increase earnings as a diversified energy services company by carrying out
core gas operations as well as operating energy-related businesses that complement and add value to those
operations. Furthermore, to respond to the IT revolution and Japan’s “graying” society as well as contributeto environmental protection, Tokyo Gas is actively promoting various new businesses that transcend the boundsof the energy sector. Two examples of these are urban development and information-related businesses. In
respect of our 47 subsidiaries, we are working to raise their profitability and foster autonomy with a view totaking 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

Equity Interest (%)

Business

Tokyo Gas Energy Co., Ltd.

100

Sales of liquefied petroleum gas (LPG) and coke

Tokyo Gas Chemicals Co., Ltd.

100

Sales of gas for industry and chemicals

Tokyo Oxygen and Nitrogen Co., Ltd.

54

Production and wholesale of liquefied oxygen and nitrogen

Tokyo Gas Urban Development Co., Ltd.

100

Real estate leasing, management and brokerage, etc.

Park Tower Hotel Co., Ltd.

100

Hotel management

KANPAI CO., LTD.

93.3

Gas facilities construction and gas appliance sales

Gastar Co., Ltd.

66.7

Production and wholesale of gas appliances

TG Credit Service Co., Ltd.

100

Leasing of information equipment, gas appliances and office equipment, and credit administration connected with gas appliances andinstallations

Chiba Gas Co., Ltd.

99.9

Supply of gas to Chiba City and surrounding cities

Tsukuba Gakuen Gas Co., Ltd.

100

Supply of gas in Tsukuba City

Tokyo Gas Engineering Co., Ltd.

100

Comprehensive engineering services with a particular focus onenergy-related work

TG Information Network Co., Ltd.

100

Information processing services, software development and sales

TG Enterprise Co., Ltd.

100

Financial administration and building leasing for Tokyo Gas andof computer equipment, etc.
related companies
Tokyo LNG Tanker Co., Ltd.

100

LNG and LPG transportation and chartering of carriers

Gas Malaysia Sdn. Bhd.*

20

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 staya truly memorable experience.
RIGHT
This ultra-low-temperature, deep-freeze warehouse for tuna is one exampleof the cryogenic utilization of LNG.

TOKYO GAS Annual Report 2000

Topics
Increasing Focus on LNG and LPG Transportation Business
In July 2000, Tokyo Gas announced its intention to build and operate two LNG
carriers. The first vessel is slated for completion in 2003, while delivery of the second
is expected in either 2005 or 2006. Tokyo Gas already owns shares of LNG and LPG
carriers through our subsidiary Tokyo LNG Tanker Co., Ltd. This subsidiary wasestablished in 1991 with two goals in mind: reducing the import price of LNG and
LPG feedstocks; and securing a stable energy supply.
The two proposed new vessels will allow Tokyo Gas to take advantage of new
procurement methods such as short-term contracts and spot tradings, as well as totransport LNG procured under long-term contracts. The result will be a further
reduction in LNG import prices and greater purchasing flexibility. Moreover, Tokyo
Gas is seeking to further develop its LNG transportation business in areas such as
supplying LNG to third parties.

Key Ingredient For Breakthrough Diagnostic Method
Since 1989, Tokyo Gas has been working on a process to separate and condense 13CMethane from natural gas. The first shipments were made in May 2000, following
completion of a plant to produce 13C-Methane for commercial use—the first of its
type in the world. The 13C-Methane will be processed into 13CO2 by Tokyo Gas Chemi-

23

cals and sold to Otsuka Pharmaceutical Co., Ltd. for use in a breakthrough drug that
we developed with them. The drug diagnoses the existence of Helicobacter pylori, acommon cause of gastritis and gastric ulcers, and will make for more patient-friendly
diagnoses of these ailments.
Looking ahead, Tokyo Gas intends to develop diagnostic drug applications us13

ing C-Methane to detect, for example, diabetes and cerebral disease. By aggressively promoting 13C-Methane in the pharmaceutical raw materials field, Tokyo Gas
will develop new value-added businesses for LNG.

Tokyo Gas Looks to Enter Electricity Retailing and
Telecommunications Fields
In July 2000, Tokyo Gas, together with NTT Facilities Inc. and Osaka Gas Co., Ltd.,established a planning company to examine the feasibility of entering the electricity
retailing field. The new company, ENNET Corporation, will draw on the expertiseand in-depth knowledge of these three partners in the energy field to develop highvalue-added electricity operations, taking full advantage of IT to optimize the distribution of energy.
Tokyo Gas has also teamed up with Marubeni Corporation and Global Bandwidth Solutions, Inc., a wholly owned Marubeni subsidiary, to deliver next-generation,
high-speed broadband communications services to end users over the “last mile” inJapan. The “last mile” refers to the crucial final leg of service distribution from thebroadband infrastructure to end users. In this IT age, development of new businessmodels beyond the realm of energy supply that harness the power of IT will beessential growth drivers. By participating in this endeavor, Tokyo Gas has taken an
important first step in its new information and telecommunications strategy. We
expect to build up invaluable experience in the IT field from this venture.
Annual Report 2000 TOKYO GASBoard of Directors

24

Soichiro Akimoto

Haruno Ito

Yasuyuki Yamaguchi

Toshiyuki Takasuna

Norio Ichino

Senior Managing Director

Executive Vice President

Executive Vice President

Senior Managing Director

Senior Managing Director

Kunio Anzai

Hideharu Uehara

ChairmanPresident

Managing Directors

Directors

Fumio Ohori
Norihiro Takuma
Tohru Itoh
Hideo Nishiwaki
Shouzou Ohno
Kouya Kobayashi
Masahiro Ishiguro
Mitsunori Torihara
Shigero Kusano

Yoshihito Imura
Takeki Hirooka
Yasuyuki Makiuchi
Hiroshi Urano
Minoru Yokouchi
Takeo Kuno
Takeo Ishikawa
Tadashi Sakurai
Tadashi Zemba

Tadaaki Maeda
Ieaki Uemura
Takashi Kunitomi
Tsunenori Tokumoto

Corporate Auditors

Akira Ogawa
Shigeru Ogasawara
Kenshiro Koto
Gaishi Hiraiwa
Masayuki Sato

(As of June 29, 2000)

TOKYO GAS Annual Report 2000

Financial Statements
25

Contents
[26]
[27]
[31]
[34]
[36]
[37]
[38]
[39]
[47]

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 2000 TOKYO GASSix-Year SummaryTokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31

Thousands of
U.S. dollars

Millions of yen
2000

1999

1998

1997

1996

1995

2000

Net sales . . . . . . . . . . . . . . . . . . . ¥ 992,255 ¥ 997,767 ¥1,009,155 ¥ 988,077 ¥ 958,662 ¥ 915,862$ 9,360,896

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

672,070

674,997

686,649

663,066

633,253

601,990

6,340,283

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

126,747

132,749

126,840

134,174

135,669

137,209

1,195,726

Related construction . . . . . . . . .

63,94963,63066,69569,966

68,82570,034603,292

Real estate rental business . . . . .

14,95915,617

16,495

18,423

18,468–141,123

Other . . . . . . . . . . . . . . . . . . . .

114,530

110,774

112,476

102,448

102,447

106,629

1,080,472

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

69,23372,30376,48562,163

67,10960,105653,142

Income before income taxes . . . .

43,73840,96436,261

32,601

39,47332,858412,623

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

26,69817,764

17,241

15,432

16,762

11,072

251,868

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

136,214132,568

114,893

123,569

120,569–

1,285,038

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

121,806

142,030

159,433

162,282

180,080–

1,149,113

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

¥9.50

¥6.32

¥6.14

¥5.49

¥5.97

¥3.94

$0.09

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

8.84

5.94

5.76

5.37

–

–

0.08

5.00

5.00

5.00

5.00

5.00

5.00

0.05

¥1,805,086 ¥1,707,446 ¥1,720,684 ¥1,772,132 ¥1,657,176 ¥1,608,244$17,029,113

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

Cash dividends applicableto the year . . . . . . . . . . . . . . . . .
26

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

843,634

820,753765,304

878,674

743,177

724,523

7,958,811

Total stockholders’ equity . . . . . . .

484,239

421,442

417,755

414,906

413,725

411,164

4,568,292

Notes: 1. U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥106.00=U.S.$1, the approximate Tokyo
foreign exchange market rate as of March 31, 2000.
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.
3. Net sales for “real estate rental business” were included in “other” up to the year ended March 31, 1995.
4. Capital expenditures and depreciation figures disclosed up to the year ended March 31, 1995 are not based on the same figures
disclosed from the year ended March 31, 1996.

TOKYO GAS Annual Report 2000

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

Gas Sales Volume

4,000

The volume of gas sold by Tokyo Gas in fiscal 1999, the year ended March 31, 2000, rose
3.2% to 8,424 million m3. Despite record high temperatures, which rose by 0.2°C over the

2,000

past year to an average of 17.0°C in the Tokyo area, residential gas volume increased 1.4%
due to efforts to win new customers and to popularize gas appliances. Industrial use also rose,increasing 2.0% from the previous year due to higher demand from large-volume users. Furthermore, gas sales volumes to commercial and other business users climbed 6.2% due toefforts to expand demand for gas-fired air conditioning.
Net Sales

0Mar. 31

96 97 98 99 00

Residential
Commercial
Industrial
WholesaleNote: Non-consolidated

Consolidated net sales decreased 0.6% over the past year to ¥992.2 billion. Higher overall gas
sales volumes could not offset a reduction in gas rates based on the “sliding rate” system anda downward rate revision implemented during the fiscal year.
Operating Expenses and Operating Income

Net Sales by Segment(Billion ¥)The cost of sales increased 1.4% to ¥483.8 billion due to the higher cost of raw materials(mainly LNG). However, efforts to pare expenses such as operating and personnel expenses

1,200

27

yielded a 2.0% decrease in selling, general and administrative expenses to ¥439.2 billion.
Thus, total costs and expenses declined 0.3% to ¥923.0 billion. Operating income decreased
4.2% to ¥69.2 billion due to the above factors.

1,000
800

Other Income (Expense)
Other expense improved ¥5.8 billion to ¥25.4 billion. The main factors were inclusion ofequity in the net income of an affiliated company, higher exchange gains in line with the yen’s

600
400

appreciation and the absence of losses on the sale of marketable securities that were recordedin the previous fiscal year.
Income Before Income Taxes and Income Taxes
Income before income taxes increased 6.8% to ¥43.7 billion. Income taxes decreased to ¥16.0
billion due to a reduction in Japan’s statutory tax rate.
Net Income
Net income climbed 50.3% to ¥26.6 billion over the previous year due to the above factors as

200
0Mar. 31

96 97 98 99 00

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

well as a tax adjustment resulting from the adoption of tax-effect accounting. Basic net income per share consequently increased 50.3% to ¥9.50 and diluted net income per share rose
48.8% to ¥8.84. Average ROE for fiscal 1999 was 5.9%, a substantial increase from 4.2% in
fiscal 1998.

Annual Report 2000 TOKYO GASSEGMENT INFORMATION

Average LNG
Procurement Cost(¥ per ton)

Gas Sales
Gas sales decreased 0.4%, or ¥2.9 billion, to ¥672.0 billion due to a reduction in gas rates

30,000based on the “sliding rate” system and implementation of a downward rate revision during the
fiscal year. Gas sales accounted for 67.7% of total net sales. On the cost front, costs andexpenses increased 2.3%, or ¥11.7 billion, due to higher raw materials (mainly LNG) costs.

20,000The net result was that segment operating income decreased 9.4%, or ¥14.7 billion, to ¥141.3
billion.
Gas Appliance Sales

10,000

Segment sales decreased 4.5%, or ¥6.0 billion, to ¥126.7 billion due to actions taken tostrengthen the segment’s sales system. Gas appliance sales accounted for 12.8% of total net
sales. Costs and expenses, meanwhile, decreased 7.0%, or ¥9.4 billion, as a result of improvements to the distribution and sales systems. Segment operating income increased ¥3.4 billion

0Mar. 31

to ¥2.7 billion.

96 97 98 99 00

First half
Second half

Related Construction
Segment sales increased 0.5%, or ¥0.3 billion, to ¥63.9 billion, representing 6.4% of total net

Net Income

sales. Costs and expenses decreased 2.2%, or ¥1.5 billion. The result was a ¥1.3 billion in-(Billion ¥)crease in net income to ¥1.9 billion.
30

Real Estate Rental Business
Sales decreased 4.2%, or ¥0.6 billion, to ¥14.9 billion, mainly due to a reduction in leasing
fees at Park Tower Hotel. Sales here accounted for 1.5% of total net sales. Costs and expenses
increased 2.6%, or ¥0.7 billion, meaning that operating income fell 6.1%, or ¥0.5 billion, to28

20¥8.2 billion.
Other
Segment sales increased 3.4%, or ¥3.7 billion, to ¥114.5 billion on the back of continued

10

strong demand for district heating and cooling (DHC) systems. Other sales represented 11.5%of total net sales. Costs and expenses in this segment increased 0.9%, or ¥1.3 billion. But
operating income climbed 27.4%, or ¥2.4 billion, to ¥11.4 billion.

0Mar. 31

96 97 98 99 00

FINANCIAL POSITION

Total assets as of March 31, 2000 stood at ¥1,805.0 billion, up 5.7%, or ¥97.6 billion, from ayear ago.
Fixed Assets

Total Assets andEquity Ratio(Billion ¥)

(%)

2,000

40

1,500

30

1,000

20

500

10

Fixed assets increased 2.0% to ¥1,491.0 billion. Property, plant and equipment decreased
0.7% to ¥1,333.5 billion due to depreciation exceeding capital expenditures. Intangibles increased due to the inclusion of software, which was previously shown under other investments
and non-current assets. Investments and other non-current assets, meanwhile, increased dueto the inclusion of deferred income taxes of ¥41.5 billion.
Current Assets
Current assets stood at ¥314.0 billion, an increase of 27.9%, as of March 31, 2000. This wasprimarily due to an increase in cash and cash equivalents resulting from the issue of domestic
unsecured bonds during the fiscal year. The increase also reflected a deferred income taxes asset

0

due to the adoption of tax-effect accounting and higher trade notes and accounts receivable.

Mar. 310
96 97 98 99 00

Fixed assets
Current assets
Equity ratio (%)

TOKYO GAS Annual Report 2000

Long-Term Liabilities
As of March 31, 2000, long-term liabilities had increased 1.7% from ¥985.4 billion a year

Interest-bearing Debt
(Billion ¥)

(%)

1,000

100

800

80

600

60

400

40

200

20

earlier to ¥1,002.5 billion. This represented the transfer of ¥39.8 billion in domestic unsecured
convertible bonds to current liabilities offset by the issue of ¥60.0 billion in domestic
unsecured bonds.
Current Liabilities
Current liabilities increased 5.8% to ¥314.6 billion due mainly to growth in long-term debt
due within the current fiscal year, which outweighed decreases in bank loans and notes andaccounts payable.
Interest-bearing Debt
As of March 31, 2000, interest-bearing debt was ¥957.0 billion, up 4.9% from a year ago. The
rate of dependence on interest-bearing debt, which is defined as interest-bearing debt as apercentage of total assets, decreased from 53.4% to 53.0%.
Stockholders’ Equity
Total stockholders’ equity increased 14.9% to ¥484.2 billion and the equity ratio rose from
24.7% to 26.8%.
CAPITAL EXPENDITURES

Tokyo Gas has expanded facilities to put in place a more stable supply system for gas. In
respect to production facilities, Tokyo Gas built the Ohgishima LNG Terminal as well as other

00Mar. 31

96 97 98 99 00

Long-term debt
Bank loans
Dependancy on interest-bearing
debt (%)
Note: Long-term debt includes
long-term debt due within
one year, and bank loans
refers to short-term notes.

Capital Expenditures
and Depreciation(Billion ¥)200

facilities. The Ohgishima LNG Terminal came on line in the year ended in March 1999. In
regard to supply facilities, the stability of supply was bolstered in fiscal 1999 by the completionof the Keihin Transmission Pipeline and the Yokohama Transmission Pipeline. In addition, capi-

150

29

tal expenditures focused on new pipelines for creating demand, the planned replacement ofexisting pipelines and measures to prevent earthquake damage. In respect of facilities for
auxiliary businesses, Tokyo Gas is constructing DHC facilities in a new city center presently

100

under development in Ohmiya, Saitama Prefecture. Capital expenditures in fiscal 1999 decreased 14.2% to ¥121.8 billion.
CASH FLOWSNet cash provided by operating activities decreased ¥7.0 billion to ¥154.6 billion. This re-500Mar. 31flected an increase in notes and accounts receivable, which offset increases in net income anddepreciation. Net cash used in investing activities decreased ¥34.5 billion to ¥124.3 billion,
due mainly to lower capital expenditures which have passed their peak following the completion of the Ohgishima LNG Terminal and other facilities. Financing activities provided net cashof ¥22.8 billion, a ¥28.1 billion increase from the previous year. The increase reflected the

96 97 98 99 00

Capital expenditures
Depreciation

Net Cash Provided byOperating Activities(Billion ¥)200

repayment of interest-bearing debt, namely payments for short-term bank loans of ¥10.2
billion and payments for notes and long-term debt of ¥47.5 billion, offset by cash from longterm debt of ¥34.7 billion and the issue of ¥60.0 billion in domestic unsecured notes. Cash150

dividends paid were ¥14.0 billion. As a result of the foregoing items, cash and cash equivalents
at end of year was ¥97.3 billion.

100

50

0
Mar. 31

96 97 98 99 00

Note: See accompanying notes
on page 39.
Annual Report 2000 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 re-4

spond to an escalation in demand for gas. As a result of those expenditures, interest-bearing
debt has increased.

3

However, Tokyo Gas is now poised to recover those investments through the sales andearnings they are generating. From fiscal 2000 onward, Tokyo Gas expects that it will be able
to conduct capital expenditures within the bounds of depreciation By using the resulting free2

cash flows to reduce interest-bearing debt, Tokyo Gas will create a slimmer balance sheet
thereby improving its financial position (see table below).
At the same time as reducing interest-bearing debt, Tokyo Gas is placing emphasis on im-

1

proving the efficiency of its asset deployment. This will include thoroughly examining the
profitability of new capital expenditures as well as reviewing the profitability of existing facili-

0ties and investments to raise ROA.

Mar. 31

Key Financial Objectives
Fiscal 2000—Fiscal 2004
Free cash flows

Average of ¥61.5 billion a year for 5 years

96 97 98 99 00

Note: Interest coverage ratio=(net income+income
taxes+interest expense)/
interest expense(Total of ¥307.5 billion over 5 years)
ROA

1.7% (5-year average)

Interest-bearing debt (Non-consolidated)¥610.0 billion as of March 31, 2005
ROE and ROA(%)

MARKET RISK EXPOSURE

Stock Price Risk
30

6Equities 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.

5

Tokyo Gas has formulated a management policy and rules for the handling of such stock.
4

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

3

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 isdetermined by the “sliding rate” system with reference to crude oil prices, fluctuations in the21market price of crude oil are another risk factor. The hypothetical effect of these fluctuations
on annual raw materials costs is as follows:0

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

¥1 billion

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

¥4 billion

However, the above fluctuations are automatically passed on to the gas user in the form ofrevisions in gas purchase prices after six months under the “sliding rate” system. Consequently,
while this time lag may have a short-term effect on operating income, there is no effect overthe medium to long term.
Interest Rate Risk
Tokyo Gas has only 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 2000

Mar. 31

96 97 98 99 00

ROA
ROE

Frequently Asked Questions
1. Please explain Tokyo Gas’ rate system.

Tokyo Gas’ gas rates fall into three categories: two regulated agreements and non-regulated
large-volume supply.
• Service agreement: Tokyo Gas uses “regulated” rates approved by the Ministry of International
Trade and Industry (MITI) to bill customers for gas supplied through pipelines to meet generaldemand. In May 1999, revisions were made to the Japanese Gas Utility Industry Law allowing
Tokyo Gas to lower these rates simply by filing a notice with MITI as long as this does notadversely affect any customers.
• Optional agreements: Tokyo Gas is permitted to offer rates and service terms other than thoseoutlined in the above service agreement. These agreements have to be reported to MITI. They
enable Tokyo Gas to make efficient use of its gas supply facilities—and contribute to ourbusiness efficiency.
• Large-volume supply: In June 1994, revisions to the Japanese Gas Utility Industry Law eased
regulations governing the setting of rates and area of supply to large-volume customers,
allowing the gas supplier and customers to decide on supply terms, including rates, between
themselves. As a result of revisions to the Japanese Gas Utility Industry Law in May 1999, thethreshold for large-volume customers was lowered to encompass customers consuming
1 million m3 or more of gas per year.
“Regulated” rates are calculated using the basic “total cost” formula as shown in the following
simplified equation:
Operating costs + Fair return – Deductions = Total cost
31

Cost of raw materials
Labor costs
Administrative costs
Depreciation
Corporate taxes

Dividends
Cost of debt

Deductions(Revenue fromby-products)
Efficiency target
amountRepresents an appropriate
profit added to an
appropriate cost underefficient management

In January 1996, the raw materials cost “sliding rate” system was introduced. This system
adjusts the gas rate every three months in line with fluctuations in raw material costs, which aremainly affected by foreign exchange rates and crude oil prices.
2. What is Tokyo Gas’ gas rate strategy?
Tokyo Gas announced that it would reduce rates twice, once in the year ended March 31, 2000
and once in the year ending March 31, 2001, to make gas more competitive relative to otherforms of energy, including electricity, and to respond to customer demands. The first of thosecuts was implemented in December 1999, when Tokyo Gas reduced rates by an average of 2%.
The second rate reduction, of 2-3% on average, is planned for the current fiscal year. Tokyo Gas
intends to use the increased competitiveness of its gas rates to propel gas demand.
3. What recent deregulatory developments have taken place in Japan’s energy sector and what is Tokyo
Gas’ stance toward them?
In the gas industry, revisions were enacted to the Japanese Gas Utility Industry Law in November
1999. The major changes brought about by these revisions are as follows:(1) The threshold defining large-volume customers was lowered from those consuming two million m3 or more per year to one million m3. Rates for these customers can be freely set andthere are no regulations limiting the service area.

Annual Report 2000 TOKYO GAS(2) Gas companies are now allowed to reduce rates by simply filing a report with MITI.
Previously, they had to first obtain MITI’s permission.
(3) Gas companies were handed greater management independence, allowing them to freely
use a portion of profits from business activities to strengthen their financial position and passprofits on to shareholders, as well as to reduce gas rates as in the past.
In the electricity industry, revisions were enacted to the Electricity Utility Industry Law inMarch 2000. These revisions opened the way to unrestricted electricity sales to large-volume
customers, defined as users with a capacity of over 2,000 kW and using a 20 kV supply.
These developments have removed many barriers to the energy sector and are expected tostimulate intense competition, including from new entrants.
Tokyo Gas regards deregulation-driven expansion of the energy marketplace in Japan as amajor business opportunity and intends to aggressively advance into highly profitable new fields
such as electricity retailing.
4. What yardstick of performance is Tokyo Gas placing most emphasis on in its medium-term management
plan?
Free cash flows has been positioned as the most important yardstick of performance. Free cash
flows, defined as net income plus depreciation expenses less capital expenditures, shows theactual change in available cash for the year and is used as a measure of profitability. And, importantly, free cash flows represent a major source of funds to drive future growth and improve a
company’s financial position. Free cash flows are thus a measure of a company’s growth potential.
5. How does Tokyo Gas intend to use the free cash flows it expects to generate in its medium-term
32

management plan?
Tokyo Gas’ medium-term management plan has set a goal of generating a total of ¥250 billion
in free cash flows over the 5-year period from the year ending March 31, 2001 through the year
ending March 31, 2005, excluding funds for gas rate reductions. These cash flows will be used for:(1) Reducing interest-bearing debt, which stood at around ¥760 billion as of March 31, 2000, to¥610 billion by March 31, 2005, thereby improving the company’s financial position.
(2) Passing on profits to shareholders either by repurchasing and retiring treasury stock and/or
increasing dividends.
(3) Investing in new businesses, including electricity retailing and construction of companyowned LNG carriers.
6. Please outline Tokyo Gas’ plans for capital expenditures.
Over the last several years Tokyo Gas has invested more than ¥130 billion annually for theconstruction of the Ohgishima LNG Terminal, Keihin trunk line and other facilities to meet future
expansion in gas demand. As these projects had largely been completed by the year ended in March
2000, it will be possible to reduce capital expenditures on plant and equipment in the future.
(Years ended March 31, Unit: billions of yen)

Facility Investment Plans

2000 (Actual)

2001

2002

2003

2004

2005

2001-2005

Gas business facilities
Production facilities

15.7

13.9

11.7

14.0

11.3

8.5

(11.6%)

59.4

Distribution facilities

80.9

85.9

76.5

72.5

75.1

69.3

(74.3%)

379.3

Service and maintenance facilities

10.4

10.7

10.8

12.4

12.5

10.7

(11.2%)

57.1

Total

107.0

110.5

99.0

98.9

98.9

88.5

(97.1%)

495.8

Facilities for auxiliary businesses
Total

6.0

2.4

4.7

4.3

1.9

1.6

(2.9%)

14.9

113.0

112.9

103.7

103.2

100.8

90.1

(100.0%)510.7

Note: Figures in parentheses indicate percentage shares of totals.

TOKYO GAS Annual Report 2000

7. How will the introduction of new accounting standards for calculating retirement benefits affect Tokyo
Gas’ financial position?
Tokyo Gas calculated the shortfall in its corporate pension funds (referred to as Past Service
Liabilities) arising from the adoption of new accounting standards at ¥23 billion as of the end of
March 2000, assuming a 3% applicable discount rate. This shortfall will be cleared in the year
ending March 31, 2001. Regarding the treatment of this amount, Tokyo Gas is consideringtaking a one-off charge of ¥17 billion as an extraordinary loss and putting the remaining ¥6 billion
in trust.
8. What are Tokyo Gas’ arrangements for procuring LNG in terms of pricing, contracts and sources?
The price of LNG is determined largely by crude oil prices, since petroleum is the world’s mainenergy source and LNG’s primary competitor. Furthermore, most of the LNG that Tokyo Gas
purchases is closely linked to the price of oil imported by Japan. Payment methods fall into two
categories: Ex-Ship contracts and FOB contracts. Under Ex-Ship contracts, payment is madewhen LNG is unloaded in Japan at LNG receiving terminals. Under FOB contracts, settlementtakes place when LNG is loaded at the source-country port. At present, Tokyo Gas imports
approximately 6.2 million tons of LNG per year from 6 countries: Malaysia, Brunei, Indonesia,
Australia, the U.S. (Alaska) and Qatar.
When seeking sources of LNG, Tokyo Gas makes its selections based on conditions such asstability of supply, economic feasibility and flexibility of terms. Looking ahead, Tokyo Gas will, in
principle, follow its existing policy of relying on long-term supply contracts. But to respond toderegulation and liberalization in Japan’s energy sector, Tokyo Gas will consider new procurement methods such as short-term contracts.
In the event that any particular source of supply is interrupted, Tokyo Gas has a number of
options to fall back on. Those include the company’s reserves of LNG, substitute natural gas(SNG), purchasing excess production from other LNG producers and assistance from other LNG
importers.
9. What effect has the adoption of consolidated tax-effect accounting had?
In fiscal 1999, the year ended March 31, 2000, Tokyo Gas adopted tax-effect accounting. Its
introduction had the following effects on the company’s balance sheets and statements ofincome.
(1) Balance Sheet
Deferred tax assets: investments: ¥41.5 billion; current assets ¥7.5 billion
Deferred tax liabilities: long-term liability: ¥0.2 billion; current liability ¥45 million
Prior-year tax-effect adjustment in consolidated retained earnings : ¥49.2 billion
Decrease in consolidated retained earnings after tax adjustment : ¥ 0.7 billion(2) Statements of Income
Tax adjustment: ¥0.7 billion
Net income decreased by ¥0.7 billion as a consequence of the application of tax-effect accounting.
Regarding the Tokyo Gas Group, total deferred tax liabilities were ¥0.3 billion and totaldeferred tax assets were ¥49.1 billion. The large difference between the two figures largely
represents prepayments of tax.
Major components of deferred tax assets:
Excess provision for retirement allowances: ¥25.9 billion
Prior-year qualified pension plan expenses : ¥ 7.7 billion
Excess amortization of deferred assets: ¥ 3.5 billion

Annual Report 2000 TOKYO GAS

33

Consolidated Balance Sheets
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
March 31, 2000 and 1999

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2000

1999

2000

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

¥ 669,151
1,696,315
207,957
583,642
123,954¥ 669,814
1,595,849
214,167
562,735
144,853$ 6,312,745
16,002,972
1,961,858
5,506,057
1,169,377

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

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

3,187,418(1,844,624)

30,953,009(18,372,330)

1,333,552

1,342,794

12,580,679

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

19,8204,171

186,981

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

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

11,71520,753–84,023(1,486)

110,009
193,594
392,075
615,935(13,038)

137,649

115,005

1,298,575

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

97,3282,310

44,211
3,396

918,189
21,792

125,512(1,505)27,0607,560
55,800114,804(1,501)
27,687–56,8791,184,075(14,198)
255,283
71,321
526,416

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

314,065

245,476

2,962,878¥1,805,086¥1,707,446$17,029,113

See accompanying notes.

TOKYO GAS Annual Report 2000

Thousands of
U.S. dollars (Note 1)

Millions of yen

LIABILITIES AND STOCKHOLDERS’ EQUITY
Long-term debt due after one year (Note 6) . . . . . . . . . . . . . . . .
Retirement benefits (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allowance for repairs of gas holders . . . . . . . . . . . . . . . . . . . . . .
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2000

1999

2000

¥ 843,634
106,393
3,341
49,162¥ 820,753
105,723
3,330
55,633$ 7,958,811
1,003,708
31,519463,792

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 8) . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41,642
71,81052,86838,455392,849
677,453

39,28554,416
14,73345,08547,72754,00344,54018,821
59,90628,852

370,613513,358
138,990425,330
450,256

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .

314,698

297,4452,968,849

Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,619

3,120

34,142

Stockholders’ equity (Note 9):
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

141,8172,038
340,387

141,817
2,038
277,589

1,337,896
19,226
3,211,198

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

484,242(3)

421,444(2)

4,568,320(28)

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

484,239

421,4424,568,292¥1,805,086¥1,707,446$17,029,113

Commitment and contingent liabilities (Note 12)

Annual Report 2000 TOKYO GAS

35

Consolidated Statements of Income
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2000 and 1999

Thousands of
U.S. dollars (Note 1)

Millions of yen
2000

1999

2000

¥992,255¥997,767$9,360,896

483,814439,208477,284
448,180

4,564,283
4,143,471

923,022925,464

8,707,754

69,23372,303

653,142

1,283(23,366)

1,365(22,393)

12,104(220,434)(7,838)2,637(8,546)
1,382(73,943)
24,877

–
393
1,396

(1,556)–(1,591)–
3,708
13,169(25,495)(31,339)(240,519)

Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .

43,73840,964

412,623

Income taxes (Note 8)
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,064714

23,499–151,547
6,736

Minority interest in net income of consolidated subsidiaries . . . .

26,960(262)

17,465299

254,340(2,472)

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

¥ 26,698¥ 17,764$ 251,868

Net sales (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and expenses (Notes 7 and 10):
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . .

Operating income (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expenses):
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments of charges for construction of
distribution facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on restructuring of business ofa consolidated subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in net income of an affiliated company . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36

Yen
2000

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 2000

¥9.50
8.84
5.00

U.S. dollars (Note 1)
1999

¥6.32
5.94
5.00

2000

$0.09
0.08
0.05

Consolidated Statements of Stockholders’ Equity
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2000 and 1999

Millions of yen
Shares ofcommon stock(Thousands)

Commonstock

Additional
paid-in
capitalBalance at March 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid (¥5.00 per share) . . . . . . . . . . . . . . . . . .
Bonuses to directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued upon conversion of convertible bonds . . . . . . . .
Increase due to additions of consolidated subsidiaries . . . . . . .

2,810,009¥141,817¥2,038

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

2,810,012

Balance at March 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,810,012

Retainedearnings¥273,904
17,764(14,050)
(148)

3
119
141,817

2,038

277,589
49,233
26,698(14,050)
(151)
494
574

¥141,817¥2,038¥340,387

Thousands of U.S. dollars (Note 1)
Commonstock

Additional
paid-in
capitalBalance at March 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect of adopting deferred income tax accounting . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid ($0.05 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bonuses to directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase due to addition of consolidated subsidiaries . . . . . . . . . . . . . . . . . .
Increase due to addition of company on equity method . . . . . . . . . . . . . . . .

$1,337,896$19,226$2,618,764
464,462
251,868(132,547)(1,425)
4,660
5,416

Balance at March 31, 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,337,896$19,226$3,211,198

Retainedearnings

See accompanying notes.

Annual Report 2000 TOKYO GAS

37

Consolidated Statements of Cash Flows
Tokyo Gas Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2000 and 1999

Thousands of
U.S. dollars (Note 1)

Millions of yen
2000

1999

2000

¥ 43,738¥ 40,964$ 412,623

136,214
4,092
4,331

132,568
10,6983,539

1,285,038
38,60440,858(3,748)(1,283)23,366

6,452(1,365)22,393(35,358)(12,104)
220,434(10,591)657(10,639)
7,397
(154)
3,287

3,872
2,296
(12,582)(5,822)
(152)
5,257

(99,915)
6,198(100,368)
69,783(1,453)31,009Cash received for interest and dividend . . . . . . . . . . . . . . . . .
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

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

208,118
1,365(24,102)(23,662)

1,855,349
12,358(218,387)(190,443)

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

154,641

161,719

1,458,877(965)(115,325)(5,176)(3,170)227(676)(149,436)(766)(8,840)667(9,104)(1,087,972)(48,830)(29,905)
2,142

76

152

717

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

(124,333)(158,899)(1,172,952)

Cash flows from financing activities:
Proceeds from (Payments for) short-term bank loans . . . . . . . .
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . . . .
Payments for long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10,280)
94,699(47,525)(14,092)

11,445
101,144(103,853)(14,050)(96,981)
893,386(448,349)(132,943)

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

22,802(5,314)215,113

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

53,1107
44,211(2,494)–46,705501,03866
417,085

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . .

¥ 97,328¥ 44,211$ 918,189

Cash flows from operating activities:
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile income before income taxes to
net cash provided by operating activities:
Depreciation (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of long-term prepayments . . . . . . . . . . . . . . . .
Loss on disposals of property, plant and equipment . . . . . . .
Increase (Decrease) in retirement allowance andaccrued pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and dividend income . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Decrease (Increase) in notes and accounts receivable . . . . .
Decrease in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decrease in notes and accounts payable . . . . . . . . . . . . . .
Increase (Decrease) in consumption taxes payable . . . . . . .
Bonuses paid to directors . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38

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 prepayments . . . . . . . . . . . . . . . . . . .
Proceeds from sale of tangible and intangible fixed assets . . . . .
Increase in other investments andother non-current assets — net . . . . . . . . . . . . . . . . . . . . . . . .

See accompanying notes.

TOKYO GAS Annual Report 2000

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

1. Basis of consolidated financial statements

which are controlled through substantial ownership ofTokyo Gas Co., Ltd. (the Company) and its consolidated

majority voting rights or existence of certain conditions.

domestic subsidiaries maintain their accounts and records

Previously, only majority-owned companies were consoli-in accordance with the provisions set forth in the Japanese

dated. The prior years’ consolidated financial statements

Commercial Code and the Securities and Exchange Law

have not been restated.

and in conformity with accounting principles and practices

There was no effect of applying this rule to the Company’s

generally accepted in Japan, which are different from theconsolidated financial statements.

accounting and disclosure requirements of International

Equity method — Investments in unconsolidated subsidiaries

Accounting Standards.

and affiliates over which the Company has the ability to

The accompanying consolidated financial statements are

exercise significant influence over operating and financial

a translation of the audited consolidated financial state-policies of the investees, are accounted for on the equity

ments of the Company which were prepared in accordance

method. The effect of adopting the new accounting stan-with accounting principles and practices generally accepted

dard is immaterial.

in Japan from the accounts and records maintained by theConsolidated Statements of Cash Flows — In accordanceCompany and its consolidated subsidiaries and were filedwith the “Standards for Preparation of Consolidated Cashwith the Minister of Finance (“MOF”) as required by the

Flow Statements, etc.” (the “New Standards”), effective

Securities and Exchange Law.

from the year ended March 31, 2000, the Company is

In preparing the accompanying consolidated financial

required to prepare consolidated cash flow statements. The

statements, certain reclassifications have been made in theprior year's consolidated cash flow statement, which wasconsolidated financial statements issued domestically in

prepared for readers outside Japan although such state-order to present them in a form which is more familiar toment was not required, has been restated to conform toreaders outside Japan. The consolidated cash flow state-

the 2000 presentation.

ments for 1999 has been prepared for the purpose of

Property, plant and equipment — Property, plant and equip-

inclusion in the consolidated financial statements, althoughment is generally stated at cost. Depreciation is determinedsuch statement was not customarily prepared in Japan andmainly by the declining-balance method based on the esti-

not required to be filed with MOF prior to 2000.

mated useful lives. But buildings acquired after March 31,

The translation of the Japanese yen amounts into U.S.
dollars are included solely for the convenience of the1998 are depreciated using the straight-line method.
Software costs — In accordance with the provisional rule of thereader, using the prevailing exchange rate at March 31,

JICPA’s Accounting Committee Report No.12 “Practical Guid-

2000, which was ¥106 to U.S. $1.00. The convenienceance for Accounting for Research and Development Costs,

translations should not be construed as representations thatetc.” (the “Report”), the Company and its consolidated sub-the Japanese yen amounts have been, could have been, or

sidiaries accounts for software which was included in

could in the future be, converted into U.S. dollars at this or

long-term prepaid expenses in investments and other in the

any other rate of exchange.

same manner in 2000 as in 1999. Pursuant to the Report,
however, the Company included software in intangible assets

2. Significant accounting policies

in 2000 and depreciated it using the straight-line method over

Consolidation — The consolidated financial statements include

the estimated useful lives . The amount for 1999 has been re-

the accounts of the Company and substantially all of its sig-classified to conform to the 2000 presentation.

nificant subsidiaries. All significant intercompany transactions

Cash and cash equivalents — Cash and cash equivalents

and account balances are eliminated in consolidation.

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

Effective for the year ended March 31, 2000, all companies are required to consolidate all significant investees

term highly liquid investments with maturities of notexceeding three months at the time of purchase.
Annual Report 2000 TOKYO GAS

39

40

Securities — Listed equity securities included in current

basis and included in “Retirement benefits” in the accom-

assets and non-current assets are carried at the lower ofpanying balance sheets.

moving-average cost or market value. Other securities are

Allowance for repairs of gas holders — The Company and its

stated at moving-average cost.

certain consolidated subsidiaries provides for future repairs

Inventories — Inventories are stated at cost, cost beingof gas holders almost every ten years by estimating future

determined by the moving-average method.

expenditures and charging them to income in equal annual

Allowance for doubtful accounts — The Company and its

amounts. The difference between the actual expenditureconsolidated subsidiaries provide for doubtful accounts atand the amount provided is charged to income in the year

estimated amount of probable bad debt plus the maximum

repair is completed.

amount deductible under Japanese tax regulations.

Accounting for certain lease transactions — Finance leases

Retirement benefits — Under the terms of the Company’s

which do not transfer ownership to lessees are accounted

retirement plan, eligible employees are entitled, under

for in the same manner as operating leases under account-most circumstances, upon mandatory retirement or earlier

ing principles generally accepted in Japan.

voluntary severance, to severance payment based on com-

Income taxes — Income taxes comprise corporation tax andpensation at the time of severance and years of service.

inhabitants taxes. The Company provided income taxes at

Employees’ retirement benefits covering substantially all

the amounts currently payable for the years ended March

employees are provided through two arrangements: an un-

31, 1999. Effective April 1, 1999, the Company adopted

funded lump-sum benefit plan and a funded pension plan.

the new accounting standard, which recognizes tax effects

The liabilities under the unfunded benefit plan are statedof temporary differences between the carrying amounts

at the amount which would be required had all eligible em-

and the tax bases of assets and liabilities. Under the newployees retired voluntarily at the balance sheet date.

accounting standard, the provision for income taxes is

In addition, employees, who are age 30 or more with 5

computed based on the pretax income included in the con-years or more of service, are covered by the funded pen-solidated statement of income. The asset and liability

sion plan, and receive lifetime pension payments from theapproach is used to recognize deferred tax assets andage of 60 from the plan when they leave the Company at

liabilities for the expected future tax consequences ofage 50 or more with 15 years or more of service. They may

temporary differences.

alternatively elect to receive the current value of theirvested benefits in a lump-sum distribution.

The amount of deferred income taxes attributable to the
net tax effects of the temporary differences at April 1, 1999

Employees of consolidated subsidiaries are entitled,

is reflected as an adjustment to the retained earnings

under most circumstances, to lump-sum severance pay-brought forward from the previous year. Prior years’ finan-

ments upon reaching mandatory retirement age, or earlier

cial statements have not been restated.

in the case of voluntary or involuntary termination, based

The cumulative effect of adopting the new accounting

on the compensation at the time of severance and years ofstandard is ¥49,233 million ($464,462 thousand), which isservice. Liabilities for retirement benefits are recognized at

directly added to the retained earnings brought forward

100% of the amount required had all employees retired atfrom March 31, 1999. The effect for the year ended March

the balance sheet date. Certain consolidated subsidiaries

31, 2000 was to decrease net income by ¥714 million

have qualified pension plans.

($6,736 thousand) and to increase retained earnings byWith regard to retirement benefits to directors and statu-¥48,518 million ($457,717 thousand).

tory corporate auditors, certain consolidated subsidiaries

Enterprise tax — Enterprise tax normally constitutes income

have separate unfunded lump-sum benefit plans based ontaxes. However, in the case of companies engaged in gas

established guidelines subject to stockholders’ approval.

and certain other businesses, enterprise tax is levied not on

Liabilities under these plans are provided on an accrual

income but on net sales. In the accompanying statements

TOKYO GAS Annual Report 2000

of income, enterprise tax levied on net sales is accounted

Cash dividends per share have been presented on an

for in “Selling, general and administrative” expenses in theaccrual basis and include dividends approved or to be ap-

amount of ¥9,006 million ($84,962 thousand) andproved after the balance sheet dates, but applicable to the¥11,257 million for the years ended March 31, 2000 andyear then ended.

1999, respectively. Enterprise taxes calculated based on
profit are included in income taxes.

3. Property, plant and equipment

Foreign currency translation — Current monetary assets andProperty, plant and equipment is generally recorded at

liabilities denominated in foreign currencies are translated

cost. However, in cases where the Company receives

into Japanese yen at the exchange rate prevailing at thecontributions towards the cost of construction from cus-balance sheet date.

tomers, such contributed amount is offset against theAmounts per share of common stock — The computations ofacquisition cost of the subjected asset. Such offset amountnet income per share are made based on the weighted

accumulated to March 31, 2000 was ¥222,968 million

average number of shares outstanding during each fiscal year.

($2,103,472 thousand).

4. Market value information for securities
Book value, market value and net unrealized gains of quoted securities included in current assets and investments at March
31, 2000 and 1999 were as follows:
March 31, 2000
Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
March 31, 1999 – parent only

Millions of yen

Thousands of
U.S. dollars¥ 13,726
131,196¥117,470$ 129,490
1,237,698$1,108,208

Millions of yen

Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥11,670
94,339Net unrealized gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥82,669

Disclosure of market value information for securities was required only on an un-consolidated basis for the year ended
March 31, 1999.

5. Inventories
Inventories at March 31, 2000 and 1999 consisted of the following:Thousands of
U.S. dollars

Millions of yen

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

2000

1999

2000

¥ 2,434
16,3228,245
59¥ 2,342
10,9957,764
6,586$ 22,962
153,981
77,783557¥27,060¥27,687$255,283

Annual Report 2000 TOKYO GAS

41

6. Bank loans and long-term debt
At March 31, 2000 and 1999, bank loans consisted of short-term notes, bearing interest at an annual average rate of 0.5%
and 0.72%, respectively.
Long-term debt at March 31, 2000 and 1999 comprised the following:Thousands of
U.S. dollars

Millions of yen

42

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 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 1.04% to 7.50%:
Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less amounts due within one year . . . . . . . . . . . . . . . . . . . . . . .

The indentures covering the first through sixth domestic

2000

1999

2000

¥ 35,000
30,00030,00030,00040,00030,00030,000¥ 35,000
30,00030,00030,00040,000––$ 330,189
283,019
283,019
283,019377,358
283,019
283,019

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

58,79139,80899,583
98,95849,99849,993
14,81018,333800

554,632
375,547920,698
933,566
471,679
471,632
139,718
172,953
7,547

15,201
246,158

6,623
256,511

143,406
2,322,244

915,444
71,810859,208
38,4558,636,264
677,453¥843,634¥820,753$7,958,811

sixth issue convertible bonds.

convertible bonds provide, among other conditions, for (1)At March 31, 2000, investment securities and property,

conversion into shares of common stock at the current con-and equipment at book value amounting to ¥12,533 mil-version prices per share of ¥1,267.90 ($11.96), ¥1,267.90

lion ($118,236 thousand) were pledged as collateral for($11.96), ¥1,105.70 ($10.43), ¥1,105.70 ($10.43),

secured loans and notes issued by consolidated subsidiaries.

¥339.00 ($3.20) and ¥339.00 ($3.20), respectively (subject

As is customary in Japan, a lending bank has the right toto adjustment in certain circumstances), (2) conversion pe-

offset cash deposited with it against any debt or obligation

riods through September 2003, September 2000, Marchthat becomes due and, in the case of default or certain

2005, March 2002, March 2009 and March 2007, respec-

other specified events, against all debt payable to the bank.

tively, and (3) redemption at the option of the Company,

To date no such request has been made to the Company

commencing in October 1996, October 1994, April 1998

and its consolidated subsidiaries.

and April 1996 , respectively, at prices ranging from 106%

Certain of the loan agreements provide, among otherto 100% of the principal amount except for the fifth andthings, that, upon request, the Company and domestic

TOKYO GAS Annual Report 2000

subsidiaries submit to the lenders for approval of its

Neither the Company nor any of its consolidated

proposed appropriation of income (including dividends)

subsidiaries has ever received any such request.

before such appropriation is submitted to the stockholders.
The annual maturities of long-term debt at March 31, 2000 were as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 71,810
126,383
74,83699,758124,274
418,383$ 677,453
1,192,292
706,000
941,113
1,172,396
3,947,010¥915,444$8,636,264

7. Retirement benefits
Charges with respect to employees’ and retirement benefits

Significant components of deferred tax assets and liabilities
as of March 31, 2000 are as follows:covering employees and directors and statutory corporate

Millions of Thousands ofyen
U.S. dollars

auditors of the Company and consolidated subsidiaries included in “Costs and expenses” were ¥31,484 million($297,019 thousand) and ¥25,270 million for the years
ended March 31, 2000 and 1999, respectively.

Liabilities for retirement benefits . . . ¥33,637
Reserve for tax-purpose cost
reduction of certain pipelines . . . .
(235)
Other -net . . . . . . . . . . . . . . . . . . . 15,396$317,330

Total . . . . . . . . . . . . . . . . . . . . . . . ¥48,798$460,358(2,217)145,245

8. Income taxes
The Company is subject to a number of taxes based on

9. Stockholders’ equity

income, which, in the aggregate, indicate statutory rates inAt the current conversion prices, 550,487 thousand shares ofJapan of approximately 36% and 42% for the years ended

common stock were issuable at March 31, 2000 upon fullMarch 31, 2000 and 1999, respectively.

conversion of the outstanding convertible bonds (see Note 6).

The following table summarizes the significant differ-

Under the Commercial Code of Japan, the Company is re-ences between the statutory tax rate and the Company’squired to appropriate as legal reserve an amount equal to at

effective tax rate for financial statement purposes for the

least 10% of cash dividends and bonuses to directors until

year ended March 31, 2000:

the reserve equals 25% of common stock. This reserve is not

Statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax rate difference between
gas business (36%) and others (42%) . . . . . . . . . .
Other – net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36%

Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . .

38%available for dividends but may be used to reduce a deficit
by resolution of the stockholders' meeting or transferred to11

the common stock by resolution of the Board of Directors.
The amount of retained earnings on a non-consolidated
basis less the amount required for legal reserve is available
for cash dividends. Legal reserve is included in retained earnings in the accompanying consolidated balance sheets.
The maximum amount that the Company can distributeas dividends is calculated based on the unconsolidated
financial statements of the Company in accordance with
the Commercial Code of Japan.
Annual Report 2000 TOKYO GAS

43

10. Segment information
The Company’s primary business activities include (1) gas sales, (2) gas appliance sales, (3) related construction, (4) realestate rental business and (5) other business.
A summary of net sales, cost 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

Other

Eliminationor corporate

Consolidated¥–¥ 992,255–

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

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

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

–

1,169

4,703

22,88344,290(73,045)

672,070

127,916

68,652

37,842

158,820(73,045)992,255

Costs and expenses . . . . . . .

530,686

125,139

66,70029,588147,323

23,586923,022

Operating income . . . . . . . .

¥ 141,384

¥

2,777

¥ 1,952¥

8,254¥ 11,497¥ (96,631)¥

69,233

Identifiable assets . . . . . . . . .

¥1,148,758¥ 53,311¥22,451¥252,016¥224,176¥ 104,374¥1,805,086

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

109,108754

169

12,991

14,160(968)

136,214

Capital expenditures . . . . . . .

107,388

482

115

2,283

12,741(1,203)

121,806

Outside customers . . . . . .

¥ 674,997¥132,749¥63,630¥ 15,617¥110,774–¥ 997,767

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

–

1,177

5,188

21,99944,270(72,634)–

For 1999:
Sales:
44¥674,997

133,926

68,81837,616

155,044(72,634)

997,767

Costs and expenses . . . . . . .

518,899

134,625

68,23528,826

146,02128,858925,464

Operating income . . . . . . . .

¥ 156,098

¥

¥

8,790

¥

Identifiable assets . . . . . . . . .

¥1,145,642¥ 52,906

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

106,481

Capital expenditures . . . . . . .

121,695

(699)

583

¥

9,023

¥(101,492)¥

72,303¥ 12,003¥1,707,446¥22,301¥257,963¥216,631

704

57

13,331

12,006(11)

132,568

631

295

2,112

18,808(1,511)

142,030

Eliminationor corporate

Consolidated$

Thousands of U.S. dollars
Gas appliance
sales

RelatedReal estate
construction rental business

6,340,283$1,195,726$603,292$ 141,123$1,080,472–$ 9,360,896–

11,02944,368215,877

417,830(689,104)–

Gas sales

Other

For 2000:
Sales:
Outside customers . . . . . . $Inside group

6,340,283

1,206,755

647,660

357,000

1,498,302(689,104)

9,360,896

Costs and expenses . . . . . . .

5,006,471

1,180,557

629,245

279,132

1,389,840

222,5098,707,754

Operating income . . . . . . . . $1,333,812$

26,198$ 18,415$

77,868$ 108,462$(911,613)$

Identifiable assets . . . . . . . . . $10,837,340

653,142$ 502,934$211,802$2,377,509$2,114,868$ 984,660$17,029,113

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

1,029,321

7,113

1,594

122,557

133,585(9,132)

1,285,038

Capital expenditures . . . . . . .

1,013,094

4,547

1,085

21,538120,198(11,349)

1,149,113

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

non-current securities of the Company.

Information for overseas sales is not disclosed due to overseas

Geographic segment information is not shown due to theTOKYO GAS Annual Report 2000

sales being not material compared to consolidated net sales.

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

Millions of yen
2000

1999

2000

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

¥1,053¥1,267$ 9,934

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

¥ 776
1,032

¥ 943
1,282

$ 7,3219,736¥1,808¥2,225$17,057

The company uses certain production facilities, distribution facilities, service and maintenance facilities and other assets
under lease arrangement. An analysis of equivalent amounts of leased assets under finance leases is as follows:
Millions of yen
Acquisition
cost

Accumulated
depreciation

Net bookvalue

For 2000:

Production facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and maintenance facilities . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

¥ 110
758
425
4,415

¥

55
377
261
3,207

¥

55
381
164
1,208

¥5,708¥3,900¥1,808

¥ 124
651
306
4,900

¥

30
312
205
3,208

¥

¥5,981¥3,755¥2,226

For 1999:

Production facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and maintenance facilities . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

94
339
101
1,692

Thousands of U.S. dollars
Acquisition
cost

Accumulated
depreciation

Net bookvalue$ 1,038
7,151
4,009
41,651

$

519
3,557
2,462
30,254$$53,849$36,792$17,057

For 2000:

Production facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and maintenance facilities . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Thousands of
U.S. dollars

Millions of yen

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

519
3,594
1,547
11,397

2000

1999

2000

¥1,053¥1,267$9,934

Annual Report 2000 TOKYO GAS

45

Information as lessor:
Millions of yen

Thousands of
U.S. dollars

2000

1999

2000

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

¥ 4,359¥ 4,840$ 41,123

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

¥ 4,243
10,107¥ 3,776
8,733$ 40,028
95,349¥14,350¥12,509$135,377

Some of consolidated subsidiaries have direct finance lease of other assets. An analysis of leased assets under direct financelease is as follow:
Millions of yen
Acquisition
cost

Accumulated
depreciation

Net book
value¥24,532¥16,081¥8,451¥24,641¥16,614¥8,027

For 2000:

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
For 1999:

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Thousands of U.S. dollars
46

Acquisition
cost

Accumulated
depreciation

Net book
value$231,434$151,708$79,726

For 2000:

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Millions of yen

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

Thousands of
U.S. dollars

2000

1999

2000

¥2,684¥2,676$25,321

12. Commitment and contingent liabilities
The Company and its consolidated subsidiaries were contingently liable (1) to banks in the amount of ¥5,282 million($49,830 thousand) at March 31, 2000 with respect to joint and several liabilities upon default of debtors and (2) as guarantors for the in-substance defeasance of domestic unsecured notes in the amount of ¥30,000 million ($283,019 thousand)issued by the Company, which were assigned to certain banks under the debt assumption agreements made through theyears ended March 31, 1999. At the same date, some consolidated subsidiaries were contingently liable with respect totrade notes receivable discounted with banks in the amount of ¥220 million ($2,075 thousand).
At March 31, 2000, the Company had several long-term purchase contracts for the supply of LNG. The purchase pricedeterminable under such contracts is contingent upon fluctuations in the market price of crude oil.
13. Subsequent events
At the annual meeting held on June 29, 2000, the Company’s stockholders approved (1) payment of year-end cash dividends of ¥2.5 ($0.02) per share aggregating ¥7,025 million ($66,274 thousand) to the stockholders of record as of March
31, 2000, and (2) payment of bonuses to directors totaling ¥83 million ($783 thousand).

TOKYO GAS Annual Report 2000

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) andsubsidiaries as of March 31, 2000 and 1999, and the related consolidated statements of income, stockholders’ equity andcash 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, 2000 and 1999, 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, 2000, TOKYO GAS CO., LTD. and subsidiaries adopted new Japanese
accounting standards for consolidation and equity method accounting, income taxes and research and development costs.

Also, in our opinion, the U.S. dollar amounts in the accompanying consolidated financial statements have been translated
from Japanese yen on the basis set forth in Note 1.

Tokyo, Japan
June 29, 2000

Statement on Accounting Principles and Auditing Standards

This statement is to remind users that accounting principles and auditing standards and their application in practice mayvary 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 theauditing 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 2000 TOKYO GAS

47

Energy Statistics

Share of Natural Gas in Total Primary Energy Supply (1999)
Japan
Coal 18.0%

U.S.A.

EuropeCoal 24.6%

Petroleum 51.0%

Hydro
1.6%

Petroleum 40.0%

Petroleum 41.9%

Hydro
2.9%

Hydro
1.2%

Nuclear
16.2%

Coal 19.3%

Nuclear13.7%

Nuclear
9.0%
Natural Gas
13.2%

Natural Gas
22.2%

Natural Gas
25.2%

Source: BP Amoco Statistical Review of World Energy 1999

Use of Gas* by Sector (1998)
Japan

U.S.A.

Electricity
65.0%OECD Europe

Electricity
28.3%

Residential &Commercial
20.8%

Residential &Commercial
35.7%

Electricity
21.9%

Residential &Commercial
43.6%

Industrial
14.2%
48

Industrial
34.5%

Industrial
36.0%* Includes manufactured gas
Source: IEA, Energy Balances of OECD Countries, 1997–1998

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

632,280
601,219
7.0
6.0

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
5.6

5.6

5.4

5.7

6.0
77.5

79.2

80.1

80.6

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

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

Mar. 31

89

90

91

92

93

94

95

96

97

98

99

00

TOKYO GAS Annual Report 2000

Share of Japan’s GDP by Area
(For year ended March 31, 1998)
Japan’s GDP

Population of the Tokyo, Osaka,
and Nagoya Areas

Comparison of Tokyo Gas, OsakaGas, and Toho Gas Sales Volumes(As of October 1, 1999)(in thousands)(For year ended March 31, 2000)(Millions of m3, 46.047 MJ/m3)
Tokyo Area
43,289

Japan
126,686

Tokyo Gas
8,418

All of Japan
21,774

Nagoya Area
9.2%

Toho Gas
2,108
Tokyo
Area
38.4%

Osaka Area
16.6%

Nagoya Area
10,990Source: Economic Planning Agency

Osaka Gas
7,160

Osaka Area
20,774

Source: Management and Coordination Agency

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.

MITI’s Long-term Energy Supply Outlook for Japan (1998)(Unit: Million kl crude oil equivalent)
800
1.3

700
600
500

0.5

3.4
1.1

0.2

3.4
12.3

3.1

15.4

0.6

New Energy Sources

3.8

Geothermal
12.3

17.4

15.4

13.0

Hydro

11.4

400
300

16.4
3.3

3.0

14.9
3.2

200
51.9

1996 (Actual)

2010 (Case 1)

2010 (Case 2)

Primary Energy Supply

597 million kl

693 million kl

616 million kl

New Energy Sources

6.9 million kl

9.4 million kl

19.1 million kl

Geothermal

1.2 million kl

3.8 million kl

3.8 million kl

Hydro

82 billion kWh

105 billion kWh

105 billion kWh

Nuclear

Nuclear

302 billion kWh

480 billion kWh

480 billion kWhNatural Gas

Natural Gas

48.2 million t

60.9 million t

57.1 million t

Coal

Coal

131.6 million t

145 million t

124 million t

LPG

Oil (including LPG)

329 million kl

358 million kl

291 million kl

LPG only15.2 million t

16.1 million t

15.1 million t

Oil (excluding LPG)

310 million kl

337 million kl

271 million kl

597 million kl

693 million kl

616 million kl

Oil (excluding LPG)

48.6
44.0

100
0

Total

1996 (Actual)

2010 (Case 1)

2010 (Case 2)

Notes: 1. Case 1 represents a business as usual scenario (no additional energy conservation measures are implemented).
2. Case 2 represents a scenario in which additional energy conservation measures are implemented and new sources of energy are developed.
3. The indicated years are fiscal years (April 1 of the indicated year through March 31 of the following year).

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

60,00052,11250,00049,47848,34946,44543,68940,00039,98537,952

33,041

30,00029,67827,831

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

Japan
Tokyo Gas0

182 84

2,364
970
629
242

Mar. 31

70

72

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

Annual Report 2000 TOKYO GAS

49

Organization

Board of Directors

Market Planning Dept.

Service Promotion Dept.

Customer Service Division

18 Regional Service Branches

Chairman of the Boardof Directors

Residential Market Planning
Dept.

President
Residential Sales
and Service Division

Executive Vice Presidents
Senior Managing Directors

Residential Market
Development Dept.
Residential Service Dept.

Managing Directors

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

Secretary Dept.
Audit Dept.
Corporate Planning Dept.
Corporate R&D Dept.

Energy Sales
and Service DivisionInter-regional
Planning Dept.

Environmental Affairs Dept.
International Affairs Dept.

Energy Systems
Engineering Dept.

General Administration
Dept.

50

Industrial Gas Sales Dept.

Volume Sales Dept.

Corporate Communication
Dept.
Pipeline Dept.

Personnel Dept.
Accounting and Finance
Dept.

Pipeline and Safety
Management Division

Appliance and Facility Dept.

Appliance and Pipeline
R&D Dept.

Eastern Pipeline
Regional Office

Purchasing Dept.
Gas Resources Dept.
Information andCommunication Systems
Dept.

Southern Pipeline
Regional OfficeWestern Pipeline
Regional Office
Natural Gas Vehicle Dept.

Center for Supply Control
and Disaster Management

Northern Pipeline
Regional Office
Kanagawa Pipeline
Regional Office

Negishi LNG Terminal
Sodegaura LNG Terminal
Production Division

Ohgishima LNG Terminal
Production
Engineering Dept.
Production Dept.

Corporate Auditors

Corporate Auditors’ OfficeBusiness Development
Division

Business Planning Dept.

(As of June 29, 2000)

TOKYO GAS Annual Report 2000

Corporate Information

ProfileTokyo Gas, Japan’s largest gas company, is the dominant player in the greater Tokyo/Kanto Plainmarketplace, a market where demand potential is enormous. Capital investments we have madeTokyo 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: +81-3-3433-2111

Tel: +60-3-244-2928

Fax: +81-3-5472-5385

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

280 Park Avenue, New York, NY 10017, U.S.A.

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

Tel: +1-212-818-1210

tively propose new technologies for using gas to spur demand. An even more ambitious goal we

Paris Representative Officehave set is to turn Tokyo Gas into a diversified energy services company, supplying heat and102, Avenue des Champs-Elysées, 75008 Paris, France

electricity as well as gas by taking maximum advantage of our powerful infrastructure. Achieve-

Tel: +33-1-45-62-00-59

Fax: +1-212-818-1218

Fax: +60-3-244-2930

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

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

ment of these goals will translate into higher profits, which we intend to return to customers
and shareholders.

Investor Information

Date of Establishment

Publications

October 1, 1885

The following English-language publications are available

Authorized Number of Shareson written request:• Annual Review 1998

51

Contents

6,500,000,000 shares

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

Number of Stockholders• TG Minutes

211,705• Environmental Report 2000

Cash Dividends Applicable to the Year

Internet Address¥5.00

http://www.tokyo-gas.co.jp

Securities Traded

Further Information

Common stock: Tokyo, Osaka, Nagoya and Kyoto stock

For further information and additional copies of this reportexchanges

and other publications, please contact:

Independent Auditors

IR Section, General Administration Dept.

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

Planning Section, International Affairs Dept.

Transfer Agent

Tel: +81-3-5400-7561

Japan Securities Agents, Ltd.

Fax: +81-3-5472-5385

2-4, Nihonbashi Kayabacho 1-chome, Chuo-ku

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

[10]
[12]
[14]
[16]
[18]
[19]
[20]
[22]
[24]

Financial Highlights
Our Position in the Market
Message From Management
A Multifaceted Energy Growth Strategy
Toward an Increasingly Diversified
Energy Services Company
Spurring Residential Gas Demand
A Focus on Technological Innovation
Powerful Supply Infrastructure—
the Foundation of Our Competitiveness
Environmental Conservation
SafetyCorporate Citizenship
International Operations
Diversification
Board of Directors• Annual Report 1999

Tokyo 103-8202, Japan

[25]
[48]
[50]
[51]

Financial Statements
Energy Statistics
Organization
Corporate Information/Investor Information

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.

Units
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(As of June 29, 2000)

Annual Report 2000 TOKYO GASTOKYO GAS CO., LTD.

5-20, Kaigan 1-chome, Minato-ku, Tokyo 105-8527, Japan
Tel : +81-3-3433-2111
Fax : +81-3-5472-5385
http://www.tokyo-gas.co.jp

TOKYO GAS CO., LTD.

Annual Report 2000
For the year ended March 31, 2000

ANNUAL REPORT 2000

A
Multifaceted Energy
Growth Strategy

Printed in Japan on Recycled Paper