Focus Story

1

Steady Advances in Three Areas of Diversification
for Resource Procurement—Preparations for Importing LNG from the United States

Procurement from the Cove Point LNG Project
In April 2013, Tokyo Gas entered into a Heads of Agreement for Sale and Purchase that enables it toprocure LNG from the Cove Point LNG Project in Maryland State, in the United States. This agreement
marked the conclusion of the Company’s first long-term LNG procurement contract to have procurement
prices linked to the U.S. natural gas market through the use of the Henry Hub index. The Cove Point LNG
Project is being developed jointly with Sumitomo Corporation. Natural gas procured from the U.S. market
through this project will be liquefied and then exported out of the country as LNG. Cove Point is a project ofparticular significance to Tokyo Gas as it represents a large step forward in the three areas of diversification
described in the Company’s resource procurement strategy. In this section, we explain in detail the significance of this project.

The Company’s Three Areas of Diversification
Tokyo Gas is advancing an LNG resource procurement strategy that defines three areas of diversification.
These areas are: diversification of resource suppliers; diversification of procurement contract conditions;and diversification of our global LNG network. By pursuing these types of diversification, Tokyo Gas willseek to secure stable supplies of affordable resources into the future.

 Diversification of Resource Suppliers
Currently, Tokyo Gas has long-term procurement agreements toimport LNG from 10 projects in five countries. By further diversifying the range of resource suppliers, the Company aims toincrease its options, boost bargaining power, and mitigate risks
through dispersion. We are not limiting ourselves to conventional
LNG projects in this pursuit. Rather, floating LNG projects andother projects employing new technologies are also being
considered as options for advancing the diversification of
resource suppliers.

27

Tokyo Gas Annual Report 2014

Tokyo Gas LNG Imports by Country
Thousands of tons

Location

FY2011

2012

2013

Composition

Malaysia

4,479

4,409

4,767

(37.2%)

Australia

2,264

3,379

3,992

(31.2%)

Brunei

1,362

1,439

962

(7.5%)

Indonesia

1,011

835

614

(4.8%)

Russia

1,678

1,682

1,813

(14.2%)

Qatar

290

235

325

(2.5%)

Other

826

734

330

(2.6%)

Total

11,91012,712

12,804(100.0%) Diversification of Procurement Contract Conditions
Previously, LNG procurement was mainly conducted through traditional contracts with prices linked to theprice of crude oil. Going forward, however, we will also employ procurement contracts with prices linked to
U.S. and European natural gas indexes. We are also pursuing diversification in terms of contract periods
and other detailed conditions. Specifically, short-term and medium-term procurement contracts are now
being considered, when long-term contracts used to be the main focus, and contracts with free destination
clauses are being concluded, a departure from the traditional contract conditions that forbade reselling
procured LNG to a third party without the permission of the seller. This diversification in contract conditions
will enable the Company to stabilize procurement prices by building a portfolio that includes contracts
linked to different indexes. In addition, more flexible contract conditions will open the door for LNG to be
sold to different markets when our supplies are in surplus.

 Diversification of Our Global LNG Network
At present, there is a disparity between LNG prices in different parts of the world. However, the impacts ofthis disparity can be lessened by constructing sales channels that link Asia to North America and Europe.
Furthermore, by linking overseas upstream businesses with such downstream businesses as power
generation, we will be able to divert LNG intended for generation purposes to be used as city gas when the
supply and demand situation is tight. In this manner, we aim to create a framework for realizing the flexible
trade of resources.

Background for Three Areas of Diversification
Currently, it is common for LNG to be procured through a pricing
framework that links the price of LNG to the price of crude oil,which means that a rise in the price of crude oil will result in a
subsequent rise in the price of LNG. This situation is compoundedby Japan’s lack of alternative energy sources and Asia’s lack ofpipeline networks, like those used to supply natural gas in North
America and Europe without using LNG. Due to this situation, LNG
buyers in Asia suffer from a lack of bargaining power, and theregion has thus been forced to accept LNG prices higher thanthose in the United States and Europe, creating an “Asia premium”
on LNG. Even faced with such pressures, Tokyo Gas has continued to strike hard bargains with LNG sellers with the aim ofprocuring more affordable gas.

Gas Prices by Region
US$ / MMBtu
18

12

6

0

2008/4
Japan (All Japan LNG)

2011/4
Europe (NBP)

2014/4

U.S.A. (Henry Hub)

Source: Compiled by Tokyo Gas from various materials

Significance of the Cove Point LNG Project1

The procurement of LNG from the United States, wherelong-term contracts are not concluded at the moment,
will advance the diversification of resource suppliers.

To Japan

Cove Point LNG Project2

Contract agreements provide for LNG prices linked to the Henry Hub
U.S. natural gas price index, which is holding stable at approximately
US$4 / MMBtu, allowing LNG to be procured at prices that are lower
than previously available, even if liquefaction and transportation costs
are added on top of the LNG prices. Also, the diversification away fromcrude oil price linked contracts will allow procurement prices to bestabilized under various circumstances.

To other markets

3

Contract conditions allow for procured LNG
to be resold to third parties. Supply to Japan
will remain our first priority; however, should
LNG stocks in Japan be in surplus, this LNG
could be sold to other markets in need.

Due to these factors, the Cove Point LNG Project is advancing diversification in all three areas.

Tokyo Gas Annual Report 201428

Focus Story
Steady Advances in Three Areas of Diversification for Resource Procurement—Preparations for Importing LNG from the United States

Future Outlook
As there are currently no free-trade agreements between the United States and Japan, in order to procure
LNG from Cove Point, Tokyo Gas was required to receive LNG export approval from the U.S. Departmentof Energy. This approval was received on September 11, 2013 (EDT). Going forward, we will advance thenecessary measures to get the project producing and to commence export to Japan in 2017.
Cove Point LNG Project

Deeper Project Involvement
In February 2014, joint venture company ST Cove Point LLC was established through the respective
subsidiaries of project partner Sumitomo Corporation and the Company. ST Cove Point will also be responsible for contracting liquefaction to Dominion Cove Point LNG, LP. The investment by Tokyo Gas in ST Cove
Point represents a deeper level of project involvement for the Company. Whereas our role has previously
been limited to purchasing or holding a partial stake, we will participate in the Cove Point LNG Project bydealing directly with liquefaction facility operators and arranging transportation vessels. Through suchhands-on involvement, we aim to procure LNG more stably and with greater transparency with regard to
the price of shipments.
Scheme of Cooperative
Ventures with Sumitomo

U.S. Gas Market

Dominion Resources

2.3 million
tons/year(Tolling operator)

Pacific Summit Energy(Gas procurement)

ST Cove Point(Tolling customer /LNG seller)

1.4 million
tons/year

TG PLUSTokyo Gas

(LNG buyer/seller)(LNG buyer)(Wholly owned subsidiaryof Tokyo Gas)

Kansai Electric Power

Sumitomo
0.9 million
tons/year

Natural gas tolling agreement  

Natural gas sale and purchase agreement  (LNG buyer/seller)

0.8 million
tons/year(LNG buyer)

LNG sale and purchase agreement

Acquisition of Upstream Shale Gas Interests
In April 2013, Tokyo Gas acquired a interests in a shale gas development project in the Barnett basin, in the
U.S. state of Texas. These interests were acquired from Quicksilver Resources Inc., the operator of the
project, and represents our first upstream interest in the United States. At present, the Barnett basin projectis producing approximately 275 million cubic feet per day (natural gas equivalent) of shale gas and natural
gas liquids to be marketed in the United States. A total of US$485 million was paid to acquire 25% working
interests in this project through TG Barnett Resources LP (TGBR), a wholly owned subsidiary of Tokyo Gas
America Ltd., and it is estimated that these interests will entitle the Company to receive between 350,000
tons and 500,000 tons of gas resources a year in LNG equivalent. Roughly one year has passed since wecommenced participation in this project. We continue to see smooth production at gas fields, and we are
accumulating a great deal of knowledge through our involvement.
Upstream areas are positioned as a core focus of overseas businesses. In addition to generating stable
returns, upstream investments also help increase resilience to resource price fluctuations, thereby stabilizing
the overall earnings of the Tokyo Gas Group. Specifically, the price of resources procured from the Cove PointLNG Project and the natural gas sold by TGBR are both tied to the Henry Hub index. This situation makes ourearnings more resilient to fluctuations in the Henry Hub index as any change in the price of procuring LNG
from the U.S. market will be offset by an equal change in the price at which TGBR sells natural gas in thismarket. In addition, as the project advances, we are actively sharing information with operators through suchvenues as monthly meetings regarding operations, natural gas sales, or other matters. For this reason, ourinvolvement in this project is enabling us to develop expertise in this upstream area.

29

Tokyo Gas Annual Report 2014

Shale gas development project in the Barnett
Basin

On-Site Progress toward Realizing the “Challenge 2020 Vision”
Resource
Procurement

General Manager,
Energy Resources
Planning Section,
Gas Resources
Department

Satoshi Tanazawa
I am persistent in negotiations, always aiming tocapture better procurement conditions.
Tokyo Gas procures more than 12 million tons of LNG each year. At theEnergy Resources Planning Section of the Gas Resources Department,
we strive to procure resources flexibly as necessitated by fluctuating gas
demand. In this endeavor, we coordinate with relevant divisions, such as
those related to LNG receiving terminal operations and sales. Always
committed to receiving more affordable and flexible procurement conditions, we persistently negotiate with various sellers. The three areas ofdiversification for resource procurement advocated by the “Challenge
2020 Vision” are at the forefront of our minds in these negotiations.
Traditionally, procurement contracts have been centered on Southeast
Asia and Australia and were generally long-term agreements that camewith crude oil linked prices. However, we are broadening our view toinclude the entire world, seeking out new projects and negotiating withnew sellers to capture procurement contracts with a more diverse range

Overseas
Businesses

Tokyo Gas America Ltd.
Director,
General Manager of
Houston Office

Koji Yoshizaki
I will create new, upstream business opportunities
for natural gas.
At Tokyo Gas, upstream businesses are advanced through coordination
between the Tokyo Head Office and local subsidiaries in Australia andNorth America. As the Company’s U.S. subsidiary, Tokyo Gas America ismainly responsible for developing and managing the Company’s upstream resource interests in the United States. Here, the shale gas
revolution is expected to result in the majority of the country’s natural gas
being supplied through shale gas by 2040. The price of this gas is
expected to remain consistently stable over the long term as well.
Furthermore, natural gas demand is anticipated to grow substantially inthis country for various applications, including generation and industrial
applications, as well as for export as LNG.
Currently, the operation and management of the shale gas development project in the Barnett basin is progressing without a hitch. In
addition, we are leveraging the location utility of our office positioned in
Houston, Texas, the energy capital of the world, and coordinating withof conditions. We are persistent in negotiations regarding existing contracts as well, making strong pushes toward revised agreements that
grant us better conditions.
For example, we have concluded a natural gas tolling agreement andan LNG sale and purchase contract with the U.S. Cove Point LNG
Project. We later received approval from the U.S. Department of Energy
to export LNG to countries with which the United States does not havefree-trade agreements. Japan is one such country. This is a stride forward
in all three areas of diversification. After the project commences operations in 2017, we anticipate that it will be an invaluable asset in our efforts
to stably acquire affordable LNG.
We also must look at the possible electricity and gas system reforms.
These reforms will potentially agitate demand fluctuations, and wetherefore feel the need to strengthen coordination with relevant divisions
to prepare for these changes. As demand fluctuations become more
pronounced in the future, flexible procurement alone will not be a sufficient response. We will need to be able to employ a wider range ofoptions that includes reselling resources should our stock exceed thedemand in our service area. From this perspective as well, the creation ofan optimal procurement portfolio is an urgent task for Tokyo Gas, and weare constantly pursuing progress in this area.
Japan is forced to procure LNG at higher prices than other regions,which is no doubt a factor behind the country’s growing trade deficit. For
this reason, the procurement of a stable supply of affordable LNG is not
only crucial for the Company’s operations; it also represents an important
obligation toward society. While I recognize that these issues will not be
resolved overnight, I will remain vigilant and work to procure economicallysound energy, in order to contribute to economic development in Japan.

LNG Upstream Sect. to uncover new candidate projects for investment.
However, even faced with appealing projects, we take a cautious approach. By tapping our experience and human networks, we scrutinize
such projects to identify hidden risks and other pitfalls.
Our participation in the Barnett basin project is a result of informationacquired through our human network. We had initially planned to invest ina different project, but the negotiations led us to consider Barnett with
Quicksilver Resources Inc. and finally resulted in us choosing this project
instead. This experience reaffirmed to me the importance of constantly
expanding such networks, in addition to one’s view field, while considering a wide range of options.
In the shale gas development project in the Barnett basin, approximately 1,000 shale gas wells are currently in operation, and we expectthat several additional wells will be opened each year, gradually expanding production volumes at this project. Participation in new well openings
is left to the discretion of each participant. We make these decisions
quickly and after careful evaluation of the business feasibility of each well.
We currently contract Quicksilver Resources to sell natural gas produced
at this project in the U.S. market, but we are considering the possibility of
conducting sales directly in the future.
The number of opportunities to participate in upstream resource
projects is growing in North America. Globally as well, chances forparticipating in natural gas projects are expected to increase as resource
development commences in new regions, such as Africa, and throughnew development methods, such as floating LNG projects. The “Challenge 2020 Vision” defines the goals of reducing resource costs, constructing a global LNG value chain, and growing overseas businesses tothe extent that they account for 25% of total net income. I hope to create
new business opportunities to move us closer toward achieving thesegoals, and I will do this through close coordination with our team in Japan.

Tokyo Gas Annual Report 201430

Focus Story

2

Fuel Conversion as Promoted by Tokyo Gas

Tokyo Gas is cultivating demand for city gas by promoting fuel conversion to natural gas.
In this section, we introduce an example of how we are accelerating demand cultivationin the Kashima Waterfront Industrial Zone.

Asahi Tostem Exterior Building Materials
Co., Ltd.’s Kashima Plant

Kashima Plant, Asahi Tostem Exterior Building Materials Co., Ltd.

Obstacles to Fuel Conversion
Ceramic siding is a material commonly used in the outer walls of housing. It is also the main product ofAsahi Tostem Exterior Building Materials Co., Ltd., a company that we recently guided through theprocesses of fuel conversion. Ceramic siding is made by sterilizing raw clay materials in a high-temperature,high-pressure steamer known as an autoclave and then by molding and drying these materials. Afterdrying, the clay is glazed and dried again. This process is repeated to finish products. A gas-fired furnace
is used in the drying process.
Asahi Tostem’s Exterior Building Materials’ Kashima Plant had originally used LPG to fuel its drying
furnace. After the opening of the Company’s Chiba–Kashima Line, however, the plant began considering
fuel conversion to city gas in light of a proposal we had made. The maintenance processes associated withusing LPG were expensive and time consuming, and the plant’s facilities were in need of replacement.
These were factors considered in the decision to undertake fuel conversion.
The troublesome maintenance and other procedures associated with LPG created significant costs andtime losses in plant operations. As LPG was stored in tanks and then supplied as gas to furnaces, appropriate management of LPG stocks and orders was necessary. Tanks, gasification equipment, pipes, andother facilities also had to undergo daily inspection with legally mandated inspections sometimes required.
The Kashima Plant had high expectations that the introduction of city gas would alleviate these issues.
However, the plant also faced a number of obstacles in undergoing this fuel conversion. For example,
several kilometers of piping needed to be installed, and production line downtime had to be minimized so
as not to interfere with the plant’s duty of supplying products.
“It was a daunting task,” recalls Section Chief Nakata, manager in charge of the project. Through extensive discussions, Asahi Tostem Exterior Building Materials and Tokyo Gas sought out a solution to the issues.

31

Tokyo Gas Annual Report 2014

From left: Kimijima (Tokyo Gas), Section Chief
Nakata (Asahi Tostem Building Materials),
Kashima Plant Manager Kokubo (Asahi Tostem
Building Materials), and Aihara (Tokyo Gas)

Drying furnace

Concentrated Effort of More Than 200 Workers
The solution came in two parts. First, we would use the existing LPG pipes in order to minimize renovations
to the drying furnace and limit costs. Second, we would finish the conversion through a concentrated effort
over a period of roughly 10 days. With this decision made, we began conducting the various preliminary
studies and tests that were necessary, a process that took a year and a half. “My greatest concern wascalorie adjustment,” reflects Kashima Plant Manager Kokubo. In March 2013, a coordinated team of morethan 200 workers, consisting of gas supply and facility modifying teams from Tokyo Gas as well as specialists we had recommended for the project, jumped into action at the command of Section Chief Nakata.
City gas flowed into the drying furnace 10 days later, right on scheduled, allowing all production lines to berestarted simultaneously. The cost of the conversion was also 20% less than would normally be required.
Section Chief Nakata had praise for our efforts, saying, “This success was a result of the people at Tokyo
Gas and their masterful installation techniques.” Meanwhile, Kashima Plant Manager Kokubo offered wordsof encouragement, “The benefits of the maintenance cost reductions were just as I had anticipated. In the
future, I hope Tokyo Gas will be able to seek out more affordable natural gas to reduce the price of LNG.”
For the Kashima Plant, planning this undertaking while continuing normal operation would have been aherculean task to surmount with their limited manufacturing staff. However, by outsourcing the planning,scheduling, and implementation of this project to Tokyo Gas, the plant was able to undergo fuel conversion
without incurring additional labor requirements. This fact is significant in and of itself.
For Tokyo Gas, this project serves as a prime example of how we can muster our collective strength toremove obstacles to fuel conversion and provide comprehensive support in areas ranging from energy
provision to consumption.

Siding is a manmade building material primarily
created from cement that is applied to theouter walls of houses. Common types of siding
include ceramic siding and metal siding(photograph is an example of ceramic siding).

Asahi Tostem Exterior
Building Materials Co., Ltd.
Asahi Tostem Building Materials is
an external building material manufacturer created through the integration of the exterior building
material operations of Asahi GlassCo., Ltd. and Tostem Corporation(currently LIXIL Corporation). The
company provides various functional and ascetically pleasing
products—ranging from ceramic
and metal sidings to other exteriorbuilding materials and roofing materials—that create comfortableliving environments.

On-Site Progress toward Realizing the “Challenge 2020 Vision”
Sales

General Manager,
Energy Service
Promotion Section,
Industrial Gas Sales
Department

Shingo Nagashima
I will drive the transformation from a gas supplierto an energy solutions partner.
To contribute to the realization of the “Challenge 2020 Vision,” theIndustrial Gas Sales Department is advancing three priority measures:
encouraging fuel conversion, spreading the usage of cogeneration
systems that match customer needs and feature high total efficiency, andexpanding operations in the new field of energy services.
In the near future, it can be expected that a number of new players willenter the gas market. As such, we will have to abandon the assumptionthat customers who want to use gas will naturally select Tokyo Gas. In my

department, we aim to have users choose Tokyo Gas as a solutions
partner, and therefore we are putting incredible effort into providing energy
services that combine energy provision with solutions. One such solution
is “TG Miru Net”*. This service helps track energy consumption rates andfacility efficiency to contribute to energy savings and cost management.
Customers using this service have offered very high opinions. We also
hope to have customers view our technologies firsthand at the “AsuTimes Laboratory”, and we are steadfastly promoting visitation. Createdthrough a combined effort by sales and technology divisions, this permanent exhibit enables people to view the combustion and other technologies used by Tokyo Gas. Numerous visitors have expressed how they
view Tokyo Gas as a partner that provides solutions to their problems.
I therefore believe that the Company is successfully cultivating a corporate
culture that equates good service with earnings.
Going forward, we will develop a deep understanding of customers’
production processes and future refine “TG Miru Net” to create more valuable solutions for contributing to quality improvements and cost reductions. In addition, we are investigating the possibility of constructing abusiness model that combines the supply of gas and electricity withenergy solutions. In these ways, we are preparing for the impending fullderegulation of the market. By expanding high-value-added services andutilizing these services in sales, we aim to grow Tokyo Gas into the No. 1
energy solutions provider in Japan, a company that can win out against
any rival.

* TG Miru Net:	This energy traceability service tracks the flow rate and pressure of gas and steam and uses this data to measure energy usage levels, equipment operating rates, and energy consumption rates offactories and facilities. Reports can be prepared based on user needs, making this system a viable tool for helping conserve energy and maintain facilities.

Tokyo Gas Annual Report 201432

Focus Story

3

Continually Growing Electric Power Business—Ohgishima Power Station

Characteristics of the Ohgishima Power Station
 State-of-the-Art GTCC Generation Method
The Ohgishima Power Station’s gas turbines use the state-of-the-art
gas turbine combined cycle (GTCC) generation method. Under thismethod, exhaust heat from a gas turbine’s generation process isrecovered and used to power a steam turbine to generate additional
power. As a result, generation efficiency is significantly higher (record
high of 58% realized at the Ohgishima Power Station) than simple cycle
generation, which cannot utilize steam power.

 Close Proximity to High Demand Areas
The Ohgishima Power Station is situated in Kawasaki City, in Kanagawa
Prefecture. The prefecture and the surrounding Kanto region are densely
populated by industrial zones, such as the Tokyo–Yokohama Industrial
Zone, and electricity demand is robust as a result. Electricity differs fromgas in the fact that it cannot be stored, and it is therefore necessary toadjust generation levels in conjunction with demand fluctuations.
Electricity also incurs large losses during transmission. For thesereasons, a location close to high demand areas is a great advantage foran electric power business.

Combined Cycle Generation
Generator

Steam turbine

Steam Turbine
Generation
Steam
Exhaust heat collection boiler
Exhaust heat

Gas Turbine
Generation
Generator

Gas turbine

Kanto Region

 Neighboring LNG Terminal
The Ohgishima Power Station neighbors the Company’s Ohgishima
Terminal. The close proximity to this LNG receiving terminal means thatthe power station can be easily supplied with the natural gas it uses asfuel. In addition, the Ohgishima Terminal can be contracted to conduct
generation within its facilities, thereby ensuring efficient operation withlow costs.

Ohgishima Power Station‌Tokyo Gas
Group supplyarea‌Industrial zones
Factories

33

Tokyo Gas Annual Report 2014

Ohgishima Power Station’s Third Unit
 Construction of the Third Unit
In addition to the two units already operating at the Ohgishima Power Station, Tokyo Gas is constructing athird unit. Scheduled to commence operation in fiscal 2015, this unit will have a generation capacity of 407
MW, which will raise the overall generation capacity of the power station from the current 814 MW to 1,221
MW. As the supply and demand situation for electricity remains tight in the Tokyo metropolitan area, thehighly competitive power we supply will continue to benefit from robust demand, enabling us to contributeto a stable supply of electricity.

 Continuation of Tight Electricity Supply and Demand Situation after Fiscal 2015

Variable costs (¥ / kWh)Some stakeholders have expressed concern that the construction of a third unit at the Ohgishima Power
Station could result in a supply glut. The basis for this concern is the possibility of Japan’s nuclear power
plants being restarted, which would likely result in an easing of theGeneration Costs by Power Source: Variable Costs (representation)
supply and demand situation for electricity.
The Company’s highly efficient natural gas-fired thermal power
plants boast incredible cost competitiveness when compared with
LNG-fired thermal,
oil-fired thermal, etc.
older oil-fired and LNG-fired thermal power plants. It can be
expected that buyers will choose to fill demand by first using
High-efficiency
LNG-fired thermal
lower-cost power sources. For this reason, we anticipate thatdemand will be lost for older model thermal power plants should
Coal-fired
thermalnuclear power plants be restarted. It is difficult to imagine
NuclearHydro
a situation in which we could not find buyers for the electricity
from the Company’s highly efficient natural gas-fired thermal
Supply capacity (MW)power plants.

On-Site Progress toward Realizing the “Challenge 2020 Vision”
Electric
Power
Business

General Manager,
Power Strategy Section,
Total Energy Business
Department

Shinya Nishigata
I will be both bold and calculating in advancing theelectric power business.
The Company’s “Challenge 2020 Vision” defines the goal of raising ourdomestic generation capacity to between 3,000 MW and 5,000 MW. Our
first step toward realizing this goal is the construction of the Ohgishima
Power Station’s third unit, which is scheduled to commence operations infiscal 2015. Going forward, we will examine various options for achieving
the vision’s goal.
In expanding generation capacity, the strength of Tokyo Gas lies in its
ability to use its LNG procurement capabilities as well as its LNG terminals,
pipelines, and other infrastructure to develop and operate natural gas-fired
thermal power plants that utilize highly efficient combined cycle generation
methods. While leveraging this strength to its full extent, we will also build
a strong power supply portfolio to boost the competitiveness of theelectric power business, with base power sources like coal-fired thermal
included among the options. Collaboration with capable partners will also
be considered as a way of advancing this quest in the future.
However, expanding the scale of our power generation operations will
not be easy. Currently, the environment surrounding energy in Japan ishighly opaque, particularly with regard to trends in electricity and gas
regulatory systems, the possible timing for the restart of nuclear power
plants, and medium-to-long-term electricity demand growth. In all honesty,
it is difficult to project what the electricity supply and demand situation andmarket prices for electricity will look like even a year down the line.
In this unclear environment, we must make difficult decisions regarding
the construction of large-scale power plants, which entail massive
investments and require a period of seven or eight years before a plantcan be brought on stream. Even looking at the large-scale natural
gas-fired thermal power plants Tokyo Gas is currently operating, we will
see that circumstances surrounding energy changed substantially after
their construction was approved. Moreover, there are a variety of opinions
and perspectives within the Company, and the decisions themselves are
not easy.
Nonetheless, I believe that no matter how the operating environment
for energy may look, there will be business opportunities to be foundtherein. In seeking out these opportunities, it is crucial to develop scenarios based on various projected changes in the environment, and thesescenarios will need to be carefully examined. We must then formulate
strategies that will allow us to respond flexibly, even if a serious riskmaterializes. In the coming age of unprecedented uncertainty, this typeof bold and calculating approach will be more important than ever todeveloping business operations.

Tokyo Gas Annual Report 201434