Tokyo Gas : Medium-Term Management Plan(Compass Transformation 23-25)

Compass Transformation 23-25

New mid-term management plan	Final Stage
Positioning of the new mid-term management plan	2029-2030

Introduction	Introduction
Contents

The business environment continues to change rapidly due to heightening geopolitical risks and the associated volatility in energy markets.

We have positioned the 2023-2025 period of the mid-term management plan as one in which "We transform our own business model in pursuit of the sustainable development of society and the provision of greater value to customers with solutions and business groups that transcend conventional energy frameworks." Through this, we will make steady progress toward the vision outlined in the Group's management vision, Compass2030.

External environment
Decarbonization	2nd Stage
Digitalization
2023-2025

3rd Stage

2026-2028

Delivering the results of change

Realizing our Vision

Tokyo Gas Group

Management Vision

Providing energy and solutions to the future of

our life, society and the earth

CEO's	CEO's Message
Message
How	How We Create Value
We
The Value Creation Process
Create Value	Promoting Sustainability and Material issues
Business Strategy
	Compass2030 & Compass Action

Fluctuations in energy

markets

Strengthen human capital management and the financial base, steadily commercialize and monetize the decarbonization field, establish the solutions business as a second pillar of business after energy

Business	Compass Transformation 23-25
Strategy 1: Achieve both stable energy
supply & decarbonization
Strategy 2: Fully roll out Solutions
business
Strategy
Strategy 3: Realize a flexible corporate
culture resilient to change
Introduction of Internal Companies
CFO's Message

Transforming our business model

Preconditions	Economic frame for 2025
Crude oil price = 90$/bbl / Exchange rate = 140 yen/$

Corporate	Corporate Strategy

1st Stage	Compass
2020-2022
Transformation
	23-25

Laying the foundation for 10 years from now

Maximize cash flow generated from the core energy business and actively invest in new growth areas such as decarbonization and solutions, etc., while identifying core and non-core businesses and business life cycles, and promoting asset replacement

Financial & environmental indicators	Now (FY2020-		FY2025
22 average)
	Segment profits*1 (operating profit	¥130.0 billion		¥150.0 billion
	+ equity income of subsidiaries)
Finan-	ROA*1	3.0%		Approx. 4%
cial
ROE*1	7.3%		Approx. 8%
	D/E ratio	0.91		Approx. 0.9
Environ-	CO2 reduction contribution	6.00 mn tons*	2	12.00 mn tons*	3
mental			Energy
Cash flow & investment plan	FY2020-22		FY2023-25		¥200.0 billion
		(estimated)

	Sustainability
Strategy	Corporate Governance
Financial	Financial Data

Formulation

of a new

management

philosophy

Company with	Transition to
a Nominating	holdings type
Committee, etc.	group structure

Redefining

material issues

Business

investment

to realize our

vision

Cumulative operating cash flow (profit	¥960.0 billion	¥1.1 trillion	Overseas
attributable to owners of parent + depreciation)	¥190.0 billion
	Growth investments (portion	¥530.0 billion	¥650.0 billion
	for decarbonization-related
Invest-	(¥190.0 billion)	(¥230.0 billion)	Solutions, etc.
investments)
ments	Infrastructure investments	¥370.0 billion	¥350.0 billion	¥260.0 billion
	Total (3 years)	¥900.0 billion	¥1 trillion

*1 Profits after sliding time lag effects *2 Average for FY2020-21, Japan only *3 Includes overseas

Data

Web Site

Investor Relations Website

Investors' Guide

(Financial Data and Industry Data)

Financial Results Presentation Materials

Financial Results Bulletin

Corporate Governance Report

22 Tokyo Gas Group Integrated Report 2023

Sustainability Factbook

Looking Back on the Previous Mid-term Management Plan

Despite an uncertain business environment owing to the spread of COVID-19 and the expansion of market volatility, our efforts to achieve the mid-term management plan were progressing smoothly.

As for KPIs and KGIs, while some issues remain, such as growth in the No. of customer accounts and renewable power source transaction volume due to ongoing competitive pressure, we were able

Business portfolio composition: operating profit + equity income of subsidiaries

17%

10%

25%

Overseas*1

12%

Solutions, etc.*2

73

Energy*3 (gas + electricity +

28%

%

25%

50%

networks)

60%

Management guidelines

FY2022 plan

FY2022 results

and key figures in

Key contributing factors and sentiments

Compass2030

KGI

operating profit + equity income of

Strong performance driven mainly by competitive access

¥140.0 billion

¥417.0 billion

Approx. 200 bn yen

to raw materials, and by increased revenues from

subsidiaries

overseas business (particularly upstream interests) due to

skyrocketing oil prices, and sharp yen depreciation

Introduction	Introduction
Contents
CEO's	CEO's Message
Message
How	How We Create Value
We
The Value Creation Process
Create	Promoting Sustainability and Material issues

to generally achieve our targets for the most part. We will continue to monitor trends in the LNG and

electricity markets, international situations, and other factors, and promote initiatives to achieve our vision and the new mid-term management plan.

*1 All overseas businesses

*2 Energy-related, real estate, other

*3 Gas and electricity business in Japan

*4 The Compass2030 initial target: 10 million tons (Japan only)

*5 The Compass2030 initial target: 5 million kW

23 Tokyo Gas Group Integrated Report 2023

Financial indicators
ROA	Approx. 4%	8.3%
ROE	Approx. 8%	20.0%
D/E ratio	Approx. 0.9	0.81
	Factoring in hybrid bonds/loans	-	0.76
KPI
No. of customer accounts, million (FY-end)	14.80	13.00
Natural gas transaction volume, million	17.00	19.00
tons (FY)
Segment profit from Overseas Business,	16.0	67.9
¥billion (FY)
CO2 reduction contribution , million tons	6.50	6.35
(Base year: FY2013)
Renewable power source transaction	2.00	1.633
volume, million kW (FY-end)
Cost structure reform, ¥billion (vs. FY2019)	-30.0	-30.0
Capital expenditure	FY2020-22 plan FY2020-23 results
Overseas business (¥ billion)*1	200.0	153.3
	Renewable energy (¥ billion)	110.0	61.7
Solutions, etc. (¥ billion)*2	200.0	130.3
Energy (¥ billion)*3	380.0	436.0
	Renewable energy (¥ billion)	30.0	107.4
Common (¥ billion)	220.0	106.3
Total (¥ billion)	1,000	826.1

4%	Profitability indicators soared with strong earnings
8%	Profitability indicators soared with strong earnings
	Borrowings are expanding due to focused investment in
Approx. 0.9	growth areas, etc., but D/E ratio is advancing as planned
	thanks to strong earnings

20.00 Gas and electricity accounts have steadily risen, but growth in services & solutions accounts has stalled

20.00 Tracking strongly, buoyed by increased demand from power generation industry and other factors

• Upstream and shale business performance is robust owing to higher oil prices and other factors

17.00*4 Plateauing due to factors such as decreased operation of customer equipment

6.00*5 Growth is being slowed down by shifting market conditions and fiercer competition

• Reforms for reducing consignment, repair, indirect, and other costs are moving on track

FY2021-30 plan

Approx. 500.0

-

Approx. 1,000

Approx. 500.0

-

-

2,000

Value	Business Strategy
	Compass2030 & Compass Action
Business	Compass Transformation 23-25
	Strategy 1: Achieve both stable energy
	supply & decarbonization
	Strategy 2: Fully roll out Solutions
	business
Strategy
	Strategy 3: Realize a flexible corporate
	culture resilient to change
Introduction of Internal Companies
CFO's Message
Corporate	Corporate Strategy
Sustainability
Corporate Governance
Strategy
Financial Data	Financial Data
		Web Site
		Investor Relations Website
		Investors' Guide
		(Financial Data and Industry Data)
	Financial Results Presentation Materials
		Financial Results Bulletin
		Corporate Governance Report
		Sustainability Factbook

Deriving Strategy from remaining challenges

Achievements and challenges under the previous medium-term plan

Introduction	Introduction
Contents

By actively investing in the renewable energy field in Japan and overseas, partnering with Octopus Energy Group Limited, and shifting to a holdings type group structure through FY2022, we have built the foundation to achieve the vision we set for ourselves in Compass2030.

However, as LNG procurement risks due to the external environment, such as geopolitical risks, have become apparent, this was also a period in which we strongly felt the importance of continuing stable procurement and supply.

In addition, challenges remained in acquiring strengths in the decarbonization field,

promoting commercialization and increasing profitability, and in improving the quality and recognition of services amid ongoing competitive aggressiveness.

Based on the achievements and challenges under the previous mid-term management plan, the new mid-term management plan aims to maximize the diverse values of LNG while actively investing resources in the GX field (renewable energy, e-methane, etc.), expand solutions by utilizing digital technology based on our real strengths, establish a profit model, and reform staff operations and Human Capital Management through the use of digital technology.

CEO's	CEO's Message
Message
How	How We Create Value
We
The Value Creation Process
	Promoting Sustainability and Material issues

Three challenges to realizing our vision

01

02

03

CreateValue

Business Strategy

Compass2030 & Compass Action

Achievements

under the previous mid-term management plan

Challenges

under the previous mid-term management plan

Remaining

challenges to be focused on in the new mid-term management plan

• LNG deemed to have net-zero CO2 emissions because carbon credits from forest conservation projects, etc. are used to offset GHG emissions of the processes from exploration to combustion

Lead transition to

net-zero CO2

Actively invested in renewables in Japan & abroad

Expanded carbon-neutral LNG*

Secure procurement of energy and stable supply amid rising geopolitical risks

Gain additional strengths in the decarbonization field

Achieve green transformation (GX) while maintaining stable energy procurement & supply

Establish a value co- creation ecosystem

Partner with Octopus Energy Group Limited

Expanded decentralized energy systems & smart city development

Improve service quality and awareness thereof

Strengthen customer experience

(CX) by accelerating digital

transformation (DX)

Establish new business to join gas and electricity businesses

Transform the LNG

value chain

Transition to holdings type group structure

Launched new LNG trading company & new services (last-mile, etc.)

Strengthen the system to realize Vision

01 02

Strengthen human capital

Drive structural reforms with

digital tools (DX)

Business	Compass Transformation 23-25
	Strategy 1: Achieve both stable energy
	supply & decarbonization
	Strategy 2: Fully roll out Solutions
	business
Strategy
	Strategy 3: Realize a flexible corporate
	culture resilient to change
Introduction of Internal Companies
CFO's Message
Corporate	Corporate Strategy
Sustainability
Corporate Governance
Strategy
Financial Data	Financial Data
		Web Site
		Investor Relations Website
		Investors' Guide
		(Financial Data and Industry Data)
	Financial Results Presentation Materials
		Financial Results Bulletin
		Corporate Governance Report

24 Tokyo Gas Group Integrated Report 2023

Sustainability Factbook

Three core strategies derived from remaining challenges

			Lead transition to	Establish a value	Transform the LNG value
Vision
		net-zero CO2	co-creation ecosystem	chain

		01	02	03
			strategy	strategy	strategy
			Achieve both	Fully roll out	Realize a flexible
Strategy
		stable energy	corporate culture
			Solutions
			supply &	resilient to
			business
			decarbonization	change

			Building an integrated business brand &
		Establishment of a new model for	expand lineup of solutions
		Strengthening customer communication	Implementing 3 key DX actions
		stable energy supply
		Leveraging value chain flexibility to	through our strengths in face-to-face	Exercising human capital
Action Plan
	engagement and through digital	management	p.50
	address market volatility and maintain
		technologies	Strengthening our financial base
		stable supply
		Co-creating value with communities by
		Responsibly leading the transition	p.38
		providing them with optimized solutions that
			leverage our strong root in the community

		Commercialize and monetize the	Develop Solution business as a center next	Increase resilience to uncertainty by
		transforming our business model through
Strategy
	business in decarbonization area, while	to Energy business, by integrating solutions
outcomes		DX, in addition to exercising human
	continuing to stably supply energy	which incorporate GX & DX
		capital management and implementing
				financial strategy

25 Tokyo Gas Group Integrated Report 2023

Introduction	Introduction
	Contents
CEO's	CEO's Message
Message
How	How We Create Value
We
The Value Creation Process
CreateValue	Promoting Sustainability and Material issues
	Business Strategy
	Compass2030 & Compass Action
Business	Compass Transformation 23-25
Strategy 1: Achieve both stable energy
	supply & decarbonization
	Strategy 2: Fully roll out Solutions
Strategy	business
CFO's Message
	Strategy 3: Realize a flexible corporate
	culture resilient to change
	Introduction of Internal Companies
Corporate	Corporate Strategy
	Sustainability
Strategy	Corporate Governance
FinancialData	Financial Data
	Web Site
	Investor Relations Website
	Investors' Guide
	(Financial Data and Industry Data)
	Financial Results Presentation Materials
	Financial Results Bulletin
	Corporate Governance Report
	Sustainability Factbook

Establish a new model for stable energy supply

Provide customers with optimal energy solutions by integrating various values such as decarbonization and decentralization using digital technologies

As an island country with few resources, it is important for Japan to achieve both a stable supply of energy and decarbonization, and the Tokyo Gas Group sees this as its own responsibility.

The new model for stable energy supply that we are aiming for is to provide optimal energy solutions to customers through a combination of the value for stable supply of LNG, the value for balancing capacity that flexibly balances supply and demand, the decarbonization and the decentralization value for renewable energy, in combination with the power of digital technology.

Even in an environment with high volatility, we will promote decarbonization while simultaneously controlling the impact of fluctuations by integrating supply and

demand, customers, and society as a whole, rather than going unidirectionally from supply to demand.Compass Transformation23-25

https://www.tokyo-gas.co.jp/en/IR/support/pdf/20230222-05e.pdf#page=14

Explanation 01	Achieve both stable energy supply & decarbonization	Lead the transition to net-zero CO2
Strategy
strategy

Introduction	Introduction
Contents
CEO's	CEO's Message
Message
How	How We Create Value
We
The Value Creation Process
Create Value	Promoting Sustainability and Material issues
Business Strategy
	Compass2030 & Compass Action

	Develop renewable	Strengthen transport
	power sources	capacity
Energy
sources for base load	trading
supply
	Secure long-term LNG	Expand supply/
	contracts and power	demand balancing &

Utilize decentralized	Expand credit offset
resources	products

Energy
demand	Demand	Develop gas/electricity
pricing system aligned
response, etc.	with market fluctuations

26 Tokyo Gas Group Integrated Report 2023

A new model for stable energy supply

Value for decarbonization Value for decentralization

Value for diverse range of offerings

Value for flexibility

	Value for
A new form of	integration
stable supply	Digital utilization

Value for stable supply

Value for balancing

capacity

Diverse solutions

Supply-demand adjustment

and trading

Provide optimal solutions to our customers

Secure profitability across the entire group Form optimal assets and strengthen the customer base

Toward a decarbonized society

Business	Compass Transformation 23-25
Strategy 1: Achieve both stable energy
supply & decarbonization
Strategy 2: Fully roll out Solutions
business
Strategy
Strategy 3: Realize a flexible corporate
culture resilient to change
Introduction of Internal Companies
CFO's Message
Corporate	Corporate Strategy
Sustainability
Corporate Governance
Strategy
Financial Data	Financial Data
	Web Site
	Investor Relations Website
	Investors' Guide
	(Financial Data and Industry Data)
	Financial Results Presentation Materials
	Financial Results Bulletin
	Corporate Governance Report
	Sustainability Factbook