TOKYO GAS CO.,LTD.

Business Details

Engages in city gas manufacturing and sales, LNG Sales & Trading, Electricity Retail & Wholesale, and Engineering Solutions (engineering, energy services, etc.). The largest segment, accounting for approximately 86% of the Group's external customer revenue. With approximately 8.86 million gas retail customers and approximately 4.34 million electricity retail customers centered on the Tokyo metropolitan area, it serves as the foundation of domestic energy supply. Due to the application of the raw material cost adjustment system, the income impact of LNG raw material price fluctuations is considered minor over the medium to long term.

Recent Overview

Electricity sales volume expanded significantly, up 19.5% year on year, and segment profit increased by ¥28.5 billion year on year.

In FY2026 (ending March 2026), despite a decrease in the average unit sales price due to the gas raw material cost adjustment, sales increased by ¥145.7 billion year on year to ¥2,486,107 million (segment total) due to an increase in electricity sales volume, among other factors. Operating expenses also increased due to higher power source procurement costs, among other factors, but segment profit, including equity method investment gains, increased by ¥28.5 billion year on year to ¥150,247 million. Note that an impairment loss of ¥30,149 million was recorded in the Energy Solutions segment. While city gas sales volume for residential use increased due to lower temperatures, overall volume decreased 0.4% year on year due to declines in industrial use and supply to other operators.

Key Products

Growth Drivers

• An increasing trend in the number of electricity retail customers (4,337 thousand at the end of FY2026, up 4.5% year on year) and a significant expansion in wholesale sales volume (up 28.4% year on year)
• Recovery in residential city gas demand due to lower temperatures (residential sales volume up 2.1% year on year in FY2026)
• Generation of gains from the raw material cost adjustment system's timing lag (depending on market conditions)
• Expansion of the Engineering Solutions business (capturing decarbonization and digitalization demand)
• Strengthening customer engagement and enhancing market competitiveness through the active use of AI and digital technologies (per the FY2026-FY2028 medium-term management plan)
• Improved profitability and optimal resource allocation through the introduction of segment-based ROIC management

Risks

• Earnings volatility due to the time lag in the raw material cost adjustment system (crude oil price and exchange rate fluctuations are reflected in tariffs with a delay of up to five months)
• Fluctuations in city gas sales volume due to temperature variation (residential and commercial demand decreases during mild winters or high temperatures)
• Fluctuations in electricity wholesale sales volume (dependent on wholesale customers' demand trends)
• Risk of increased power source procurement costs (procurement costs increase in line with electricity sales volume expansion)
• Risk of impairment of fixed assets (an impairment loss of ¥30,149 million was recorded in the Energy Solutions segment in FY2026, ending March 2026)
• Decline in city gas demand for industrial use and supply to other operators (structural demand decline due to reduced operations by customers and supply destinations, etc.)
• Impact on raw material procurement from geopolitical risks such as the situation in the Middle East

Business Details

Tokyo Gas Group's Network segment's primary business is city gas transportation services (operation of pipeline transportation infrastructure). Even after gas retail liberalization, it remains a regulated business that, as a pipeline operator, provides infrastructure to other gas retailers, with the majority of sales composed of intersegment internal transactions (transportation fee revenue from the Energy Solutions segment). In FY2026 (ending March 2026), earnings improved due to an increase in residential transportation volume attributable to lower temperatures, turning from an operating loss in the prior year to an operating profit.

Recent Overview

Earnings improved due to increased transportation volume attributable to lower temperatures, turning from an operating loss to an operating profit

In FY2026 (ending March 2026), the average temperature decreased by 0.2°C year on year (to 17.4°C), which led to an increase in residential transportation volume due to lower temperatures, improving earnings by ¥7.2 billion year on year. As a result, the segment turned from an operating loss of ¥3,128 million in the prior year to an operating profit of ¥4,103 million. Sales to external customers were ¥103,127 million (up ¥6,039 million year on year). Capital expenditure decreased by ¥4,907 million year on year to ¥81,026 million.

Key Products

Growth Drivers

• Increase in residential gas transportation volume due to lower temperatures (a decrease in average temperature directly contributes to earnings)
• Expansion of the customer base through an increase in the number of installed meters (12,693 thousand at the end of FY2026, up 129 thousand year on year)
• Sophistication and efficiency improvement of pipeline infrastructure through the promotion of smart meter replacement
• Underlying boost to transportation demand from the increase in the number of retail customers (8,861 thousand at the end of FY2026, up 35 thousand year on year)

Risks

• A high fixed cost structure (depreciation and amortization of ¥96,164 million) means temperature and demand fluctuations directly affect earnings
• Risk of decreased city gas transportation volume due to temperature fluctuations (mild winters or high temperatures) (FY2027 assumes an average temperature of 16.9°C, projecting a 3.4% decrease in city gas sales volume)
• Risk that increased expenses associated with promoting smart meter replacement will pressure earnings
• Risk of increased costs to address the aging of social infrastructure
• Regulatory risk whereby, as a regulated business, changes to the transportation fee system directly affect earnings
• Risk of decreased transportation volume due to declining demand for industrial use and supply to other operators (due to reduced customer operations, etc.)

Business Details

Tokyo Gas Group's "Overseas" segment's main businesses are Overseas Resource Development & Investment and energy supply, among others. Centered on the North America Shale Gas Business, the segment achieved a substantial increase in profit in the fiscal year under review (FY2026, ending March 2026) due to higher unit sales prices in the North America Shale Gas Business. Its share of total Group sales rose to 8.5% (from 6.8% in the prior year), further increasing its prominence as a growth segment.

Recent Overview

Driven by higher North America Shale Gas unit sales prices, segment profit expanded approximately 3.2x year on year

In FY2026 (ending March 2026), the Overseas segment achieved a substantial increase in profit, with sales up ¥60,218 million year on year to ¥241,082 million and segment profit (including equity method) up ¥50,969 million year on year to ¥73,837 million, mainly due to higher unit sales prices in the North America Shale Gas Business. Meanwhile, portfolio restructuring progressed with the deconsolidation of Tokyo Gas Australia Pty Ltd and TG Global Trading Co., Ltd. Capital expenditure increased 7.0% year on year to ¥139,700 million, maintaining continued investment in North America upstream operations.

Key Products

Growth Drivers

• Improved earnings due to higher unit sales prices in the North America Shale Gas Business
• Expansion in production scale of the North America Shale Gas Business (capital expenditure of ¥139,700 million, up 7.0% year on year)
• Expansion of overseas energy supply against a backdrop of increasing electricity and gas demand
• Positioning of the "Overseas" business as one of three growth businesses in the FY2026-FY2028 medium-term management plan, promoting optimal resource allocation
• Promotion of profitability improvement measures through the introduction of segment-based ROIC management

Risks

• Risk of fluctuations in North America shale gas prices (gas price market risk)
• Yen/dollar exchange rate fluctuation risk (FY2026 actual: ¥150.67/dollar; FY2027 assumption: ¥155/dollar)
• Crude oil price fluctuation risk (FY2026 actual: $71.41/bbl; FY2027 assumption: $85/bbl)
• Geopolitical risk and regulatory change risk in overseas resource development (situation in the Middle East, etc.)
• Pressure on profit from increased depreciation and amortization (¥90,399 million) accompanying the expansion in scale of the North America upstream business
• Risk of business portfolio contraction due to deconsolidation of subsidiaries (Tokyo Gas Australia Pty Ltd, etc.)
• Decrease in equity method investment gains (from ¥3,928 million in the prior year to ¥3,106 million in the fiscal year under review)

Business Details

The Urban Business segment centers on Real Estate Development & Leasing, and also operates the Hotel Business, among others. Sales to external customers in FY2026 (ending March 2026) contracted to ¥46,042 million (from ¥50,667 million in the prior year). Segment profit (operating income + equity method profit/loss) decreased substantially to ¥9,743 million from ¥24,020 million in the prior year. The main cause was increased costs associated with the renovation of the Park Hyatt Tokyo. Its share of total Group sales is small at approximately 1.6%.

Recent Overview

Segment profit decreased approximately 59% year on year due to increased costs associated with the Park Hyatt Tokyo renovation

In the Urban Business segment for FY2026 (ending March 2026), increased costs associated with the renovation of the Park Hyatt Tokyo had a direct impact, with segment profit decreasing substantially by ¥14,277 million (approximately 59%) year on year to ¥9,743 million from ¥24,020 million in the prior year. Sales also contracted by ¥4,391 million year on year to ¥73,436 million. Equity method investment profit/loss turned to a loss of ¥104 million (from a profit of ¥587 million in the prior year). Capital expenditure contracted to ¥22,165 million from ¥25,851 million in the prior year, while segment assets increased by ¥15,758 million year on year to ¥343,727 million.

Key Products

Growth Drivers

• Recovery in occupancy rate and improvement in earnings at the Park Hyatt Tokyo following completion of the renovation
• Continued demand for development and leasing of urban real estate
• Improvement in profit margin on real estate sales
• Expansion of earnings opportunities through growth in the asset base (segment assets of ¥343,727 million, an increase from the prior year)

Risks

• Risk of decreased occupancy rate in the Hotel Business (renovation, changes in the external environment)
• Risk of volatility in real estate sales earnings (timing and volume of sales are uneven)
• Risk of deteriorating performance at equity-method affiliates (an equity method investment loss of ¥104 million was recorded in FY2026, ending March 2026)
• Impact of rising interest rates on the real estate market
• Risk of continued pressure on earnings from temporary cost increases such as renovation expenses