TOKYO GAS エネルギー･フロンティア

Growth Strategies and Gas and Power Complexes

June 8.2006

Amsterdam

PGC B-DEMAND STUDY GROUP

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TOKYO GAS エネルギー･フロンティア

Context

Ⅰ.Types of growth Strategies

Ⅱ.Movements of Energy Companies

Ⅲ.Formation of Gas and Power Companies

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TOKYO GAS エネルギー･フロンティア

Ⅰ.Types of Growth Strategies

Concentration Vertical Growth Upstream, Downstream

Horizontal Growth Intrastate, Interstate, Abroad

DiversificationConcentric Growth Related Business

Conglomerate Growth

Unrelated Business

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TOKYO GAS エネルギー･フロンティア

Ⅱ.Movements of Energy Companies

1.Gas Companies

・ Horizontal Growth

　・ Vertical Growth

・ Concentric Growth 　　　　 2.Electric Power Companies

3.Oil and Gas Producers

4.Energy Merchant Companies

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Company Sale

Gas Natural 12bcm

(Souces:The Players on the European Gas Market,2004 Edition CEDIGAZ)

ENI

Foreigin Markets

Examples of Diversification Strategies

Sweden, Finland, Austria, Luxembourg,Czech Republic, Slovak Republic, Romania,Hungary, Poland, Astonia,Lithuania, Latvia

7bcmE.ON

(Ruhrgas)

GDFGermany, Italy, Portugal, Hungary, SlovakRepublic Mexico, Urguay

23bcm

Italy, Brazil, Mexico, Columbia, Argentina

Turkey, Germany, Spain, Portugal, UK,Hungary, Slovenia, Argentina

26bcm

Gas Companies: Horizontal Growth

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Gas Company: Vertical growth

Centrica interited the Morecambe Bay gas field as well as nation wide customer base.

GDF is enlarging its portfolio of gas assets in the North Sea and exploring for gas outside Europe as in Algeria and Egypt.

Tokyo gas has directly participated in Darwin LNG project in Australia.

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Gas Company: Concentric Growth

KeySpan succeeded in evolving into power generation businesses through merging with LILO.

Centrica is a gas and electric supply company serving in residential markets including meter reading, bill collections, back office, database and marketing.

Tokyo Gas set up Energy Advance Co., which provide on site one –stop service covering consulting

on energy conservation, construction, operation, maintenance, and gas and electricity supply and financing support.

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TOKYO GAS エネルギー･フロンティア

Electric Power Companies

External growth and internal growth E.ON-Ruhrgas and RWE-Thyssengas have

advanced into external growth through acquisition of gas transportation and distribution companies.

EDF and TEPCO plan to expand internal growth through construction of own facilities such as pipelines and LNG facilities.

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TOKYO GAS エネルギー･フロンティア

Oil and Gas Producers

Some oil and gas producers are increasing their presence in the power generation sector.

The new business enables them to upgrade gas production by power generation and arbitrage on energy markets via trading subsidiaries.

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Energy Merchant Companies

Trade volumes in gas and power markets are expected to recover with proceeding liberalization of the two industries.

In the future, energy merchant companies will be able to broaden their rage of services to become multi service entities based on some asset integration.

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Ⅲ. Formation of Gas and Power Complexes

(1) Upstream Gas and Power Complex

(2) Midstream Gas and Power Complex

(3) Downstream Gas and Power Complexes

(4) Service-oriented Gas and Power Complexes

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Upstream Gas and Power Complex

KeySpan acquired power generation assets in Long Island to be the largest gas and power company in Northeastern Area USA.

Tokyo gas and Osaka Gas in Japan are planning to build large-scale power plants in the near future.

E.ON-Ruhrgas and RWE-Thyssengas have teamed up in a major gas and power convergence deal to secure gas supply.

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TOKYO GAS エネルギー･フロンティア

Midstream Gas and Power Complex

The merger of National Grid and Transco in the U.K. have been expected synergy effects based on the economies of scope and scale.

E.ON-Ruhrgas and RWE-Thyssengas include a significantly geographical overlap between pipes and wires.

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Downstream Gas and Power Complexes

The cooperative efforts of gas and power companies can result in significant savings through combined meter reading, billing and emergency repair services.

Centrica is a typical case of “downstream gas and power complexes”.

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TOKYO GAS エネルギー･フロンティア

Service-Oriented Gas and power Complexes

Combined heat power(CHP) can use heat from the power generator. CHP significantly increase system efficiency when applied to high thermal use customers such as process industries ,hospitals and district heatings.

Service-oriented complexes have opportunities to provide value-added services concerning trades of gas and power on the markets and risk management.

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ProductionImport

Transport(pipes)

Whole SaleSupply

Retail SaleSupply

generation Transport(wires)

Whole SaleSupply

Retail SaleSupply

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Exelon

Active Areas of Gas and Power Complexes(1)

E.ON(Ruhrgas)RWE(Thyssengas)

Duke Energy

KeySpan

EnergyService

(Gas)(Electricity)

Centrica

National GridTransco

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TOKYO GAS エネルギー･フロンティア

ProductionImport

Transport(pipes)

Whole SaleSupply

Retail SaleSupply

generation Transport(wires)

Whole SaleSupply

Retail SaleSupply

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Active Areas of Gas and Power Complexes(2)

(Gas)(Electricity)

EnergyService

ENRON

KEPCO

Tokyo Gas

Osaka Gas

TEPCO

KOGAS