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Frequently Asked Questions on Osaka Gas' Business

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Q1.What is the advantage of gas in realizing low carbon society and preventing global warming?
A1.With less emissions of CO2 and NOx than coal and oil and no emissions of SOx, natural gas is considered the most environment-friendly among all the fossil fuels.
In the Basic Energy Plan formulated by the government in April 2014, the direction to promote the use of natural gas is shown in industrial fields, etc. from the perspective of global warming countermeasures.
It is expected that there will be an accelerated progress in fuel shift to natural gas from oil and other fuels and in the advanced utilization of natural gas.
Q2.How does Osaka Gas procure natural gas? Are there any risks involved in its procurement?
A2.In order to mitigate risks, Osaka Gas imports LNG (liquefied natural gas) from diversified sources, from as many as 8 countries in Middle East, South East Asia and Oceania, and so on. Osaka Gas also plans to procure from the United States in 2018. About 90% of the company's LNG is purchased on a long-term contract of more than 20 years to secure the stable supply. Osaka Gas also strives to reduce the cost of procurement by investing in overseas gas field developmental projects and in LNG shipping by its own vessels.
Q3.What is gas cogeneration system?
A3.It is a system to generate power with gas at customers' site equipped with recovery system of heat from the generator to provide hot water and steam. While the energy efficiency of the generator alone is mere 40%, the generation system with heat recovery achieves energy efficiency from 70 to 90%. Cogeneration system has a higher total energy efficiency than power generation located far from customers due to the loss of power on the transmission lines. Thanks to the technological advances for downsizing and higher efficiency, more cogeneration systems have been installed at small customers including convenience stores, fast food restaurants, and households. Osaka Gas introduced gas cogeneration systems called EneFarm and EcoWill to the household customers.
Q4.Why does Osaka Gas engage in Electricity business?
A4.Given the increasingly severe gas business environment with decreasing population and fiercer competition among energy companies, Osaka Gas taking the progress of deregulation as a business opportunity for expanding business. We started the electricity business aiming to provide "natural gas", "electric power" and "LP gas" according to customer's needs. Electricity business is a business that can use the strengths of the Group, such as procurement capability in natural gas upstream sector, utilization of LNG base facilities, proposal that we cultivated through cogeneration sales etc. and network with our customers, We believe that we can offer price competitive electric power and secure profits. In addition, with the deregulation of electricity in April 2016, we begin retail sales of electric power. We provide our customers with energy & services comprehensively and develop our business as a new era energy marketer.
Q5.Why does Osaka Gas engage in overseas business?
A5.Given the increasingly severe gas business environment with decreasing population and fiercer competition among energy companies, Osaka Gas explores new income sources by globally developing natural gas related businesses. This secures stable and economical LNG procurement and gives advantages to domestic gas business. Having engaged in overseas business since 1990, Osaka Gas has invested in overseas business operations of LNG terminals and IPPs, Independent Power Producers. With stable domestic demands and know-how of gas business, Osaka Gas develops its international businesses successfully.
Q6.Why is Osaka Gas engaged in non-gas businesses? Isn't it over-diversified?
A6.Pursuing stable business development, Osaka Gas' businesses are focused in three main fields: real estate business developed from the use of self-owned land, IT business started from use of IT system for gas business, and material solutions business developed from application of coal chemical technology. Osaka Gas also focuses on exploring new growth opportunities through application of our technologies and know-how and strategic alliances. We continue improving shareholders' value through our group operations as we integrate and restructure our affiliated businesses by looking at management indices such as SVA (shareholder value added) and capital costs.
Q7.Doesn't the aggressive investment approach create more interest-bearing debts?
A7.Osaka Gas boasts a high standard of financial stability with its equity ratio of about 50%. We are planning investments of 1.45 trillion yen in total over the 14 year period, which we don't think will damage our strong financial base. With the target of interest-bearing debt /equity ratio approximately 0.7 and the capital adequacy ratio around 50%, Osaka Gas intends to maintain its sound financial standing.
Q8.How do foreign exchange rate and oil price affect the balance sheet of Osaka Gas?
A8.Since the introduction of the Fuel Cost Adjustment System, in which gas price follows the foreign exchange rate and oil price, the balance sheet of Osaka Gas has not been affected by foreign exchange rate and oil price. The Fuel Cost Adjustment System may, however, cause a brief discrepancy in the company's accounts due to the time lag of the maximum of 6 months until foreign exchange rate and oil price are reflected on gas rates.

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