1. Growth Strategies and Gas and Power Complexes June 8.2006 Amsterdam PGC B-DEMAND STUDY GROUP

2. 2 Context Ⅰ.Types of growth Strategies Ⅱ.Movements of Energy Companies Ⅲ.Formation of Gas and Power Companies

3. 3 Ⅰ.Types of Growth Strategies Concentration Vertical GrowthUpstream, Downstream Horizontal GrowthIntrastate, Interstate, Abroad Diversification Concentric GrowthRelated Business Conglomerate Growth Unrelated Business

4. 4 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

5. 5 Gas Companies: Horizontal Growth

6. 6 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.

7. 7 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.

8. 8 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.

9. 9 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.

10. 10 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.

11. 11 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

12. 12 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.

13. 13 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.

14. 14 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 ”.

15. 15 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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