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TGC and SDK to Set up JV for Industrial Gas Sales

April 22, 2004

Tokyo Gas Chemicals Co., Ltd. (TGC), a consolidated subsidiary of Tokyo Gas Co., Ltd., and Showa Denko K.K. (SDK) today signed an agreement whereby they will jointly establish a company for sales of industrial gases centering on oxygen, nitrogen and hydrogen.

The 50-50 joint venture, to be named TG Showa K.K., will start operation on July 1, having the second largest share in the oxygen/nitrogen market and the largest share in the hydrogen market, both in the Kanto region.

Demand for industrial gases is expected to grow constantly for use in a wide variety of areas. TGC and SDK are engaged in the industrial gas business mainly in the Kanto region. By establishing the sales joint venture, the two companies intend to streamline marketing activities and distribution network, thereby improving competitiveness/earning power and increasing the enterprise value.

Specifically, the consolidation will bring the following advantages:

[Oxygen/nitrogen business]

TGC and SDK are already partners in two joint ventures that are producing oxygen and nitrogen by cryogenic air separation. Tokyo Liquefied Oxygen Co., Ltd., located at Yokohama City, Kanagawa Prefecture, has the capacity to produce 20,000 m3 per hour of oxygen/nitrogen while Tokyo Oxygen & Nitrogen Co., Ltd. in Sodegaura City, Chiba Prefecture, is equipped with a 35,000 m3 per hour production facility.

These facilities produce oxygen and nitrogen in large quantities and with high energy-efficiency through exchange of heat with liquefied natural gas (LNG) handled by Tokyo Gas. Furthermore, the two facilities are located in the huge consumer markets in the metropolitan area. TG Showa K.K. will have the right to take the majority of the products from both facilities, resulting in improved cost competitiveness and more stabilized supply system.

[Hydrogen business]

SDK now has the largest share in the hydrogen market in the Kanto region. Meanwhile, TGC has the technology to provide hydrogen by reforming LNG on-site. As a result, the two will hereafter complement each other very well in addressing the market needs in the area of hydrogen energy, especially in fuel cells.

TG Showa K.K., to be headquartered in Tokyo, will have three branches in the Kanto region (Tokyo, Yokohama, Utsunomiya) and one branch in western Japan (Nagoya). It will also have marketing offices in Kofu, Shizuoka, Kohriyama, Nagoya, Osaka, Toyama and Oita. The new company will be capitalized at ¥400 million, which will be shared equally by TGC and SDK. The two parent companies will have three directors each on the board of the new company. Ieaki Uemura, president of TGC, will concurrently serve as president of the new company. The number of employees of the new company will be around 80.
TG Showa K.K. will take various steps to meet diversified customer needs and ensure stable supply of products. It will aim to achieve annual sales of ¥19 billion in 2005.


Outline of Tokyo Gas Chemicals Co., Ltd.

Established: October 1973
Head office: 7-1, Nishi Shinjuku 3-chome, Shinjuku-ku, Tokyo
Capital: ¥1 billion
Shareholders: Tokyo Gas Co., Ltd. 82.3%; TG Enterprise Co., Ltd. 17.7%
President: Ieaki Uemura
Scope of business: Sales of industrial gases, chemicals, and various types of equipment; engineering
Annual sales: ¥20.3 billion (for the fiscal year that ended March 2003)
Number of employees: 146 (as at the end of March 2003)