China Gas to increase its stake in five ventures
By Zhang Jin (China Daily)
Updated: 2004-08-25 13:50

Hong Kong-listed China Gas Holdings Ltd, a gas pipeline construction firm, will spend a total of HK$94.57 million (US$12.1 million) increasing its stake in five gas ventures on the Chinese mainland.

Analysts say it is a fresh move from overseas investors to cash in as the clean and cheap energy is in great demand in China to fuel the economy and supply its dense population.

The company, which owns a 65 per cent stake in each of Hancuan Jiaxu, Xiaogan Jiaxu, Yingcheng Jiaxu and Yumeng Jiaxu, plans to acquire the rest of the share holdings from two venture partners, the firm said in a statement.

The four ventures, which will become wholly-owned subsidiaries of China Gas upon completion of the transaction, were granted exclusive rights by the respective municipal governments in November 2003 to construct gas pipelines and distribute natural gas for a period of up to 30 years.

China Gas' stake in the fifth venture, Xiaogan Zhenrong, would also be increased to 55 per cent from 30 per cent.

All the five ventures are in Central China's Hubei Province.

China Gas said the acquisitions would help it "to further increase its investment interests in the five joint ventures with a view to further capitalizing upon the growing natural gas market."

China Gas said it would purchase the equity interests from its two venture partners, Beijing Yu Long Cang Gas Technology and Great Sun Investments Co Ltd.

In June the firm signed exclusive supply contracts with 27 cities and districts on the Chinese mainland.

It reported a turnover of HK$376 million (US$48 million) in the latest fiscal year that ended on March 31, 2004, up approximately 337 per cent on a yearly basis.

The move took place as China is revving up efforts to popularize the usage of natural gas to replace pollutants coal and oil.

"The natural gas sector is on the rise," said Liu Keyu, an official with China National Petroleum Corp.

According to a development outline released by the National Development and Reform Commission, the country's top economic planner, natural gas will be available in 140 cities, compared to the current 60. The figure is expected to rise to 270 by 2010.

"No one can afford to lose such a big market," said Liu.

Lured by the fledgling but lucrative market, overseas and private gas companies have quickened their pace in signing contracts with local governments to supply natural gas.

It is reported that New Hope Group, a leading Chinese private enterprise, has signed contracts to be the exclusive supplier of natural gas to 10 cities for 30 years. The cities are in the provinces of Hubei, Anhui, Sichuan, Jiangsu and Gansu.

Another private firm, Xinao Gas Holdings, has also gained the distribution rights for a number of cities.

Japanese trading house Sumitomo Corp also showed interest in cashing in on the market.

The central government allowed private and overseas players access to public utilities such as water, gas and electricity in late 2002.

The sector was previously controlled by the State.

According to Bai Rongchun, an official with the National Development and Reform Commission, the country will invest 22 billion yuan (US$2.26 billion) by 2020 in building infrastructure to deliver the gas.

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