Transcript Document

Corporate
Presentation
April 2010
Table of contents
Section
Page
1
About China Gas
3
2
Operational Highlights 1H FY2010
15
3
Financial Highlights 1H FY2010
22
4
FY2010-11 Guidance
27
5
Sector Outlook
29
2
About China Gas
Overview
 Principal Business Segments
1. Natural Gas Services Operator: Engages in the investment, operation and management of city gas pipeline
infrastructure, distribution of natural gas to residential, industrial and commercial users, and construction and
operation of natural gas refilling stations
–
Business started in 2002 when China decided to construct the West-East Pipeline
–
Operates in 117 city concessions with 30-year monopolistic operating right each
–
Possesses a pipeline network of more than 28,990 km serving approximately 4.2 million household users and
nearly 30,983 industrial and commercial users
2. LPG Supplier: The only vertically-integrated LPG operator in PRC
–
Entered into the LPG industry in September 2008
–
Owns 11 LPG receiving terminals, 275,000 m3 of LPG storage capacity, upstream to downstream distribution
network in PRC
 Strategic cooperation agreement signed with PetroChina in both natural gas and LPG businesses in PRC
4
Natural gas
Business model
Natural gas fields
City gate
National or provincial
pipelines
Storage tanks
(spherical or cylinder)
Assets owned by the Group:
Main pipelines
Branch pipelines
Industrial users*
Pressure regulating boxes
Switches
Processing stations
* Customers’ pipelines which are not owned by the
Group are within the customers’ premises and are
not highlighted in this diagram.
Residential
households*
Car refueling station
Commercial users*
5
Natural gas
Revenue model and pricing
Natural gas business operates on a cost-plus pricing model
END-USER TARIFF COMPONENTS
Exploration
Transportation
Distribution
Wellhead price
Transmission tariffs
Distribution cost + margin
NDRC Approval
Local Price Bureau Approval
 2 main sources of revenue
– Gas connection: one-off payment mainly from residential users, less so from industrial and
commercial users
– Sale of piped gas: recurring income at tariffs approved by the local governments
6
Natural gas
Project development process
China Gas has a strong track record of developing city gas projects on time and on budget
Bid & award
Construction & development
12-18 months
Operation
30 years
About 15 - 20 projects
under review
Revenue: Gas connection fees
Revenue: Sales of piped gas
Investment criteria
include:
1. Project IRR > 15%
2. Industrial demand
3. Natural gas
accessibility
Projects under development
2007: 20 projects
2008: 18 projects
2009: 47 projects
1H FY10: 34 projects
Projects in operation
2007: 37 sites
2008: 50 sites
2009: 63 sites
1H FY10: 80 sites
7
Natural gas
Current project locations
Inner Mongolia Hohhot, Wushenqi, Wushenqi
Heilongjiang Harbin, Jiamusi,
Pipeline, Changmeng Pipeline, Baotou, 4 counties, Etoke
Banner
Shuangcheng
Heilongjiang
Hebei Cangzhou, Cangzhou Economic
Development Zone, Nanpi, Qinghe, Leting,
Xinle, Gaocheng, Pingshan, Feng Nan,
Neiqiu, Wangdu, Nanbao, Bohai New Area,
Hebei Pipeline
Liaoning Dalian, Fushun,
Jilin
Xinjiang
Liaoning
Inner Mongolia
Gansu
Ningxia Zhongwei
Ningxia
Beijing
Tianjin
Shanxi
Qinghai
Shaanxi Baoji, Qishan Xian, Yulin
Hubei Yichang, Xiaogan, Hanchuan,
Hubei
Sichuan
Yunnan
Guangxi
Chongqing Dianjiang E&P, Yubei
District, Dingwang purification, Chongqing
Pipeline
Hunan Yiyang, Yuanjiang
Guangxi Yuling, Qinzhou, Liuzhou,
Fongchenggang, Laibin, Baise, Nanning
Dongmeng Development Zone
Anhui
Shanghai
Jiangsu Pizhou, Yangzhong,
Nanjing (Jiang Bei), Xuzhou
(Jiawang), Xuzhou (Xinyi), Yangzhou
Zhejiang
Hunan
Guizhou
Shandong Dezhou, Qingdao
Jiangsu
Chongqing
Yingcheng, Yunmeng, Suizhou, Tianmen,
Guangshui, Dangyang, Xiaogan Pipeline,
Dangyang Pipeline, Huanggang-Daye
pipeline
Tianjin Tianjin Pipeline
Hebei
Shandong
Henan
Shaanxi
Tibet
Jinzhou, Sujiatun(Shenyang), Jinzhou
D. Zone, Liaoyang, Gaizhou,
Zhuanghe, Linghai, Pulandian
Jiangxi
Fujian
Guangdong
Zhejiang Hangzhou (Xiaoshan),
Taiwan
Shaoxing, Taizhou, Jinhua
Fujian 28 city gas concessions
Hainan
Anhui Wuhu, Huainan, Shouxian,
Suzhou, Wuhuxian, Nanling,
Huoshan, Fengtai，Wuwei
Guangdong Maoming,
Conghua, Meizhou, Yunfu, Shanwei
8
CNG refilling stations
 CNG automobile development in the PRC is underpinned
by the government’s determination to reduce emission
and reliance on oil as the main source of vehicle fuel
 China Gas currently owns 72 CNG refilling stations
– With daily capacity in excess of 1,200,000 m3
 We aim to construct at least 120 CNG automobile filling
stations by 2012
– Annual CNG sales volume is expected to reach 800
million m3
– Projected annual sales of approximately RMB 2.0 billion
9
LPG
 China Gas is the largest and only vertically integrated LPG
supplier in the PRC covering retail and wholesale
 Our LPG business covers:
– Upstream: Direct supply from refineries of PetroChina
(28 refineries with total capacity of 6 million tons) and
Sinopec; also import from the Middle East;
– Midstream: 11 receiving terminals, 275,000 m3 LPG
storage facilities, fleets of vessels and trucks, and
distribution logistics in Guangdong, Guangxi, Fujian,
Zhejiang and Jiangsu;
– Downstream: Direct retail of bottled LPG to households.
 Our vertically integrated LPG business provides a sustainable
gross margin of 17%+
10
LPG
Business model
Class 1 Station
Oil Refinery
Class 2 Station
Class 3 Station
Import/
Domestic Supply
LPG Receiving Terminal
Bottling Station
Domestic supply
Storage Facilities
Assets owned by the Group:
LPG vessels
LPG trucks
Trucks sending bottled LPG
Industrial users
Residential households
11
LPG
Current project locations
Guangxi
Jiangsu
Fangcheng Class I Storage with 50,000-ton
terminal and storage capacity of 49,000m3
Jingjiang Class I Storage with 50,000-ton terminal and
storage capacity of 57,800m3
Heilongjiang
Jilin
Haiyan Class I Storage with storage capacity of 4,400m3
Xinjiang
Liaoning
Inner Mongolia
Gansu
Ningxia
Beijing
Tianjin
Shanxi
Qinghai
Hubei
Sichuan
Jiangsu
Anhui
Hunan
Yunnan
Guangxi
- 35 Class III stations in the 5 coastal provinces
- 96 retail shops
- 8 LPG vessels
- 450 LPG trucks
Hainan
Shanghai
Zhejiang
Chongqing
Guizhou
Wenzhou Xiaomen Island Class I Storage with 50,000-ton
terminal and storage capacity of 97,000m3 ; Leqing
Transfer Station with storage capacity of 900m3 ; Yongjia
Huadian Class II Storage with 1,000-ton floating pier and
storage capacity of 1,000m3
Hebei
Shandong
Henan
Shaanxi
Tibet
Other LPG Assets
Zhejiang
Fujian
Jiangxi
Fujian
Guangdong
Taiwan
Fuzhou Hengyuan Class II Storage with 1,000-ton
floating pier and storage capacity of 1,700m3
Jingjiang Xiahua Class II Storage with 5,000-ton terminal
and storage capacity of 2,020m3
Guangdong
Nansha Huakai Class I Storage with 50,000-ton terminal
and storage capacity of 56,700m3
Shantou Class II Storage with 5,000-ton terminal and
storage capacity of 3,020m3
12
Strategic partnerships
Strategic shareholders have partnered and helped China Gas’ growth through the years
SINOPEC
Management
8.64%
GAIL
Strait Finance
6.30%
10.20%
ADB
SK E&S
Oman Oil
6.30%
7.13%
Oman Fund
4.50%
4.85%
Public
4.98%
47.10%
CHINA GAS
 China Gas has joint venture with each of GAIL, Oman Oil and SK E&S to leverage on their technical
knowhow and experience in their respective expertise
 Each of GAIL, Oman Oil, SK E&S and ADB has senior person on the board of China Gas, providing
valuable insights and advice from the international and diversified perspectives
13
Cooperation agreement with
PetroChina
 China Gas entered into a strategic cooperation agreement with
CNPC Kunlun Natural Gas (a wholly-owned subsidiary of
PetroChina)
 The two parties will co-operate in the following areas:
— LPG business: China Gas and CNPC Kunlun will jointly use
Shanghai Zhongyou as the platform to carry out PRC LPG
business; CNPC Kunlun has an annual LPG output of 6m
tonnes
2008 Gas Supply in China
CNOOC
9%
Imports
6%
Sinopec
12%
— Piped gas: Agreed for non-compete on existing projects.
Preference will be given to each other in the development of
long-distance pipelines and piped gas, and will jointly bid to
secure new piped gas projects in large and medium cities
— Supply of LNG: CNPC Kunlun will give preference to China Gas
for LNG supply
— Sharing of human resources, technology and branding
PetroChina
73%
Total Annual Supply: 79 billion m3
Source: Macquarie Research
14
Operational Highlights
1H FY2010
Natural gas
Sales volume
1800
1,652.5
Period
Sales Growth –
Total
Coal Gas & Piped LPG
1H10
106.0%
Natural Gas
1H09
110.9%
1H08
124.6%
Period
Sales Growth –
Natural Gas Only
1H10
101.8%
1H09
138.0%
1H08
117.3%
1600
Total sales volume
(million m3)
1400
145.5
1200
1000
802.3
800
1,507.0
55.5
600
380.5
400
200
746.8
66.7
313.8
0
1H08
1H09
1H10
16
Natural gas
Customer breakdown
1600
1,507.0
CNG Stations
107.8
Commercial
145.4
Natural gas sales volume
(million m3)
1400
1200
Industrial
Residential
1000
746.8
800
400
313.8
200
42.2
35.8
191.1
0
44.7
1H08
Sales
Volume
Growth in
1H10
% of
Total
Volume
CNG
Stations
39.1%
7.2%
Commercial
118.6%
9.6%
Industrial
119.0%
72.2%
Residential
56.2%
11.0%
1,088.7
77.5
66.5
600
Sector
497.1
105.7
165.1
1H09
1H10
17
Natural gas
Customer data
Customer Growth
Organic
Acquired
1H10
Portfolio Total
Residential
289,262
163,273
4,197,905
23.5%
3,399,100
105
4
529
116.8%
244
Commercial
1,752
191
30,454
24.8%
24,402
CNG Stations
7
-
67
34.0%
50
Industrial
Change from
1H09
1H09
Portfolio Total
Customer Tariffs (ex-tax)
(RMB / m3)
1H10
Change from 1H09
1H09
1H08
Residential
1.84
1.1%
1.82
1.74
Industrial
2.03
4.1%
1.95
1.49
Commercial
2.31
14.4%
2.02
2.05
CNG Stations
2.14
-7.4%
2.31
1.98
18
LPG
Operational data
LPG Sales Volume (tons)
LPG Average Sales Income per ton (HKD)
1H10
FY09*
435,900
495,155
4,010
4,589
22
17
Operational Location (Cities)
* The acquisition of the LPG business was completed in September 2008.
Therefore, the FY09 figures above do not capture full year performance
19
Other operational data
Natural gas daily consumption
55
10,000
8,000
(000 m3)
CNG for Automobiles
Commercial
Industrial
Residential
623.0
4,485.0
5,000
5,963.0
476.0
437.0
4,000
25.40%
50
890.0
6,000
45
25%
18.40%
20%
50.9
40
15%
35
44.0
40.7
3,000
2,374.7
2,000
292.0
379.8
1,000
1413.7
-
291.5
496.5
1H08
1H09
10%
30
3,075.5
1,437.0
1H10
30%
Penetration Rate
(%)
7,000
28.30%
8,913.0
Urban Population
Covered (m)
9,000
Urban population covered and penetration rate
5%
25
20
0%
1H08
1H09
1H10
20
Other operational data
1H10
Change from 1H09
1H09
1H08
Residential Connection Fee
(RMB per customer)
2,418
8.5%
2,228
2,368
Total Pipelines
(km)
28,990
69.8%
17,073
14,483
21
Financial Highlights
1H FY2010
Financial summary
Income Statement
HK$ ('000)
1H FY10
% change
1H FY09 (restated)
1H FY08
3,937,292
138.7%
1,649,787
877,762
1,577,112
51.7%
1,039,417
549,941
559,269
35.4%
412,950
227,027
1,748,104
-
-
-
52,807
-73.3%
197,420
100,794
Gross Profit
934,031
68.9%
553,100
271,802
Profit after tax
490,778
338.2%
111,986
74,476
Profit Attributable to Shareholders
431,778
484.8%
73,836
64,711
Basic EPS (HK Cents)
12.95
483.3%
2.22
2.05
Gross Margin – Gas Sales
22.9%
n/a
19.3%
13.6%
Gross Margin – Connection Fees
74.8%
n/a
76.5%
80.0%
Gross Margin – LPG Sales
8.4%
n/a
-
-
Turnover
Gas Sales
Connection Fees
LPG Sales
Other
23
Income statement
Turnover breakdown
1H FY08
1H FY09
Others
12.0%
Others
11.5%
1H FY10
Sales of LPG
44.4%
Sales of
Piped Gas
63.0%
Sales of
Piped Gas
62.7%
Connection
Fees
25.9%
Others
1.3%
Connection
Fees
14.2%
Connection
Fees
25.0%
Sales of
Piped Gas
40.1%
24
Financial summary
Balance sheet & debt position
HK$ ('000)
1H FY10
FY09
Total Assets
19,451,891
18,086,766
Total Equity
4,477,943
4,017,271
Shareholder's Equity
3,648,305
3,223,270
Cash
2,503,123
2,896,457
Short-term Bank Debt
3,102,667 *
3,103,855
Long-term Bank Debt
7,968,539
7,194,067
14,823
14,823
Convertible Bond
* Including HK$2,295,512,000 LPG Trading Facilities
25
Balance sheet
Gearing and debt maturity profile
Management is committed to prudent capital management, and a significant portion of the
Group’s debt is long term
 Net Gearing at 148%1
 Short-term debt primarily consists of trade financing from banks for the LPG trading business of Shanghai Zhongyou
 Bank borrowings consist primarily of bank loans
Debt Maturity Profile
Less than one year
10.5%
From first year to
second year
4.4%
More than five
years
54.9%
From second year
to fifth year
30.2%
Note 1): As at 30 September 2009
Net Gearing = Net Debt Excluding LC Related Trading Facilities / Total Equity
26
FY2010-11 Guidance
FY2010-2011 guidance
Management will focus on organic growth of existing city gas and pipeline projects
New investments will be on opportunistic basis
FY2010
FY2011
3.3 – 3.5 bn
4.5 – 5.0 bn
New residential connections
500,000 – 520,000
600,000 – 650,000
CNG stations
to reach 90 – 100
120 – 130
to reach 1.2–1.3m tons
2.0 – 2.2m tons
Gas volume (m3)
LPG sales
28
Sector Outlook
Natural gas market
2007
Hydro/
others
7.3%
2010 Forecast
Coal
69.5%
Natural gas
3.5%
Crude Oil
19.7%
Hydro/
others
8.1%
2020 Forecast
Coal
66.1%
Natural gas
5.3%
Natural gas
10.0%
Others
90.0%
Crude Oil
20.5%
Gas total = 69bn m3
Gas total = 120bn m3
Gas total = 280bn m3
Source: National Development and Reform Commission of China, China National Bureau of Statistics, Macquarie Research
30
LPG market
China LPG Demand by Sector
32
28
30
Feedstock for Cracking
28
Industry
24
26
Commercial (Transportation and etc)
22
24
Residentail Gas
20
Supply
Demand
Net Trade
26
18
22
16
20
14
18
Million tons
Million tons
China LPG Supply and Demand
12
16
10
14
12
10
8
6
4
8
2
6
0
4
-2
2
-4
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-8
Source: Company data
31
Natural gas demand growth
 China’s economic outperformance is expected to
continue
 Major volume and revenue growth drivers going forward:
Real GDP vs. 2000 levels
400
China
– Increase in penetration rate: From 25% to 60% by
2014 – enhanced connection fee income
350
300
Forecasts
United States
G7 Average
250
– More industrial connections: Previously constrained
by limited supply of gas; waiting lists in cities will
gradually be shortened
– CNG stations rollout: To build at least 120 new CNG
stations in 30 cities by 2012
– Integration of LPG supply chain: To achieve the sale
target of 3m tons of LPG sale by 2012
200
150
100
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: International Monetary Fund
32
Natural gas supply growth
 Growth made possible by:
–
China Natural Gas Supply Projection
Additional gas supply from PetroChina as a result of the
cooperation agreement
600
550
Commissioning of new gas fields
–
–
–
–
500
450
Xinjiang Province
Inner Mongolia
Sichuan Province
Commissioning of new national pipelines
–
Sichuan – East Pipeline
–
West – East Pipeline II
–
Import of piped gas from Central Asia, Russia and Myanmar
–
Completion of additional LNG terminals
400
350
Billion m3
–
LNG imports
Pipeline imports
Other imports
CNOOC
Sinopec
PetroChina
300
250
200
150
100
50
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Source: NDRC, Macquarie Research
33
Natural gas pricing
 Wellhead and retail prices are bound to hike because of new gas sources and imports
 Expect an average of 8-10% increase per annum in the next 5 years
 Natural gas pricing reform is expected to be implemented in early 2010
 Pricing reform helps:
– Transparency and clarity of price adjustment mechanism
– Maintain price competitiveness of natural gas against alternative fuels
 Cost pass-through mechanism will continue to function
– Pass on price adjustments to end-users
34
Disclaimer
Statements in this presentation and handout that are not strictly historical are “forward-looking”
statements. Forward-looking statements involve risks and uncertainties, including, but not limited to,
continued acceptance of the Company’s product and services in the marketplace, competitive factors,
new products and technology changes, the Company’s dependence upon third party suppliers and other
risks detailed from time to time in the presentation, handout and other related documents. China Gas is
not responsible for the accuracy and completeness of the contents of such presentations and/or other
documents. The materials and information in the presentations and other documents are for
informational purposes only, and are not an offer or solicitation for the purchase or sale of any securities
or financial instruments or to provide any investment service or investment advice.
35