CR Gas in US$238m projects deal

PUBLISHED : Thursday, 17 May, 2012, 12:00am
UPDATED : Thursday, 17 May, 2012, 12:00am


China Resources Gas (CR Gas) has agreed to pay about US$237.71 million for a portfolio of gas projects on the mainland from United States' AEI Energy in a rare deal that will boost its presence on the mainland.

CR Gas, the gas supply flagship of state-owned China Resources (Holdings), yesterday said it would take over 28 city piped-gas projects, eight liquified petroleum gas stations and four mid-stream gas transmission pipeline projects in 11 provinces.

CR Gas managing director Wang Chuandong said the deal was part of the group's expansion strategy in terms of its footprint in the mainland's robust downstream gas supply market.

'The acquisition creates synergy with the group's existing gas operation, which will broaden our revenue base and sustain earnings growth,' he said.

CR Gas, which bought 25 gas projects last year and earmarked HK$8 billion for acquisitions this year, said the latest deal will boost the number of its projects to 113 upon completion.

The net asset value of the portfolio at stake was 1.65 billion yuan (HK$2.02 billion) as of December 31 last year. The unaudited net profit after tax and extraordinary items more than doubled to 83 million yuan last year, from 38 million yuan in 2010.

Houston-based AEI has been divesting electricity generation and gas distribution and transmission assets in emerging markets since the beginning of last year in an asset reorganisation, aiming to return money to shareholders and focus on power generation in its home market.

It withdrew a planned initial public offering in 2009.

CR Gas said the acquisition price could be adjusted, depending on the assets' audited profit and loss.

Bank of China analyst Peter Yao said the acquisition price was 'cheap,' given that its price-to-earnings ratio was 14 times last year's earnings compared with a P/E of 22 for CR Gas.

He said the earnings potential of the portfolio 'looks good' as 80 per cent of gas sales stemmed from heavy users, commercial and industrial.

Some analysts said it was rare for so many projects to come up for grabs in a market that has been deregulated since 2000, with most city pipe-gas supply franchises having been awarded.

A prime example is China Gas, which has a portfolio of 151 gas projects across the mainland.

Since December, the firm has become a takeover target for rivals such as London-listed Fortune Oil, as well as an alliance between ENN Energy and the mainland's No 3, Sinopec.

CR Gas shares jumped 3.56 per cent at one stage yesterday before closing 2 HK cents lower at HK$14.58.

The benchmark Hang Seng index slipped 3.19 per cent.