Towngas set to issue more dim sum bonds

PUBLISHED : Saturday, 04 June, 2011, 12:00am
UPDATED : Saturday, 04 June, 2011, 12:00am

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Utility Hong Kong and China Gas, with its 'Towngas' trademark, is keen on issuing more yuan bonds as it taps cost-effective funding for its planned HK$10 billion investment across the border in the next three years, a top official says.

Managing director Alfred Chan Wing-kin said low-interest-rate yuan-denominated bonds, dubbed 'dim sum' bonds, were gaining popularity on the back of a large pool of yuan deposits in Hong Kong and strong demand for yuan investment products.

He said the group would seek to sell more dim sum bonds 'soon' after becoming the city's first blue-chip company to issue this type of bond, raising 1 billion yuan (HK$1.2 billion) in April.

'The dim sum bond is an option to raise lower-interest-rate funds,' Chan said after the group's annual general meeting yesterday. 'This is despite the fact that we have HK$9.5 billion cash on hand.'

Towngas, a dominant gas utility which has supplied piped naphtha gas to customers in Hong Kong for nearly 150 years, has earmarked HK$10 billion over the next three years for acquiring projects on the mainland for growth, he said.

The group, which has chalked up a portfolio of 124 projects on the mainland spanning natural gas supply, new energy sources and water supply, was in talks to invest in about 30 projects at present, he said.

Of the potential investments, 15 projects were expected to be finalised this year, Chan said.

On the back of the 12th five-year plan to 2015 encouraging the use of clean fuels, Towngas planned to seal five projects this year in new energy sources such as coal-bed gas and shale gas as supply of natural gas remained tight.

The group's investments in new energy resources were on track to be profitable in the second half of this year, he said.

'The mainland portfolio will account for about half of our total profit next year, and the rest from Hong Kong,' Chan said. 'We are on the early stage of a harvesting period.'

Last year, Towngas' mainland operations generated an after-tax profit of HK$1.65 billion, or a 3 per cent rise from 2009.

Chan said Towngas sold 23 per cent more natural gas on the mainland last year at 8.5 billion cubic metres, or 10 times the amount of gas it sold in Hong Kong. The growth accelerated in the first three months of this year, at 26 per cent, as the central government encouraged the use of the clean fuel, he said.

In Hong Kong, gas sales grew 3.9 per cent in the first quarter - thanks to cooler weather, he added.

Separately, Chan said Towngas' subsidiary, Towngas China, with a portfolio of 65 piped-gas projects around the mainland, planned to raise funds to refinance US$150 million of debt maturing in September.

Towngas shares fell 2.88 per cent to HK$17.48 yesterday while Towngas China rose 0.48 per cent to HK$4.20.

30

Number of mainland projects under discussion that Towngas plans to invest in. At present, the group has 124 projects across the border