Berkshire Hathaway

Kunlun seeks cash for LNG boost

PUBLISHED : Wednesday, 04 April, 2012, 12:00am
UPDATED : Wednesday, 04 April, 2012, 12:00am


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Kunlun Energy, the gas distribution arm of China's largest oil and gas producer, PetroChina, saw its share price fall 3.1 per cent yesterday after the concern announced it would raise HK$10.48 billion to fund its liquefied natural gas (LNG) projects.

PetroChina has agreed to sell 800 million existing shares and subscribe to the same number of new shares to be issued by Kunlun, at HK$13.10 each, 7.6 per cent less than the closing price on Monday. Kunlun shares closed at HK$13.74 yesterday. The exercise will raise HK$10.25 billion in net proceeds for Kunlun. PetroChina's stake will be diluted to 58.7 per cent from 65.1 per cent as a result.

The proceeds will become working capital to develop Kunlun's LNG business.

Kunlun said the share placement will allow it to 'capture future expansion and acquisition growth opportunities as and when they arise'.

Kunlun said in its annual results announcement statement last week that it began the construction of 15 LNG processing plants on the mainland last year, with a total daily capacity of 20 million cubic metres. Four of the plants, in Inner Mongolia, Xinjiang, Qinghai and Hainan, have a combined daily capacity of 1.38 million cubic metres. The rest are slated to come on stream in the next two years.

Kunlun also said it has 23 compressed natural gas (CNG) filling stations and 109 LNG stations under construction. CNG is compressed gas stored on vehicles in high- pressure tanks, while LNG is liquefied by being chilled to minus 163 degrees Celsius, and is moved by special tanks on vessels or trucks.

Kunlun, previously an oil and gas producer with projects at home and in South America, Central Asia and Southeast Asia, diversified downstream by completing the purchases from PetroChina of a 55 per cent stake in PetroChina Jiangsu for 500 million yuan in 2010, a 75 per cent stake in PetroChina Dalian LNG for 2 billion yuan in March last year and a 60 per cent interest in Beijing Pipeline for 18.9 billion yuan in December.

PetroChina Jiangsu built and operates an LNG terminal in Rudong, Jiangsu province, that re-gasifies LNG imported from Qatar, while PetroChina Dalian built and operates one in the city to import gas from Australia.

Beijing Pipeline operates long-distance gas pipelines connecting gas fields in Shaanxi to markets in Beijing, Tianjin, Hebei, Shandong, Shanxi and Shaanxi provinces.

Kunlun posted a net profit of HK$5.61 billion for last year, up 33.7 per cent from a restated 2010 profit.

Oil and gas production accounted for 43 per cent of before-tax profit of HK$10.4 billion, against 41.6 per cent from pipeline transmission, 12.8 per cent from city gas sales, and 2.5 per cent from LNG terminal processing.

Kunlun had a net debt-to-equity ratio of 52.1 per cent at the end of last year, up from 32.4 per cent a year earlier.


Number of tonnes of liquefied natural gas imported into the mainland in January, according to customs figures