Beijing Enterprises upbeat on gas outlook
Pipeline operator says flat volumes on the Shaanxi-Beijing link due in part to depreciation costs, but strong demand will revive growth
Beijing Enterprises Holdings, the Hong Kong-listed flagship of the Beijing municipal government, says flat throughput growth at its 40 per cent-owned gas pipeline between Shaanxi province and Beijing is temporary, as it posted a 13.6 per cent rise in interim profit.
The gas-distribution-to-brewery conglomerate's PetroChina Beijing Pipeline unit recorded a 0.7 per cent year-on-year volume rise to 12.25 billion cubic metres (bcm). Oil and gas giant partner PetroChina owns 60 per cent of the pipeline operator.
Despite flat volume growth, Beijing Enterprises derived 1.06 billion yuan (HK$1.33 billion) of first-half net profit from its stake in the pipeline, up 14.8 per cent year on year. The firm attributed the growth to a major drop in depreciation expenses as a part of the pipeline's useable life was extended to 30 years from 14 years for accounting purposes.
Chief financial officer Jimmy Tam Chun-fai attributed the flat growth to the commissioning of terminals to re-gasify imported liquefied natural gas in Qingdao and Dalian in northeast China, which took business away from PetroChina Beijing's pipelines.
"Given China's gas demand grew 20 per cent year on year in the first half, we are confident the pipeline's throughput will resume strong growth," he said.
Beijing Enterprises said it and PetroChina were building a fourth line of the pipeline linking Shaanxi and Beijing, and gas storage facilities in Dagang, Hebei province, which would spur volume growth.
Total profit of the firm's gas distribution business, which also includes an exclusive city-gas distribution franchise in the capital, grew 14.9 per cent year on year to 1.82 billion yuan.
The city-gas business saw a 17.2 per cent rise in first-half gas sales to 4.7 bcm.
The entire firm's first-half net profit rose 13.6 per cent to 2.06 billion yuan, 3.7 per cent less than the 2.14 billion yuan average estimate of four analysts polled by Bloomberg.
Beijing Enterprises late last month agreed to pay HK$8.22 billion for its parent Beijing Enterprises Group's 22 per cent stake in China Gas Holdings, the mainland's largest piped gas distributor by number of projects.
The deal means Beijing Enterprises Holdings will become its largest shareholder.
China Gas last Friday appointed Beijing Enterprises Holdings vice-chairman and chief executive Zhou Si as chairman of the board and executive director.
He would not discuss the details on the sharing of leadership responsibilities with executive chairman Liu Ming-hui, China Gas' second-largest shareholder.
It also announced the signing of a "strategic co-operation framework agreement" with Beijing Enterprises Holdings and its parent to jointly develop "gas related value-added services" such as projects that turn coal into natural gas, and jointly bid for new city-gas distribution projects.