China Resources (Holdings)

CRG set to spend HK$5b to buy rival gas supply firms

PUBLISHED : Thursday, 14 March, 2013, 12:00am
UPDATED : Thursday, 14 March, 2013, 7:47am

China Resources Gas Group plans to spend HK$4 billion to HK$5 billion this year to acquire city-gas projects, and aims to double gas sales in five years.

CRG, the natural gas distribution arm of the government-backed conglomerate China Resources (Holdings), unveiled the plan yesterday after posting a rise in net profits for last year of 38 per cent, to HK$1.65 billion.

Revenue jumped 45 per cent to HK$19.6 billion, of which existing projects contributed 27 per cent and acquisitions 18 per cent. Gas sales grew 28 per cent, to 9.3 billion cubic metres, from 7.2 bcm in 2011.

CRG derived 80 per cent of its revenues from gas sales, and 20 per cent from fees it charged customers to connect them to the gas distribution network.

The company acquired 78 gas projects last year, of which 16 were bought from its parent firm, 28 from the United States-based utility firm AEI Energy and 34 from other parties. It currently has exclusive distribution concessions in 152 cities.

CRG's chief financial officer, Ken Ong Thiam Kin, said that after spending HK$8.5 billion on acquisitions last year, the company has budgeted HK$4 billion to HK$5 billion to buy more projects this year, plus HK$2 billion to HK$3 billion to expand its distribution infrastructure.

Even if CRG funds all of the budgeted acquisition spending by raising bank loans and bonds, its debt-to-equity ratio will only rise to 52 per cent from the current 49 per cent, similar to the 53 per cent seen just before it raised HK$2.7 billion in November via a new share sale, Ong said.

The company's chairman, Wang Chuandong, said opportunities abounded, as there were more than 1,000 operators on the mainland. Last year CRG sold around 8.5 per cent of all the natural gas used on the mainland.

CRG has secured 11 bcm of confirmed gas supply from the nation's three major state-backed gas producers. It plans to raise gas sales to 20 bcm in 2015, through growing existing projects and buying new ones. Wang said he was confident CRG would be able to pass any increase in natural gas prices on to customers, rather than see the company's profits squeezed, despite pressures from local governments to keep prices down to residential customers.