Chinese natural gas distributor ENN eyes major expansion in power retailing
Beijing is dismantling the retail monopoly held by mainland China’s two state-owned power distributors
ENN Energy, one of the mainland’s largest city-natural gas distributors, has set up 13 provincial-level power retail firms in preparation for expansion in the nascent business, which started in Guangdong.
ENN Group, its parent, is among 11 firms that won licences in December to sell electricity in Guangdong – the first mainland province to open up the sector.
Three of the 11 firms are private ones, with the remainder, including two large power producers, being state-owned.
Late last year, Beijing announced detailed policies on dismantling the retail monopoly held by mainland China’s two state-owned power distributors, and encouraged private firms like ENN to join the fray.
“Guangdong will be our trial project, which will be rolled out when regulation allows to over 20 industrial parks where we have obtained rights to distribute natural gas,” ENN Energy deputy chairman Cheung Yip-sang said on Tuesday. “Our customers are very supportive of our integrated model of providing power, gas, heat and cooling services.”
He said the key to gaining competitiveness in the power retail business lay in information technology and financial modelling that enabled a firm to come up with the most cost-efficient way of procuring and supplying energy.
The Guangdong project is in Zhaoqing, where ENN Energy has a 30 per cent stake, Hebei-based ENN Group – controlled by mainland tycoon Wang Yusuo – has 40 per cent, and local government-backed Zhaoqing Investment has 30 per cent.
In Yunnan, ENN Energy has formed a power retailing joint venture which is 34 per cent owned by it, 15 per cent by its parent and 51 per cent by local government-owned Yunnan Investment.
Because mainland regulations prohibited Hong Kong-listed and Cayman Islands-registered ENN Energy from owning a majority stake in a power retail business, it would co-invest with its parent in such ventures, Cheung said.
ENN Group has been grooming a “smart micro-grid” energy supply business over the past seven years, with data on industrial customers’ gas, heat, cooling and power demand analysed so that energy can be supplied more efficiently and cheaply.
Cheung said ENN Energy had met its gas sales target last year but declined to give figures. It aimed to grow non-wholesale gas sales volume by 10 per cent to 15 per cent last year. Growth was 10 per cent in the first half of the year.
Mainland gas demand growth picked up from 4 per cent year on year in October to 9.7 per cent in November and more than 20 per cent in December after Beijing cut gas price by 28 per cent in mid-November and the commissioning of new gas-fired heating units to replace coal-fired ones.
Analysts said whether the growth was sustainable after winter was questionable given gas was still more expensive than oil and coal for the industrial consumption which accounted for the bulk of gas demand.