Sinopec unit raises HK$2.7b to boost overseas operations

Sale of new shares will generate cash to bolster Sinopec Kantons' overseas operations and tie in with the national goal of energy security

PUBLISHED : Friday, 03 May, 2013, 11:31am
UPDATED : Saturday, 04 May, 2013, 4:54am


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Sinopec Kantons is raising HK$2.68 billion by selling new shares to help fund fuel storage and logistics projects overseas, as part of China's efforts to build up influence over key international fuel supply facilities and enhance its energy security.

The fund-raising exercise will see Sinopec Kantons' state-backed parent China Petroleum & Chemical (Sinopec) sell 412.5 million existing shares and subscribe to the same number of new shares, it said in an announcement. Sinopec's stake in Kantons would fall to 60.3 per cent from 72.3 per cent when the deal is completed.

The stock's selling price of HK$6.50 is a 5 per cent discount to the last trading price on Thursday. Its shares gained 4.5 per cent to HK$7.15 yesterday after Kantons announced the share sale.

Kantons said the share sale would help it "further develop its oil storage and logistics businesses [on the mainland] and on a global basis".

The firm is one of the smallest Hong Kong-listed subsidiaries of Sinopec, China's second-largest crude oil and gas producer and the largest refined fuel and petrochemicals producer and distributor. But in the past year it has made a series of major acquisitions, including three deals overseas, which have made it an up-and-coming player in fuel trading and logistics.

Kantons' net profit grew 36.6 per cent to HK$291.74 million last year from 2011, as sales increased 12 per cent to HK$22.04 billion.

Some 95 per cent of its sales last year came from crude oil trading, with the rest from crude oil jetty and vessel charter services. It had an operating loss of HK$23.7 million on oil trading and a loss of HK$89.5 million on vessel chartering due to sinking tanker rates. These were offset by an operating profit of HK$259.3 million from oil jetty services.

Kantons early last year bought from Sinopec stakes in five joint ventures that operate deepwater crude oil terminals in eastern China, for HK$2.2 billion.

Kantons also acquired earlier this year from other parties a 50 per cent stake in a company that plans to build fuel storage facilities and an oil terminal in Fujairah, in United Arab Emirates; a 95 per cent interest in a company that will construct similar facilities in Indonesia; and a 50 per cent stake in a firm that operates 1.6 million cubic metres of existing storage facilities in Europe.

The Fujairah facilities are expected to cost US$304 million and will have 1.13 million cubic metres of storage capacity. The Indonesia facilities involve 2.6 million cubic metres of storage and a construction budget of US$841 million.

Kantons in December formed a joint venture with state-backed China Shipping Development.