Hong Kong and China Gas (HKCG) hopes to reduce costs by about $100 million this year, in part by injecting staff into a new subsidiary, which will cut down on subcontractor costs. Shares in the utility rose 4.04 per cent yesterday to $9, as institutional investors parked funds in utilities ahead of the Lunar New Year. Brokerage Jardine Fleming is understood to have turned positive on the stock after a company visit last week. HKCG executive director Ronald Chan Tat-hung said a subsidiary, Utech, had been established last year, which could expand to employ 100 former staff of the utility this year. Analysts said the new entity could provide HKCG a welcome boost to earnings through competing for engineering contracts from other utilities. Mr Chan said other cost savings would come from decreasing inventories and sourcing materials from cheaper countries. Analysts believe the utility should be able to report its non-fuel operating costs at least flat for the financial year. The drive to further cut costs comes as the utility struggles to maintain margins after freezing basic tariffs last month. Mr Chan said the Government was unlikely to force the utility to reduce tariffs. 'The gas company has been very responsible in not increasing prices too much over the past 10 years,' he said. In a recent report, Lehman Brothers said the Government could force HKCG to cut tariffs. 'We believe that the Government will use the threat of competition through the introduction of third-party access to the gas network to exert indirect pressure on HKCG,' the investment bank said. Another analyst said the firm was more likely to slightly increase basic tariffs next year, following increases expected from other utilities with higher cost levels.