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Denise Tsang

Hong Kong and China Gas (Towngas) is interested in bidding for a 24 per cent stake in Shenzhen Gas Group, a piped-gas monopoly in the booming economic zone, according to managing director Alfred Chan Wing-kin.

Mr Chan was speaking after Towngas unveiled an 0.2 per cent year on year interim rise in net profit as interest income, hit by low rates, shrank 66 per cent to HK$63 million.

Shenzhen Gas supplies gas to 400,000 households in Shenzhen and the number is rocketing along with the burgeoning residential property market.

The potential investment in Shenzhen Gas also fits Towngas' ambition of forming an extensive gas distribution network in southern Guangdong as growth of its core gas business in Hong Kong slows.

'We are genuinely interested in Shenzhen Gas and have received an invitation to take part in the stake sale,' Mr Chan told Business Post.

'We will regard it as a strategic investment, unlike other mainland projects in our portfolio in which we hold management rights and substantial stakes.'

Shenzhen Gas' assets, valued at 877 million yuan (about HK$823.5 million), include a 10 per cent stake in the liquefied natural gas terminal in Shekou, the first of is kind in China.

Towngas also owns a 3 per cent stake in the terminal.

'We see synergies in co-operation especially in the LNG terminal if we buy the stake in Shenzhen Gas,' Mr Chan said.

Shenzhen Gas is one of the five top quality state-owned enterprises put up for sale to foreign investors as part of Shenzhen municipal government's efforts to boost their efficiency, competitiveness and profitability.

Mr Chan said China would provide 'exponential growth' to Towngas after 2004 as natural gas would be available to most of its existing 11 joint-ventures.

These projects are scattered around Guangdong, Shandong and Jiangsu and Shanghai.

'We expect to conclude another three or four projects by the end of the year,' Mr Chan said.

The projects will provide piped-gas to medium or large cities with strong economic growth and heavy industrial and commercial consumption of gas.

In the first six months of the year, Towngas' mainland projects contributed nearly HK$20 million profit, up about 200 per cent from the same period last year.

'The full-year profit contribution from these projects is expected to reach about HK$40 million this year,' Mr Chan said.

SAR gas sales climbed 2.67 per cent to HK$3.79 billion, hit by warmer than usual temperatures and the economic downturn.

'The El Nino effect has brought hotter weather and affected our gas sales. But I don't think it will last long,' Mr Chan said. He said the company's cash pile dwindled after it spent HK$4.6 billion buying back shares.

The interim dividend was unchanged at 12 HK cents per share. Earnings per share jumped 8.33 per cent to 29.9 HK cents.



Towngas mulls taking 24pc in Shenzhen Gas