Analysts raise questions over pace of fund-raising activities as utility secures a 20 billion yuan bank loan to fund projects The flurry of fund-raising exercises at China Gas Holdings shows no sign of abating, with the mainland-based piped-gas supplier returning to the debt market with a 20 billion yuan bank facility, sources say. A contract would be signed today between the company and China Development Bank, which would make the loan available at a favourable interest rate for more than 10 years, they said. The fresh funds will add to its war chest of about $1.6 billion raised during the past year from placing shares and issuing convertible bonds. 'After placing shares to more than seven parties for funds, the company will rely more on debt financing to avoid the dilution effect on shareholders,' one source familiar with the latest deal said. The money would be used to fund new projects, including 26 under negotiation, he added. The new projects would target average urban populations of more than one million. Some analysts pointed out that China Gas had raised US$320 million in the past three years in nine equity deals and four debt financings, prompting questions about the strategy behind the moves. Some said they could see business opportunities arising from the sales of shares to India's state gas firm, GAIL, and China's No2 oil firm, Sinopec. But they remained sceptical about other equity alliances, such as those with state-owned Oman Oil, Templeton Asset Management and the FMO, the Netherlands' international development bank. With a 'neutral' stock recommendation on China Gas, JP Morgan in a recent research report called on the company to reduce the frequency of its financing activities, whether equity or debt. 'While it is totally warranted for small companies like China Gas to raise additional capital to fund highly capital-intensive piped-gas projects and that the introduction of strategic investors is likely to bring added value to the company, we believe conducting 13 financings over three years, or an average one financing every three months, for US$24 million each time, seems a little too much when compared to its peers,' the brokerage said. JP Morgan reckoned more fund raising was on the card. Seeking growth by acquisitions, China Gas was expected to remain in negative cash-flow territory in the next two to three years and be in need of an extra $2 billion in cash to meet capital commitment, it said. A Thomson First Call poll on analysts showed a consensus of 27.24 per cent growth in China Gas' net profit to $168.28 million in the financial year to March 31. In the past two years, the share price of China Gas has skyrocketed 111 per cent to $1.45 on Friday. Sources said the next and the final equity financing to be conducted would involve Korea Gas Corp. China Gas said last month it was on the verge of wrapping up negotiations about selling 210 million shares to the South Korean company China Gas said at that time that the Kogas deal would pave the way for a joint venture that would see China Gas using the Korean company's technological expertise in the construction, operation and maintenance of liquefied petroleum gas terminals along the mainland's coastal areas.