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China’s state-owned pipeline giant agrees to buy Kunlun Energy assets for US$6.3 billion as consolidation gathers steam
- Kunlun Energy, a PetroChina subsidiary, will sell a 60 per cent stake in a Beijing gas pipeline and a 75 per cent stake in its Dalian LNG company to PipeChina
- PipeChina will pay for the Kunlun Energy assets in cash in two instalments
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China’s pipeline network behemoth signed a US$6.3 billion asset purchase in the latest step to bolster the nation’s energy security and break down market barriers.
Kunlun Energy will sell a 60 per cent stake in a Beijing natural gas pipeline and a 75 per cent stake in its Dalian LNG company for 40.9 billion yuan to the new state-owned firm China Oil & Gas Pipeline Network Corp (PipeChina), according to a statement to the Shanghai Stock Exchange on Tuesday. Kunlun Energy is a PetroChina subsidiary that owns most a gas pipeline feeding Beijing, as well as LNG import infrastructure.
PipeChina is part of an effort by President Xi Jinping’s government to consolidate the nation’s major pipelines and other midstream facilities into a single firm, intended to boost competition among drillers and downstream oil and gas sellers. The entity officially started operations in October.
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The sale values the Kunlun Energy assets at a 90 per cent premium to book value, Morgan Stanley analysts wrote in an emailed note, while Daiwa Capital Markets pegged the premium at 97 per cent. Both brokerages said the valuation exceeded market expectations.
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In July, PipeChina reached an agreement with PetroChina and China Petroleum & Chemical Corp to give them US$56 billion in cash and shares for pipelines, storage tanks, LNG terminals and other facilities.
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