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China May Increase Retail Natural Gas Prices by September, Xinao Gas Says
China, the world’s second-biggest energy user, may raise retail natural gas prices in some regions before September, according to Xinao Gas Holdings Ltd., the piped-gas distributor partly owned by the World Bank.
Local governments in 14 provinces where the company operates may increase prices after wholesale costs were raised June 1, Yu Jianchao, Xinao’s finance director, said in a phone interview yesterday. The lag between wholesale and retail adjustments may cost the company about 20 million yuan ($2.9 million) in profit, Yu said. The loss will be offset by increased sales, according to Yu.
The National Development and Reform Commission, China’s top economic policy planning agency, raised wholesale gas prices 25 percent last month, the first increase in more than two years, to curb wasteful consumption. Distribution companies led by Hong Kong-listed Xinao haven’t been allowed to increase retail prices immediately to pass on the higher costs because “it takes time” to get through regulatory procedures, Yu said.
“China’s natural gas prices will have room to rise further because of the higher costs for China to purchase either liquefied natural gas or piped gas from the global market,” Grace Liu, an energy analyst with Guotai Junan Securities Co., said by phone from the southern city of Shenzhen. “Higher prices, together with demand growth in China, will benefit both producers and distributors of gas over the long run,” Liu said.
Gas Demand
China’s gas demand may jump about 20 percent this year because of economic recovery, according to Yu. The increase may exceed the company’s expectations, he said.
Local governments may raise domestic retail prices by more than 0.2 yuan per cubic meter, Yu said. Xinao is in contact with local governments to push for the increase, he said. The adjustments by the provinces may happen at different times between now and September, he said.
The timing and pace of any adjustments to costs paid by residential users will be decided after public hearings conducted by local governments, the NDRC said on May 31. Shanghai raised the price of gas for commercial and industrial users July 1, the Shanghai Daily reported on June 30.
Restaurant operators’ charges will rise to 2.99 yuan per cubic meter from 2.6 yuan if they consume less than 5 million cubic meters a month, the English-language daily said. Costs for home users won’t be affected, the newspaper said.
Xinao climbed 0.6 percent to HK$17.54 at the midday break in Hong Kong trading. The stock has risen 40 percent in the past year, compared with a 9 percent gain the benchmark Hang Seng Index.
The gas distributor’s net income rose by 27 percent to 801 million yuan last year, Xinao said in March. The company sells natural gas in provinces and cities including Hebei, Shandong, Jiangsu, Shanghai, Zhejiang and Guangdong, according to the company’s website.
--Wang Ying in Beijing. Editors: Ang Bee Lin, John Viljoen.
To contact the reporter on this story: Ying Wang in Beijing at ywang30@bloomberg.net
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