China Gas Holdings Ltd. (384), which supplies natural gas to 195 cities in Asia’s biggest economy, expects sales will jump as much as fivefold by 2020 as the nation pushes for wider use of the fuel to replace coal.
Deliveries may reach 40 billion cubic meters from an estimated 8 billion cubic meters this year, Chief Financial Officer Eric Leung said during a group interview at the company’s Northwest Management Center in Shaanxi’s Baoji city on Oct. 17. Growing sales will gradually push dividend payouts toward 30 percent, he said, from 23 percent in the year ended March 31.
Air pollution in China’s northern cities including Beijing and Tianjin exceeded hazardous levels several times this year, prompting the government to take steps to curb the burning of coal. The nation plans to more than double the capacity of gas-fired power plants to 56 gigawatts by end-2015 from 26.4 gigawatts in 2010, data compiled by Bloomberg Industries show.
“Those policies will greatly help our businesses, especially in expanding the number of our commercial and industrial users,” said Leung. “We are very confident about the consumption growth as long as our upstream supplies can be guaranteed.”
Natural gas is distributed mostly at fixed prices, causing earnings to move in tandem with sales, he said. China Gas, which sold 6.8 billion cubic meters of natural gas in the year ended March 31, expects volumes to touch 8.5 billion cubic meters in 2014 and 10 billion cubic meters in 2015, according to Leung.
The company’s shares rose as much as 4.3 percent to HK$8.67 and traded at HK$ 8.59 as of 2:08 p.m. in Hong Kong. They have doubled in the past year, compared with an 8.8 percent gain in the city’s benchmark Hang Seng Index.
GAIL India Ltd. (GAIL) raised HK$492 million by selling 60 million shares, or 1.2 percent of China Gas’ total shares, this month, according to terms for the deal obtained by Bloomberg. India’s biggest gas-marketing company still owns 150 million China Gas shares after the sale, data compiled by Bloomberg show. China Gas wouldn’t speculate on why GAIL sold the shares, said Leung.
“If you look at our shareholding structure, major shareholders mostly purchased their stakes gradually from the open markets,” he said. “I see that as an endorsement of our ability to deliver for shareholders.”
Beijing Enterprises Holdings Ltd. (392), which supplies natural gas to Beijing, announced in July it will take over a 22 percent stake in China Gas from its state-owned parent Beijing Enterprises Group to become the biggest shareholder. The company increased its stake last year after China Petroleum & Chemical Corp. (386) and ENN Energy Holdings Ltd. (2688) made a takeover offer for China Gas.
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