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China Gas Sees Sales Tripling by 2020 on Russian Supply

China Gas Holdings Ltd. (384), supplier to 237 cities in the country, plans to increase sales threefold by the end of the decade as Russian natural gas flows to the nation following a historic deal signed in May.

The company is targeting sales of 30 billion cubic meters by 2020. “I’m expecting some explosive sales growth down the road,” Executive Chairman Liu Minghui said at a briefing in Hong Kong yesterday, following the company’s earnings release.

China Gas sold 8 billion cubic meters of gas in the year ended March 31, and plans to sell 10 billion cubic meters in 2015 and 12 billion in 2016, it said in a statement. The end-of-decade target is “very achievable,” based on China’s total consumption estimate of 450 billion cubic meters by 2020, Liu said.

China Gas and other natural gas distributors such as Beijing Enterprises Holdings Ltd. (392) and ENN Energy Holdings Ltd. (2688) are set to benefit from the $400 billion deal between China National Petroleum Corp. and OAO Gazprom (OGZD), which will see Russian exports to China start in 2018. Their sales are also climbing as the government takes measures to curb coal burning and encourage the use of less polluting fuels to improve deteriorating air quality in its major cities.

Gas Development

“The entire Chinese natural gas sector is set to develop very fast,” said Yan Shi, an analyst at UOB Kay Hian Ltd. in Shanghai. “Growth at China Gas should outpace the industry as a whole since they’re already in a good position.”

China Gas’ net income climbed 47 percent to HK$2.58 billion ($333 million), or 51.61 cents a share, in the year ended March 31 from HK$1.76 billion, or 36.86 cents, in the previous period. Sales rose 44 percent to HK$26 billion.

China Gas rose 1.3 percent to HK$14.06 at 9:38 a.m. in Hong Kong. The shares have more than doubled in the past year, compared with a 13 percent gain in the city’s benchmark Hang Seng Index.

Russian gas will boost the company’s sales in northern China, where it runs about 90 gas distribution projects, Liu said.

To contact the reporters on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net; Benjamin Haas in Hong Kong at bhaas7@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Iain Wilson

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