CGH sp surges on asset injection...29 Nov 2013 21:09
China Gas in talks to buy 2 billion yuan of projects from parent
Thursday, 28 November, 2013, 10:18am
China Gas, the mainland’s largest city gas distributor, is in talks to buy a 2 billion yuan city gas portfolio from its biggest shareholder, Beijing Enterprises Group, according to sources with the companies.
At stake is the portfolio of some 20 city gas projects state-owned Beijing Enterprises Group operates in provinces such as Shandong, Hebei and Xinjiang, they said.
The potential asset injection, if it materialises, means a significant step forward towards Beijing Enterprises Group’s ambition to break out from its principal market – Beijing – to the rest of the mainland.
It is also part of Beijing Enterprises Group’s asset reorganisation, which aims at bundling its non-Beijing city gas portfolio with that of China Gas while leaving Beijing Gas – a wholly owned subsidiary of its Hong Kong-listed infrastructure flagship, Beijing Enterprises Holdings (BEH) – to focus on the capital, where it is the sole supplier of city gas, the sources said.
Earlier this month, Beijing Enterprises Group transferred its 21.96 per cent stake in China Gas to BEH for HK$7.39 billion. BEH vice-chairman Zhou Si, also chairman of the board and executive director of China Gas, said on Tuesday the two firms were discussing “co-operation” and declined to comment further.
The China Gas management is looking into the valuation of Beijing Enterprises Group’s portfolio, which is fairly sizeable A source with one of the companies
This is despite the fact that China Gas had announced a “strategic co-operation framework agreement” with BEH and its parent to jointly develop “gas-related value-added services”, such as projects that turn coal into natural gas, and jointly bid for new city-gas distribution projects.
“The China Gas management is looking into the valuation of Beijing Enterprises Group’s portfolio, which is fairly sizeable,” one source said. “This makes business sense.”
Beijing Enterprises Group amassed its stake in China Gas by buying shares in the market since February last year, jumping into a ferocious multilateral battle for the control of the city gas provider.
China Gas was the subject of a hostile takeover by a consortium of smaller rival ENN Energy and Sinopec, the mainland’s No 2 oil firm, as well as Britain-based energy company Fortune Oil.
Analysts said the potential asset injection would meaningfully boost China Gas’ portfolio of 208 city gas projects, ranging from Heilongjiang in the north to Guangdong in the south.
Brokerages such as China International Capital Corp, Citi, Jefferies and JP Morgan upgraded on Wednesday their forecasts for China Gas’ earnings for the fiscal years to March next year and March 2015 by between 7 per cent and 25 per cent after the company reported unexpectedly strong interim
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