G3 Exploration Regulatory News (G3E)

20 Dec 2006 09:13

Green Dragon Gas Ltd20 December 2006 20 December 2006 GREEN DRAGON GAS LTD. ("Green Dragon", "GDG" or the "Company") GDG ACQUIRES STAKE IN BEIJING GAS DISTRIBUTOR Green Dragon Gas Ltd. (AIM: GDG), today announces the acquisition of a 49%equity interest in Kesi Hengrun (Beijing) Technology Co. Ltd ("KHBT") for atotal consideration of US$26.0 million (US$1.1 million in cash and US$24.9million in new GDG ordinary shares issued at a price of US$6.75 per share). KHBT, a holding company, has as its only significant asset a 59% interest inBeijing Huayou United Gas Development Co Ltd (BJHY); the balance of 41% is ownedby China National Petroleum Company (CNPC). The transaction has been approved bythe Chinese Ministry of Commerce (MOFCOM) and the Administration of Industry andCommerce (AIC). KHBT, since incorporation, has been focused on developing a gas distributionnetwork through its interest in BJHY within the Business Development Area (BDA)in southeastern Beijing. BDA is a rapidly expanding planned industrial zonewithin the city limits strategically located on the Beijing-Tianjin expressway.BJHY presently owns 166 km of pipelines with an annual capacity of 4 billion m3that is strategically fed by CNPC proprietary citigas stations being supplied bythe West-East pipeline network. Its customers include a gas-fired power plant,industrial customers such as Mercedes Benz and approximately 7000 residentialclients. Gas prices in Beijing in 2006 were between US$0.23-0.24/m3 and expectedto rise 8% in 2007 to US$0.25-0.26/m3. Under the terms of the KHBT equity purchase, GDG will have: a Board seat on KHBTand BJHY; the right to appoint the KHBT General Manager; and pre-emption rightsover future equity sales in KHBT among others. In the year ended 31 December 2005, BJHY made an EBITDA of US$1.3 million onsales of US$7.6 million. These revenues were achieved from an estimated 2%utilisation of 3 billion m3 of pipeline capacity; the capacity has now increasedto 4 billion m3 and the utilisation level is expected to increase significantlyover the coming years as the BDA continues its growth and transition to gas asan energy source. As at 31 December 2005, BJHY had net assets of US$4.3 millionand KHBT had net assets of US$2.4 million. The 3,685,167 new GDG shares being issued pursuant to this investment in KHBTare expected to be admitted to AIM on 3 January 2007. Company Chairman and CEO, Mr. Randeep S. Grewal commented, "A remarkable yearfor Green Dragon's continued growth concludes with this fitting acquisition. Wehave strategically focused on downstream gas distribution network expansionwhile the successful upstream drilling operations continue. The dual pronggrowth strategy provides us with a vertically integrated business plan buildingour balance sheet and P&L concurrently. BJHY is one of the main gas distributorsin one of China's biggest citigas consumption markets. A solid partner like CNPCand its vast gas distribution network coupled with assured supply to Beijingprovides significant foundation for the business's continued expansion". "Green Dragon joins a very small group of vertically integrated gas companies inChina. In addition to our large gas resource in place, strong equitypartnerships with CNPC subsidiaries in both the upstream and downstream sectorsfacilitate our strategically China exclusive and Coal Bed Methane focused gassupplier business plan" Mr. Grewal concluded. For further information on the Company and its activities, please refer to thewebsite at www.greendragongas.com or contact: Randeep S. GrewalChairman and Chief ExecutiveBetty CheungGreen Dragon Gas Ltd.+852 2166 8686 Tim Thompson / Nick MelsonBuchanan Communications020 7466 5000 Dr Azhic Basirov / David JonesSmith & Williamson Corporate Finance Limited020 7131 4000 Daniel Fox-DaviesFox-Davies Capital Limited020 7936 5200 This information is provided by RNS The company news service from the London Stock Exchange