Last checked at 6 Aug 2008 07:00
6 August 2008
GREEN DRAGON GAS LTD.
("Green Dragon" or the "Company")
Green Dragon Gas Acquires CNG Stations and related
Manufacturing Technology
Green Dragon Gas Ltd. (AIM: GDG), announces today that it has completed purchase agreements with Beijing Nanhai Environment Engineering Ltd. and several private investors to acquire 100% of the share capital of Zhengzhou Nanhai Gas Ltd ("ZNG"), Zhengzhou Clean Petro-Equipment Ltd. ("ZCP") and Zhengzhou Clean Technology Ltd. ("ZCT"). All the businesses are located and operate in the Company's China operating hub, Zhengzhou, the capital of Henan Province.
The aggregate consideration for purchases was USD $9.25 million payable in cash on completion. The acquisitions were funded from Green Dragon's existing cash resources.
ZNG directly controls one operating Compressed Natural Gas ("CNG") Service Station ("CNGS") and holds the licenses and approvals to construct three more, which are in various stages of development. The four approved sites are synergistic to the Company's interest in the Shizhuang South coalbed methane production block in Shanxi as well as its recently acquired distribution centre located in Zhengzhou. ZNG has seen rapid revenue growth with stable operating margins in excess of 40%. Favourable central and provincial government policies are expected to continue to drive revenue growth. Higher margins are expected as further price rises occur as a result of the CNG to gasoline price spread. The three CNGSs being completed over the coming year are expected to provide further profitable growth. ZNG has current secured gas resources committed through to 2013 for volumes of 45,000 m3 per day in addition to gas volumes from the Company's Shizhuang South gas field.
ZCP is a profitable operating equipment supplier for CNG vehicles, service stations and other related activities. Its "ZZ Clean" branded CNG dispensers have been sold and delivered to a growing list of customers and are operational in the Northeast, Central and Eastern China regions. The current capacity to produce over 300 CNG dispensers is modular and can be expanded as the demand for CNG continues to grow throughout China and particularly within the inner provinces where there are limited gasoline supplies. ZCP is a profitable operating company with profit growth of 121% (2007 vs 2006). The high price of oil and derivatives such as gasoline compared to the cost of CNG is likely to encourage the continued conversion by fleet, taxi and bus operators to CNG as a preferred source of fuel. ZCP provides the basic conversion to CNG supply, and dispensing equipment needed for CNGSs that are being constructed or upgraded throughout China.
ZCT is a niche technology company providing proprietary software and Supervisory Control and Data Acquisition systems for petrochemical companies. The company developed a proprietary automated monitoring system for the upstream gas production which allows remote monitoring of gas volumes, pressures at the well and compressor stations. Additionally, it has an operating downstream CNG distribution system that provides remote monitoring of gas deliveries into vehicles and is capable of auto-cash collection for gas sales. This proprietary software is required across all facets of the Company's operation from upstream drilling and CBM production, to midstream gas compression and transportation and the downstream gas sales and cash collection.
Both ZCP and ZCT will be incorporated into the Company's Greka Technical Services business, providing an important link in the Company's vertical integration strategy. Both businesses have clear synergies with the Company's other operations and acquisitions. ZCP will supply all equipment in completing ZNG's three CNGSs while ZCT will provide the automation to maintain efficiency.
Zhengzhou, with a population of over 4.3 million, has a high level of CNG adoption by both vehicles and industry. Zhengzhou provides a profitable location for commercialising the Company's Shizhuang South gas field which is currently producing gas and is 223km northwest of Zhengzhou with established infrastructure links.
Randeep Grewal, Chairman and CEO of Green Dragon commented:
"This acquisition strengthens our core CNG position while concurrently realising our vertically integrated strategy. It consolidates our position in Zhengzhou and provides a strong platform for growth from which to launch gas sales from Shizhuang South. This acquisition is expected to reduce future costs, diversifies the Company's income streams and provides us with access to a further valuable part of the gas sales chain. It strengthens the midstream and downstream components of the Company and further demonstrates our execution capability within the inner provinces of China, synergistic to our business plan."
For further information on the Company and its activities, please refer to the website
at www.greendragongas.com or contact:
Randeep S. Grewal / Betty Cheung
Green Dragon Gas +852 37100168
Dr Azhic Basirov / David Jones
Nomad & Broker, Smith &Williamson +44 20 7131 4000
Tim Redfern
Broker, Evolution Securities +44 20 7071 4300
Tim Thompson / Susanna Gale / Christian Goodbody
Investor Relations, Buchanan +44 20 7466 5000