Corporate
Presentation
December 2009
Table of contents
Section
Page
1
About China Gas
4
2
Operational performance FY07-09
12
3
Financial performance FY07-09
18
4
FY2010/11 guidance
23
5
Demand growth outlook
25
6
Natural gas pricing outlook
27
2
About China Gas
Overview
 Principal Businesses
1. Natural gas services operator: Principally engaged in the investment, operation and management
of city gas pipeline infrastructure, distribution of natural gas to residential and industrial users,
construction and operation of natural gas refilling stations; started this business in 2002 when
China decided to build the West-East Pipeline
–
Operates in 113 city concessions with 30-year monopolistic operating right each
–
Has a pipeline network of more than 27,000 km serving around 4.1 million household users
and nearly 30,000 industrial and commercial users
2. LPG Supplier: The only vertically-integrated LPG operator in PRC; entered into the LPG industry in
September 2008
–
Owns 11 LPG receiving terminals, 275,000 m3 of LPG storage capacity, upstream to
downstream distribution network in PRC
 Have strategic cooperation with PetroChina in both the natural gas and LPG businesses in China
4
Natural gas
Business model
Natural gas fields
City gate
National or provincial
pipelines
Storage tanks
(spherical or cylinder)
Assets owned by the Group:
Main pipelines
Branch pipelines
Industrial users*
Pressure regulating boxes
Switches
Processing stations
* Customers’ pipelines which are not owned by the
Group are within the customers’ premises and are
not highlighted in this diagram.
Residential
households*
Car refueling station
Commercial users*
5
Natural gas
Revenue model and pricing
Natural gas business operates on a cost-plus pricing model
FINAL TARIFF COMPONENTS
Exploration
Transportation
Distribution
Wellhead price
Transmission tariffs
Distribution cost & margin
NDRC approval
Local price bureau approval
 2 main sources of revenue
– Gas connection: one-off payment mainly from residential users, less so from industrial and
commercial users
– Sale of piped gas: recurring income at tariffs approved by the local governments
6
Natural gas
Project development process
China Gas has a strong track record of developing city gas projects on time and on budget
Bid & award
Construction & development
12-18 months
Operation
30 years
About 15 projects
under review
Revenues: Gas connection fees
Revenues: Sales of piped gas
Investment criteria
include:
1. Project IRR > 15%
2. Industrial demand
3. Natural gas
accessibility
Projects under development
2007: 20 projects
2008: 18 projects
2009: 47 projects
Projects in operation
2007: 37 sites
2008: 50 sites
2009: 66 sites
7
Natural gas
Current project locations
Inner Mongolia Hohhot, Wushenqi, Wushenqi
Heilongjiang Harbin, Jiamusi,
Pipeline, Changmeng Pipeline, Baotou, 5 counties
Shuangcheng
Heilongjiang
Hebei Cangzhou, Cangzhou Economic
Development Zone, Nanpi, Qinghe, Leting,
Xinle, Gaocheng, Pingshan, Feng Nan,
Neiqiu, Wangdu, Nanbao, Bohai New Area,
Hebei Pipeline
Liaoning Dalian, Fushun,
Jilin
Xinjiang
Liaoning
Inner Mongolia
Gansu
Ningxia Zhongwei
Ningxia
Beijing
Tianjin
Shanxi
Qinghai
Shaanxi Baoji, Qishan Xian, Yulin
Hubei Yichang, Xiaogan, Hanchuan,
Hubei
Sichuan
Yunnan
Guangxi
Chongqing Dianjiang E&P, Yubei
District, Dingwang purification, Chongqing
Pipeline
Hunan Yiyang, Yuanjiang
Guangxi Yuling, Qinzhou, Liuzhou,
Fongchenggang, Laibin, Baise, Nanning
Dongmeng Development Zone
Anhui
Shanghai
Jiangsu Pizhou, Yangzhong,
Nanjing (Jiang Bei), Xuzhou
(Jiawang), Xuzhou (Xinyi), Yangzhou
Zhejiang
Hunan
Guizhou
Shandong Dezhou, Qingdao
Jiangsu
Chongqing
Yingcheng, Yunmeng, Suizhou, Tianmen,
Guangshui, Dangyang, Xiaogan Pipeline,
Dangyang Pipeline, Huanggang-Daye
pipeline
Tianjin Tianjin Pipeline
Hebei
Shandong
Henan
Shaanxi
Tibet
Jinzhou, Sujiatun(Shenyang), Jinzhou
D. Zone, Liaoyang, Gaizhou,
zhuanghe, linghai, Wafangdian,
Pulandian
Jiangxi
Fujian
Guangdong
Zhejiang Hangzhou (Xiaoshan),
Taiwan
Shaoxing, Taizhou, Jinhua
Fujian 28 city gas concessions
Hainan
Anhui Wuhu, Huainan, Shouxian,
Suzhou, Wuhuxian, Nanling,
Huoshan, Fengtai，Wuwei
Guangdong Maoming,
Conghua, Meizhou, Yunfu, Shanwei
8
Liquefied petroleum gas
 China Gas is the largest and only vertically integrated LPG
supplier in the PRC covering retail and wholesale
 Our LPG business covers:
– Upstream: Direct supply from PetroChina’s 28 refineries
(total capacity 6m tons); also import from the Middle
East;
– Midstream: 11 receiving terminals, 275,000 m3 LPG
storage facilities, fleets of vessels and trucks, and
distribution logistics in Guangdong, Guangxi, Fujian,
Zhejiang and Jiangsu;
– Downstream: Direct retail of bottled LPG to households.
 Our vertically integrated LPG business provides a sustainable
gross margin of 17+%
9
Strategic partnerships
Strategic shareholders have partnered and helped China Gas’ growth through the years
SINOPEC
Management
8.64%
GAIL
Strait Finance
6.30%
10.20%
ADB
SK E&S
Oman Oil
6.30%
7.13%
Oman Fund
4.50%
4.85%
Public
4.98%
47.10%
CHINA GAS
 China Gas has joint venture with each of GAIL, Oman Oil and SK E&S to leverage on their technical
knowhow and experience in their respective expertise
 Each of GAIL, Oman Oil, SK E&S and ADB has senior person on the board of China Gas, providing
valuable insights and advice from the international and diversified perspectives
10
Operational
performance
FY07-09
Gas volume growth
2,325.9
2,500
195.6
Million M3
2,000
1,500
1,000
1,148.8
105.3
432.2
500
0
2,130.3
357.7
74.5
FY07
Natural gas
1,043.5
FY08
FY09
Coal gas & piped LPG
12
Natural gas
Customer breakdown
2,500
2,130.3
168.4
221.9
million m3
2,000
1,500
1,043.5
105.5
117.8
1,000
500
357.7
0
239.7
62.0
22.7
33.2
FY07
Residential
Industrial
1,463.3
669.5
150.7
276.7
FY08
FY09
Commercial
CNG Stations
13
Natural gas
Customer growth
No. of end
users
Residential
Industrial
Commercial
CNG Stations
Portfolio total
New connections
FY2007
FY2008
FY2009
FY2008
FY2009
1,349,782
2,253,044
3,745,370
280,230
418,695
111
185
420
56
186
10,451
19,325
28,511
1,852
2,616
21
45
60
24
15
14
Natural gas
Average tariffs (RMB/m3) (ex-tax)
Type of end user
FY2007
FY2008
FY2009
Residential
1.75
1.75
1.85
Industrial
1.66
1.84
1.97
Commercial
2.31
1.85
2.06
CNG stations
2.23
1.95
2.08
15
Other operational data
Total Daily NG Consumption (m3)
Total Pipelines (km)
Urban Population Covered
FY2007
Growth %
FY2008
Growth %
FY2009
1,618,160
142.9%
3,931,089
74.4%
6,855,126
9,843
64.8%
16,217
59.5%
25,866
32,008,000
33.7%
42,801,000
18.1%
50,550,000
Penetration Rate
16.5%
Average Connection Fees
2,092
20.6%
9.7%
2,295
24.7%
6.2%
2,437
16
Financial
performance
FY07-09
Financial summary
Income statement
FY2007
FY2008
(restated)
(restated)
Natural Gas
LPG
Total
1,236,469
2,552,075
4,051,650
2,272,173
6,323,823
Gas Sales
750,101
1,691,159
2,678,377
2,272,173
4,950,550
Connection Fees
387,243
615,282
1,127,403
1,127,403
Other Sales
99,125
245,634
245,870
245,870
Gross Profit
419,764
746,119
1,300,204
EBITDA
406,474
817,325
1,215,699
EBIT
307,045
620,006
869,100
Profit after Tax
236,249
187,571*
133,959**
Profit Att’ble to shareholders
200,789
141,059*
103,679**
6.70
4.39*
3.11**
HK$ (‘000)
Turnover
Basic EPS (HK Cents)
FY2009
129,145
1,429,349
* after a HK$167m non-cash impairment due to convertible bonds issued in June 2005
** after a HK$366m non-cash impairment due to interest rate swap contracts
18
Financial summary
Balance sheet & debt position
HK$ (‘000)
FY2007
FY2008
FY2009
7,308,847
11,306,127
18,086,766
922,124
1,399,851
1,950,637
Total equity
2,692,805
3,686,006
4,017,271
Cash
1,512,347
1,674,641
2,896,457
Short term bank debt
686,781
157,061
3,103,855*
Long term bank debt
2,242,452
5,624,454
7,194,067
Total assets
including Construction in progress
* Of which HK$2,669m comes from the LPG subsidiary, about 84% of it was 30-90 day Letter of Credit financing for its LPG import business
19
Income statement
Turnover breakdown
FY2007
FY2008
Sales of
Others
8.0%
Sales of
LPG
0.0%
Sales of
Others
9.6%
Connection Fees
31.3%
Sales of
LPG
0.0%
FY2009
Sales of
Others
3.9%
Connection Fees
24.1%
Connection Fees
17.8%
Sales of
LPG
35.9%
Sales of
Piped
Gas
60.7%
Sales of
Piped
Gas
66.3%
Sales of
Piped
Gas
42.4%
20
Balance sheet
Debt maturity profile
Management is committed to prudent capital management, and currently most of Group’s
debt is long term
 Short-term debt of the Group primarily consists of trade financing from banks for the LPG trading business
 Bank borrowings consist primarily of bank loans
Debt Maturity Profile
Less than one
year
10.5%
From first year
to second year
4.4%
More than five
years
54.9%
From second
year to fifth
year
30.2%
21
FY2010/11
guidance
FY2010~2011 guidance
Management will focus on organic growth of existing city gas and pipeline projects.
New investments will be on opportunistic basis.
Gas volume (m3)
New residential connections
CNG stations
LPG sales
FY2010
FY2011
3.3 – 3.5 bn
4.5 – 5.0 bn
500,000 – 520,000
600,000 – 650,000
to reach 90 – 100
120 – 130
to reach 1.3m tons
2.0 – 2.2 m tons
23
Demand growth
outlook
Demand growth outlook
 Major volume and revenue growth drivers FY10-12:
– Increase in penetration rate: From 25% to 60% by 2014 – enhanced connection fee income
– More industrial connections: Previously constrained by limited supply of gas; waiting lists in cities
will gradually be shortened
– CNG stations rollout: To build at least 120 new CNG stations in 30 cities by 2012
 Growth made possible by:
– Commissioning of new gas fields and national pipelines
– Import of piped gas from Central Asia
– Completion of more LNG terminals
25
Natural gas
pricing outlook
Natural gas pricing outlook
 Wellhead and retail prices are bound to hike because of new gas sources and imports
 Expect an average of 8~10% increase per annum in the next 5 years
 Natural gas pricing reform is expected to be implemented end of 2009 or early 2010
 Pricing reform helps:
– Transparency and clarity of price adjustment mechanism
– Maintain price competitiveness of natural gas against alternative fuels
 Cost pass-through mechanism will continue to work to pass on price adjustments to users
27
Disclaimer
Statements in this presentation and handout that are not strictly historical are “forward-looking”
statements. Forward-looking statements involve risks and uncertainties, including, but not limited to,
continued acceptance of the Company’s product and services in the marketplace, competitive factors,
new products and technology changes, the Company’s dependence upon third party suppliers and other
risks detailed from time to time in the presentation, handout and other related documents. China Gas is
not responsible for the accuracy and completeness of the contents of such presentations and/or other
documents. The materials and information in the presentations and other documents are for
informational purposes only, and are not an offer or solicitation for the purchase or sale of any securities
or financial instruments or to provide any investment service or investment advice.
28