Corporate Presentation
August 2010
1
Table of Contents
Section
Page
1
About China Gas
3
2
Natural Gas Business
8
3
Liquefied Petroleum Gas Business
13
4
Operational Highlights FY2010
19
5
Financial Highlights FY2010
26
6
FY2011-12 Outlook
29
2
About China Gas
China Gas Overview
 Principal Business Segments
1. Natural Gas Services Operator: Engages in the investment, operation and management of city gas pipeline
infrastructure, distribution of natural gas to residential, industrial and commercial users, and construction and
operation of natural gas refilling stations
–
Business started in 2002 when China decided to construct the West-East Pipeline
–
Operates in 134 city concessions with 30-year monopolistic operating right each
–
Possesses a pipeline network of more than 31,943 km serving approximately 5.1 million household users and
nearly 35,481 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
–
Covering wholesale and retail LPG supply in Guangdong, Guangxi, Fujian, Zhejiang, Jiangsu and Anhui
provinces.
4
Strategic Partnerships
Strategic shareholders have partnered and helped China Gas’ growth through the years
SINOPEC
(Dec 2004)
Management
& Founders
(2002)
18.39%
GAIL
(May 2005)
6.24%
Oman Fund
(Nov 2007)
Oman Oil
(Jan 2006)
6.24%
SK E&S
(June 2008)
ADB
(Oct 2006)
7.06%
4.46%
Public
4.81%
3.90%
48.92%
CHINA GAS
 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
As of 30 June 2010
5
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
Revenue: Gas connection fees
Revenue: 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
2010: 35 projects
Projects in operation
2007: 37 sites
2008: 50 sites
2009: 63 sites
2010: 99 sites
6
Natural Gas
Current Project Locations
Hebei Cangzhou, Cangzhou Economic
Development Zone, Nanpi, Qinghe, Leting,
Xinle, Gaocheng, Pingshan, Feng Nan, Neiqiu,
Wangdu, Nanbao, Bohai New Area, Hebei
Pipeline
Heilongjiang Harbin, Jiamusi,
Henan 11 city gas concessions
Shuangcheng, Mudanjiang, Jiagedaqi
Heilongjiang
Jilin
Inner Mongolia Hohhot, Wushenqi,
Wushenqi Pipeline, Changmeng Pipeline,
Baotou, 4 counties, Etoke Banner, Etuokeqi
Hubei Yichang, Xiaogan, Hanchuan,
Xinjiang
Inner Mongolia
Gansu
Henan
Shaanxi
Tibet
Hubei
Sichuan
Yunnan
Hunan
Anhui
Shanghai
(Jiang Bei, Pukou), Xuzhou (Jiawang),
Xuzhou (Xinyi), Yangzhou
Zhejiang
Zhejiang Hangzhou (Xiaoshan),
Fujian
Guangxi Guangdong
Shaoxing, Taizhou, Jinhua
Taiwan
Fujian 29 city gas concessions
Anhui Wuhu, Huainan, Shouxian,
Hainan
Suzhou, Wuhuxian, Nanling, Huoshan,
Fengtai, Wuwei, Xiuningxian
Guangdong Maoming, Conghua,
Guangxi Yuling, Qinzhou, Liuzhou,
Fongchenggang, Laibin, Baise, Nanning City,
Nanning Dongmeng Development Zone, Bobai
Jiangsu Pizhou, Yangzhong, Nanjing
Jiangxi
Dingwang purification, Chongqing Pipeline
Hunan Yiyang, Yuanjiang, Youxian
Shandong Dezhou, Qingdao
Jiangsu
Chongqing
Guizhou
Tianjin Tianjin Pipeline
Beijing
Tianjin
Hebei
Shanxi Shandong
Ningxia
Qinghai
Yingcheng, Yunmeng, Suizhou, Tianmen,
Guangshui, Dangyang, Xiaogan Pipeline,
Dangyang Pipeline, Huanggang-Daye pipeline
Chongqing Dianjiang E&P, Yubei District,
Sujiatun(Shenyang), Jinzhou D. Zone,
Liaoyang, Gaizhou, Zhuanghe, Linghai,
Pulandian
Liaoning
Ningxia Zhongwei
Shaanxi Baoji, Qishan Xian, Yulin
Liaoning Dalian, Fushun, Jinzhou,
Jiangxi Nanchang (Wanliqu)
Meizhou, Yunfu, Shanwei, Xinxingxian,
Fengshunxian, Pingyuanxian
7
Natural Gas Business
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*
9
Natural Gas
Revenue Model and Pricing
Natural gas business operates on a cost-plus pricing model
END-USER 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
10
Natural Gas Supply Growth
 Growth made possible by:
–
China Natural Gas Supply Projection
Additional gas supply from PetroChina as a result of the
cooperation agreement
600
550
Commissioning of new gas fields
–
–
–
–
500
450
Xinjiang Province
Inner Mongolia
Sichuan Province
Commissioning of new national pipelines
–
Sichuan – East Pipeline
–
West – East Pipeline II
–
Import of piped gas from Central Asia, Russia and Myanmar
–
Completion of additional LNG terminals
400
350
Billion m3
–
LNG imports
Pipeline imports
Other imports
CNOOC
Sinopec
PetroChina
300
250
200
150
100
50
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Source: NDRC
11
Peer Group Analysis
Sales Revenue Growth FY2009/2010
Source: individual companies’ annual reports
Number of Gas Projects
Source: individual companies’ annual reports
12
Liquefied Petroleum Gas (LPG) Business
LPG Business
 China Gas is the largest and only vertically
integrated LPG supplier in the PRC covering retail
and wholesale
Heilongjiang
 Our LPG business covers:
Jilin
–
–
–
Upstream: Direct supply from refineries of
PetroChina and Sinopec; 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, Anhui and Jiangsu;
Downstream: Direct retail of bottled LPG to
households.
Xinjiang
Liaoning
Inner Mongolia
Gansu
Ningxia
Beijing
Tianjin
Shanxi
Qinghai
Henan
Shaanxi
Tibet
Hubei
Sichuan
Chongqing
Hunan
Guizhou
Yunnan
Hebei
Shandong
Jiangsu
Shanghai
Anhui
Zhejiang
Jiangxi
Fujian
Guangxi Guangdong
LPG receiving terminals and storage facilities
Taiwan
Hainan
14
LPG
Business Model
Oil Refinery
Class 1 Station
Class 2 Station
Import/
Domestic Supply
Class 3 Station
Bottling Station
LPG Receiving Terminal
Industrial users
Domestic supply
City gas companies
Storage Facilities
Assets owned by the Group
LPG vessels
LPG trucks
Trucks sending bottled LPG
Commercial users
Residential households
15
Value Chain of LPG Supply
4-5%
Class 1
Station
Oil Refinery
Gross Margin (%)
5-6%
LPG Wholesaler
Class 2 Station
6-7%
Bottled LPG Maker
Class 3 Station
Bottled LPG
Retailers
10-12%
2009 LPG gross margin for China Gas: 5.7%
2010 LPG gross margin for China Gas: 8.7%
Source: Company data
16
LPG
Market Share and Margins Outlook
LPG Market Share by volume
LPG Gross Margin Expansion
Source: Company data
17
LPG
Supply and Demand in China
China LPG Demand by Sector
32
China LPG Supply and Demand
28
30
Feedstock for Cracking
28
Industry
24
26
Commercial (Transportation and etc)
22
24
Residentail Gas
20
Supply
Demand
Net Trade
26
18
22
16
20
14
18
12
16
10
14
8
12
6
10
4
8
2
6
0
4
-2
2
-4
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-6
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
-8
Source: Company data
18
Operational Highlights FY2010
Natural Gas
Total sales volume (million m3)
Sales Volume (as at 31 Mar 2010)
Period
Sales Growth – Total
FY10
54.5%
FY09
102.5.%
FY08
165.8%
Period
Sales Growth – Natural Gas Only
FY10
58.7%
FY09
104.1%
FY08
191.7%
20
Natural Gas
Customer Breakdown (as at 31 Mar 2010)
Sales Volume
Growth in FY10
% of Total
Volume
CNG Stations
46.5%
7.3 %
Commercial
52.3%
10.0%
Industrial
64.2%
71.1%
Residential
41.7%
11.6%
Natural gas sales volume (million m3)
Sector
21
Natural Gas
Customer Data (as at 31 Mar 2010)
Customer Growth
Organic
Acquired
FY10
Portfolio Total
Residential
657,907
434,159
4,837,436
29.2%
3,745,370
323
67
810
92.9%
420
Commercial
3,825
1,140
33,476
17.4%
28,511
CNG Stations
31
-
91
51.7%
60
Industrial
Change from FY09
FY09
Portfolio Total
Customer Tariffs (ex-tax)
(RMB / m3)
FY10
Change from FY09
FY09
FY08
Residential
1.88
1.6%
1.85
1.75
Industrial
2.09
6.1%
1.97
1.84
Commercial
2.13
3.4%
2.06
1.85
CNG Stations
2.17
4.3%
2.08
1.95
22
Natural Gas
Other Operational Data (as at 31 Mar 2010)
Urban Population Covered (m)
Urban population covered and penetration rate
Penetration Rate
(000 m3)
Natural gas daily consumption
23
Natural Gas
Other Operational Data (as at 31 Mar 2010)
FY10
Change from FY09
FY09
FY08
Residential Connection Fee
(RMB per customer)
2,368
-2.8%
2,437
2,295
Total Pipelines (km)
31,513
21.8%
25,886
16,217
24
LPG
Operational Data (as at 31 Mar 2010)
FY10
FY09*
Sale tonnage (ton)
944,000
495,155
Gross Margin (%)
+8.7%
+5.7%
Operating Margin (%)
+ 1.6%
- 0.2%
Net Profit Margin (%)
+ 0.2%
- 2.1%
* Only half year data as China Gas commenced LPG business in Sep.2008
25
Financial Highlights FY2010
Financial Summary
Income Statement
HK$ ('000)
FY10
% change
FY09
FY08
10,211,959
61.5%
6,323,823
2,552,075
Gas Sales
3,831,627
43.1%
2,678,377
1,691,159
Connection Fees
1,461,573
29.6%
1,127,403
615,282
LPG Sales
4,637,924
104.1%
2,272,173
-
280,835
14.2%
245,870
245,634
Gross Profit
2,116,292
48.1%
1,429,349
746,119
Profit after tax
1,015,501
658.1%
133,959
187,571
875,636
744.6%
103,679
141,059
Basic EPS (HK Cents)
26.19
742.1%
3.11
4.39
Gross Margin – Gas Sales
20.8%
-
19.1%
15.9%
Gross Margin – Connection Fees
70.6%
-
67.4%
72%
Gross Margin – LPG Sales
8.7%
-
5.7%
-
Turnover
Other
Profit Attributable to Shareholders
27
Financial Summary
Balance Sheet & Debt Position
HK$ ('000)
FY10
FY09 (restated)
Total Assets
22,997,594
18,024,749
Total Equity
5,230,237
3,982,128
Shareholder's Equity
4,123,022
3,223,270
Cash
4,361,419
2,896,457
Short-term Bank Debt
5,294,761*
3,103,855 **
Long-term Bank Debt
8,021,345
7,194,067
-
14,823
Convertible Bond
* of which HK$2,450,349 was Zhongyou Huadian LPG trade finance related facilities
** of which HK$2,255,659 was Zhongyou Huadian LPG trade finance related facilities
28
FY2011-12 Outlook
Natural Gas Pricing Reform
Given residential gas sales is only 11.6% of total gas sales, the impact of the recent 24.9%
wellhead natural gas price hike on 2010/2011 earnings should be immaterial
 No impact on commercial & industrial gas
sales: automatic 100% pass-through
 represents 81.1% of users for China Gas
 Low elasticity: retail price hike of only
RMB0.23/m3 and we anticipate residential users
can absorb with minimal impact on demand
 On a macro-view, price hike will stimulate
upstream domestic production and encourage
LNG imports, further easing near-term
shortage of supply
Sensitivity Analysis(1)
Period of Non-Pass Through
As a % of Total
Revenue
% of Volume
passedthrough
(residential
users only)
Full Year
6 month
3 month
0%
(0.95%)
(0.47%)
(0.24%)
50%
(0.47%)
(0.24%)
(0.12%)
90%
(0.09%)
(0.05%)
(0.02%)
(1) Total revenue is based on FY2010 natural gas total volume, FY2010 total revenue
and 100% automatic pass-through of RMB0.23/m3 of price hike for commercial and
industrial gas sales
30
FY2011-2012 Drivers
Natural Gas
 Significant increase in upstream supply will
lead to:
LPG
 Completion of vertical integration of supply
chain will lead to:
– Increase in penetration rate: To reach 43%
by 2012 – enhanced connection fee income
– Wider distribution network: To cover 9
provinces with wholesale and retail supply
– More industrial connections: More gas to
connect industrial customers in backlog –
further increase gas sale volume
– Increase in sale volume: To reach at least 2
million tons by 2012
– Faster CNG stations rollout: To reach at
least 180 CNG stations in 50 cities by 2012
– improving overall operating margins of
gas sale
– Improved margins: To reach 15% gross
margin and 5% net margin by 2012
31
FY2011-2012 Guidance
 Enhance organic growth of existing city gas and pipeline projects in terms of residential penetration,
industrial connections and CNG station rollout
 Continue upstream LPG integration with refineries Sinopec and CNPC
 Active rollout of LPG downstream retail distribution network and CNG stations
Gas volume (m3)
New residential connections
CNG stations
LPG sales (million ton)
FY2011
FY2012
4.8 bn
6.0 bn
700,000
850,000
to reach 120
180
1.3
2.0
32
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.
33