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Corporate Presentation December 2009

Corporate Presentation December 2009. 4. 5. FY2010/11 guidance. Demand growth outlook. 23. 25. Table of contents. Section. Page. 1. About China Gas. 4. 2. Operational performance FY07-09. 12. 3. Financial performance FY07-09. 18. 6. Natural gas pricing outlook. 27.

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Corporate Presentation December 2009

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  1. Corporate PresentationDecember 2009

  2. 4 5 FY2010/11 guidance Demand growth outlook 23 25 Table of contents Section Page 1 About China Gas 4 2 Operational performance FY07-09 12 3 Financial performance FY07-09 18 6 Natural gas pricing outlook 27

  3. About China Gas

  4. Overview • Principal Businesses • 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 • 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

  5. Natural gasBusiness model Natural gas fields City gate National or provincial pipelines Storage tanks(spherical or cylinder) Assets owned by the Group: Main pipelines Branch pipelines 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. Industrial users* Residentialhouseholds* Car refueling station Commercial users*

  6. FINAL TARIFF COMPONENTS Exploration Wellhead price Transportation Transmission tariffs Distribution Distribution cost & margin NDRC approval Local price bureau approval Natural gasRevenue model and pricing Natural gas business operates on a cost-plus pricing model • 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

  7. Bid & award Construction & development 12-18 months Operation 30 years Natural gasProject development process China Gas has a strong track record of developing city gas projects on time and on budget • About 15 projects under review • Investment criteria include: • Project IRR > 15% • Industrial demand • Natural gas accessibility Revenues: Gas connection fees Projects under development 2007: 20 projects 2008: 18 projects 2009: 47 projects Revenues: Sales of piped gas Projects in operation 2007: 37 sites 2008: 50 sites 2009: 66 sites

  8. Inner Mongolia Hohhot, Wushenqi, Wushenqi Pipeline, Changmeng Pipeline, Baotou, 5 counties Heilongjiang Harbin, Jiamusi, 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, Jinzhou, Sujiatun(Shenyang), Jinzhou D. Zone, Liaoyang, Gaizhou, zhuanghe, linghai, Wafangdian, Pulandian Jilin Xinjiang Liaoning Inner Mongolia Gansu Tianjin Tianjin Pipeline Beijing Tianjin Ningxia Zhongwei Hebei Ningxia Shandong Dezhou, Qingdao Shandong Shanxi Qinghai Shaanxi Baoji, Qishan Xian, Yulin Henan Jiangsu Shaanxi Jiangsu Pizhou, Yangzhong, Nanjing (Jiang Bei), Xuzhou (Jiawang), Xuzhou (Xinyi), Yangzhou Tibet Shanghai Hubei Yichang, Xiaogan, Hanchuan, Yingcheng, Yunmeng, Suizhou, Tianmen, Guangshui, Dangyang, Xiaogan Pipeline, Dangyang Pipeline, Huanggang-Daye pipeline Anhui Hubei Sichuan Zhejiang Chongqing Jiangxi Hunan Zhejiang Hangzhou (Xiaoshan), Shaoxing, Taizhou, Jinhua Guizhou Fujian Yunnan Taiwan Guangdong Guangxi Chongqing Dianjiang E&P, Yubei District, Dingwang purification, Chongqing Pipeline Fujian 28 city gas concessions Hainan Anhui Wuhu, Huainan, Shouxian, Suzhou, Wuhuxian, Nanling, Huoshan, Fengtai，Wuwei Hunan Yiyang, Yuanjiang Guangxi Yuling, Qinzhou, Liuzhou, Fongchenggang, Laibin, Baise, Nanning Dongmeng Development Zone GuangdongMaoming, Conghua, Meizhou, Yunfu, Shanwei Natural gasCurrent project locations

  9. 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+%

  10. SINOPEC GAIL ADB SK E&S Management Strait Finance Oman Oil Oman Fund Public 4.85% 4.98% 47.10% 8.64% 6.30% 10.20% 6.30% 7.13% 4.50% CHINA GAS Strategic partnerships Strategic shareholders have partnered and helped China Gas’ growth through the years • 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

  11. Operational performance FY07-09

  12. Gas volume growth 2,325.9 1,148.8 432.2

  13. Natural gasCustomer breakdown million m3

  14. Natural gasCustomer growth

  15. Natural gasAverage tariffs (RMB/m3) (ex-tax)

  16. Other operational data

  17. Financial performance FY07-09

  18. Financial summaryIncome statement * 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

  19. Financial summaryBalance sheet & debt position * 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

  20. Income statementTurnover breakdown FY2007 FY2008 FY2009

  21. 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 Balance sheetDebt maturity profile Management is committed to prudent capital management, and currently most of Group’s debt is long term Debt Maturity Profile

  22. FY2010/11 guidance

  23. FY2010~2011 guidance Management will focus on organic growth of existing city gas and pipeline projects. New investments will be on opportunistic basis.

  24. Demand growth outlook

  25. 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

  26. Natural gas pricing outlook

  27. 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

  28. 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.

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