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Piped-gas distributor Panva Gas plans to sign 15 new projects in 2006 and 2007 in the mainland in a race to grab more market shares than its rivals, a company executive said.

 

Yuen Fei, senior vice-president of Panva Gas said the Hong Kong-listed gas firm secured six to eight projects annually over the past few years.

 

"We want to keep that growth pace this year and next year," Yuen said.

 

Panva Gas now operates 25 piped gas projects across the mainland, with Northeast China and western China's Sichuan Province as its major focus. Covering a total of 600,000 households, the company earns money by connecting households and industrial users to pipelines and supplying gas to them.

 

"There are about 15 projects under negotiation," said Yuen, adding most of them are located in Northeast and western China.

 

Formerly a liquefied petroleum gas distributor, Panva ventured into piped-gas business in 2001 and has established itself as a top player in the mainland's fledging and fragmented piped-gas market. Other renowned players include XinAo Gas and China Gas, which also trade their shares in Hong Kong.

 

Partly owned by Hong Kong's tycoon Li Ka-shing, Panva is considering raising at least US$200 million in the second half of the year to fuel its growth in the investment-demanding industry.

 

"The piped-gas market does demand a lot of investment ... A medium-sized project requires 60 million to 80 million yuan (US$9.8 million)," Yuen said. "It's not a business everybody can play."

 

The company would most likely issue new shares or introduce strategic partners to compete, Yuen said.

 

Although use of natural gas in the mainland is not as popular as in Hong Kong or other developed economies, the market has shown potential since the central government opened the sector up to overseas and private investors in 2001. Encouragement to consume environmentally friendly energy, such as natural gas to reduce the use of coal and oil, also increases demand.

 

Piped-gas distributors typically sign a contract with a city, usually a small one, to be its exclusive supplier for 30 years. Though demanding major investment on the initial stage, these projects have the potential to deliver a return rate exceeding 15 percent in a few years, and higher one in a long term.

 

Eyeing this prospect, gas firms have quickened their pace to sign as many projects as they can.

 

The mainland's largest private piped-gas distributor XinAo Gas, which runs around 60 projects, said it would sell some projects in smaller cities to focus on corporate customers and first-tier cities.

 

China Gas, another gas distributor, has raised a total of US$4 billion in the past months through a flurry of fund-raising exercises such as share placement and debt issuance. Its recent move was obtaining a 20 billion-yuan (US$2.5 billion) credit from policy lender China Development Bank last month.

 

The company said it intended to nearly double the number of its piped-gas projects to 80 over the next five years.

 

(China Daily February 16, 2006)