Tian Lun Gas to seek funds for Inner Mongolia pipeline project

October 10, 2014 10:16
Tian Lun Gas chairman Zhang Yingcen says there is 'no need to worry about funding for a good project'.  Photo: HKEJ

China Tian Lun Gas Holdings (TLG, 01600.HK) will seek funding for two natural gas transmission pipelines linking Inner Mongolia and central and eastern China.

The project is a joint venture in the Inner Mongolia autonomous region with the privately owned Inner Mongolia Minghua Holdings and the local government financing vehicle Inner Mongolia Transportation and Investment.  

There is "no need to worry about funding for a good project", chairman Zhang Yingcen said in an interview with EJ Insight.

The major portion of funding is likely to be provided by insurance companies.

Zhang did not say how much funding is required or when the company will start seeking funds.

The two natural gas pipelines, with a combined length of 2,930 kilometers and designed transmission of as much as 50 billion cubic meters a year, will need an investment of 55 billion yuan.

The gas producer has a market value of about HK$7.7 billion. It holds one third of the joint venture.

Zhang said the confidence comes from the company's strategy of keeping in line with the country's major policies.

The opening up of industries dominated by state-owned enterprises to private entities and the policy shift toward cleaner fuels have created huge opportunities for Tian Lun Gas, he said.

Tian Lun allotted 500 million yuan for 33.3 percent of the shares in the joint venture. Inner Mongolia Minghua and Inner Mongolia Transportation hold 26 percent and 40 percent, respectively.

While the central and eastern provinces have suffered increasing natural gas shortage during the winter in recent years, Inner Mongolia has a great amount of natural gas reserves and resources to produce natural gas but is hampered by the limited means to export the gas.

Pipelines built by the joint venture will be put into operation in 2017, and are expected to further strengthen the company’s competitiveness.

The upstream business, meanwhile, is becoming more cost effective. Zhang said the investment needed for a coal gas production plant with annual output of four billion cubic meters has declined to 20 billion yuan from 40 billion yuan in previous years.

Tian Lun's terminal network is expanding. The number of its gas stations will reach 60 by the end of the year compared with 19 as of October 2013. 

The company reported revenue of 574.76 million yuan in the six months to June, a year-on-year increase of 43.92 percent. Net profit climbed 42 percent from a year ago to 103.24 million yuan, stock exchange filing shows.

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EJ Insight reporter