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Corporate PresentationAugust 2010
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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
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About China Gas
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China Gas Overview
Principal Business Segments
1. Natural Gas Services Operator: Engages in the investment, operation and management of city gas pipelineinfrastructure, distribution of natural gas to residential, industrial and commercial users, and construction andoperation 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 andnearly 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 distributionnetwork in PRC
Covering wholesale and retail LPG supply in Guangdong, Guangxi, Fujian, Zhejiang, Jiangsu and Anhuiprovinces.
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Strategic Partnerships
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
Strategic shareholders have partnered and helped China Gas growth through the years
CHINA GAS
Management
& Founders
(2002)
SINOPEC
(Dec 2004)
Oman Oil
(Jan 2006)
GAIL
(May 2005)
Oman Fund
(Nov 2007)
ADB
(Oct 2006)
Public
SK E&S
(June 2008)
18.39% 6.24% 7.06%6.24% 4.81%4.46% 3.90% 48.92%
As of 30 June 2010
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Natural GasProject Development Process
Bid & awardConstruction & development
12-18 months
Operation
30 years
About 15 projects
under review
Investment criteria
include:
1. Project IRR > 15%
2. Industrial demand
3. Natural gas
accessibility
Revenue: Gas connection fees
Projects under development
2007: 20 projects
2008: 18 projects
2009: 47 projects
2010: 35 projects
Revenue: Sales of piped gas
Projects in operation
2007: 37 sites
2008: 50 sites
2009: 63 sites
2010: 99 sites
China Gas has a strong track record of developing city gas projects on time and on budget
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Beijing
Shanghai
Heilongjiang
Jilin
Liaoning
Inner MongoliaXinjiang
Tibet
Qinghai
Gansu
Ningxia
Shaanxi
Shanxi
Henan
ShandongHebei
Jiangsu
Anhui
Zhejiang
Fujian
JiangxiHunan
Guangdong TaiwanGuangxi
Hainan
Yunnan
Guizhou
SichuanChongqing
Tianjin
Hubei
Natural GasCurrent Project Locations
Shaanxi Baoji, Qishan Xian, Yulin
Hebei Cangzhou, Cangzhou EconomicDevelopment Zone, Nanpi, Qinghe, Leting,
Xinle, Gaocheng, Pingshan, Feng Nan, Neiqiu,
Wangdu, Nanbao, Bohai New Area, Hebei
Pipeline
Hubei Yichang, Xiaogan, Hanchuan,Yingcheng, Yunmeng, Suizhou, Tianmen,
Guangshui, Dangyang, Xiaogan Pipeline,
Dangyang Pipeline, Huanggang-Daye pipeline
Hunan Yiyang, Yuanjiang, Youxian
Guangdong Maoming, Conghua,Meizhou, Yunfu, Shanwei, Xinxingxian,
Fengshunxian, Pingyuanxian
Guangxi Yuling, Qinzhou, Liuzhou,Fongchenggang, Laibin, Baise, Nanning City,
Nanning Dongmeng Development Zone, Bobai
Chongqing Dianjiang E&P, Yubei District,Dingwang purification, Chongqing Pipeline
Inner Mongolia Hohhot, Wushenqi,Wushenqi Pipeline, Changmeng Pipeline,
Baotou, 4 counties, Etoke Banner, Etuokeqi
Ningxia Zhongwei
Fujian 29 city gas concessions
Jiangsu Pizhou, Yangzhong, Nanjing(Jiang Bei, Pukou), Xuzhou (Jiawang),
Xuzhou (Xinyi), Yangzhou
Anhui Wuhu, Huainan, Shouxian,Suzhou, Wuhuxian, Nanling, Huoshan,
Fengtai, Wuwei, Xiuningxian
Zhejiang Hangzhou (Xiaoshan),Shaoxing, Taizhou, Jinhua
Liaoning Dalian, Fushun, Jinzhou,Sujiatun(Shenyang), Jinzhou D. Zone,
Liaoyang, Gaizhou, Zhuanghe, Linghai,
Pulandian
Shandong Dezhou, Qingdao
Tianjin Tianjin Pipeline
Heilongjiang Harbin, Jiamusi,Shuangcheng, Mudanjiang, Jiagedaqi
Jiangxi Nanchang (Wanliqu)
Henan 11 city gas concessions
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Natural Gas Business
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Natural GasBusiness Model
Storage tanks
(spherical or cylinder)
Natural gas fields
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
City gate
Industrial users*
Residential
households*
Commercial users*Car refueling station
National or provincial
pipelines
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Natural GasRevenue Model and Pricing
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
Exploration
Wellhead priceTransportation
Transmission tariffsDistribution
Distribution cost + margin
END-USER TARIFF COMPONENTS
NDRC Approval Local Price Bureau Approval
Natural gas business operates on a cost-plus pricing model
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Natural Gas Supply Growth
Growth made possible by:
Additional gas supply from PetroChina as a result of the
cooperation agreement
Commissioning of new gas fields
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
-
50
100
150
200
250
300
350
400
450
500
550
600
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
LNG imports
Pipeline imports
Other imports
CNOOC
Sinopec
PetroChina
Billionm3
China Natural Gas Supply Projection
Source: NDRC
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Peer Group Analysis
Sales Revenue Growth FY2009/2010
Source: individual companies annual reports
Number of Gas Projects
Source: individual companies annual reports
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Liquefied Petroleum Gas (LPG) Business
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LPG Business
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 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.
Beijing
Shanghai
Heilongjiang
Jilin
Liaoning
Inner Mongolia
Xinjiang
Tibet
Qinghai
Gansu
Ningxia
Shaanxi
Shanxi
Henan
ShandongHebei
Jiangsu
Anhui
Zhejiang
Fujian
JiangxiHunan
GuangdongTaiwan
Guangxi
Hainan
Yunnan
Guizhou
Sichuan
Chongqing
Tianjin
Hubei
LPG receiving terminals and storage facilities
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LPGBusiness Model
Oil Refinery
LPG Receiving Terminal
Class 2 Station
Assets owned by the Group
LPG vessels
LPG trucks
Trucks sending bottled LPG
Import/
Domestic Supply
Class 1 Station
Storage Facilities
Domestic supply
Class 3 Station
Bottling Station
Residential householdsCommercial users
Industrial users City gas companies
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Value Chain of LPG Supply
Oil RefineryClass 1
Station
LPG Wholesaler
Class 2 Station
Bottled LPG Maker
Class 3 Station
Bottled LPG
Retailers
5-6% 6-7% 10-12%
Source: Company data
Gross Margin (%)
2009 LPG gross margin for China Gas: 5.7%
2010 LPG gross margin for China Gas: 8.7%
4-5%
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LPGMarket Share and Margins Outlook
LPG Market Share by volume LPG Gross Margin Expansion
Source: Company data
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LPGSupply and Demand in China
Source: Company data
-
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Feedstock for Cracking
Industry
Commercial (Transportation and etc)
Residentail Gas
China LPG Demand by Sector
-8
-6
-4
-2
0
2
4
6
8
10
12
14
16
18
20
22
24
26
28
2 00 0 2 001 20 02 2 00 3 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 2 01 2 2 01 3 2 01 4 201 5
SupplyDemandNet Trade
China LPG Supply and Demand
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Operational Highlights FY2010
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Natural GasSales 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%
Totalsalesvolum
e(millionm3)
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Natural GasCustomer Breakdown (as at 31 Mar 2010)
Sector
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%
Naturalgassalesvol
ume(millionm3)
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Natural GasCustomer Data (as at 31 Mar 2010)
Customer Growth Organic Acquired
FY10
Portfolio Total Change from FY09
FY09
Portfolio Total
Residential 657,907 434,159 4,837,436 29.2% 3,745,370
Industrial 323 67 810 92.9% 420
Commercial 3,825 1,140 33,476 17.4% 28,511
CNG Stations 31 - 91 51.7% 60
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
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Pen
etrationRate
UrbanPopulationCovered(m)
Natural gas daily consumption Urban population covered and penetration rate
(000m3)
Natural GasOther Operational Data (as at 31 Mar 2010)
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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
Natural GasOther Operational Data(as at 31 Mar 2010)
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LPGOperational 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
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Financial Highlights FY2010
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Financial SummaryIncome Statement
HK$ ('000) FY10 % change FY09 FY08
Turnover 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 -
Other 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
Profit Attributable to Shareholders 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% -
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Financial SummaryBalance 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 2,896,457Short-term Bank Debt 5,294,761* 3,103,855 **
Long-term Bank Debt 8,021,345 7,194,067
Convertible Bond - 14,823
* 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
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FY2011-12 Outlook
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Natural Gas Pricing Reform
Period of Non-Pass Through
As a % of Total
Revenue Full Year 6 month 3 month
% of Volume
passed-
through
(residential
users only)
0% (0.95%) (0.47%) (0.24%)
50% (0.47%) (0.24%) (0.12%)
90% (0.09%) (0.05%) (0.02%)
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 ofonlyRMB0.23/m3 and we anticipate residential userscan 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)
(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
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FY2011-2012 Drivers
Significant increase in upstream supply will
lead to:
Increase in penetration rate: To reach 43%
by 2012 enhanced connection fee income
More industrial connections: More gas toconnect industrial customers in backlog
further increase gas sale volume
Faster CNG stations rollout: To reach at
least 180 CNG stations in 50 cities by 2012
improving overall operating margins of
gas sale
Completion of vertical integration of supply
chain will lead to:
Wider distribution network: To cover 9
provinces with wholesale and retail supply
Increase in sale volume: To reach at least 2million tons by 2012
Improved margins: To reach 15% gross
margin and 5% net margin by 2012
Natural Gas LPG
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FY2011-2012 Guidance
FY2011 FY2012
Gas volume (m3) 4.8 bn 6.0 bn
New residential connections 700,000 850,000
CNG stations to reach 120 180
LPG sales (million ton) 1.3 2.0
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
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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 Companys product and services in the marketplace, competitive factors,
new products and technology changes, the Companys 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 securitiesor financial instruments or to provide any investment service or investment advice.
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