HONG KONG: China Gas Holdings Ltd, a Hong Kong-listed supplier of gas to homes and businesses on the mainland, said it aims to double sales in the next two years as demand, reflecting both government and consumer desires, increases for the cleaner-energy source.

Sales may reach as much as 5 billion cubic meters by March 2011, compared with 2.3 billion in the financial year ended the same month this year, Chief Financial Officer Eric Leung said at a press briefing today.

A key factor in the rising demand for gas is Beijing's plan to double the use of natural gas to just over 5 percent of total domestic energy consumption by 2010, compared with levels four years ago, to help reduce its reliance on more polluting coal. The nation is building a second pipeline from Central Asia and plans to add at least 10 terminals for imported liquefied gas from suppliers that include Australia, Qatar and Malaysia.

The relatively low cost and low pollution associated with the use of gas are also cited as considerations spurring this increasing demand. "Natural gas is a relatively new form of energy in China and it has a lot of advantages, including that it's cleaner burning and cheap," said Leung, adding he was confident the company can reach sales targets.

China Gas aims to connect at least 1.1 million more residential customers in the next two years, said Leung. Sales rose 104 percent in the financial year ended in March and the number of city gas distribution projects rose to 110 from 60, a company statement issued to the Hong Kong stock exchange said yesterday.

Profit for the financial year ended this March fell 26 percent to HK$103.7 million ($13 million), the statement said.

China Gas booked a HK$366.3 million impairment of the value of financial derivatives, mainly reflecting declines in the value of interest-rate swaps contracts for some loans, according to the stock exchange filing. Excluding the writedown, net income would have increased by 53 percent, China Gas said.

Interest rate rises are likely this year as the global economy recovers, reversing last year's losses, a company statement said today.

Shares fell 5.3 percent in Hong Kong trading to HK$1.95, the most in two weeks. The Hang Seng index dropped 1.3 percent.

China Gas is investigating whether to set up gas distribution projects in more than 20 cities, said Leung.

Most new customers will likely come from existing plans as the company hopes to increase its market penetration from about 25 percent of homes and businesses to 70 percent, Leung added.

China Gas shares have gained 71 percent this year, more than double the 34 percent gains in the Hang Seng in the same period. These stock gains and the prospect of a doubling in sales could soon mean a period of "double happiness" for China Gas and its bottom line.

China Daily - Bloomberg News

(HK Edition 07/23/2009 page4)