AMSTERDAM () -- Based on the expected sustainable natural gas demand growth from the Chinese markets, Asian investors are keeping a keen eye on the expected Hong Kong Stock Exchange (HKEx) listing of the Shenzhen Gas Corporation (SGC).
The floatation, targeted for 2008, will bring SGC, which is the special economic zone's sole piped-gas supplier, to the market in a move by its joint-venture owners Hong Kong and China Gas (Towngas), holding 30%, in order to raise new capital for further expansion plans.
Analysts are especially keen on the listing, as the company is one of the largest China based LNG sector operators in one of China's most booming sectors. No decision has yet been taken how many shares of the company will be brought to the market, but it is slated to be more than 30% of capital. Chinese reports indicate that the share block could depend on the market situation at that time.
Guotai Junan (Hong Kong) has been taken onboard by SGC to act as the underwriter of its initial public offering.
In 2003, based on Chinese financial reports, the overall group was set at a market capitalization of 905 million yuan, based on the fact that Chinese investor Towngas agreed to spend 377 million yuan for a 30% stake.
The decision of the listing has been taken, but total volume also will depend on the vision of two other main stakeholders, the Shenzhen Investment Management, which is the municipal government's investment arm (60%) and New Hope Group, owned by agri-business tycoon Liu Yonghao (10%).
Based on its current market share, SGC holds a vast stake in the wholesale and LPG gas business. According to its website, SGC is the second largest Chinese gas supplier, with around 1.4 million clients.
Analysts are also indicating that investors will be interested in the company as it holds a 30-year monopoly on the Shenzhen gas distribution network, ending in 2034.
In combination with the fact that SGC is becoming a major LNG operator, based on its decision to construct an LNG plant in the special economic zone, the market is ripe for its HKEx listing. LNG supply is expected to reach 3.2 billion cubic metres per year in 2010, expanding to 7.7 billion cubic metres a year by 2020.
Chinese newspapers have indicated that Shenzhen Gas owns at present 10% of the Shenzhen special economic zone LNG terminal.
Growth of LNG usage in China is even set to increase as the Chinese government has stated that it will soon launch a programme to research and promote the use of liquefied natural gas (LNG) as a vehicle fuel.
According to Hou Fushen of the National Clean Vehicle Coordination Leading Group Office and the China Automotive Technology and Research Centre, Beijng will open a bid round the coming weeks in which investors and operators will be invited to express interest in research work to develop LNG engines and vehicles, as well as factory contracts to build newly designed engines and vehicles.
At present, there are only about 300,000 gas-powered vehicles in China, including those burning liquefied petroleum gas (LPG) and compressed natural gas (CNG).
In several main Chinese cities, such as Beijing, Guiyang and Urumqi, small experiments are already in place. Main supply for the latter projects will have to come from already existing LNG plants or new plants in the country.
China opened its first LNG importing terminal in Guangdong province in June, and numerous other LNG import terminals are planned for China's eastern coastline.
SGC's market capitalization could increase dramatically if the latter project will become fully implemented. Its critical role in supplying LNG to these new markets could make it a major force in Asia.
A possible listing on the HKEx would be hitting bulls-eye, analysts are stating. Maybe it would be even more feasible to push forward the targeted listing somewhere at the end of 2007.