Hong-Kong registered Zhongyu Gas Holdings saw 2017 profits soar as China’s efforts to curb smog drove switching from coal to gas. The group is active in gas sale and distribution particularly in northern and eastern China, operating a 12,342-km pipeline network.
Revenues for Zhongyu rose 35.6% in 2017 to HK$5.048 billion (US$643 million) from HK$3.723 billion (US$474 million) in 2016. Returns were boosted, too, as net profit attributable to shareholders surged by 170% to HK$558 million (US$71 million) from HK$206 million (US$26.3 million). The group reported a rise in units of gas sold to 1.33 bcm in 2017, from 985 mcm in 2016, with an average cost of natural gas of 2.11 yuan (US$0.34) per 1,000 cubic metres, up 6% on the 2016 average.
Zhongyu also installed new piped gas connections at over 365,000 premises. The group now has more than 2.2 million residential customers, primarily within urban areas in Henan, Jiangsu, Fujian, Hebei and others.
Sales of gas drove improved 2017 performance, with revenues of HK$3.399 billion (US$433 million), up from HK$2.46 billion (US$313.5 million) in 2016. Pipeline connections and equipment sales also increased revenues, as did LPG sales.
Revenues from CNG and LNG fuel stations declined, though, down 2.4% from 2016. Zhongyu attributed this to weak oil prices, making refined fuels more competitive. As such, the group said it would maintain its CNG and LNG network, but that any future expansion would be “prudent”.
Given Chinese government support for gas over coal, Zhongyu has a strong basis for operations in the urban market and with potential for growth in rural areas. The group is upbeat on security of supply for gas, driven by developments such as the extension of the domestic gas pipeline network and the completion – in 2020 – of the China-Russia East Route pipeline. The latter will add immediately to supply options in nine provinces, including Hebei, where Zhongyu is particularly active.
The company’s acquisition of Harmony Gas would serve as a "benchmark" for possible future mergers and acquisitions, it said, although such opportunities would be assessed in a "cautious manner".