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China Life to buy chunk of Sinopec’s $3.3bn gas pipeline

SDIC, the largest state-owned investment holding in China, will also purchase a minority stake in the 2,229km network.

China’s largest insurance company, China Life, has teamed up with a subsidiary of SDIC to acquire a 50 percent interest in East China Gas Pipeline, a network owned by China Petroleum & Chemical Corporation, also known as Sinopec. 

The proposed transaction will see the two state-owned institutional investors pay a total of 22.8 billion yuan ($3.3 billion; €3.1 billion) in cash to Asia’s largest oil refiner. Once completed, China Life will hold a 43.86 percent stake in the network, while SDIC will own a 6.14 percent. Sinopec retains a 50 percent share. 

The asset comprises operating gas pipelines with a total length of 2,229km, covering six provinces and two directly administered municipalities that comprise Sichuan, Chongqing, Hubei, Jiangxi, Anhui, Jiangsu, Zhejiang and Shanghai. As of this June, the pipeline company had total assets of about 19.6 billion yuan and total liabilities of about 17.8 billion yuan. 

The transaction price represents a premium of over 20 percent above the book value of the pipeline company, according to Sinopec. 

The oil major proposed to sell half of the stake in the Sichuan-to-Shanghai gas pipeline project in August in a bid to raise funds to build other pipelines, grow capacity and develop storage facilities for the East China Gas Pipeline, with some of the money also earmarked to repay debts. 

The transaction follows a similar move last year by rival oil giant PetroChina. The company sold a 50 percent stake in its Trans-Asia Gas Pipeline Company to a unit of state-owned asset manager China Reform Holdings Corporation in November 2015 for 15.5 billion yuan. 

China Life, for its part, is not new to infrastructure. Its investment arm has deployed more than 50 billion yuan into infrastructure investments, according to its website, which also says that these include domestic projects. The firm told PEI in July that it was looking to commit to infrastructure funds in the next 12 months. 

SDIC de-facto controller is China’s State-owned Assets Supervision and Administration Commission of the State Council. As of the end of 2015, the company had invested in about 20 ports and more than 3,500km of trunk railways, managing total assets of around 26 billion yuan.