Chinese gas firm completes $70m financing

China Gas, the Hong Kong-listed piped gas distributor, has pulled in financing from foreign investment groups to develop natural gas projects in China.

In total, China Gas has raised $70 million (€58 million). FMO, a Dutch development bank and PROPARCO, a French development bank, have teamed up to provide a nine-year $50 million loan facility to China Gas, which will pay interest of 2.35 percent over LIBOR for an average tenor of 6.6 years.

In addition, Templeton Strategic Emerging Markets Fund II (TSEMF II) and FMO have committed to purchase new shares in China Gas worth $14 million and $6 million respectively. 

The funds raised will be used to develop China Gas’ existing 44 gas distribution concessions currently in its portfolio as well as another 28 in development.

Dr Mark Mobius, head, TSEMF II 

With pollution a major concern in China, natural gas is touted as a clean, safe and cost-efficient source of energy for both commercial and domestic users. Companies like China Gas connect the last mile infrastructure from main gas pipelines to its clients.

According to a statement issued by Templeton Asset Management, it is forecast that gas usage in China will grow from three percent of total energy consumption in China currently to ten percent by 2010.

FMO, which has a €2 billion investment portfolio, invests risk capital in companies and financial institutions in developing countries. PROPARCO is a subsidiary of the Agence Francaise de Developpement (AFD), a corporation and specialised financial institution that provides economic development aid. Both organisations focus on infrastructural and environmentally valid projects in the private sector in emerging markets.

TSEMF II, which is managed by Templeton Asset Management, makes strategic investments in emerging markets and has 11 offices worldwide, including in Hong Kong and Singapore. Based in San Mateo, California, the firm’s investment team is headed by Dr Mark Mobius and had over $20 billion under management as of September 30 2005.