First investment in China gas for IFC's global fund

The International Finance Corporation (IFC), the private investment arm of the World Bank, and the Global Infrastructure Fund (GIF), a $1.2 billion vehicle launched in December last year by IFC Asset Management Company (AMC), have invested $75 million each in China Tian Lun Gas Holdings to help expand the company’s natural-gas distribution infrastructure in the country.

This marks the first deal in the region by GIF, one of AMC’s eight investment funds. On a combined investment basis, this is also IFC and AMC’s largest infrastructure equity investment in East Asia.

“IFC and the IFC Global Infrastructure Fund’s international expertise in infrastructure investments can help us achieve our goal of increasing access to clean energy for Chinese households and businesses,” said Yingcen Zhang, chairman of Hong Kong-listed Tian Lun Gas, in a statement.

“Tian Lun Gas will be the IFC Global Infrastructure Fund's first commitment in Asia,” added Gavin Wilson, chief executive officer of AMC. “We are excited by the opportunity to partner with a dynamic group as they participate in the rapid transformation of China's natural-gas sector.”

This deal is the latest investment by IFC in China’s gas sector as the institution strives to make the low-carbon fuel more available for household as well as for industrial, commercial, and transportation use in third- and fourth-tier Chinese cities.

Last month, IFC announced a $300 million debt financing package to China Gas Holdings. It also invested in ENN Energy Holdings, which bills itself as China’s “largest clean energy distributor”, in 2013.

IFC says addressing air pollution is a priority for China as, after decades of fast economic growth that has led the country to rely heavily on coal and oil to generate power, smog in cities has reached worrying levels.

“Natural gas is a sustainable, environmentally friendly, and economical fuel source with vast potential in China,” said Vivek Pathak, IFC’s director for East Asia and the Pacific. “Our partnership with Tian Lun Gas reflects our support for the company’s business model and our commitment to helping China achieve greener growth.”

As of December 2014, Tian Lun Gas had 44 city gas concessions in China. Headquartered in Zhengzhou, it operates 36 natural-gas filling stations across 10 provinces, including Gansu, Guangdong, and Yunnan.