IFC lends $60m to China Tian Lun Gas

China Tian Lun Gas (Tian Lun Gas), one of China’s major domestic gas operators, and the International Finance Corporation (IFC), the World Bank's private investment arm, have agreed to provide $60 million to help Tian Lun Gas expand its natural gas activities in China’s cities.

The five-year loan follows a $150 million equity investment by IFC and IFC Global Infrastructure Fund (GIF) in May 2015, making them the second-largest shareholders in the company on a combined basis. Each holds 9 percent of the Hong Kong-listed company’s shares.

At the loan agreement signing ceremony in Hong Kong, Zhang Yingcen, chairman of Tian Lun Gas, said: “We are honoured to have won the trust and long-term support of IFC and IFC GIF. Their equity investment together with IFC’s loan will give us ample capital to grow our existing business, develop new business, and improve our debt structure.”

The borrower is Henan Tian Lun Gas Group, a wholly owned subsidiary of Tian Lun Gas. The loan is expected to help Tian Lun Gas expand and acquire city gas concessions as well as build related infrastructure or plants.

By facilitating access to gas for citizens in China’s third- and fourth-tier cities, the borrower hopes to bring a significant improvement in the living conditions of people, with gas expected to replace other less efficient and more harmful cooking fuels or, in some cases, home heating fuels such as coal, LPG, or wood.

According to the US Energy Information Administration (EIA), coal supplied the majority (nearly 66 percent) of China’s total energy consumption and natural gas supplied 5 percent in 2012. The Chinese government is currently increasing its use of natural gas to replace some coal and oil as a cleaner burning fuel and plans to use natural gas for 10 percent of its energy consumption by 2020.

When asked about the currency risk for its US dollar-dominated loan, Zhang said the company is capable of managing the risk with a balanced financing structure, in which 60 percent of financing comes from China and the rest from overseas partners.

Tian Lun Gas has business interests in city gas, liquefied petroleum gas (LPG) stations and production and sales of liquefied natural gas (LNG), as well as long-haul gas pipeline construction and direct supply to industrial users.

The company now owns 49 city gas projects, 38 operational compressed natural gas/LNG refilling stations with 12 under construction, two LNG processing plants under construction, and three long-haul gas pipeline projects in operation in 16 provinces.

Launched in 2013, GIF is a $1.2 billion fund investing alongside IFC in equity and equity-related investments in infrastructure projects and companies in developing countries. It has made eight investments so far. Tian Lun Gas is its first investment in Asia.