China Gas Holdings Ltd, a Hong Kong-listed distributor of piped gas, will pay 140 million yuan (US$17 million) for a stake in a gas company that supplies gas to the biggest industrial city in South China's Guangxi Zhuang Autonomous Region.

The firm will get a 50 percent stake of Liuzhou City Gas Co which distributes natural gas to about 50,000 households in Liuzhou City.

So said China Gas yesterday in a statement to the Hong Kong Stock Exchange.

Shares of China Gas, suspended on Wednesday, resumed trading yesterday and went up 2.143 percent to HK$1.43 (18 US cents).

Liuzhou City Gas Co, a wholly-owned subsidiary of Liuzhou Holdings which is controlled by the local government, owns the other 50 percent stake of the new joint-venture.

According to an accord signed on Wednesday, Liuzhou Holdings has yet to get approval from the Liuzhou City State-owned Assets Committee for the equity transfer.

The transaction is expected to be completed within the next two months, China Gas said.

The new venture will have the right to operate a gas business in the city for 30 years and China Gas will use its internal resources to fund the acquisition.

China Gas said the acquisition is the company's third investment this year in the clean fuel market in a city with a population of more than 1 million, following Baoji in Northwest China's Shaanxi Province and Yangzhou in East China's Jiangsu Province.

The Hong Kong-listed gas company last month set up two joint-ventures for a 30-year natural gas supply in Baoji and Yangzhou, with investments of 281 million yuan (US$34.6 million) and 369 million yuan (US$45.5 million) respectively.

"The directors (China Gas board) have always been proactive in seeking opportunities to expand and enhance the natural gas business in the country," China Gas said in the statement.

China Gas bought the right to the equity stake though a public tender offered by Liuzhou City Gas last month.

Total net assets of Liuzhou City Gas were 168 million yuan (US$20.7 million) at the end of April.

Company officials yesterday said they had no further investment plans to disclose. Last year the gas company made a before-tax profit of 781,827 yuan (US$96,402), up by 35.8 per cent.

China, which relies on coal and oil for about 90 percent of its fuel, is pushing the use of natural gas to clean up the sky. By 2010 it wants natural gas to contribute 8 percent of its energy mix, up from the current 3 percent.

China Gas, which has investments in more than 58 projects in provinces including Hubei, Guangdong and Hebei, plans to sell 5 billion cubic meters of natural gas per year by 2010.

The company sold 17.18 million cubic meters and 21.95 million cubic meters of gas to household residents and industrial users respectively in the 2004 fiscal year, and collected revenue of about HK$49.73 million (US$637.6 million).

(China Daily December 9, 2005)