Beijing Gas Blue Sky Announces 2019 Annual Results

Revenue and EBITDA increased by 24.6% and 28.5% respectively year-on-year

Highlights

• Total gas sale in subsidiaries increased by 90.0% to 1,013.2 million cubic meters
• Revenue increased by 24.6% to HK$2,676.1 million.
• Gross profit increased by 13.2% to HK$224.5 million.
• EBITDA (excluding all one-off gain*) increased by 28.5% to HK$480.9 million.
• Total assets increased by HK$523.3 million to HK$8,751.6 million.
• The closing cash balance was HK$542.3 million, representing a year-on-year increase of 92.6%, and the gearing level was 36.1%.
• As at 31 December 2019, the Group's natural gas projects covered 17 provinces, cities and autonomous regions in the PRC

Financial Highlights

^#Gross profit plus government subsidies (subsidies for coal-to-gas connection, gas appliance & sales spread)

*One-off gain includes (i) disposal of subsidiaries (ii) deemed partial disposal of an associate (iii) partial disposal of joint ventures and (iv) gain arising from acqusition of an associate

HONG KONG, CHINA - Media OutReach - 30 Mar 2020 - Beijing Gas Blue Sky Holdings Limited ("the Company" or "Beijing Gas Blue Sky", together with its subsidiaries, the "Group", HKSE stock code: 6828) announced its interim results for the six month ended 31 December 2019 ("FY2019"). In FY2019, the Group recorded total revenue of HK$2,676.1 million, representing a growth of 24.6% year-on-year. The growth was mainly attributable to the completion of the acquisition of Zhejiang Bo Xin and Xin Te (the "Zhejiang Acquisition") this year. LNG business has been launched with great success, as income from LNG business increased significantly by 66.5% over the corresponding period, and income from direct LNG supply business also increased by 21.7% over the corresponding period.

During the year, gross profit increased 13.2% to HK$224.5 million; earnings before interest, tax, depreciation and amortization ("EBITDA") (excluding all one off gain) increased by 28.5% to HK$480.9 million.

BUSINESS REVIEW

In FY2019, the Group's total gas sales and throughput volume increased by 42.6% year on year to approximately 7,306.2 million cubic meters (FY2018: 5,125.0 million cubic meters). The gas sales volume from the subsidiaries amounted to 1,013.2 million cubic meters in FY2019 (FY2018: 533.4 million cubic meters), and the significant increase was attributable to LNG business. In particular, since the remaining 88 million cubic meters of a shipment of offshore gas purchased through cooperation with CNOOC was sold out at the beginning of the year, and the LNG business grew upon the completion of the Zhejiang Acquisition, LNG business achieved a year-on-year growth of 145.2%. Moreover, the sales from direct LNG supply business also achieved a year-on-year growth of by approximately 51.3% because of the new acquisition projects.

As at 31 December 2019, the Group's natural gas projects covered 17 provinces, cities and autonomous regions in the PRC, including Liaoning Province, Jilin Province, Hebei Province, Beijing City, Shandong Province, Shanxi Province, Shaanxi Province, Ningxia Autonomous Region, Shanghai City, Jiangsu Province, Anhui Province, Zhejiang Province, Guizhou Province, Hubei Province, Guangdong Province, Guangxi Province and Hainan Province.

CITY GAS BUSINESS

As of FY2019, the Group had 6 city gas projects in Shanxi Province, Jilin Province, Liaoning Province and Hubei Province. During the year, the Group connected gas pipelines for 45,042 new users and the accumulated number of users reached 477,443, of which 44,784 were new residential users and the accumulated number of residential users reached 474,949. The volume of natural gas sold by the Group to residential users amounted to 72.6 million cubic meters (FY2018: 53.8 million cubic meters). The Group secured 258 new industrial and commercial users and the accumulated industrial and commercial users reached 2,494, and the natural gas sold to industrial and commercial users reached 94.1 million cubic meters (FY2018: 79.2 million cubic meters). City gas segments recorded an income of HK$565.0 million, which included a connection fee income of HK$68.3 million, and the government grants related to connection fee income of HK$73.2 million was recorded in other gains and losses (FY2018: HK$209.9 million).

The Group actively responded to national policies. In order to properly implement the Blue Sky Defensive Strategy to improve the quality of the atmospheric environment, the Group deepened the existing project regional market and vigorously promoted the coal-to-gas process in the plain regions. Moreover, the Group is developing high-quality industrial and commercial users in order to adjust the gas consumption structure of the Northeast market, the Group continued to improve the market system with the goal of "market integration" and made important contributions to the Group's overall gas volume and revenue. In addition, further development of urbanization boosted residential gas consumption. As China's economy continues to grow, urbanization is expected to achieve stable development, and gas market will likely further expand in the future.

TRADING AND DISTRIBUTION OF LNG AND CNG BUSINESS

As of 31 December 2019, the Group owned 29% equity interests in PetroChina Jingtang LNG Co., Ltd., and distributed LNG with gas sources from Sinopec's Dongjiakou receiving terminal in Bohai Rim, and distributed LNG with gas sources from CNOOC's Ningbo receiving terminal in the Eastern China. The Group recorded a total trading volume of 675.9 million cubic meters (FY2018: 275.7 million cubic meters) and segment sales amount in trading and distribution business of HK$1,527.1 million (FY2018: HK$917.1 million) through distributing LNG by 67 self-owned natural gas transportation vehicles (FY2018: 52 natural gas transportation vehicles). Benefiting from the advantage of the Group's whole LNG value chain business, the sales from this business grew dramatically. The Group participated in the first bidding for the window period of LNG receiving terminal provided by CNOOC to independent third party with its business partner in winter 2018, gained access to the import and joint distribution right of offshore gas in the peak season of demand for LNG, and completed the distribution of approximately 88 million cubic meters of LNG during the reporting period.

The layout of the Group's LNG business has become more solid upon building up the upstream gas resources, stronger midstream logistics deployment capacity as well as the downstream terminal distribution advantages in the whole LNG value chain, Therefore, the entire value chain of LNG has been fully developed, so that all links could fully exert synergy effects and promote the rapid growth of sales volume of LNG business. In addition, in the first half of 2019, the Group completed the Zhejiang Acquisition, which is a significant LNG operator in the Zhejiang region with better upstream gas sources and a huge trading network, contributing to stronger growth of the Group's trading business during the period.

DIRECT SUPPLY BUSINESS

During the year, the Group recorded an income of HK$430.1 million from its direct supply business, representing an increae of 21.7% as compared to the corresponding period (FY2018: 353.5 million), which sold 135.0 million cubic meters (FY2018: 89.2 million cubic meters) of natural gas to industrial and commercial users through the provision of the direct supply service, representing a growth of 51.3% as compared to the corresponding period of last year, covering such provinces as Shandong Province, Guizhou Province, Anhui Province, Hainan Province, Zhejiang Province, Guangdong Province, Liaoning Province and Shanghai City. Gas sales volume from this business increased in 2019 mainly attributable to the completion of the Zhejiang Acquisition at the end of May 2019, which provides direct supply service to over 100 industrial customers with high demands for LNG as the project is located at Yangtze River Delta region. With steady upstream gas sources and regular downstream industrial customers, the project has become a significant contributor to the growth of LNG direct supply business of the Group since the completion of the acquisition.

LNG AND CNG REFUELLING STATION BUSINESS

The Group sold natural gas to LNG vehicles (trucks and buses) and CNG vehicles (taxis, buses and private cars). During FY2019, the Group owned 29 gas refuelling stations including 17 CNG refuelling stations and 12 LNG refuelling stations (FY2018: 34 gas refuelling stations including 19 CNG refuelling stations and 15 LNG refuelling stations) mainly covering Hainan Province, Anhui Province, Shandong Province, Guizhou Province, Jilin Province, Shanxi Province and Liaoning Province, with gas sales of 35.6 million cubic meters (FY2018: 35.4 million cubic meters) and sales income of HK$153.9 million (FY2018: HK$173.0 million), representing a decrease of 11.0% as compared to the corresponding period of last year, which was mainly affected by recession in the industry, the selling price declined compared to the corresponding period last year, as such the Group closed some gas refuelling stations that presented unsatisfactory operation performance.

LNG RECEIVING TERMINAL PROJECTS

In FY2019, the total throughput volume of Petrochina Jingtang (Caofeidian Jingtang LNG Receiving Terminal) reached 6,275.8 million cubic meters, among which, the gas volume externally delivered to the pipelines through gasification was 5,503.0 million cubic meters while the gas transportation volume of tank trucks was 772.8 million cubic meters. The throughput volume of this project dropped this year as compared to corresponding period of last year, mainly because consumption growth declined in natural gas industry; implementation of coal-to-gas policy slowed down; growth of demand from the downstream in the Northern China decreased, and warm winter resulted in low demand from downstream sector.

Expansion initiatives

The Group completed the Zhejiang Acquisition in May 2019, the consideration of which was RMB205,000,000 (equivalent to approximately HK$239,174,000). As an essential LNG strategy of the Group, the project will help the Group to further improve its comprehensive competitiveness in markets in the Eastern China or even across China.

FUTURE PROSPECTS

Get bonus brought by policies, and map out key strategies

As the government adopts the policy of "regulating the core and relaxing the ends", the Group will make good use of "core" resources, and develop key "ends" businesses to seek opportunities in the industry, and maximize the comprehensive advantage.

Regarding upstream gas sources, the Group not only held equity interest in LNG receiving terminal located at Tangshan, but also won the bid for window period to engage in international trade for LNG through cooperating with CNOOC. Since the Group has successful experience in international procurement for gas source and domestic trade distribution, various domestic and overseas companies are willing to make strategic cooperation with the Group. For instance, China Sam Enterprise Group Co., Ltd ("China Sam") entered into Cooperation Framework Agreement with the Group in the hope to maximize the development value of its existing LNG resources cooperatively. In the future, the Group will explore the cooperation with Sinoenergy Corp, a subsidiary of China Sam, to provide proper use of a total of 4 million tons LNG loading and unloading capacities annually of Sinoenergy Corp's Jiangyin receiving terminal in Yangtze River Delta and Chaozhou receiving terminal in the Pearl River Delta economic belts, take advantage of the international procurement resources and experience, and gain greater bargaining power in international gas sources. As such, would improve the Group's pricing power and industrial influence in international procurement and domestic distribution.

In addition, SK E&S, a Korean group whose main businesses are LNG and renewable energies, is interested with China's market potential (as China is one of the East Asian countries with fastest growth of demands for LNG) and the domestic resources and operation experience of the Group. Thus, there will be more collaborative cooperation with the Group for upstream gas source businesses. Meanwhile, Beijing Gas Group Co., Ltd ("Beijing Gas"), a major shareholder of the Group, is constructing a LNG receiving terminal at Nangang Industrial Zone in Tianjin, including wharf, berth, and 10 LNG storage tanks with the tank capacity of 200 thousand cubic meters each, and building the supporting facility -- pipelines transmitting natural gas from the receiving terminal to Beijing City. This indicates that the Group will have more cooperation opportunities with the major shareholder, Beijing Gas, in constructing LNG wharf and trading of LNG. Furthermore, the Group will also pay close attention to other wharf resources to improve its capacity to handle businesses.

In terms of LNG business from downstream customers, the Group is maximizing the synergistic effect brought by the acquisition, and exploring potential in Yangtze River Delta after the completion of the Zhejang Acquisition. It is expected that the Group will adopt the same strategy in Beijing-Tianjin-Hebei region, another district with strong consumption of LNG. Enjoying prosperous economy, Beijing-Tianjin-Hebei region is home to various commercial and industrial enterprises with considerable market demands. In the future, the Group will keep increasing its market share and influence in Yangtze River Delta and Beijing-Tianjing-Hebei region to generate development momentum for surrounding areas, and improving its overall capacity to supply and distribute LNG to increase its total volume of trade and form greater scale economies effect, so as to further enhance the Group's bargaining power with upstream markets.

In terms of city gas business, the Group will gradually gain more projects, and projects designed mainly for industrial and commercial users will become a driver for growth. At the same time, the Group will make every possible effort to attract such end market customers such as gas power plants, gas for transportation, distributed energy, industrial and commercial users, and residential users, so as to increase gas consumption from the end customers.

Achieve rapid growth with support from the major shareholder and the Group's strength

With the establishment of China Oil & Gas Piping Network Corporation, pipeline and network becomes independent which would gradually open to third parties, so as to improve the fair competitive capability of other market players. The Group will maximize the advantages of LNG layout in the upstream sector and stable commercial and industrial customer network in the downstream sector to gradually improve its comprehensive services, and increase the proportion in the profit of trade. As for city gas business, the Group will keep exploring opportunities of the major shareholder's project in Beijing-Tianjin-Hebei region and China-Russia east-route natural gas pipeline, and lay out key new project markets. For the existing city gas projects, the Group will adhere to refined management to improve the profitability of existing projects and achieve steady growth in the income of existing city gas assets, and also leverage the existing projects' "point-to-area"（以點帶面）capability to focus on tapping the market potential of Shanxi and Jilin.

Improve management system to promote high-quality development

Focusing on strategy planning and based on main principles of "increasing revenue while reducing expenditure, and reducing cost while increasing efficiency", the Group will optimize its organization structure and personnel, impose strict control on expense, and improve efficiency to implement projects, so as to increase its comprehensive profitability. In terms of finance, as projects acquired has achieved normal operation to increase cash flow and work in tandem with the support from the major shareholder, the Group will broaden financing channel, increase debt ratio and scale of current borrowings appropriately through cooperation with more commercial banks, and achieve a reasonable decline in finance cost by refinancing the existing debts to improve the Group's profitability. In terms of management of budget and cash flow, the Group will develop strict review system and a large data management system, adopt various measures to ensure the security of cash flow, and make active effort to develop peripheral market guided by budget objectives, As such, to make constant improvement in its overall operation, and ensure high-quality development for the Group. In terms of performance management, the Group will develop a more scientific performance system to achieve a sound appraisal system, such as achieving a thorough assessment-related systems, improved assessment process, extensive application of assessment results, and effective measure to ensure the implementation of assessments. In addition, the Group will also apply its strategies and ideologies in performance management to corporate culture and human resources management so as to maximize the guiding and encouragement role of performance appraisal, and to further help employees and the Group to grow together.

About Beijing Gas Blue Sky Holdings Limited

Beijing Gas Blue Sky Holdings Limited ("Beijing Gas Blue Sky", HKSE stock code: 6828) is an integrated natural gas provider, distributor and operator, with an emphasis on the midstream and downstream natural gas development. Our natural gas business includes: (i) construction and operation of compressed natural gas ("CNG") and liquefied natural gas ("LNG") refueling stations for vehicles; (ii) construction of natural gas pipelines and operation of city gas projects by providing piped gas; (iii) direct supply of LNG to end-users; and (iv) trading and distribution of CNG and LNG.

The Group has adapted to the "One Belt One Road" policy, and focus on operating and investing natural gas business. The Group is actively expanding its business development and distribution, as well as continues to gradually expanding the scale of operations. Currently, the Group's natural gas projects covered 17 provinces, cities and autonomous regions in the PRC, including Liaoning Province, Jilin Province, Hubei Province, Beijing City, Shandong Province, Shanxi Province, Shaanxi Province, Ningxia Autonomous Region, Shanghai City, Jiangsu Province, Anhui Province, Zhejiang Province, Guizhou Province, Hubei Province, Guangdong Province, Guangxi Province and Hainan Province. The Group is committed to its vision: "develop clean energy, enhance customer value, create a beautiful blue sky". In the future, it will continue to actively investing and developing natural gas business, as well as participating in the development of natural gas industry value chain.