Net profit at Shenzhen’s main gas distributor falls in H1
Shenzhen Gas, a piped city gas distributor in the southern Chinese city of Shenzhen, posted an 11.88% drop in net profit year on year to RMB 443.3 million ($72.11 million) in H1, after a one-off gain boosted earnings in the same period last year.
Stripping out last year’s exceptional gain from the divestment of property assets, net profit would have grown by 8.82% year on year from increased sales of pipeline gas, according to results filed with the Shanghai Stock Exchange. Sales reached RMB 4.62 billion in H1, up by 13.59%.
Shenzhen Gas sold 719 million cubic metres (MMcm) of gas in the six-month period, an increase of 7.63% year on year. However, that is still less than halfway towards a planned sales target of 1.55 billion cubic metres for this year, which the company attributed to the economic slowdown, higher electricity transmissions from western provinces edging out gas, and lower-than-expected demand from gas-fired power plants.
The company’s pipeline gas business still developed steadily. The company sold 684 million cubic metres (MMcm) of pipeline gas, up by 5.88% over the same period last year. It also added 144,400 new customers, which brought its total to 1.82 million.
Shenzhen Gas admitted a planned increase in the price of gas distributors pay to long-distance pipeline operators such as PetroChina – known as the citygate price – may affect its ability to sign up more industrial and commercial users and sell more gas.
The increase, effective from 1 September, will raise citygate prices by an average of nearly 19% nationwide for non-residential gas users using existing volumes. Guangdong province, where Shenzhen is located, will see a smaller 4.3% increase to RMB 2.74 per cubic metre as citygate prices there are already higher than average following a pilot price reform scheme started at the end of 2011.
Distributors are unlikely to be able to fully pass on the tariff hike to the retail level because of weak demand from end-users, UBS Securities analyst Xu Yingzhen said in a research note last Friday.
Shenzhen Gas will need to expand by developing business in cities other than its homebase in the future, said Xu.
The company’s gas sales outside Shenzhen reached 178 MMcm, up by 32.84% year on year. Sales in these areas went up by 36.78% to RMB 569 million, according to the company filing.
Shenzhen Gas warned that one danger facing future gas sales was slowing demand from industrial, commercial and power generation customers because of increasing imports of electricity from western provinces.
However, the competition posed by electricity purchases has divided opinion, with some experts arguing Shenzhen’s efforts to clean up air pollution will continue to support demand for gas despite the imports.
A clean air plan released by Shenzhen authorities in September 2013 called for the use of 25,000 LNG trucks and electric vehicles by the end of this year, with another 10,000 to be added by the end of 2015, according to Northeast Securities analyst Wang Weigang.
Shenzhen’s gas grid will be expanded to cover 72.5% of the area by the end of next year, which will boost local gas consumption over the next few years.
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