Connected Transaction Acquisition
of City Gas Business
31 December 2009
The Board announces that Kunlun Gas, a wholly-owned subsidiary of the Company, participated in an open tender in respect of the sale of the equity interest in Zhongqing Gas held by Daqing Petroleum Administrative Bureau, a wholly-owned subordinated entity of CNPC, and entered into an asset transfer agreement on 30 December 2009 in respect of equity interests in Zhongqing Gas in accordance with the results of the open tender. Pursuant to the Asset Transfer Agreement, Kunlun Gas will acquire the City Gas Business from the Transferor. Upon completion of the Acquisition, Kunlun Gas will pay consideration in the amount of RMB1,088,064,200 (approximately HK$1,236,436,600) to the Transferor, which will be adjusted by any gain/loss attributable to the Target Equity Interest which arose between the reference date of valuation and the Completion Date on a dollar-for-dollar basis.
Since the applicable percentage ratios for the Acquisition are more than 0.1% but less than 2.5%, the Acquisition is only subject to the reporting and announcement requirements and is exempt from the independent shareholders' approval requirement under the Listing Rules. The Acquisition has been approved at the sixth meeting of the fourth session of the Board.
Reasons for the acquisition and benefits to the company
The Board considers that the acquisition of the City Gas Business is in line with the development strategies of the Company. In particular, the Board considers that the acquisition of the City Gas Business has the following strategic importance:
(1) Zhongqing Gas is mainly responsible for operating the City Gas Business in North Eastern China. Upon completion of the Acquisition, the total assets of Kunlun Gas, the main platform through which the Company establishes its city gas business, is expected to increase by about 40%. Kunlun Gas will also expand its operations to North Eastern China, thereby optimizing its resource allocation and promoting the competitiveness and economy of scale of the Company’s city gas business.
(2) As natural gas is an environment friendly source of energy, the natural gas related assets to be acquired in the Acquisition have strong potential in value growth. The assets to be acquired are of high quality, enjoy a technological edge, and are backed up by abundant resources and pipeline networks. This is beneficial to the Company's professional and standardized operation in the city gas business, and brings new prospects to the Company's profitability.
PetroChina Company Limited, press release