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Suchuang Gas Corporation Ltd., 01430.HK - Company Profile
Chairman	SU Yi
Share Issued (share)	903,000,000
Par Currency	Hong Kong Dollar
Par Value	0.01
Industry	Gas Supply
Corporate Profile	Business Summary: The principal business activities of the Group during the year included the distribution and sale of piped natural gas, operating compressed natural gas (“CNG”) and liquefied natural gas (“LNG”) refuelling station business, the provision of natural gas transmission, and acting as the main contractor of construction and connection of gas pipelines in Mainland China. Performance for the year: Revenue was approximately RMB1,181.1 million, representing a decrease of approximately 11.2% over last year. Profit attributable to owners of the parent was approximately RMB54.4 million, representing a decrease of approximately 22.4% over last year. Basic earnings per share amounted to RMB0.06. Business Review： As at 31 December 2020, as the leading piped natural gas supplier and operator in Taicang City, Jiangsu Province, China, the Group had a natural gas pipeline network totaling 645 km covering all major regions in Taicang City and over 90% (in terms of length) of the natural gas pipeline network in Taicang City. Taicang, as the county-level city closest to Shanghai, actively promoted the planned connection to Shanghai for the comprehensive integration into the Yangtze River Delta in 2020. During the period, efforts were made to extend Shanghai Jiamin Line northward, with the completion and opening of the Shanghai-Nantong Railway (Phase I) and the accelerated construction of the Shanghai-Nantong Railway (Phase II). Moreover, active efforts were made to maintain alignment with Shanghai industrial map and proactively integrate into Shanghai Hongqiao Central Business District for deepening the construction of the Jiading-Kunshan-Taicang collaborative innovation rim. This, along with the inclusion of Taicang Pilot Section of Suzhou-Wuxi-Changzhou Intercity Railway (Shanghai Jiamin Line northward to Taicang Section) in national major projects, the official opening of the road connecting Yuelu Road and Jiading Chengbei Road, the completion of the Jiading-Kunshan-Taicang Science and Technology Industrial Park, successful completion of the presentation for coordinated development of Shanghai and Taicang and other events, adds momentum to the economic development of Taicang. The data in the Government Work Report of Taicang City 2021 show that, in 2020, Taicang City recorded the gross regional product of RMB136 billion (estimated, similarly hereinafter), representing a year-on-year increase of 3.9%; the average annual growth of RMB136 billion in gross regional product; the gross regional product per capita exceeding RMB190,000; total investment of RMB46.859 billion in fixed assets; and ranked tenth among China’s Top 100 Counties in terms of comprehensive economic competitiveness, and comprehensive strength. The general public budget revenue was RMB17.1 billion, representing an increase of 5.0%. In addition, the Taicang Port is an important part of Shanghai International Shipping Center as designated by the state, the main container port, the transshipment hub for transport by river and sea, as well as the sole riverside natural harbthe Group’s in Jiangsu. As at the end of 2020, Taicang Port ranked first in the province, ninth in China and 30th in the World’s Top 100 Container Ports and became the No.1 foreign trade port along the Yangtze River, the port with the biggest number of foreign trade routes along the Yangtze River and the largest number of incoming and outgoing international navigation ships in the province. The favorable macroeconomic environment and great growth potential of Taicang City provides the Group with an excellent business environment and strong support for business development, which is conducive to the steady growth of the Group. Cooperation with the world’s leading natural gas enterprises in jointly developing LNG projects In June 2020, the Group, through China Suchuang Energy Co., (Hong Kong) Ltd. (“Suchuang Energy”), a wholly-owned subsidiary of the Group, entered into a comprehensive strategic cooperation framework agreement with Bp (China) Holdings Limited (“BP”), in relation to the whole industry chain of natural gas and LNG, and gas-fired generation, pursuant to which, BP intends to cooperate with Suchuang Energy in jointly developing and constructing new LNG receiving terminal projects in China. The unique experience of BP in Guangdong Dapeng LNG Receiving Terminal and other international LNG receiving terminal projects will add special value to the cooperation with Suchuang Energy in terms of both construction and operation, and both parties wish to carry out strategic cooperation in the following areas: (i) long-term supply of spot LNG to Suchuang Energy or its associated companies in China; (ii) potential equity investment in LNG receiving terminal projects of Suchuang Energy or its associated companies in China; (iii) joint development of domestic LNG/natural gas market in China. Looking for new gas sources to break through the limitation of gas source On 27 July 2020, the Company entered into a cooperation framework agreement with CNOOC Gas & Power Group Limited (“CNOOC Gas & Power Group”) for a term of five years from the date of the agreement, for the purpose of establishment of a cooperative relationship for the development of LNG businesses, construction of LNG receiving terminals, development and operation of LNG tank container businesses, and construction of LNG refueling stations for vehicles and vessels in Taicang Port. The cooperation between the Group and CNOOC Gas & Power Group will create a synergy for both parties to seek further business cooperation in certain projects (including the development by the Company of LNG receiving terminals in Taicang Port and the construction and development by the Company of LNG refueling stations in Taicang City), which is in the interests of the long-term development of the Group and the interests of its shareholders as a whole. The cooperation may help break through the current limitation of natural gas supply, and increase the sources of natural gas supply to fill the long-term gap in the supply of natural gas in the market, as well as boosting the revenue and profit of the Company. According to the national development strategy, clean energy including LNG will be the major energy for use in the future. The continuous increase in the demand for natural gas consumption, the significant seasonal differences in consumption, short-term shortage of gas storage facilities in China and other factors lead to the current failure of LNG receiving terminals in operation and under construction in China to fully satisfy and adapt to the growth of natural gas consumption, and the market demand. In order to ensure the steady supply of gas in Suzhou and the Yangtze River Delta region, accelerate the upgrade of industrial structure and capitalize on the natural advantages of Taicang Port and the increase in the objective demand for natural gas in the Yangtze River Delta, the Group intends to construct an LNG receiving terminal in Taicang Port. ADJUSTMENT OF NATURAL GAS PRICE The Group has been in good strategic relation with PetroChina Company Limited for more than 10 years, and put into operation the city gateway station which is connected with Sichuan-East Transmission Pipeline of Sinopec in November 2015, further ensuring sufficient gas-supply resources in areas where the Group carries out main businesses. The purchase price of natural gas of the Group is determined by NDRC according to the type of end users and gateway station prices. During the year, the Group’s average unit purchase price for piped natural gas (exclusive of VAT) (which is calculated by dividing the total natural gas purchase cost by the total natural gas purchase volume for the relevant period) was RMB2.02/m3 . The maximum end-user price at which the Group could sell piped natural gas to the end-users is determined by the Taicang Price Bureau. The prices for industrial and commercial end-users are generally higher than those for residential users and other users. During the year, the Group’s average unit selling price for piped natural gas (exclusive of VAT) was RMB2.60/m3 . NATURAL GAS SALE AND TRANSMISSION BUSINESS Taicang City, the Group’s main operating area, is a major industrial county-level city in Jiangsu Province, and is adjacent to affluent cities in Eastern China, such as Suzhou, Kunshan, Changshu and Shanghai, with remarkable geographic advantages available, creating the Shanghai-Taicang one-city effect together with Shanghai. The dynamic economic and industrial development has brought unceasingly increasing industrial and commercial users of natural gas to the Group. As of 31 December 2020, the Group had 627 commercial and industrial users, and approximately 260,500 residential users in Taicang, representing an increase of 32 commercial and industrial users and an increase of approximately 10,500 residential users as compared to those as at 31 December 2019. During the year, revenue generated from the Group’s sale and transmission of natural gas business was approximately RMB1,041.5 million, declining by 13.0% compared with 2019, accounting for 88.2% of the Group’s total revenue. Such decrease was primarily due to a decrease in the volume of natural gas sold during the year. As of 31 December 2020, the Group had a total of 5 CNG/LNG filling stations, including 3 stations in Guangyuan, Sichuan, 1 station in Taicang and 1 station in Suzhou. 2 LNG/CNG filling stations in Sichuan and Taicang are under preparation and will be completed by the end of 2021. NATURAL GAS PIPELINE CONSTRUCTION AND CONNECTION BUSINESS The Group’s natural gas pipeline construction and connection business includes the construction and installation of urban gas pipeline networks, as well as the connection of the networks to the end-user pipelines for property developers and new industrial and commercial users. During the year, revenue generated from natural gas pipeline construction amounted to RMB120.3 million, representing an increase of 7.4% compared to RMB112.0 million for last year, which accounted for 10.2% of total revenue during the year. The main reason for the increase was that the projects completed in the year were mainly the projects for commercial users, which had higher profit margin than that for the pipeline projects for residential users. DEVELOPING INTO A COMPREHENSIVE ENERGY AND ENVIRONMENTAL PROTECTION ENTERPRISE According to the national development strategy, LNG, which is clean energy, will be the major energy for use in the future. According to the Three-year Action Plan for Green Port Construction of Taicang Port, efforts will be made to accelerate the optimization of the energy consumption structure of the port, construct LNG refueling facilities in and around the port area, or use LNG refueling vehicles to provide refueling services for standard transportation machinery in the port. In July 2020, the Group, through Taicang Natural Gas Company Limited (“Taicang Natural Gas”), a wholly-owned subsidiary of the Group, entered into the Strategic Cooperation Framework Agreement for Taicang Port LNG Energy Project with Taicang Port Group Co., Ltd. (“Port Group”). Both parties give full play to their respective advantages, make joint efforts to build a professional LNG functional segment in Taicang Port which is influential in the Yangtze River Delta region, and carry out comprehensive strategic cooperation in the development and operation of LNG container business, joint promotion of the construction of tank container yards, construction of LNG receiving terminals, refueling stations and floating refueling stations, etc. Prospects: Affected by the COVID-19 outbreak, there was a decline followed by a rise in the energy industry in China last year. In particular, the growth in natural gas consumption in the first quarter turned negative for the first time in history. However, as the outbreak was gradually put under control, domestic production and the economy recovered quickly. The PRC government requires the accelerated fostering of a new development paradigm with “domestic circulation” as the mainstay, and therefore the increase in domestic demand becomes a driving force behind the steady upturn of the economy. The rapid industrial and commercial growth in China lay a strong foundation for the sustainable growth of energy consumption. During the 14th Five-Year Plan period, the central government will stay the course for environmental governance, and will continuously promote energy structure optimization and adjustment. The governance of industrial enterprises with high pollution and high energy consumption as well as the replacement of fire coal with clean energy will remain the focus of work, in which natural gas will play an important role. The NDRC pointed out in the Opinions on Accelerating the Utilization of Natural Gas that efforts will be made to increase the primary energy consumption proportion of natural gas to approximately 15% by 2030. According to the latest forecast of China Energy News (中國能源報), the proportion of coal consumption in China’s energy consumption will drop rapidly, from 60% in 2018 to 35% in 2040, and the total reduction will be basically offset by the increase in the consumption of renewable energy and natural gas. Under the policy for making efforts to develop natural gas as an alternative energy source in China, the natural gas industry ushers in a golden period of development. On the whole, the natural gas industry continues to develop continuously and steadily. The natural gas industry of China will develop in a positive direction in 2021. Attracting new industrial customers, by new gas sources from LNG tank container businesses The natural gas consumption population, the total supply and consumption of natural gas in cities in China increase continuously, with the promotion of clean energy under the national policy and the improvement in urbanization. However, the insufficient construction of gas reserve peak shaving facilities, the less connectivity of the pipeline network and the smaller scale of construction, as well as the larger growth rate of the downstream demand lead to the failure of existing LNG receiving terminals under operation and construction in China to fully meet and adapt to the natural gas consumption growth and market demand, and therefore a supply gap in the natural gas market is inevitable. The NDRC expected that the gap between natural gas supply and demand in China will reach approximately 175 billion m3 by 2023. Jiangsu Province, a natural gas consumption powerhouse, and where the Group is located, has vigorously implemented the “coal-to-gas” policy and the gas power generation policy. For example, in 2020, the apparent consumption of natural gas in Jiangsu Province for the year was 30.7 billion cubic meters, representing a year-on-year increase of 7.0%. In 2021, the natural gas consumption in Jiangsu Province is estimated to exceed the level in the previous year. The data of the Jiangsu Energy Regulatory Office of National Energy Administration show that in January 2021 alone, the consumption of natural gas as urban gas and industrial fuel was 1.66 billion cubic meters, representing a year-on-year increase of 28.7%; the consumption of natural gas for power generation was 0.7 billion cubic meters, representing a year-on-year increase of 5.6%. Taking Southern Suzhou and Shanghai, both of which are the main natural gas consumption regions in coastal areas, as examples, it is expected that by 2025, the natural gas consumption will reach 43.3 billion m3 . Since there is no natural gas resource in Jiangsu Province, the main gas sources are west-to-east gas transmission, Sichuan to Eastern China gas transmission, Hebei Nanjing Pipeline and surrounding LNG receiving terminals. In 2020, the comprehensive gas supply capacity is 25.8 billion m3 , while the demand in Jiangsu Province is 35 billion m3 , with a gap of 9.2 billion m3 which needs to be filled up by other gas resources. It is expected that the gap will further increase to 11.4 billion m3 by 2025. Attracting new industrial customers, by new gas sources from LNG tank container businesses (continued) Considering the construction pace of natural gas supply infrastructure in and around Jiangsu Province being far lower than the growth rate of market demand, the Group will capitalize on the advantages of Taicang Port to construct LNG receiving and storage facilities, so as to acquire downstream users within the economic radius of 300 km which may be covered by the LNG tank container business. The Group has cooperated with large LNG trade distributors and engaged them to acquire downstream users. In the future, the Group can also supply gas directly to downstream users, so as to maintain and increase its share in the downstream market. During the period, the Group sold 82.2 tons of LNG, representing an increase of 63.5 tons compared with the same period of last year, laying a foundation for the future tank container business of the Group. In order to push the current industry limit and ensure the steady supply of gas in Suzhou and the Yangtze River Delta region, it is necessary for the Group to further explore gas sources, expand the market and promote business diversification. Exploration of gas resources According to the National Bureau of Statistics, China’s LNG output was 13.329 million tons in 2020, representing a steady year-on-year increase of 14.4%. In the past year, the oil and gas exploration and development were in good condition. The National Energy Administration pointed out that China continuously accelerated the construction of pipeline, gas storage, LNG receiving terminal and other main projects in the field of natural gas. The shipping expansion also becomes a key development project in regions along the Yangtze River. In February 2021, in order to reflect the spirit of oil and gas system reform, Jiangsu Energy Regulatory Office and Jiangsu Development & Reform Commission formulated the Implementation Rules for Supervision of Fair Access to LNG Receiving Terminals in Jiangsu to promote the fair access to LNG receiving terminals in Jiangsu, ensure the stable supply of natural gas, and standardize and fairly allow relevant market behaviors, which will create a good environment for the development of the LNG industry. The Group believes that the national policy helped accelerate the construction of the natural gas system in the past year, which can support energy structure optimization in the future. Taicang, where the Group is located, has the largest container port along the Yangtze River, and has business licenses for hazardous chemicals. The Group previously established a strategic relationship with Taicang Port Group to build relevant infrastructure facilities including LNG receiving terminals, LNG tank and container terminals, and storage yards in Taicang Port, so that the Group can purchase LNG through tanks and containers and supply LNG to users. The Group strove to obtain the LNG tank container terminal qualification during the year. The obtaining of the qualification by the Group will enable the Group to increase the sources of natural gas supply to fill the supply gap in the market. In addition, the Group has reached a cooperation agreement with CNOOC Gas & Power Group, a subsidiary of China National Offshore Oil Corporation Limited (“CNOOC”), to import natural gas through LNG ISO storage tanks of CNOOC in the Haikou LNG Terminal. At the beginning of 2021, the Group successfully obtained the qualification for using the oil and gas pipeline of China Oil & Gas Pipeline Network Corporation, and was allowed to directly use the pipeline transportation service for connection with upstream enterprises, thus ensuring the gas supply. If relevant business is carried out smoothly, the annual import of natural gas is expected to reach 2.2 billion cubic meters, thus breaking through the bottleneck of the limited supply of low-cost natural gas. Business Development The official introduction of the Measures for Supervision and Administration of Fairness and Openness of Oil and Gas Pipeline Network Facilities (油氣管網設施公平開放監管辦法) in recent years and the official operation of PipeChina in October promote the fairness and openness of oil and gas pipeline network facilities, give new impetus to the natural gas industry chain of China, and help achieve the supply of upstream resources by multiple entities and channels and form a pricing mechanism for the natural gas market. This is conducive to improving the antitrust supervision and optimizing the oil and gas market structure, and provides the Group with the opportunity to solve the supply bottleneck, and helps expand its business to cover Jiangsu. In addition, the Group is actively expanding the downstream market, while it has supplied natural gas to the end users in Taicang City and has conducted wholesale trade in Kunshan and Changshu. Considering that the Group has new low-cost natural gas sources, it can compete with the nearby LNG receiving terminals, by supplying natural gas to gas stations, factories and other piped natural gas businesses in other cities within an economic operation radius of 300 kilometers. Meanwhile, the Group also plans to expand its LNG ISO storage tank business to other provinces, so as to expand its market presence. The LNG ISO storage tank business is only one of the strategies for expanding natural gas supply, while the target of the Group is to construct an LNG receiving terminal with an annual capacity of 8 billion cubic meters, so as to supply gas to power plants near Taicang and gas enterprises in surrounding cities. Therefore, on 27 July 2020, the Company entered into a cooperation framework agreement with CNOOC Gas & Power Group, for the purpose of establishment of a cooperative relationship for the development of LNG businesses, construction of LNG receiving terminals, development and operation of LNG tank container businesses, and construction of LNG refueling stations for vehicles and vessels in Taicang Port. After obtaining the approval of relevant authorities, the Group will immediately carry out relevant project construction with CNOOC. Business Diversification The Group also continuously invests in and explores other businesses. On 8 January 2020, the Group and Shanghai Fosun Tourism, a wholly-owned subsidiary of Fosun Tourism, entered into a non-binding strategic cooperation framework agreement to establish cooperative relationships in relation to, among others, the provision of clean energy for tourist destination projects of Fosun Tourism and its subsidiaries. The tourist destination project commenced in 2020, while at present, the Group mainly assists Shanghai Fosun Tourism in the installation of the natural gas pipelines for the project. Moreover, the Group previously signed a strategic cooperation framework agreement with Evergrande Group, pursuant to which the Group mainly assisted Evergrande Group in the installation of natural gas pipelines for the tourism project of Evergrande Group. The two businesses may provide stable and considerable revenue for the Group and contribute to the organic growth of the Group. Business Diversification (continued) 2021 is the first year of the “14th Five-Year Plan”. Due to the great importance attached to the development of green energy, it was proposed at the Central Economic Work Conference that “effort should be made to peak carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060”. Specific plans have been implemented in provinces in China to accelerate green and low carbon development. Despite the impact of the COVID-19 outbreak on the macro economy of China, the overall economy takes a turn for the better continuously. It is believed that with great support from favorable national policies, the natural gas industry of China will usher in a better development period. Under the leadership of the Chairman, Suchuang Gas will vertically integrate its business and expand its access to the international market by capitalizing on the opportunities arising from the oil and gas mechanism reform and the economic development of the Yangtze River Delta region. It will actively extend the industrial chain, and strive to realize upstream and downstream integration in the long-term planning, and accelerate the development pace of comprehensive energy and environmental protection enterprises.

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Public company info - Suchuang Gas Corporation Ltd. , 01430.HK