Towngas Smart Energy Company Limited · HKEX:1083

Towngas Smart Energy — Towngas China Company — H1 2017 Earnings Presentation

21 slides from Towngas Smart Energy's earnings presentation, August 2017

  1. Slide 1: Towngas China 2017 Interim Results Presentation

    Towngas China (1083.hk) 2017 Interim Results Presentation

  2. Slide 2: Towngas China as a major city-gas platform in China for Hong Kong & China Gas

    Towngas China as a major city-gas platform in China for Hong Kong & China Gas • Major utilities and energy Hong Kong & China Gas company in Hong Kong and (0003.hk) mainland China • A HSI constituent stock 65.89% • Major city-gas operator in Towngas China mainland China (1083.hk) as at 17 July 2017 2

  3. Slide 3: 2 project added, total 105 projects in 19 provincial regions

    As of 31 Jul 2017 Heilongjiang 2 project added, total 105 projects Jilin in 19 provincial regions Liaoning TCCL Hebei New Projects Stake Investment Inner Mongolia Beijing 2 1 Zhongxiang Hubei (city-gas) 河北钟祥 100% Rmb61Mn Shanxi Shandong 2 Guyang Inner Mongolia (midstream) 内蒙古固阳 85% Rmb68Mn Shaanxi H

  4. Slide 4: Project count growth 2006 to June 2017

    2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 17Jun Total 25 37 40 47 61 66 74 87 97 102 104 105 City-gas 25 37 40 47 61 66 73 86 94 97 97 97 120 Injection from HKCG 2 2 100 Newly Acquired 6 10 Existing 80 14 8 5 60 6 8 96 102 103 40 3 7 87 10 66 73 2 61 20 40 47 37 25 25 0 2006 2007 2008 2

  5. Slide 5: Financial and Operational Performance

    Financial and Operational Performance 5

  6. Slide 6: Turnover, gas sales and connection fees 1H 2017

    (HKD Mn) 1H 2016 1H 2017 Change Turnover Gas Sales 2,693 3,272 21.5% Connection Fees 743 764 2.8% 3,436 4,036 +17.4% Operating Profit before Finance Cost 754 817 +8.4% Effective Finance Cost (190) (215) +13.2% Profit attributable to shareholders 564 602 +6.7% In Rmb +12% Basic EPS (HK cents per shar

  7. Slide 7: Profit attributable to shareholders

    Profit attributable to shareholders 7% 12% Gas Sales New Total Projects Total Customers Volume Connections 18% +2 +392,000 +227 7

  8. Slide 8: Total assets, P/B and credit ratings

    TCCL (1083 HK) 1H 2017 1H 2017 HK$ Bn HK$ Bn Total assets 29.8 P/B 1.0x Net asset value 15.3 P/E 14.3x A Market cap 13.8 Gearing (net) 32.2% Cash & bank 1.7 BBB+ Credit Total borrowings 8.4 Ratings Baa1 8

  9. Slide 9: Gas Sales Volume (Bn m³)

    (Bn m³) 1H16 1H17 Change Industrial 1.83 2.26 +23% Commercial 0.66 0.78 +19% Residential 1.06 1.14 +8% Total 3.55 4.18 +18% 8 7.1 7 6.5 6.6 Gas Sales Volume (Bn m³) 5.9 6 5.3 5 4.7 4.0 4.18 4 3.55 3.2 3 2.7 2.1 2 1 0 2007 2008 2009 2010 2011 2012 2013 2014 FY15 FY16 1H16 1H17 *All JVs (100%) 9

  10. Slide 10: Volume by Subsidiaries, JCEs & Associates, Chengdu JV

    Volume (Mn m3) 1H 2016 1H 2017 Change Subsidiaries 924 1,156 +25% JCEs & Associates 1,883 2,230 +18% Chengdu JV 744 800 +8% Total 3,551 4,186 +18% Note: Chengdu JV with 13% shareholding is classified as financial investment according to accounting standard 10

  11. Slide 11: Gas Sales Volume Mix and Productivity

    Gas Sales Volume Mix (%) Productivity Customers No. (LHS) Residential Commercial Industrial Gas Volume/Employee (RHS) (Mn) (‘000 m³) 16 400 27% 354 30% 13 350 310 300 10 52% 54% 250 19% 18% 7 10.4 11.3 200 4 150 1H 2016 1H 2017 1 100 1H16 1H17 * All JVs (100%) 11

  12. Slide 12: Central government promotes natural gas to cut carbon emissions

    ► Central government promotes natural gas to cut carbon emissions ► Gas industry continues to achieve the fastest growth in the energy sector ► According to 13th Five-Year Plan 2016 2020 2030 NG in Energy Mix 6% 10% 15% Demand (Bn m³) 206 360 ~480 Domestic Production (Bn m³) 137 ~200 ~220 Import (Bn

  13. Slide 13: Gas price regulations and connection fees

    ► Gas price regulations and policy  Positive as gas pricing mechanism more transparent, stable and predictable  Connection fees not included in calculation of return  To achieve a right balance between affordable gas supplies and city-gate gas price formula ► Connection fees  Government has more

  14. Slide 14: Overhang removed; sector re-rating opportunity

    ► Overhang removed; sector re-rating opportunity ► Return risk eased, growth intact, re-rating kicks-off ► Regulatory Overhang Mitigated; Upgrade to Buy ► A more favorable version of downstream return regulation issued ► China's new distribution tariff mechanism for city gas distributors is credit p

  15. Slide 15: Loss making JVs, regional price control, market competition

    ► Loss making JVs  Economy recovery, market development plus cost control  18 JVs to turn black by end 2017, expecting all JVs profitable by end 2018 ► Regional price control e.g. Shandong’s margin cap on C&I  Liaise with local price bureaus to adjust pricing structure to minimize impact  Leadin

  16. Slide 16: Distributed energy, coal-to-gas conversion, space heating

    ► Distributed Energy System (DES)  Established Towngas China Energy Investment Ltd to invest in and operate DES projects  Favorable government policies and lower NG price boost DES business  Over 40 key projects are being followed ► Coal-to-Gas Conversion  National policy on replacing coal with

  17. Slide 17: Optimistic for double digit volume growth

    ► Optimistic for double digit volume growth Projected Volume in 5th Year • Distributed Energy 1.7Bn m³ System • Coal-to-Gas Conversion 1.0Bn m³ 3 Bn m³ • Space Heating 0.3Bn m³ 17

  18. Slide 18: New Projects

    New Projects ► Most new projects are greenfield industrial parks, which take long time to nurture and subject to economic volatility ► Acquire new projects with close scrutiny ► Focus on faster and more sustainable organic growth on existing city-gas projects 18

  19. Slide 19: Leverage growing customer base and Hong Kong experience

    ► Leverage on growing customer base and capitalize HK’s successful experience ► 40K units of Bauhinia gas appliances sold every year with gas clothes dryers launched in 2016, market share 15% and growing ► Mia Cucina kitchen cabinets and appliances targeting at furnished property development  2,000

  20. Slide 20: Thank You

    SK MAIRCE Towngas China Company Limited ANK YOU Expanding NEW HORIZONS

  21. Slide 21: Forward-looking statements

    This presentation and subsequent discussion may contain certain forward-looking statements. These forward-looking statements reflect the company’s view on some future events and involve known and unknown risks and uncertainties and other factors which may cause actual performance and development dif

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