Hong Kong & China Gas Co. Ltd. · HKEX:3
Hong Kong & China Gas — The Hong Kong & China Gas — FY2020 Earnings Presentation
64 slides from Hong Kong & China Gas's earnings presentation, Mar 19, 2021
Slide 1: 2020 Annual Results
The Hong Kong & China Gas Co. Ltd. (3 HK) 2020 Annual Results 19 March 2021
Slide 2: Disclaimer
Disclaimer 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 dev
Slide 3: Group Financials
@ Tires Group Financials
Slide 4: Operating profit by segment: HC, MU, NE
Hong Kong (HC) Mainland Utilities (MU) New Energy (NE) HK$3,176Mn HK$3,682Mn HK$398Mn Gas volume -2.7% City-gas volume +5% Ramp up of new Effective cost savings Rmb depreciation -0.9% Biofuel/Biomass projects New Connections delayed 4
Slide 5: Group results: revenue, operating profit, EPS, dividends
(HK$ Mn) 2020 2019 Change Revenue 40,927 40,628 +1% Operating Profit 7,256 7,013 +3% IFC Revaluation Increase/(Decrease) (477) 200 - Profit Attributable to Shareholders 6,007 6,966 -14% Earnings per Share^ HK 33.80 cents HK 39.20 cents -14% Full Year Dividends per Share HK 35 cents HK 35 cents - Bon
Slide 6: RMB exchange rate forecast
2019 2020 2021F Average Rate: - 4% Average Rate: - 1% Average Rate: + 5% 7.40 7.20 7.00 Average: RMB 6.6 6.80 6.60 Average: RMB 6.93 6.40 Average: RMB 6.89 6.20 6.00 2019 2020 2021 (Forecast) *Forecast (2021 Mar ~ Dec): RMB 6.60@USD 6
Slide 7: Total assets, borrowings, credit ratings and valuation
HKCG (3 HK) 31 Dec 31 Dec 18 Mar 31 Dec 2020 2019 2021 2019 HK$ Bn HK$ Bn Total assets 150.3 140.5 P/E Ratio 35.1x 37.0x Net asset value 79.2 75.4 P/B Ratio 3.2x 4.0x Cash and Bank 7.6 8.0 A1 Total borrowings 42.1 37.9 Credit Ratings: Interest Coverage 9.2x 10.0x A Net Gearing 30.4% 28.4% 7
Slide 8: Subsidiary results: turnover and operating profit
(HK$ Mn) 2020 2019 Change Turnover 12,826 12,924 -1% Operating Profit 1,824 1,756 +4% Profit Attributable to Shareholders 1,447 1,308 +11% Earnings per Share HK 49.56 cents HK 46.06 cents +8% Dividends per Share* HK 15 cents HK 15 cents Dividend yield 4.3% 2.8% *with option of script dividend 8
Slide 9: Cumulative total HK$25Bn
(HK$ Bn) 2.8 2.6 2.6 2.5 Cumulative Total = $25Bn 2.2 2.4 2.2 2.0 1.6 1.2 1.1 1.0 0.3 0.1 0.2 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 9
Slide 10: Funds available, dividend and investment
Inflow (HK$ Bn) HK Operations 14 PRC Dividends 10 Strategic Investors 8 32 Cash on Hand 8 Outflow Fund available 40 Dividend 20 Investments 20 Dividend and Investment 40 10
Slide 11: Hong Kong Business
BRINGING GOOD VIBES long Kong Business 11
Slide 12: Gas sales and customers in Hong Kong
Gas 27,947TJ 1.94Mn Sales (800M m3 NG eqv.) Customers 10,175 -2.7% ESG Household The cleanest fuel Penetration 74% (<5% of HK total CO2 emission) Network No fatal gas incident Coverage 86% from customer utilization for over 20 years 12
Slide 13: 2021-22 HK Government Budget housing supply
2021-22 HK Government Budget Supply in coming 5 years Public 101,400 Private 90,000 191,400 units 13
Slide 14: Target customers and gas applications
Additional Annual Gas Volume Target Customer 2021-2025 Gas Cooling and Heating Disneyland, Ocean Park, TGT, HK Airport Applications Diesel Conversion Projects Hospitals, Food Factories, Laundries Hotel development projects, Hospital extension New Projects projects, Crematorium expansion, Maxim's new
Slide 15: Association of Energy Engineers award
Association of Energy Engineers (AEE) in the United States 15
Slide 16: Appliance business
PCenelee! BUSINESS Appli les: 250,000 unit Tora Revenue iance sales: 250,000 units = GinsB + Kitchen cabinet: 4,000 units (30% market share) + TG Fun (e-commerce): 100,000 members os Towngas cooking class (Disciples Escoffier, 60 graduates/year) * Towngas cooking channel (5M views, on-line cooking c
Slide 17: Mainland Utility
Mainiand Utility y) so) v) y) so) = 77 3 2 »
Slide 18: Wider coverage of project companies
Wider coverage 316 Gas-related Business 365 282 City Gas 15 Upstream and Midstream 19 Engineering and Other Projects 33 Smart Energy 21 Distributed Energy 9 Photovoltaics 3 Energy Storage 11 Water & Environmental 7 Municipal Water 4 Solid Waste Processing 5 Extended Business All project companies 18
Slide 19: Listed company shareholdings and key cities
6 Listed company shareholding 42 Key cities include: Foran Energy (002911.SZ) 38.67% Chengdu Gas (603053.SH) 11.70% Guangdong: Foshan, Zhongshan, Chaozhou Changchun Gas (600333.SH) 28.20% Jiangsu: Suzhou, Yixin, Changzhou, Taizhou, Shenzhen Gas (601139.SZ) 26.48% Anhui Natural Gas (603689.SH) 20.61%
Slide 20: Operating highlights
Operating icicles * Total gas sales volume (including mid-stream) rose 6% to 34.4 Bn m? * City gas sales volume rose 5% to 26.9 Bn m? - Commercial and industrial sectors represent 75% or 20.19 Bn m3 - Residential customers represent 24% or 6.45 Bn m? - Distributed energy system represents 1% or 0.26
Slide 21: Customer numbers by segment
2019 2020 Change (’000) (’000) Residential 29,526.6 31,535.8 +2,009.2 (6.8%) Industrial 16.1 17.6 +1.5 (9.3%) Commercial 237.5 262.1 +24.6 (10.3%) Total 29,780.2 31,815.5 +2,035.3 (6.8%) 21
Slide 22: City gas sales volume by segment
Mn m³ 2018 2019 2020 76% 264 150 1% Distributed Energy System 0 -8% 4,206 4,597 16% Commercial +12% 4,111 +7% +12% 15,985 14,942 59% Industrial 2018 2019 2020 13,374 Covered population (Mn people) 150 158 165 +6% +10% 6,450 Penetration rate of 5,529 5,863 24% Residential residential households (%) 5
Slide 23: Selling price, gas cost and unit margin
RMB/m3 Selling Price 2018 2019 2020 Unit Opex/m3 Residential 2.44 2.59 2.66 0.50 Industrial 2.76 2.80 2.51* 0.46 0.46 0.44 Commercial 3.02 3.06 2.71* Avg Selling Price 2.73 2.82 2.60 Avg Gas Cost 2.13 2.24 2.01* Unit Gas Margin 0.60 0.58 0.59 2017 2018 2019 2020 *Due to COVID-19, NDRC reduced natura
Slide 24: Water and environmental business
Sewage capacity Water sales volume of 917 million tonnes, with an operating profit of 1,132 (Thousand tonnes/day) HK$420 million 512 Strong development in environmental business, with the addition of: 2021 2023 - Changzhou food waste processing project - Changzhou waste incineration project Soli
Slide 25: Shanghai Gas acquisition and results
Expect to complete by ① 25% May 2021 25%② 2020 Gas sales volume: 8.9 Bn m³ Customers: 6.4 Mn LNG import volume: 4.3 Mn tonnes (~ 6 Bn m³) Estimated profit RMB 850 Mn (> 30% growth) Expect double digit growth in sales volume & profit in 2021 25
Slide 26: Weiyuan shale gas and Caofeidian LNG terminal
Sichuan Weiyuan Shale Gas Liquefaction Project • Upstream gas supply of 300 million m3 p.a. • Liquefaction and storage facilities to be commissioned in 2022 Tangshan Caofeidian LNG Terminal • 2 x 200,000 m3 LNG storage tanks invested by the Group • 1 million MT p.a. LNG terminal use right to be comm
Slide 27: LNG terminals, gas storage and procurement savings
6 LNG terminals plus Weiyuan shale gas liquefaction plant PipeChina provides third-party access to facilitate gas trading Tangshan Caofeidian Beijing LNG terminal Jintan gas storage fulfils peak- shaving and storage functions Jintan gas storage Group procurement to reduce cost Shanghai Gas 2
Slide 28: Business Strategy & Opportunities
Business Strategy & Opportunities
Slide 29: Strengths and healthy comfortable living
Additional services with >31 million regular safety 291 customer centres on existing customers + inspection home visits top of community centres 6.4 million customers from Reaching >100 million Shanghai Gas Establishing customers every year consumer finance Strengths business Platform content & meal
Slide 30: Home lifestyle centres roll-out and revenue targets
Business Business Business surfacing development maturity 2021 2022-2023 2024-2025 First outlet in 2020: 500 outlets in maturity stage 200 outlets during development stage Progression Home lifestyle centre at Hudong, Suzhou 100 in east China, 70 in GBA, 250 in east China, 150 in GBA, 50 outlets tran
Slide 31: Upstream renewables, power grid, smart energy
Upstream renewables Power grid Smart energy Photovoltaics (PV) Transmission Energy storage Integrated grid energy Wind Distribution services Power grid Multi-energy supply Power Storage Rooftop PV EV charging stations Offshore wind power 31
Slide 32: Solar development at Towngas Energy
Reolc Dewelopment ak Towmneas lEMercy (As at February 2021) Inner Mongolia Guangxi ie) Goal for 2021: C&l roof top PV 1.5GW Greater | Bay Area As of end of 2020, installed capacity for largest investor totals 1.3GW Hainan 32
Slide 33: Zero-carbon smart cities
PV Focused on valued cities >10% market Greater Bay Area Power storage Peak-shaving and trough-filling, battery 2nd life Beijing-Tianjin 50 utilization Zero-carbon EV charging stations Power banks for EV trucks, V2G (Vehicle to grid) -Hebei smart cities and power banks (industrial parks) Multi-energ
Slide 34: PV key factors and solar capacity
Key factors • IRR > 9% • Subsidy-free grid parity • Continued cost reduction < RMB3.5/W • Focus on valued cities (industrial) • Large-scale rooftops (cross- premise power trading) Unit: GW 2019 2025 • > 400MW in half year Solar capacity (cumulative) 200 560 • Terrestrial PV 140 370 • Rooftop PV (C&I
Slide 35: Smart energy platform
Smart energy platform Customer, value & return Basic return IRR > 9% PV Multi-energy supply Energy Virtual trading power plant Power EV charging and storage power banks Integrated energy services 35
Slide 36: Synergy and strategic partnership
Power Smart energy Multi-energy Companies Policy support Capital (cost) C&I customers Valued cities technology platform supply Power generation Power grid Oil & gas Equipment Synergy and strategic partnership 36
Slide 37: Smart energy platform five-year target
Five-year target • 50 Smart energy cities • 10GW Rooftop PV • 3.8GWh Power storage Technology • 100,000 C&I smart energy customers • RMB1.2Bn PAT (HKCG share) Gas Rooftop PV Power storage CHP (Power sales) (Supply side) Smart Energy platform Power storage EV charging & • Aggregation of flexible Cool
Slide 38: Towards Carbon Neutrality
Towards Carbon Neutrality 38
Slide 39: Climate Change
Climate Change A Global Drive for Green-House Gas Reduction 2015 Paris Agreement • Limiting global warming to below 2°C • Pursuing efforts to limit it to 1.5°C Photo Source: Environmental Defense Fund 39
Slide 40: China's GHG Reduction Commitment
China’s GHG Reduction Commitment 2030: CO2 Peak 2060: Carbon Neutrality 40
Slide 41: Hydrogen Economy
Solar/Wind + Power Storage Hydro Geo-Thermal Renewables Tidal + Wave Municipal Waste Biomass Hydrogen Economy 41
Slide 42: From fossil fuels to biomass and waste to energy
20th Century 21st Century Use of fossil fuels Use of biomass & Waste to energy Diesel, Gasoline, Biofuels, Jet Fuel, Eco-friendly, Petrochemicals etc. Chemicals and Materials Consumer society Sustainable society (Carbon economy) (Carbon neutrality) 42
Slide 43: Natural gas, smart energy, municipal waste and biomass platforms
• Replace coal & oil Smart Natural Gas Biomass Energy (City Gas) Platform • Solar • Advanced Bio-fuels • Combined heat & power Municipal • Bio-chemicals • Energy storage • Energy efficiency management Waste • Bio-materials • Big data, AI & IoT • H2 generation • H2 utilization • Kitchen waste treatme
Slide 44: Towngas Biomass Platform
Towngas Biomass Platform 44
Slide 45: Biomass Platform
Biomass Platform Agricultural Waste Bio-grease Utilization Utilization Bio-Fuels Bio-Chemicals Bio-Materials • HVO • Paper Pulp • Furfural • SAF • Lyocell • Levulinic Acid # • Cellulosic Ethanol • FDCA # • Green Hydrogen 45 HVO: Hydrotreated Vegetable Oil, SAF: Sustainable Aviation Fuel #Building bl
Slide 46: Biomass feedstocks and products
Bio-grease Utilization Agricultural Waste Utilization • Palm Oil Mill Effluent • Corn/ Wheat Stalks • Used Cooking Oil Biomass • Corn Cobs • Gutter Oil Waste-based Cellulosic HVO Ethanol Replace Diesel Replace Gasoline Sustainable Green Aviation Fuel Hydrogen Replace Jet Fuel Carbon Free Energy 46
Slide 47: Advanced biofuel: HVO and SAF
Advanced Biofuel : Hydrotreated Vegetable Oil (HVO) : Sustainable Aviation Fuel (SAF) • Proprietary technologies • Feedstock: POME, UCO • 2021 Capacity: 250K ton HVO p.a. • Revenue: USD 380 Mn • 2022 Capacity: 350k ton HVO p.a. • Markets: Europe, Japan, Canada • Production of 50K ton SAF p.a. in 202
Slide 48: Sustainable Aviation Fuel
Sustainable Aviation Fuel 50k ton/year production line will be ready by 2022 48 Photo Source: Atlas
Slide 49: Cellulosic ethanol, furfural and paper pulp
Advanced Biofuel: Cellulosic Ethanol Bio-chemical: Furfural Bio-material: Paper Pulp Luanzhou, Hebei Cangzhou, Hebei Corn Cob/ Stalks Corn Cob Furfural (25K ton p.a.) Furfural (25K ton p.a.) Paper Pulp (110K ton p.a.) Cellulosic Ethanol (25K ton p.a.) Revenue: RMB 370 Mn p.a. Revenue: RMB 40
Slide 50: What's Next? Green Hydrogen
What’s Next? Green Hydrogen Produced from Agricultural Waste 50 Photo Source: HVO Magazine
Slide 51: Green hydrogen from agricultural waste
Produce Green Hydrogen from Agricultural Waste (Corn/ Wheat Stalks) • In-house research • Patented • Commercially feasible • Abundant feedstock resources Mid-Scale Gasification Unit * Pilot Project under Planning 51
Slide 52: Towngas' strengths
• Shanghai Chemical • Natural gas (clean fuel) R&D • Suzhou engineering • Coal to gas Capabilities Earned Chemical Green Name Engineering Expertise Towngas’ Strengths • HK • Immense sources in • Mainland China (1.4bn people) Feedstock Proprietary Sourcing Technologies • All patents Network obtained
Slide 53: Outlook
Outlook
Slide 54: Outlook: Hong Kong and Mainland China
Hong Kong Mainland China • Vaccines available • High GDP growth • Restaurant business recovering • Infrastructure projects • Hospitality business improving • Commodity price ↑ • Tourism coming back • Housing industry warming up • New hospitals • Stronger RMB • Aggressive housing plan • Towards carbo
Slide 55: Outlook: gas utilities
• Gas demand continues to grow • Vaccines taking effect, economy rebound • 14th Five-Year Plan encourages gas to replace coal & oil • Pipeline reform – access to upstream sources • LNG infrastructure + gas storage capacities • Strategic alliance with Shanghai Gas brings a promising growth 55
Slide 56: Outlook: Shanghai Gas alliance
• Access to a large city-gas market • The Group now has a much stronger positioning in Eastern China • Market value-added products/services to an addition of 6.4 million households • Gained access to Shanghai Gas’ LNG importation facilities • Probable IPO of the Shanghai Gas JV 56
Slide 57: Outlook: biofuels
• Capitalizing on R&D achievements (High return rates) • World’s only company having in-house technologies to produce 3 waste-based bio-fuels • HVO • SAF • Cellulosic Ethanol • Plans devised to expand capacities in China & SE Asia • Will seek strategic investors shortly • Pilot plant for Green H2 fr
Slide 58: Outlook: smart energy and waste treatment
• Rapid growth in Smart Energy investments Solar + Power Storage Distributed Energy Systems Energy Management Platform Big Data, AI, IoT • Municipal waste treatment 58
Slide 59: Resilient utilities and carbon neutrality opportunities
Resilient Utility Businesses + Towards Carbon Neutrality Opportunities 59
Slide 60: Environmental, Social, Governance Update
Environmental \ \ | Social a Governance Update
Slide 61: ESG material topics
• Greenhouse Gas Emissions • Community Relationship • Business Ethics • Customer Benefit • Diversity • Indoor Air Quality • Human Right • Auditing Policy • Energy & Fuel • Data Security & Privacy Management • Systematic Risk Management • Employee Relationship • Safety Management • Water & Wastewater
Slide 62: ESG recognition and rankings
Global 2000 - World's Members of Ranked 1st in both Best Employers 2019 Hang Seng Corporate Hong Kong BSI and by Forbes Sustainability Index Greater Bay Area BSI by CUHK 62
Slide 63: Aspire to be the Greenest Hong Kong based Company
Aspire to be the Greenest Hong Kong based Company 63
Slide 64: Thank you
Thank you
The Hong Kong & China Gas — FY2020 Earnings Presentation on 6ix