China Natural Gas Inc · OTC:CHNGQ
China Natural Gas — IPO Roadshow (September 2009)
36 slides from China Natural Gas's IPO roadshow presentation, Sep 1, 2009
Slide 1: China Natural Gas Inc.
China Natural Gas Inc. NASDAQ Global Market: CHNG August 2009 =
Slide 2: Safe Harbor Statement
Safe Harbor Statement ‘This document hasbeen prepared by China Natal Gas inc. CCHNG' or the “Company” orWer) soley for use athe presentation to [pte investor] By. sccepting tis docanent, you ar agreing to maintain sels confidently reguding the formation dclozedinthis document This document forme apa
Slide 3: Equity Snapshot
Equity Snapshot December 31 Price (8/19/09) Basic Shares Outstanding Debt Revenue (TTM) Note: TTM es of June 3, 209
Slide 4: Introducing CHNG
Introducing CHNG + A leading provider of compressed natural gas (CNG) for vehicular fuel and pipeline natural ‘gas (PNG) for industrial, commercial and residential use + 35 fueling stations for taxis and buses in Shaanxi (23 stations) and Henan (12 stations) + Almost 150 million Nm? sold in FY2008 +
Slide 5: Growing Footprint in the Natural Gas Industry Supply Chain
Growing Footprint in the Natural Gas Industry Supply Chain 4 CO cimesersgcon tusnenes 1) CHBa'scoe seeder dnlpment a 5 GQ
Slide 6: Improving Delivery Infrastructure Will Drive Gas Usage Rate
Improving Delivery Infrastructure Will Drive Gas Usage Rate * Phase 1 of West East Pipeline constructed in 2004 + Phase 2 will be completed in 2011 * Three pillars of PRC’s gas supply are onshore (Northwest), imported (LNG) and piped (gas from Russia) Xi’An is the central hub for China’s gas deliver
Slide 7: High Growth Through Sustainable Competitive Advantages
High Growth Through Sustainable Competitive Advantages History 2005 2006 2008 2009 2009E Conercon ot | {Smut abe eal uncpremer | | tReprenete | | Shane | | asDag nat ct pee Sedat | | "Aburtene Watetinee, | | paced oh ow red ‘cmteet | mai S49 siss s354 $677 ‘Total Revenues (SMM) 1 n 24 38 CNG Fueling
Slide 8: Investment Highlights
Investment Highlights
Slide 9: Increasing Diversification of Revenue Sources
Increasing Diversification of Revenue Sources 2010 2009 ONG Retueting ONG Roruetng Stations Piped Natura Gs
Slide 10: Business Segments
Business Segments | Piped Natural Gas 0
Slide 11: Comprehensive Fueling Station Network Drives Volume
Comprehensive Fueling Station Network Drives Volume SY Networ + Ownership of 23 stations in Xi’an, Shaanxi province (approximately 30% market share) fatistic: * 12 owned stations in Henan province + 35 stations total + We believe taxis refuel 3-4 times a day; buses 1-2 times + Our network must provi
Slide 12: CNG Business Model: Strong Cash Flow Annuity
CNG Business Model: Strong Cash Flow Annuity Fueling Stations / Sales Volume Analysis Revenue and Gross Margin Analysis ‘Volume (0008 m’) 2 GQ
Slide 13: Both Self Built and Acquired Stations Are Attractive
Both Self Built and Acquired Stations Are Attractive Shaanxi Province Henan Province luso ooo Self-built Acquired Self-built Acquired ©) Filling Station $1,300 $2,000 $1,300 $2,000 [Tankers (2); Locomotive (1) ___ $400 $400 $400 $400 Total Investment $1,700 $2,400 $1,700 $2,400 [Annual sale volume (
Slide 14: New Joint Venture with CNPC
New Joint Venture with CNPC PARES GN — CNPC Kunlun Limited Initial Investment ership Co-development of CNG fueling stations along West East Pipeline CHNG invests $3.6m for 49% stake CNPC invests $3.7m for 51% stake CHNG has 2 of 5 board seats Day to day operation of fueling stations 2 planned in 2HO
Slide 15: Vehicle Conversion Businesses
Vehicle Conversion Businesses + 4. CNG conversion workshops in Xian * Target customers: taxis, public transportation vehicles and fleet vehicles Daily taxi fuel cost (esed on 00 kms per day and 10 liter gasoline / 10 cubic meter CNG per 100 km) 54% savings + Longer service life n > : + Reduced maint
Slide 16: Business Segments: CNG Fueling Stations
Business Segments CNG Fueling Stations 6
Slide 17: Piped Natural Gas Businesses
Piped Natural Gas Businesses + 120 km high pressure natural gas pipeline Franchise monopoly rights for 40 years 103,000 residential and industrial users (growing 10% annually) Gas provided by Shaanxi NG (SOE) Regulated pricing ne, — me ot ” GQ
Slide 18: Business Segments
Business Segments | CNG Fueling Stations | Piped Natural Gas Ly, 8
Slide 19: Our 150MM Nm3 Gas Liquefaction Project in Yulin, Shaanxi
Our 150MM Nm! Gas Liquefaction Project in Yulin, Shaanxi {__Liquetaction/Processing }( Distribution/Delivery | Upstream supply + Net capacity is 150 million Nm? sourced from + 100% already committed * PetroChina + Equipment contractor is Chemtex * Customer reach up to 1,600 km radius (Guangdong, Gua
Slide 20: LNG Project: Attractive Economics
LNG Project: Attractive Economics + $45MM total cost; $32MM invested to date + PetroChina supplying natural gas at their well head price + 150MM Ni per annum commitment + Strong government assistance for utility infrastructure + Highly automated plant will save labor costs + Additional savings by us
Slide 21: LNG Project on Track
LNG Project on Track + Center of the Ordos Basin * 320 billion cubic meters reserves in Ordus Basin + 1 km from PetroChina Changqing natural gas purification factory + 25 acres of land for phase 2 and 3 expansion + Expected to be the major transport : 3Q107 1Q08 2Q°08 42709 19°10 4Q'10 . a GN
Slide 22: Liquefied Natural Gas (LNG) Target Customers
Liquefied Natural Gas (LNG) Target Customers Key Target Customers + Natural gas power plants * City gas companies covering industrial, southem coasts of China commercial and residential end users *+ LNG fueling stations in cities and ocean ports | aa Q Strategic Customers Customer/Industry Gas fired
Slide 23: Explicit Policy Support for Natural Gas
Explicit Policy Support for Natural Gas Central Government + 11 5-Year Plan: Reemphasized natural gas usage at expense of coal + 2007 Energy Law: Provided legal infrastructure for natural gas market + Energy blueprint (2007) + New policy submitted in May 2009 further supports natural gas development
Slide 24: Robust Growth Since Broad Introduction Years Ago
Robust Growth Since Broad Introduction 10 Years Ago Natural Gas Consumption in China by Si 20 Eleciy Plants 4 wet Plants ergy Sector ©. Industy Sector 0 4p, Commercial Public Sewices Feeastack Use in industry 30 : | a 5 E 0 2m 2001 202003 ams ams 2007 Industry and residential sectors both demonstrat
Slide 25: Addressable Market Still Very Large
Addressable Market Still Very Large Blige Mars Bilge Mrs xa oe oe se || ° a ‘Natural Oat 24% ‘Natural Gas Ea Available supply, government motivated by environmental concems ‘Source: US Energy formation Asotin 2007; PRC Staite Yet Beck, 2007 2%
Slide 26: Competition By Business Line
Competition By Business Line Xi'an City: Xi’an Municipal NG (15 stations), another 35 companies privately owned Henan: Zhengzhou NG (8 stations) cr aMCESM | Xi’an City: Shaanxi Qinhua (JV with HK Town Gas — 0384.HK), 790,000 customers customers — Xinjiang: Guanghui (600256.SH): 450MM Nm: facility, F
Slide 27: Growth Strategies
Growth Strategies Increase Market Share in E Production Markets Capacity Ensure Adequate ppl Natural Gas Pursue Strategic CNG Acquisitions / a
Slide 28: Robust Revenue Growth
Robust Revenue Growth (USD in millions) 2006 2007 2008 12008 4H2009 m Natural Gas = Gasoline ‘= Construction/Installation and Other
Slide 29: Consistent Financial Margins
Consistent Financial Margins 2007 2008 12008 1H2009 mm Gross Profit mm Net Income — Gross Margin —Net Margin
Slide 30: Strong Balance Sheet
Strong Balance Sheet Sheet a (SD brmains) As of December 31 As of June 30 Cash $13.3 $5.9 $9.7 Accounts Receivable 0.3 0.9 1.0 Current Assets 15.7 96 14.0 Total Assets 53.3 118.3 131.3 Total Current Liabilities 21 46 7.2 Long Term Liabilities 0.0 42.0 45.5 Shareholder's Equity $51.2 $71.6 $78.6 Long
Slide 31: Strong Working Capital Position
Strong Working Capital Position Consolidated D' Cash Flow from Ops Capital Expenditures + FY2007-4.5 + FY2007 — $10.5MM + FY2007 - $14.7MM. + FY2008 — 3.2 + FY2008 — $20.9MM + FY2008 — $62.2MM * 1H2009 — 4.3 + 1H2009 - $14.4MM + 1H2009 - $10.4MM 8 GN
Slide 32: Use of Proceeds
Use of Proceeds Use of Proceeds $16.0MM Acquire 8 CNG fueling stations in Xi7An $3.2MM Purchase 8 CNG trucks (with 16 tanks) to transport CNG $8.4MM Completion of LNG processing plant $3.6MM IV with CNPC $8.8MM Working capital Total Proceeds
Slide 33: Experienced and Proven Management Team
Experienced and Proven Management Team Name Experience * Acquired CHNG in 2003 + Over 20 years experience in the energy business + Bachelor of Economie Management from Northwestern University (Shaanxi) * Joined CHNG in May 2009 + 20 years in accounting and finance + Prior CFO to China Valves Technol
Slide 34: Summary
Summary High Brand Recognition and Market Leadership rategic Cooperation with CNPC for CNG Expansion -ge LNG Project Augments Long-Term Growth ‘oven Management Team — Achieved Revenue CAGR ‘06 3
Slide 35: Contact Information
Contact Information Company ~ China Natural Gas, Ine. Ms. Veronica Chen — CFO 19 Floor Building B, Van Metropolis Tang Yan Road, Hi-Tech Zone Xi°An, Shaanxi, China Tel: (917) 880-8726 / (86) 139 9287 9998 Email: ir.chng@naturalgas.com Legal Counsel - DLA Piper Hong Kong Mr. Gene Buttrill 40! Bank of
Slide 36: APPENDIX A: About Non-GAAP Financial Measures
APPENDIX A About Non-GAAP Financial Measures ‘This presentation contains non-GAAP financial measures for EBITDA. China Natural Gas, Inc.’s management uses those non- GAAP financial measures when it internally evaluates the performance of business and makes operating decisions, including internal bud