On 28 December 2019, Henan Tian Lun Gas Group Limited, an indirect wholly-owned subsidiary of the Company, entered into an agreement with the then shareholder of Shenqiu County Huixintuan Gas Limited to acquire the entire equity interest in Shenqiu County Huixintuan Gas Limited at a consideration of RMB280,000,000.
Shenqiu County, where the project locates, is the east gate of Henan Province and the intersection connecting the Central Plains Economic Circle and the East China Economic Circle. Shenqiu County has gas supplied by Huaiyang-Xiangcheng Pipeline of the Huaiyang Sub-station of the CNPC First West-East Gas Pipeline Project, and plans to use the gas supplied by two companies ENN and Haite in Jieshou through the First West-East Gas Pipeline. Sufficient gas source supply will provide strong support for the Group’s future operations. The target company has a stable and mature business operation, with a user base including 96,000 residential households (55,000 urban households and 41,000 township households), and 450 industrial and commercial households, and 34,000 households for gas pipelines connections, contributing to an annual gas sales volume of approximately 22 million m 3 in 2019. In addition, the gas pipeline stretches 443 kilometers and has coverage of 19 townships. The follow-up investment is small and it can be quickly built into a large-scale residential project. Shenqiu County has a population of about 1.4 million. By 2030, Shenqiu County plans to have a total urban population of 495 thousand, about 165 thousand households; a population of 1.05 million in townships, about 247.5 thousand households,indicating a huge potential for gas pipelines connections in the future. Shenqiu County enjoys fast and convenient transportation. The Zhengzhou-Hefei High-speed Rail Project, which was officially opened to traffic at the end of 2019, and the Nanjing-Luoyang Expressway, which runs through the whole Henan, will accelerate the net inflow of urban population and access to further development of local real estate and commerce. Shenqiu County has been actively promoting the process of urban industrialization. The growth rate of its industrial added values above the scale ranks third in Zhoukou City. The presence of Angang Zhoukou Iron and Steel Co., Ltd. will also drive the development of the iron and steel industrial park with a production capacity of ten million tons to deliver a qualitative leap in industrial gas sales. In addition, relying on the only inland port in Henan Province to access to rivers and seas, Shenqiu County allows year-round navigation for ships with a capacity under 2,000 tons at Shaying River Port. A number of port-based industrial projects in such fields as metallurgical, building materials, and new energy have been introduced and cultivated. The target company has established long-term stable cooperation with 51 industrial users, indicating promising future development, and gas sales of industrial users will be steadily increased.
Through the acquisition of this project, the Group can further expand the coverage of the Company’s coal-to-gas conversion business in Henan Province. At the same time, this project can form synergies with the urban gas projects of the Group that have been in operation in Henan Province, to further increase the Group’s its market share in Henan province.