PetroChina sells gas pipeline stake for US$2.9 bln
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Kunlun Energy Co has agreed to buy a 60 percent stake in a gas pipeline operator from its parent, PetroChina Co, for 18.9 billion yuan (US$2.9 billion).
Hong Kong-listed Kunlun is the successful bidder for the stake in PetroChina Beijing Gas Pipeline Co in an open tender conducted on the China Beijing Equity Exchange, Kunlun and PetroChina have jointly announced.
With the deal, PetroChina aims to turn Kunlun, formerly known as CNPC (HK) Ltd, into a gas distributor from an oil producer. Kunlun, which expects the bulk of its sales to come from gas by 2012, also in October won a bid to buy a 75 percent stake in Dalian LNG Co from PetroChina for 2 billion yuan.
Kunlun had been widely expected to win the Beijing Gas stake given the requirements, set by PetroChina, that a buyer must be state-owned and able to provide sufficient gas supplies. The 18.9 billion yuan in consideration equals the base price set by PetroChina.
Beijing Gas earned 2.48 billion yuan last year, and 1.92 billion yuan in the January-October period of this year - which can be annualized to about 2.3 billion yuan. This means Kunlun is paying a price about 14 times estimated 2010 earnings.
Goldman Sachs analyst Chris Shiu said Beijing Gas doesn't seem to have the strong growth of typical gas stocks. If the stake was not costly at 14 times 2010 earnings, it also would not deserve the high multiples as typical gas stocks, Shiu said.
PetroChina Beijing Gas provides natural gas transmission services to cities along the first and second Shaanxi-Beijing Natural Gas Pipelines.
The rest 40 percent stake is held by Beijing Enterprises Holdings.
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