Wednesday, Feb 23, 2005
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By Our Special Correspondent
NEW DELHI, FEB. 22. GAIL (India) Limited has entered into an agreement with China Gas Holdings to acquire a 9 per cent stake in the Chinese city gas distributor company. According to the share subscription agreement signed between the GAIL Chairman and Managing Director, Proshanto Banerjee, and the China Gas Managing Director, Liu Ming Hui, the Indian gas giant will pay the Hong Kong-based Chinese firm a total of HK $242 million ($31.2 million) for subscribing to 210 million new shares of the HK outfit at a price of HK $1.158 per share. The proceeds from the deal are to be used for working capital and for investment in natural gas projects, China Gas said in a statement. The agreement also provides that while China Gas will ensure that GAIL's stake is not diluted to less than 6 per cent by any future issue of shares, GAIL too will not sell the shares for two years. With this transaction, GAIL joins a number of high-profile investors, including Italy's largest utility, Enel, and Hong Kong tycoon, Li Ka-shing, who have committed investments in the gas distribution business of China. Consequent to the equity deal, GAIL and China Gas have also agreed to form a strategic cooperative partnership and set up a 50:50 joint venture to undertake projects in China, India and third countries, subject to their viability and attractiveness. The venture will deal with the operation and management of city gas pipeline networks, including purchase, sale and distribution of natural gas through these networks. The joint venture, according to GAIL, will also work on the construction, management and/or operation of long distance natural gas and other energy fuel pipelines as also purchase, imports, production and sale and distribution of LPG, LNG, CNG and other energy fuels.
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