Coal Gas: Under Price Pressure

Middle East tensions affecting energy prices. China Gas Holdings (00003) Executive Director Huang Weiyi stated that energy prices in Hong Kong remain stable and have not been affected. The company’s raw materials, naphtha, come from Malaysia, Papua New Guinea, and Australia, while natural gas is sourced from long-term contracts initiated in 2006. Prices are based on the rates agreed upon at that time, and these contracts have saved customers over 20 billion HKD in fuel costs to date. He pointed out that in Hong Kong, 60% of the gas raw material mix is natural gas, about 4% is naphtha, and the company can further increase the proportion of natural gas.

On the mainland, he noted that city gas sales remain steady, with 90% of the gas supply coming from domestic and imported pipeline gas, and 10% from LNG and unconventional sources. He expects natural gas prices in mainland China to remain relatively stable unless geopolitical conflicts persist.

Regarding whether gas prices will increase this year, Huang Weiyi said that the company raised prices two years ago. Over the past two years, inflation has risen, and factors such as early investments in North District and rising labor costs have put pressure on price increases. The extent and timing of any future price hikes are still uncertain, and the company is actively communicating with the government.

He believes that the biggest challenge for mainland operations is the decline in property prices, which has reduced citizens’ willingness to buy homes. Fewer pipeline connections will impact the company’s revenue. Once the mainland government addresses the real estate situation, he believes that citizens’ rigid demand for housing will return.

The company’s Chief Financial Officer, Yang Leiming, stated that capital expenditures this year amount to 5.1 billion HKD, lower than the previous two years. The funds are mainly used for public affairs and mainland business development. The company will continue to manage expenses prudently and maintain current levels of capital expenditure.