Caixin
Jul 23, 2020 03:48 PM
BUSINESS & TECH

PipeChina Presses Ahead With Pipeline Industry Consolidation

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What’s new: China Oil & Gas Piping Network Corp. (PipeChina) moved ahead with a mega consolidation plan for the industry by acquiring Sinopec Yu Ji Pipeline Co. Ltd. for 3.2 billion yuan ($457.5 million) in cash, according to a Tuesday filling (link in Chinese) to the Hong Kong Stock Exchange.

Yu Ji Pipeline is wholly owned by a listed arm of the state-owned giant China Petrochemical Corp.

The deal is expected to be finalized on Sept. 30.

Yu Ji Pipeline’s core business is the transmission of natural gas through its Yulin-Jinan pipeline, which starts in Northwest China’s Shaanxi province, passes through four regions, and ends in the eastern energy hub of Shandong province. The pipeline has an annual transmission capacity of 4 billion cubic meters of natural gas. The company said its capacity could eventually be expanded to 5 billion cubic meters a year.

In 2019, Yu Ji Pipeline’s after-tax profit plunged 26.7% to 172.9 million yuan. The filling blamed the drop on a change to the company’s billing model from a “one province, one price” system to a unit-based pipeline transmission distance billing model in 2017.

What’s the background: PipeChina was established in December through the consolidation of several pipeline infrastructure assets run by the country’s three state-owned energy majors.

Last month, Caixin reported that some 10 liquefied natural gas terminals owned by the trio were among the first assets to be transferred to the new company.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full Caixin article in Chinese, click here.

Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Marcus Ryder (marcusryder@caixin.com)

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