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Xiangdong Project | Pingxiang City

 

Pingxiang-City


Xiangdong Piped Natural Gas Distribution Project | Pingxiang City, Jiangxi Province, China 


At A Glance

 

Exclusive Operation: In March 2012, Changfeng received regulatory approval from Jiangxi Provincial Development and Reform Committee, which secured its 50-year exclusive operation rights to operate a natural gas construction and distribution business in the Xiangdong district including the Pingxiang Industrial Ceramic Park (the “Park”) which resides within the Xiangdong district.

Industrial Users Oriented:  The Park currently houses 25 industrial ceramics factories and is designed to house over 70 ceramics related manufacturing factories in total by the year 2020. The Park represents a large potential market for Changfeng given the large amount of heat energy required for the kilns used by the industrial ceramics companies.

 

Project Overview

 

The Xiangdong District is one of the three administrative districts of Pingxiang City. Pingxiang City itself is located in the western part of Jiangxi Province and is approximately 50 kilometers east of Changsha City.

 

In March 2012, Changfeng received the regulatory approval from the Jiangxi Provincial Development and Reform Committee to operate the piped natural gas distribution in Xiangdong District, Pingxiang City, Jiangxi Province. Within Changfeng’s 50 years operation rights’ coverage resides a 30 square kilometers in size Industrial Ceramic Park (the “Park”), which indeed is a production base for ceramic manufacturers.

 

Construction of the Park was initiated by the Provincial Government in 2006 with the purpose of improving the ceramic industry by developing efficiencies in areas such as logistics, rail and to enhance the quality of the manufactured goods through research and development. The area is designed to house approximately 72 companies of which, approximately 25 are in operation. Changfeng hopes that many ceramic manufacturing plants in the Park would convert to and/or use natural gas as their heating energy based on the above consideration.

 

Pipeline Networks at Xiangdong District and the Park

 

Changfeng started to install the pipeline in the Park in 2011. By June 30, 2015, Changfeng has completed the installation of the main and service pipeline connecting to a gated community, and selling natural gas to nine industrial customers in Pingxiang Industrial Ceramic Production Park (the “Park”) and 1,275 residential customers.

 

Gas source 

 

The Company has obtained secured gas supply through approval of a one-year gas quota of 2015: 50 million  (1,765 million).

 

Also, on December 16, 2014, the Company entered into a natural gas purchase and sale agreement (the “Agreement”) with PetroChina Company Ltd. (“PetroChina”) regarding the purchase and sale of piped natural gas in 2015 and thereafter for its Xiangdong Project to meet the natural gas quota (the “Quota Gas”) approved by the Jiangxi Provincial Bureau of Energy in 2011. Under the terms of the Agreement, PetroChina agreed to supply the qualified Quota Gas up to a volume of 50 million m³ to the Company in 2015. Thereafter, Changfeng and PetroChina will negotiate the annual volume of natural gas to be purchased by the Company from PetroChina in five year periods by the end of June in the year prior to each five year period. Under the terms of the Agreement, The Company is also required to commission contract with Jiangxi Provincial Natural Gas Investment Co., Ltd. (the “Carrier”), the official natural gas terminal receiver appointed by the Government of Jiangxi Province, for the Carrier to transmit the purchased gas from PetroChina’s Second West-East Pipeline (“WEP II”) to the Company’s gate station. The Carrier is responsible for the construction of the branch pipeline of approximately 15 kilometers connecting the WEP II and the Company’s gate station in Xiangdong. After the construction of the Carrier’s branch pipeline is completed, the Agreement will allow the Company to significantly reduce the quantities of relatively expensive CNG it has been required to purchase to supply its operations in Xiangdong.

 

 

Revenues

 

Revenue from distribution utility in Xiangdong operation comes from two separate sources, gas sales, pipeline installation and connection fees.

 

Gas sales price to the end users are promulgated by the local government. Gas sales are mainly to two customer categories: residential customers and non-residential customers, each with different pricing. Residential customers are defined as residents in the residential buildings, including condominiums and apartments in the city. Non-residential customers refer to the ceramics manufacturers in the Park, together with gas users in hotels, restaurants, hospitals, etc. The currently regulated gas sales price is RMB3.3/ cubic metres (approx. C$0.66/ cubic metres) for residential customers and RMB3.9/ cubic metres (aprrox.C$0.78/cubic meter) for non-residential customers (updated???). As of June 30, 2015, nine non-residential customers have been connected for gas use by the Company.

 

Gas connection fee is a one-time upfront charge billed by the Company to customers for installing the service pipeline and connecting the customers’ gas facilities to the Company’s pipeline networks. Different customers are charged at different rates for the connection.  According to the regulated pricing guidance, residential clients are charged at a relatively fixed amount, and non-residential clients are charged according to their maximum daily usage volume.

 

Growth Potential

 

The Xiangdong District is in what is considered as one of the industrial ceramic capitals of China. In 2009, approximately 100 ceramics- related manufacturing companies in the Park generated combined revenue of approximately $2.5 billion USD.

 

The local government is encouraging the use of natural gas as the heating energy source in the Park for both environmental and manufacturing quality reasons. The major energy source for heating for the local ceramic industry is currently coal, coke gas or water gas which causes serious air pollution in the region. Natural gas is a much cleaner heat energy source and the use of natural gas allows the ceramic companies to produce higher quality, more differentiated products that are higher in value.


Xiangdong Pipeline Construction



Panorama of the Xiangdong District Ceramic Park


 


Ceramic Products made by the manufacturers in the Park


 


Xiangdong Project Location Map


Pingxiang, Jiangxi

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