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Announcement:

Moody's comments on HKCG's 2012 results

21 Mar 2013

Hong Kong, March 21, 2013 -- Moody's Investors Service says Hong Kong and China Gas Company Limited's ("HKCG") 2012 results were in line with Moody's expectations, with no impact on its A1 issuer and senior unsecured rating.

The rating outlook remains stable.

"HKCG continued its strong operating performance in 2012 and its credit metrics remain solid," says Ivan Chung, a Moody's Vice President and Senior Credit Officer, adding, "Its stable gas business in Hong Kong and growing utilities business on the Mainland were the key contributors to earnings."

In 2012, total revenue, excluding revaluation gains on property, and operating profits reached HKD23.2 billion and HKD5.7 billion respectively. Each increased by 11%.

The Mainland utilities business represented over 50% of total revenue and 45% of operating profits, and the Hong Kong business and new energy business represented the remaining portions.

HKCG's credit metrics remain solid, as shown by low leverage and strong interest coverage. For 2012, total debt to capital was 37% and adjusted debt to EBITDA was 3.6x. At the same time, EBITDA interest coverage was 8.6x. These credit metrics continue to be appropriate for the company's rating level.

"Moody's expects that the Hong Kong gas business will continue to be the cornerstone of HKCG, as it provides highly stable and predictable cash flow to fund business expansion in China. The recent tariff adjustment in Hong Kong -- effective in April 2013 -- will also bring additional revenue of HKD285 million per year," says Chung.

"On the other hand, we expect faster growth and expansion in its gas distribution and new energy business in China. However, the higher growth potential of these businesses comes with higher operating risks and entail more capital expenditure," says Chung.

HKCG is exposed to higher regulatory risk in China than Hong Kong, given the former's evolving regulatory regime. And its new energy business is still in its developing stage, which may also mean higher execution risks. Nevertheless, Moody's takes comfort from HKCG's track record in managing growth opportunities in China and its prudent financial management.

In 2012, HKCG spent around HKD4.2 billion in capital investment mainly for its Mainland utilities and new energy businesses, and is expected to further invest HKD10 billion in next three years.

HKGC has strong liquidity with cash of HKD12 billion as of 31 December 2012. The company has strong access to the local and international debt and capital markets, with competitive low funding costs. Its undrawn bank facilities and unsold Medium Term Note Program are around HKD7 billion and US$689 million respectively, and more than enough to cover annual capital expenditure.

The principal methodology used in this rating was Regulated Electric and Gas Utilities published in August 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The Hong Kong and China Gas Company Limited, listed on Hong Kong Stock Exchange, is the first public utility in Hong Kong engaged in the production and distribution of gas, marketing of gas and appliances, and comprehensive after-sales services. It is also engaged in piped city-gas projects, upstream and midstream operations, city water projects, and new energy businesses in China.

Ivan Chung
VP - Senior Credit Officer
Project & Infrastructure Finance
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Patrick Mispagel
Associate Managing Director
Project & Infrastructure Finance
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077

Moody's comments on HKCG's 2012 results
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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