In August 2006, the Board of Directors of the Asian Development Bank (ADB) approved the Municipal Natural Gas Infrastructure Development Project, which allowed for both loan and equity participation of ADB to support the investment plan of China Gas Holdings (CGH) to fund a series of new natural gas distribution infrastructure projects in municipalities across the People's Republic of China (PRC). The CGH, established in 1995 as a downstream natural gas distribution company supplying residential, industrial, and commercial customers, is an investment holding company listed on the Hong Kong Stock Exchange.
ADB support consisted of an equity investment of up to $25 million equivalent in CGH, and two loans to Central Asia Natural Gas Shenzhen Company and Zhongran Investment, two CGH wholly owned subsidiaries. The loans, guaranteed by CGH, to CGH's subsidiaries included a direct loan of up to $50 million equivalent, of which up to 50% was in US dollars and the balance in Chinese Yuan, and a loan under ADB's complementary financing scheme of up to $75 million.
The project was designed to promote economic growth and environmental improvement by increasing the supply of clean energy and financing to municipalities. Specifically, the project aimed to (i) prevent further environmental degradation; (ii) provide flexibility in energy supply; (iii) help lower overall exposure to the volatility of oil prices and contribute to the stability of the economy; (iv) help build the nascent natural gas distribution market by providing international best practices to the PRC's downstream distribution market; and (v) demonstrate social responsibility in local municipalities by enforcing provincial policies that stipulate the preferential supply of natural gas to households first, prior to developing the industrial customer base.
This report validates the extended annual review report's assessment of the project. The Independent Evaluation Department downgrades the project's overall assessment rating to successful.