FY2018/19 INTERIM RESULTS (2018.04-2018.09)

27th November 2018 CONTENTS:

Operational Performance • Natural Gas • LPG • Value-added Services Financial Performance

Future Strategy

2 Operational Performance Natural Gas New Investments

 Acquired 11 city concessions in Province and Autonomous Region, increasing the total number of piped-gas projects to 508 (including 147 county and level township “replacement of coal with gas” projects)

Provinces/Autonomous Regions/Municipalities Cities/Districts

Heilongjiang Province Acheng District of City Jiguan New District of City Wuchang City Anda City Bin County Jiansanjiang Farming Zone

Inner Mongolia Autonomous Region Ganqimaodu Industrial Park of Urad Middle Banner Dengkou County of Bayannaoer

4

Total Gas Sales Volume

12,000 11,099.3 11,000 122.7

10,000

9,000 8,352.2 )

3 Period Volume Growth: Total Piped Gas 106.7 8,000 1HFY18/19 32.9% 7,000

6,000 1HFY17/18 73.6% 4,811.6 10,976.6 5,000 79.6 1HFY16/17 7.1% 4,000 8,245.5

Total sales volumem (million 3,000 4,732.0 2,000

1,000

0 1HFY16/17 1HFY17/18 1HFY18/19

Natural Gas Coal Gas & Piped LPG

6 Natural Gas - Volume Growth

10,976.6 11,000 10,500 10,000 9,500 Period Volume Growth: Pipelines & Trade 9,000 8,245.5

8,500 5,017.7 1HFY18/19 39.6% )

3 8,000 7,500 7,000 1HFY17/18 154.7% 6,500 3,593.8 6,000 1HFY16/17 1.8% 5,500 4,732.0 5,000 4,500 Volume Growth: City and 4,000 1,410.8 Period 3,500 Township Projects 3,000 5,958.9

Total sales volumem (million 2,500 4,651.7 1HFY18/19 28.1% 2,000 1,500 3,321.2 1,000 1HFY17/18 40.1% 500 0 1HFY16/17 11.1% 1HFY16/17 1HFY17/18 1HFY18/19

City & Township Projects Pipelines & Trade

7 Natural Gas - Customer Breakdown

% of City & Volume Growth 11,000 Township Customer 10,500 Residential Gas Volume 10,000 1,369.8 1HFY18/19 1HFY18/19 1HFY17/18 9,500 9,000 Residential 23.0% 21.0% 65.0%

) 8,500 3 Industrial City & 8,000 Industrial 52.1% 38.4% 40.9% 3,104.4 Township 7,500 1,132.0 gas volume 7,000 Commercial 15.9% 24.1% 40.6% 6,500 Commercial CNG/LNG 6,000 2,243.0 9.1% 4.8% 2.7% 944.7 Stations 5,500 CNG/LNG 5,000 540.0 4,500 686.0 761.5 4,000 515.2 3,500 Volume Growth 1,592.0 Pipelines 3,000 Pipelines & Natural gas gas sales Naturalvolume(million m 2,500 Trade & Trade Customer 1HFY18/19 1HFY17/18 1HFY16/17 2,000 541.7 5,017.7 volume 3,593.8 Trading or 501.4 39.6% 154.7% 1.8% 1,500 pipelines 1,000 1,410.8 500 0 1HFY16/17 1HFY17/18 1HFY18/19

Pipelines & Trade CNG/LNG Commercial Industrial Residential 8 Natural Gas – Effective Connections

Total New Residential Connections City Gas Projects: Existing Building Connections / Total Connections 3,000,000 2,534,709 40% 36% 2,500,000 35%

30% 2,000,000 25%

1,500,000 20%

15%

1,000,000 Households 10% 500,000 5%

0 0%

Proactively optimising its connection strategy to promote new connections of existing residential buildings, CGH continues to deliver stable new connections in city gas projects, at the same time, continue to boost its robust growth of new connections in township gas projects.

In 1HFY18/19, the proportion of existing residential connections over total new connections in city gas projects reached 36%.

9 Natural Gas - Customer

Organic Growth 1HFY18/19 Change 1HFY17/18 Customer Change from Portfolio from Portfolio 1HFY18/19 1HFY17/18 1HFY17/18 Total 1HFY17/18 Total Residential 2,534,709 18.3% 2,142,114 27,105,030 18.8% 22,823,770 City projects 1,412,193 -1.7% 1,436,384 24,833,381 12.3% 22,118,040 Township Projects 1,122,516 59.1% 705,730 2,271,649 221.9% 705,730 Industrial 1,110 0.1% 1,109 10,831 27.2% 8,512 Commercial 15,622 16.1% 13,454 184,586 18.8% 155,423 CNG/LNG Stations - - - 580 - 580

10 Natural Gas – Tariff & Dollar Margin

City Gas Projects Change from 1HFY18/19 1HFY17/18 Customer Tariffs (ex-tax) (RMB / m3) 1HFY16/17 Residential 2.49 2.45 1.6% Industrial 2.46 2.39 2.9% Commercial 2.58 2.52 2.4% CNG/LNG Stations 2.91 2.82 3.2%

Dollar Margins (ex-tax) (RMB / m3) 1HFY18/19 FY17/18 1HFY17/18

Overall Dollar Margin (city gas projects) 0.625 0.623 0.651 Residential 0.47 0.51 0.57 Industrial 0.59 0.60 0.60 Commercial 0.82 0.78 0.78 CNG/LNG Stations 0.88 0.75 0.86

11 Natural Gas - Other Operational Data

1HFY18/19 1HFY17/18 1HFY16/17 Residential Connection Fee City Projects 2,549 2,496 2,529 (RMB per customer) Township Projects 3,038 3,142 - Urban Population Covered (million) 125.6 119.5 101.0 Household Penetration Rate (City Gas Projects) 59.8% 55.7% 51.8%

12 Operational Performance LPG

13 LPG - Vertical Integration of the Value Chain

Upstream Midstream Downstream End Users

LPG Import LPG Class II Industrial receiving Stations terminals

8 LPG Terminals (Class 1 & 2) LPG Fleet Capacity: 12,600 tonnes Commercial LPG Domestic Bottling Storage Oil Refinery Stations / facilities Retail Points 100 LPG Distribution Projects 3 Over 300,000 m Storage Capacity 1,100 LPG Retail Stores Residential

CGH Core Business Areas CGH Facilities / Customers

China Gas owns:  8 LPG receiving terminals  300,000 m3 of LPG storage capacity  100 LPG distribution projects and 1,100 retail stores  LPG distribution coverage in 19 provinces in China

14 LPG - Vertical Integration of the Value Chain

Retail: • A more popular clean energy in townships and villages LPG Sales Volume Breakdown (Tonnes) where natural gas is not available; • Consolidating retail market through better service, safety standard and quality of goods; 1,938,300 1,958,441 • Owning a national call no. “95007”; 1,800,000 1,717,887 524,100 574,177 1,500,000 Retail 526,687

1,200,000 Wholesale: • Demand driven, such as rapid growth of the 900,000 petrochemical synthesis and processing sector where 1,414,200 1,384,264 LPG is used as a raw material; 600,000 1,191,200 • Contractual sales accounts for about 60% of the total

Wholesale wholesale volume, so as to effectively avoid LPG price 300,000 fluctuation risk;

0 1HFY16/17 1HFY17/18 1HFY18/19

Wholesale Retail  Further market penetration  Economies of scale  Fully liberalized market  LPG price-setter

15 LPG - Vertical Integration of the Value Chain

Change from 1HFY18/19 1HFY17/18 1HFY16/17 1HFY15/16 1HFY17/18 Sales Volume (tonnes) 1,958,441 1.0% 1,938,300 1,717,887 1,367,081 wholesale 1,384,264 -2.1% 1,414,200 1,191,200 895,429 retail 574,177 9.6% 524,100 526,687 471,652

Sales Revenue (HK$’000) 9,812,779 45.7% 6,736,886 4,830,057 5,483,218 Gross Profit (HK$’000) 721,770 9.1% 661,501 604,276 684,529 Net: FX gain/loss (178,460) 9,400 (16,141) (93,588) Core Operating Profit (HK$’000) 264,362 -6.3% * 282,247 251,112 306,317

GP Margin (%) 7.4% - 2.4 pts ** 9.8% 12.5% 12.5% Core OP Margin (%) 2.7% - 1.5 pts 4.2% 5.2% 5.6%

• The drop of Core Operating Profit was due to the increase of SG&A, which was attributable to the new expansion of LPG coverage from 16 provinces one-year ago to 19 provinces in 1HFY18/19, during the expansion period, the start-up/marketing expenses increased immediately, while the growth of sales volume to follow in coming periods

** The drop of GP margin was due to the 30.0% hike of LPG’s ASP (average selling price)

16

Operational Performance Value-added Services

18 Value-added services, asset-light business

Sale and/or delivery of products/services via existing network with 32M+ customers

Gas heaters & kitchen appliances under the brand of Gasbo (中燃寶), such as gas stoves, disinfection cabinet, range hood, etc.

Comprehensive gas insurance

Sale of water purifier Online Sale of air purifier +

Gas alarm system offline

Bottled water

Gas corrugated pipes

Maintenance and equipment conversion services

and more…

19 Value-added services, asset-light business

Huge PRC market, High margin, Strong growth

Performance (HK$ millions) Change from Value-added services 1HFY18/19 1HFY17/18 1HFY17/18 Revenue 1,011.4 45.0% 697.4 Blue Gross profit 416.9 18.9% 350.7 Ocean GP margin 41.2% -9.1 pts 50.3% Operating profit 341.5 18.2% 289.0 OP margin 33.8% -7.6 pts 41.4%

value-added services

Revenue & profit continue to grow at high double-digit in years

20 Financial Performance

21 Income Statement

1H FY17/18 HK$ (millions) 1H FY18/19 % change (restated)

Revenue 28,877.2 +38.3% 20,875.4 Gas sales 11,973.6 +41.4% 8,468.3 Connection fees 5,312.6 +35.4% 3,923.2 LPG sales 9,812.8 +45.7% 6,736.9 Value-added services 1,011.4 +45.0% 697.4 Engineering design and construction 766.9 (26.9%) 1,049.6 Gross profit 6,499.9 +18.9% 5,468.9 EBIT 5,847.1 +18.1% 4,952.8 One-off or non-operational items 198.2 88.2

Profit attributable to owners of the Company 4,225.8 +24.5% 3,395.2

EPS - Basic (HK cents) 84.42 +23.5% 68.33

Core profit attributable to owners of the Company * 4,027.6 * +21.8% * 3,307.0

Interim dividend per share (HK cents) 8.0 - 8.0

* The growth of Core profit attributable to owners of the Company would have increased by more than 21.8% if RMB vs. USD/HK$ didn’t drop by more than 3.5% from 30th Sep 2017 22 One-off / non-operational items

Items HK$ millions Remarks 1 Foreign debt proportion remained at low level of 16.9% as at 30 Sep. Exchange gain/loss (205.0) 2018 2 Gain or loss on disposal of For instance: increased shares in a JV (Hohhot city gas project) from 605.6 associate/JV/PPE 51% to 63%, which becomes a subsidiary 3 Share of ex loss attributable to ZY Gas (39.8) (associate, 43.3176% of shares)

4 Share based payments (options) (162.6) Fully booked

Total amount 198.2

23 Change of currencies

Historical exchange rate USD:RMB 7 6.8788 6.9 3.5% 6.8 6.6477 6.7 6.6 6.5 9.8% 6.4 -5.8% 6.2628 6.3 6.2 6.1 6 5.9 30/9/2017 31/3/2018 30/9/2018

Source: Wind 24 Balance Sheet

HK$ millions 1HFY18/19 FY17/18 FY16/17 FY15/16

Total Assets 93,516.1 82,058.0 59,986.8 53,532.9

Total Equity 34,712.7 32,730.1 23,927.6 20,964.1

Shareholder's Equity 29,549.8 28,456.0 20,550.2 17,852.6

Cash 9,987.9 8,537.0 5,242.3 5,772.5

Short-term Bank and Other Borrowings 8,737.8 11,079.3 10,873.3 10,324.5

of which LPG trade finance related facilities 1,696.7 3,614.1 - 1,337.2

Long-term Bank and Other Borrowings 24,385.7 21,293.1 12,745.2 12,009.7

Net Gearing Ratio * 62% 62% 77% 79%

* Excluding the LPG trade finance related facilities

25 Operating Profit Margin

1HFY18/19 1HFY17/18

Operating profit margin 20.3% 23.7%

Sales of gas 12.5% 14.3%

Gas connection 36.2% 44.0%

Engineering design and construction 17.9% 16.1%

LPG sales * 2.7% 4.2%

Value-added services 33.8% 41.4%

* Net of one-off or non-operational items, such as FX gain/loss

26 Future Strategy & Outlook

27 Future Strategy

 Continue to add 10-20 new city concessions in each year

 Speed up connections to old/existing residential buildings to increase penetration rate

 Strong volume driver: “coal to gas” conversion for industrial and commercial users

 Huge new market for winter heating application: replacement of coal with gas for residential users in towns and villages in 15 provinces in northern China

 Develop the enormous value-added services’ market for more than 32 million existing customers, which increase by 5 million annually

 Vertically integrate LPG value chain and boost LPG assets’ utilization rate

 Explore new businesses, such as, Distributed Energy, Gas Co-generation, Electric Charging Posts and Electricity Distribution etc.

28 Township “coal-to-gas” for heating

 Established strategic partnerships with Tianjin city, Hebei, Shandong, Shanxi, Henan, Shaanxi, Anhui, Yunnan, Hainan, Heilongjiang, Hubei, Jilin, Guizhou, Sichuan and Hunan provinces respectively, and implemented projects, in more than 147 counties or districts, such as “replacement of coal with gas” in towns and villages, conversion of coal-fired boilers to natural-gas-fed in urban areas, natural gas for vehicles, distributed energy resources, natural gas storage facilities and the construction of natural gas pipeline networks and “beautiful countryside”

 As at 30th September 2018, China Gas has signed contracts to replace coal with natural gas for 5.5 million households in towns/villages, including the 2.27 million households for which the connection works have been completed by September 2018.

 Replacement of coal with natural gas projects in towns and villages will contribute to the Group:

a. A substantial increase in new residential connections, on top of the annual residential connections in 361 existing city gas projects.

b. Continuously grow value-added business by selling wall-hanging gas heaters and kitchen appliances

c. Replacement of coal with natural gas projects in towns and villages is mainly for winter heating purpose, the average gas consumption per household for heating in winter is about 10 times of the usage by urban household, thus, it will bring substantial growth in natural gas sales in the future

29 Outlook

Segment FY2018/19 FY2019/20 FY2020/21

Gas volume in city & township projects 25+% p.a. Growth rate Gas volume via pipeline & trade At double-digit %

Annual residential connections (households) 4,700,000 5,500,000 6,300,000

Sale tonnage of LPG (tonnes) 4,500,000 5,000,000 6,000,000

Gross profit of value-added service 40% - 50% p.a.

30 Reference Documents

31 Township “coal-to-gas” for heating

"Reinforced Measures on Air Pollution Prevention and Control in Beijing-Tianjin-Hebei (2016-2017)"

•issued by the Ministry of Environmental Protection in collaboration with the People's Governments of Beijing, Tianjin and Hebei in June 2016 •promotion of "gas for coal replacement" campaign, designation of coal-free areas •dedicated funding from central government

"Measures for the Administration of Special Funds for Air Pollution Prevention and Control"

•issued by the Ministry of Finance and Ministry of Environmental Protection in July 2016 •strengthen the use of special funds for “air pollution prevention and control”

"Implementation Plan for the Reinforced Measures on Air Pollution Prevention and Control in Hebei (2016-2017)"

•issued by the People's Government of Hebei in August 2016 "2017 Work Plan on Air Pollution Prevention and Control in Beijing-Tianjin-Hebei and the Surrounding Areas" •issued by 4 ministries in collaboration with People's Governments of six provinces and municipalities in Northern China in February 2017 •number of "pollution diffusion belt cities" raised to 28 •shut down of heavily polluting factories in winter

32 Township “coal-to-gas” for heating

"Circular of the Central Government on Piloting Winter Cleaning and Heating in Northern China" •issued by 4 ministries in collaboration in May 2017 •support for pilot projects on clean winter heating with central finance •3 years demonstration period. Financial subsidy by the central government according to the scale of the city: 1 billion each year for municipalities, 700 million each year for provincial capital cities, and 500 million each year for prefecture-level cities.

"Priority Working Plan for Comprehensive Management of Air Pollution during Fall and Winter of 2017-2018 in Beijing-Tianjin-Hebei and its Surrounding Areas" •issued by 10 ministries in collaboration with People's Governments of six provinces and municipalities in Northern China in August 2017 •supervision of “air pollution comprehensive management” work done by the 28 “pollution diffusion belt cities” “Clean Winter Heating Plan for North China (2017-2021)" •Issued by 10 ministries in collaboration in December 2017 •Includes all 15 provinces in north China •by 2021: 70% clean heating coverage in north China, replacing 150 MTs of coal; comprehensive clean heating coverage in “2+26” cities and abolition of all boilers under 35 tons; 80% clean heating coverage in counties and city suburbs and abolition of all boilers under 20 tons; 60% clean heating coverage in rural area

“Three Year Action Plan for Winning the Battle for Blue Sky"

•issued by the State Council, highest profile document for air pollution control •Extending air pollution control from “2+26” to the Yangtze River Delta and Fenhe-Weihe Plain •Incremental gas will prioritize residential use and winter heating in areas with severe air pollution; prioritizing Beijing-Tianjin-Hebei and its surrounding area and Fenhe-Weihe Plain in order to realize “the replacement of coal with gas”

33 Township “coal-to-gas” for heating

Subsidies for "coal to gas replacement", in Hebei Province：

 Residential users:

 Installation subsidy, RMB 4,000/household. Provincial government bears RMB 1,000, city and county governments bear the rest RMB 3,000

 Equipment purchase subsidy

 70% reimbursement of purchase of wall-mounted heaters, up to RMB 2,700

 Gas subsidy in winter

 RMB 0.8/cubic meter subsidy for winter heating purpose, up to RMB 960 per year, for 3 years

 Industrial users:

 Subsidy of RMB 100,000 per steam ton for retrofitting coal-fired boilers to gas-fired boilers

34 Disclaimer & Contact

Disclaimer:

Statements in this presentation and handout that are not strictly historical are “forward-looking” statements. Forward-looking statements involve risks and uncertainties, including, but not limited to, continued acceptance of the Company’s product and services in the marketplace, competitive factors, new products and technology changes, the Company’s dependence upon third party suppliers and other risks detailed from time to time in the presentation, handout and other related documents. All the directors of China Gas jointly and severally accept full responsibility for the accuracy of the information contained in these materials and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in these materials have been arrived at after due and careful consideration and there are no other facts not contained in these materials, the omission of which would make any statement in these materials misleading. The materials and information in the presentations and other documents are for informational purposes only, and are not an offer or solicitation for the purchase or sale of any securities or financial instruments or to provide any investment service or investment advice.

For investor enquires:

Mr. Frank Li

Tel: +852 2238 0315 l Fax: +852 2287 0633

Email: [email protected]

Website: www.chinagasholdings.com.hk

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