THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW

The information presented in this section, unless otherwise indicated, is derived from various official government publications and other publications and from the F&S Report, which was commissioned by us. We believe that the information has been derived from appropriate sources and we have taken reasonable care in extracting and reproducing the information. We have no reason to believe that the information is false or misleading in any material respect or that any fact has been omitted that would render the information false or misleading in any material respect. The information has not been independently verified by us, the Sole Sponsor, the [REDACTED], the [REDACTED], the [REDACTED] or any of our or their respective directors, officers or representatives or any other person involved in the [REDACTED], except for Frost & Sullivan, and no representation is given as to its accuracy or completeness of such information. Accordingly, you should not rely on such information in making, or refraining from making, any [REDACTED] decision.

SOURCE OF INFORMATION

We have commissioned Frost & Sullivan, an independent market research and consulting company, to conduct an analysis of, and to prepare a report on the natural gas industry in China, Zhejiang Province and Huzhou. The report prepared by Frost & Sullivan for us is referred to in this document as the F&S Report. A total fee of RMB430,000 was paid to F&S for the preparation of the Frost & Sullivan Report, which we believe reflects market rates for reports of this type. Frost & Sullivan is a global consulting company founded in 1961 in New York and has over 40 global offices with more than 2,000 industry consultants, market research analysts, technology analysts and economists. Our Directors confirmed that, after making reasonable investigation, there has been no material adverse change in the market information since the date of the F&S Report and up to the Latest Practicable Date, which may qualify, contradict or have an impact in any material respect on the information in this section.

RESEARCH METHODOLOGY

The F&S Report was prepared through both primary and secondary research obtained from various sources using intelligence collection methodologies. Primary research involved discussing the status of the industry with certain leading industry participants across the industry value chain and conducting interviews with relevant parties to obtain objective and factual data and prospective predictions. Secondary research involved information integration of data and publication from publicly available sources, including official data and announcements from government agencies, company reports, independent research reports and data based on Frost & Sullivan’s own data base.

Basis and Assumptions

In compiling and preparing the F&S Report, Frost & Sullivan has adopted the following assumptions: (i) the social, economic and political environment in the PRC, Zhejiang Province and Huzhou are likely to remain stable in the forecast period; (ii) industry key drivers are likely to drive the growth of the China, Zhejiang Province and Huzhou natural gas industry in the forecast period. All statistics are based on information available as of the date of the F&S Report and have taken into account the potential impact of the COVID-19 outbreak on the growth of macro economies and on China, Zhejiang Province and Huzhou natural gas industry.

OVERVIEW OF MACRO ECONOMIC ENVIRONMENT IN ZHEJIANG PROVINCE AND HUZHOU

Zhejiang Province’s nominal GDP has increased to approximately RMB6,461.3 billion in 2020, representing a CAGR of approximately 8.1% from 2016 to 2020. Looking forward, Zhejiang Province will further promote the economy digital transformation and vigorously develop emerging industries such as high-end manufacturing, renewable energy, biomedicine and new materials. The nominal GDP

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Since the “13th Five-Year Plan”, Zhejiang Province has unswervingly followed the strategy of energy “double control” (雙控) forcing economic sustainable transformation and upgrading. Great performance has been witnessed: from 2016 to 2019, Zhejiang Province’s energy consumption per unit of GDP dropped by approximately 14.2%. In 2019, Zhejiang Province contributed to 6.3% of China’s GDP by using 4.6% of the country’s total energy consumption. The total energy consumption volume in Zhejiang Province increased from 202.8 million tonnes of SCE (Standard Coal Equivalent) in 2016 to 223.9 million tonnes of SCE in 2019 and is estimated to have reached around 239.1 million tonnes of SCE in 2020. The rapid increase of energy consumption in 2020 is mainly attributed to the operation of Zhejiang Petrochemical Project Phase I and Phase II (浙石化項目). After the separate deduction of Zhejiang Petrochemical projects, the energy consumption of industrial enterprises above designated size in Zhejiang Province decreased by 0.1% in 2020 from 2019. The total energy consumption in Zhejiang Province is expected to reach 287.8 million tonnes of SCE by 2025 at a CAGR of approximately 3.6% from 2021, with increasing proportion of clean energy and growing energy efficiency. Driven by Huzhou’s government support and economy development, the total energy consumption volume of industrial enterprises above designated size increased steadily from 7.6 million tonnes of SCE in 2016 to approximately 8.8 million tonnes of SCE in 2020 at a CAGR of 3.8%. In the future, the total energy consumption volume of industrial enterprises above designated size of Huzhou is expected to increase from 9.1 million tonnes of SCE in 2021 to 10.4 million tonnes of SCE in 2025, illustrating a CAGR of 3.4%.

OVERVIEW OF NATURAL GAS INDUSTRY IN ZHEJIANG PROVINCE AND HUZHOU

Definition and Classification

Natural gas is a type of flammable gas that occurs deep beneath the earth’s surface, consisting mainly of methane with minor amounts of ethane, propane, butane, nitrogen, etc. Natural gas is also a clean fossil fuel that has less carbon dioxide emission than coal and oil. Natural gas can be efficiently burned to generate heat and electricity, emitting less waste and toxins at the point of use relative to other fossil and biomass fuels. Downstream application areas for the natural gas industry include industrial, commercial and residential.

Natural gas can be divided into three main categories: 1) liquefied natural gas (LNG); 2) pipeline natural gas (PNG); and 3) compressed natural gas (CNG). LNG is a type of natural gas that has been converted into liquid form through cooling. The liquefaction process involves removal of certain components, such as dust, acid gases, helium, water, and heavy hydrocarbons. The natural gas is then condensed into a liquid at close to atmospheric pressure by cooling it to approximately −162°C. LNG must be kept cold to remain a liquid, independent of pressure. PNG means that natural gas is transmitted and traded through pipeline in gaseous status. PNG is not stored at one place but is continuously supplied through the pipeline from the source. PNG is applicable to China, continental Europe, Northern Americas and other countries where pipelines can be laid to directly import natural gas from neighbouring

–68– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THAT THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT. INDUSTRY OVERVIEW countries (or regions). CNG refers to gaseous natural gas that is compressed to a pressure greater than or equal to 10 MPa and no greater than 25 MPa, and then undergoes high-pressure deep dehydration and is stored in a gaseous state in a container. It has the same composition as PNG and can be used as vehicle fuel, making it an ideal alternative energy source for vehicles. It has the characteristics of low cost, high efficiency, no pollution, safe and convenient use, etc., which is increasingly showing strong potential of market development.

Value Chain Analysis

The value chain of the natural gas industry mainly consists of four segments namely source, transportation, distribution and consumption. Natural gas sources come from major domestic gas-producing regions and international importation. Natural gas is then transported via large-diameter, high-pressure steel transmission pipelines, which carry natural gas to large industrial customers and local distribution networks. For distribution purposes, the natural gas is transported to provincial natural gas enterprises, then to local natural gas enterprises through city gates. Local natural gas enterprises reduce the pressure of the gas, add odorant to aid in leak detection, and then deliver the natural gas via smaller, low-pressure lines to end users such as industrial, commercial, residential and others.

The chart below illustrates the value chain of natural gas industry:

Value Chain of Natural Gas Industry

Upstream Extract Midstream Storage and Transportation Downstream Distribution

Some users to be Domestic source Pipelines for gas supplied directly supplied directly

Gas storage Conventional gas Generating users

Provincial-level gate station Municipal-level Uncoventional gas Trans-provincial pipeline Industrial users and pipeline pipeline

Overseas source LNG liquefaction Commercial users plants

Tankers Residential users Imported PNG Multinational pipeline Refueling Imported LNG LNG receiving stations Automobile users stations

Source: F&S Report

Production and Consumption Volume of Natural Gas in China

In response to the energy structure reform, China’s production and consumption volume of natural gas kept growing in the past few years. The increasing investment on exploration and development of gas source contributed to the continuous growth of natural gas supply. The production and consumption volumes of natural gas have increased from 136.9 billion m3 and 207.8 billion m3, respectively, in 2016 to 188.8 billion m3 and 326.2 billion m3, respectively, in 2020, representing CAGRs of approximately 8.4% and 11.9%, respectively.

According to the “Guiding Opinions on Energy Work in 2021” (2021年能源工作指 導意見), the natural gas production will reach about 202.5 billion m3 by 2021. It is estimated that the production volume of natural gas would reach approximately 271.1 billion m3 in 2025 due to the increasing investment in natural gas exploration, representing a CAGR of approximately 7.6% from 2021. The consumption volume of natural gas is forecasted to reach 495.0 billion m3 in 2025, at a CAGR of approximately 8.7% since 2021.

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Production and Consumption Volume of Natural Gas (China), 2016-2025E

CAGR 2016-2020 CAGR 2021E-2025E Billion M3 Production 8.4% 7.6% 495.0 500.0 Consumption 11.9% 8.7% 456.2 420.1 400.0 386.1 354.2 326.2 306.7 300.0 281.7 271.1 252.2 239.4 234.2 217.7 207.8 202.5 200.0 188.8 160.2 176.2 136.9 148.0 100.0

0.0 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E

Source: Bureau of Statistics of China; F&S Report

Consumption Volume of Natural Gas in Zhejiang Province

Influenced by the continuous promotion of coal-to-gas and the extensive utilisation of natural gas, the consumption volume of natural gas in Zhejiang Province witnessed a steady increase at a CAGR of approximately 13.0% from 8.8 billion m3 in 2016 to 14.3 billion m3 in 2020. According to the “Zhejiang 13th Five-Year Plan for Greenhouse Gas Emission Control” (浙江省“十三五”控制溫室氣體排放實施方案), the natural gas would account for about 10% of total energy consumption by 2020. The Zhejiang Province 14th Five-Year Plan for Coal, Petroleum and Natural Gas Development (draft for comment)《浙江省煤炭石油天然氣發展 ( “十四五”規劃》（徵求意 見稿）) released by Zhejiang Energy Administration puts forward new developing goals of energy development. The consumption volume of natural gas is expected to increase from 16.0 billion m3 in 2021 to 23.5 billion m3 in 2025, demonstrating a CAGR of approximately 10.1%. The proportion of Zhejiang Province natural gas consumption in China is expected to grow from 4.5% in 2021 to approximately 4.7% in 2025.

Consumption Volume of Natural Gas (Zhejiang Province), 2016-2025E

CAGR +10.1% Consumption Billion M3 % of China % 23.5 24.0 20 22.0 21.4 19.5 20.0 CAGR +13.0% 17.7 18.0 15 16.0 16.0 14.8 14.3 14.0 13.5 12.0 10.5 10 10.0 8.8 8.0 4.8% 4.8% 4.5% 4.6% 4.6% 4.7% 4.7% 6.0 4.2% 4.4% 4.4% 5 4.0 2.0 0.0 0 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E

Source: Bureau of Statistics of China; F&S Report

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Structure of Total Energy Consumption in Zhejiang Province

Zhejiang Province’s energy consumption structure continues to optimise, with coal accounting for approximately 45.3% in 2019, decreasing from 50.8% in 2016. Natural gas accounted for approximately 8.0% of total energy consumption in 2019, increased from 5.2% in 2016. The proportion of oil witnessed an increase mainly due to the completion and production of large-scale petrochemical projects in Zhejiang (浙 石化項目).

In March 2021, the Zhejiang Province 14th Five-Year Plan for Coal, Petroleum and Natural Gas Development (draft for comment)《浙江省煤炭石油天然氣發展 ( “十四 五”規劃》（徵求意見稿）) was released by Zhejiang Energy Administration, putting forward new developing goals of energy consumption structure. For example, natural gas consumption is aimed to be around 13.0% of total energy consumption by 2025. With more policies to be implemented during the 14th Five-Year period, the energy consumption structure in Zhejiang Province will be further optimised and more favourable to clean energy such as natural gas.

Structure of Total Energy Consumption (Zhejiang Province), 2016-2025E

Coal Crude Oil Natural Gas Hydropower, Nuclear Power, Wind power and Other Energy

100%

37.1% 35.3% 33.5% 45.3% 43.5% 39.0% 50.8% 49.8% 47.4% 40.9%

21.0% 19.5% 20.2% 20.6% 17.2% 18.7% 17.8% 16.8% 21.2% 20.2% 9.3% 10.1% 10.8% 11.7% 12.6% 7.5% 8.0% 8.5% 5.2% 6.0% 31.1% 31.4% 31.9% 32.4% 32.9% 22.8% 24.0% 27.3% 29.9% 30.8%

2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E

Source: Zhejiang Provincial Bureau of Statistics, F&S Report

Consumption Volume of Natural Gas in Huzhou

Influenced by the expanding utilisation of natural gas, the consumption volume of natural gas in Huzhou experienced a rapid increase at a CAGR of approximately 19.2% from 0.52 billion m3 in 2016 to 1.05 billion m3 in 2020. In 2019, the HZDRC issued “Special Action Plan for Development and Reform of the Three-year Plan on Defending the Blue Sky in Huzhou (2018-2020)”《湖州市打贏藍天保衛戰三年行動計劃 ( 發展改革專項行動方案(2018-2020年)), which aimed to accelerate the development of natural gas infrastructure and promote the consumption of natural gas. Also, “Opinions on Further Strengthening the Administration of Energy Security (Draft for Comment)”《關於進一步加強能源保障管理的意見》 ( (徵求意見稿)) issued by the HZDRC in 2019 set the goal that the proportion of natural gas consumption in the total energy consumption would reach over 10% by 2020.

Going forward, the consumption volume of natural gas is expected to increase from 1.20 billion m3 in 2021 to 1.81 billion m3 in 2025, demonstrating a CAGR of approximately 10.8%, which is higher than the growth rate of Zhejiang Province. The proportion of Huzhou natural gas consumption in Zhejiang Province is expected to grow from 7.5% in 2021 to approximately 7.7% in 2025.

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Consumption Volume of Natural Gas (Huzhou), 2016-2025E

CAGR +10.8% Consumption Billion M3 % of Zhejiang % 2.0 1.81 20 1.8 1.64 1.6 CAGR +19.2% 1.48 1.4 1.34 15 1.20 1.13 1.2 1.06 1.05 1.0 10 0.71 0.8 0.52 0.6 7.9% 7.6% 7.3% 7.5% 7.6% 7.6% 7.7% 7.7% 6.8% 0.4 5.9% 5 0.2

0.0 0 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E

Source: F&S Report

PRICE ANALYSIS

The purchase price of PNG experienced an upward trend from RMB2.13/m3 in 2016 to RMB2.65/m3 in 2019 and then decreased to RMB2.04/m3 in 2020 mainly due to the impact of COVID-19 and oil price fluctuation. The selling prices of PNG are depending on the types of users. The PNG average unit selling price for industrial users fluctuated which changed from RMB2.52/m3 in 2016 to RMB2.62/m3 in 2020. For commercial users, the PNG selling price changed from RMB2.81/m3 in 2016 to 3 RMB2.78/m in 2020. The selling price for residential users was RMB2.60/m3 in 2016, and it had a relatively stable price tendency and increased to approximately RMB2.75/m3 in 2020. The decrease of PNG selling prices for residential and commercial users was also attributed to supportive policies with the aim to reduce costs of non-residential gas during the pandemic. With the implementation of natural gas marketisation reform, PNG price is going to better reflect the market supply and demand in the future, which may promote natural gas companies to strengthen their resilience to the risk of price fluctuations by expanding their competitive advantages.

Trend of PNG Purchase Price (Huzhou), Trend of PNG Selling Price (Huzhou), 2016-2020 2016-2020

RMB/m3 RMB/m3 3.0 Residential 4 Industrial 2.65 Commercial 2.5 3.143.14 2.782.78 2.30 3 2.812.81 2.772.77 2.952.95 2.0 2.642.64 2.752.75 2.13 2.09 2.602.60 2.632.63 2.742.74 2.04 2.712.71 2.522.52 2.562.56 2.622.62 2.402.40 1.5 2

1.0 1 0.5

0.0 0 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020

Source: F&S Report

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Entry Barriers

(i) Capital barrier

Since large capital investments are necessary to establish operations such as pipeline infrastructure layout and formation, and gas fuel plants maintenance and processing, the natural gas industry is relatively capital intensive. Hence, new market entrants of natural gas industry need to devote a large upfront investment which requires strong financial strength. Moreover, it takes a relatively long period of time for market participants to recover their investment, so new entrants need more time to establish their networks covering procurement, storage and transportation.

(ii) Qualification barrier

The natural gas industry sets a high qualification requirement for new entrants. According to the “Regulations on the Administration of Town Gas” (城鎮燃氣管理條例), companies operating in gas fuel business activities should possess gas fuel source and gas fuel facilities that conform with national standards and establish comprehensive safety management systems. The natural gas industry is highly regulated and new entrants are expected to encounter interactions with multiple public authorities for project approval, pipeline network layout, location selection for gas fuel stations, etc. It can be difficult for new entrants to acquire construction or operation permits due to the lack of proven track record, management experience and technical expertise. Concession agreements need to be granted to natural gas distributors in order for them to operate in certain areas. Therefore, government regulations, qualification requirements and concession agreements pose a high entry barrier for potential market players.

(iii) Source supply barrier

To ensure a stable and sufficient supply of natural gas, companies have to establish procurement channels and maintain good business relationship with upstream natural gas suppliers. For new entrants, it takes a relatively long period of time for them to establish and maintain a solid and long-term relationship with upstream suppliers to ensure stable and reliable natural gas supply for the operation and future development plan. Due to the lack of business reputation and industry experience, it can be difficult for new entrants to build up solid business relationship. With the lack of natural gas supply, new entrants are not able to gain competitiveness which can be a potential entry barrier for them.

Major Drivers

(i) Increasing downstream market demand

According to the “13th Five-Year Plan for Natural Gas Development” (天然氣發展 “十三五”規劃), China has been committed to increasing its natural gas consumption to over 10% of the total primary energy consumption in 2020. Multiple government policies have aimed to reduce coal consumption, hence the current replacement of coal consumption will create huge market potential for natural gas companies. In addition, the utilisation of natural gas in different downstream sectors is expected to increase as well. With the increasing total industrial added value in China from RMB24.5 trillion in 2016 to RMB31.3 trillion in 2020, the industrial sector is expected to witness an upward demand for natural gas. Other sectors such as commercial and residential are also expected to increase in the future years due to energy consumption structural shifts and growing downstream market demand. Natural gas consumption in Zhejiang Province and Huzhou increased at CAGRs of 13.0% and 11.9% from 2016 to 2020, respectively, and is expected to increase at CAGRs of 10.1% and 10.8%, respectively, from 2021 to 2025.

(ii) Rising accessibility of natural gas

The development of natural gas infrastructure allows more enterprises and residents to gain access to natural gas. According to the “Medium and Long-term Oil

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(iii) Favourable government policy

Policies that promote the development of natural gas infrastructure and adjustment plan of energy structure is a major driver that attracts enterprises and residents to gain access to natural gas and stimulate the development of natural gas industry. In 2021, the Zhejiang Province 14th Five-Year Plan for Energy Development (draft for comment)《浙江省能源發展 ( “十四五”規劃》（徵求意見稿）) and the Zhejiang Province 14th Five-Year Plan for Coal, Petroleum and Natural Gas Development (draft for comment)《浙江省煤炭石油天然氣發展 ( “十四五”規劃》（徵求意見稿）) were issued and stated targets and guidelines to promote the development of natural gas industry in Zhejiang Province such as: 1) increase the natural gas consumption; 2) increase the penetration rate of natural gas for residents; 3) increase natural gas storage capacity; and 4) set up LNG terminals and distribution system that covered the Yangtze River Delta region. The Huzhou Municipal Government also promulgated “Special Action Plan for Development and Reform of the Three-year Plan on Defending the Blue Sky in Huzhou (2018-2020)” (湖州市打贏藍天保衛戰三年行動計畫 發展改革專項行動方案(2018-2020年)) to accelerate the elimination and renovation of coal-fired boilers for the purpose of environmental protection. Moreover, the government is encouraging natural gas suppliers to build their local storage stations to support the gas peak adjustment and emergency system in order to ensure the long-time stable gas supply. According to the Advice on Gas Storage and Market Mechanism announced in 2018, town gas enterprises shall establish natural gas reserves and have the capacity of storing natural gas of not less than 5% of their annual consumption volume by 2020. These favourable government policies continue to drive the development of natural gas industry.

Market Trends

(i) Increasing awareness of environmental protection

The concern for the environment is a major reason for China’s rising demands of natural gas. Severe air pollution has driven the country to shift coal to gas, and several government actions have promoted the reduction of coal consumption. In 2014, the “Strategic Action Plan for Energy Development” (能源發展戰略行動計劃 (2014-2020)) established targets for energy supply and demand, and its principal objective was to reduce coal consumption and encourage users to switch to other fuels such as natural gas. The plan aimed to reduce total primary energy consumption to 4.8 billion tonnes of SCE in 2020 by increasing energy efficiency. Natural gas was positioned as an important solution for environment protection, hence the increasing need for environmental protection will continue to prompt the natural gas industry in the future.

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(ii) More extensive collaboration with overseas suppliers

By cooperating with diversified gas fuel suppliers both domestically and internationally, natural gas enterprises can promote market stability by filling supply and demand gap. In the past few years, the total import volume of natural gas in China increased rapidly from 75.3 billion m3 in 2016 to 141.4 billion m3 in 2020. China has established natural gas cooperation with nations in northwest (Central Asia gas pipeline), southwest (China-Myanmar oil and gas pipeline) and northeast (China-Russia natural gas pipeline). International cooperation could not only compensate the insufficient natural gas fuel supply but also lower the price by directly trading with upstream suppliers which would reduce the intermediate process in the transaction. In addition, the total LNG import volume of China increased significantly from 26.0 million tonnes in 2016 to 67.1 million tonnes in 2020. For Zhejiang Province, it enjoys the favourable location and convenient transportation which will enhance its collaboration with overseas suppliers. The convenient location of coastal region allows Zhejiang Province and its cities such as Huzhou to establish solid business relationships with LNG suppliers and further facilitate more LNG import activities. With the integration of the Yangtze River Delta, Zhejiang Province and its cities such as Huzhou will experience a rapid growth in the natural gas industry.

(iii) Comprehensive process control and monitoring

Since natural gas enterprises need to ensure that end customers receive timely delivery and be able to have quick reactions to leaks, equipment malfunctions or any other unusual activities along the pipeline, sophisticated control systems are required to monitor the gas as it travels through lengthy pipeline network. Hence, a centralised gas control system is required to collect, analyse and manage data received from city gate stations and compressor stations all along the pipeline. Centralised systems such as SCADA (supervisory control and data acquisition) systems have become not only an economical method for controlling the operation of pipelines, but also of capturing data for further analysis. The data constitutes a large amount of information used for analysing all aspects of the pipeline operation. Natural gas enterprises can remotely operate and monitor indicators such as flow rate, pressure and temperature, thus better improving the overall operational efficiency. iv) Accelerated natural gas market-oriented reform process

Currently, natural gas market in China implements a market model based on point-to-point transactions and the gate station price of natural gas is accompanied by complicated and changeable pipeline transmission fees, which hinders the formation of a unified competitive natural gas market. In recent years, the Chinese government has adopted a series of policies to accelerate the market-oriented reform of natural gas and has put forward the goal of “controlling the midstream and releasing the upstream and downstream” (管住中間，放開兩頭), that is, to liberalise the gas source and let the sales price to be formed by the market, and the government only controls the prices of pipeline transmission. Zhejiang Province has also aggressively promoted the market-orient reform of natural gas. In the past few years, the supply of PNG to natural gas distributors in Zhejiang Province was monoplised by the provincial natural gas pipeline companies. In April 2020, the ZJDRC issued “Pilot Rules for Direct Trading of Natural Gas Upstream and Downstream and Pipeline Network Transmission in Zhejiang Province (for Trial Implementation)” (浙江省天然氣上下游直接 交易暨管網代輸試點規則（試行）), encouraging the upstream and downstream companies to carry out direct natural gas transactions, and continuing to expand pilot transmissions to effectively reduce gas consumption costs. Looking forward, driven by supportive policies, the market-oriented reform of natural gas is going to be further implemented, becoming one of the major developing trends of the industry.

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COMPETITIVE LANDSCAPE ANALYSIS

Competitive Landscape of Natural Gas Industry in Zhejiang Province and Huzhou

In 2020, the sales volume of natural gas in Zhejiang Province reached 14.3 billion m3. Within approximately 220 natural gas companies in Zhejiang Province, the top five companies in Zhejiang Province’s natural gas industry had a total share of 30.5%. Company A ranked as the No.1 in 2020 with a market share of 9.8%. Our Company ranked fourth with a market share of 3.3%. There are over 40 natural gas companies of different sizes in Huzhou and surrounding cities such as Jiaxing, Hangzhou, Ningbo and Shaoxing.

Top Five Companies by Sales Volume in Natural Gas Industry (Zhejiang Province), 2020

Ranking Company Sales Volume of Natural Gas (Million M3) Market Share

1 Company A 1,400 9.8%

2 Company B 1,300 9.1%

3 Company C 800 5.6%

4 Our Company 472 3.3%

5 Company D 385 2.7%

Source: F&S Report

Note: The sales volumes for the above companies refer to the sales volume of pipeline natural gas.

Company Profiles of Major Natural Gas Companies in Zhejiang Province

Company A: Founded in 2005, the company has major operating areas in Hangzhou (Xihu District, Jianggan District, Xiacheng District, Binjiang District, etc.). Its business primarily covers the investment, construction, operation, maintenance and management of natural gas pipeline system, procurement, transportation, storage, marketing and sale of natural gas and other gas.

Company B: Founded in 2005, the company owns operating areas in Shaoxing (Yuecheng District, Keqiao District, Jinghu New District, etc.). The company mainly engages in the sale and transportation of gas and the planning, construction, operation and management of gas supply facilities.

Company C: Established in 2020, the company has operating areas in Ningbo (Zhenhai District, Beilun District, Haishu District, etc.). Its business mainly covers the sale and transportation of natural gas and LPG; and the design, construction and installation of gas engineering projects, etc.

Company D: Founded in 1998, the company has operating areas in Jiaxing (Nanhu District, Xiuzhou District, Jiaxing Port District). This company primarily engages in the storage, transportation and sale of PNG, LNG and LPG.

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In 2020, the sales volume of natural gas in Huzhou reached 1.05 billion m3. The top five companies in Huzhou natural gas industry had a total share of 91.6%. Our Company ranked as the No.1 in 2020 with a market share of approximately 44.9%, followed by Company E at approximately 270 million m3 (25.7%). The two largest natural gas companies in Huzhou accounted for nearly 70% of urban natural gas sales volume in Huzhou in 2020.

Top Five Companies by Sales Volume in Natural Gas Industry (Huzhou), 2020

Ranking Company Sales Volume of Natural Gas (Million M3) Market Share

1 Our Company 472 44.9%

2 Company E 270 25.7%

3 Company F 90 8.6%

4 Company G 80 7.6%

5 Company H 50 4.8%

Source: F&S Report

Note: The sales volumes for the above companies refer to the sales volume of pipeline natural gas.

Company Profiles of Major Natural Gas Companies in Huzhou

Company E: Founded in 1999, the company has operating area in Changxing County. The company engages in the production and sales of PNG; design, construction of gas projects; repair, maintenance and sales of gas facilities.

Company F: Established in 2004, the company has operating area in South Tai Lake New District. The company engages in the construction and management of gas pipelines; the transmission, distribution and sales of PNG, and the sales of gas equipment and other related supporting facilities.

Company G: Founded in 2004, the company has operating area in Deqing County. The company has developed into a comprehensive gas enterprise integrating the production and sales of compressed natural gas (CNG), transportation and urban pipeline gas supply.

Company H: Founded in 2011, the company has operating area in Deqing County. The business scope of the company mainly includes urban gas supply, gas equipment and stove maintenance services, as well as self-owned equipment leasing.

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