[News Analysis]: Conference call takeaways
- Target of low carbon business accounting for 10% of total revenue by 2024 remains intact
- More strategic partnerships will be formed, including government platform companies, carbon management companies, technical expertise, etc
- Pilot projects in rooftop PV, distributive heating services and integrated energy for industrial customers are under way
In the past few months, Tian Lun Gas has formed three major strategic partnerships with SPIC Henan Electric Power, China Energy Conservation and Environmental Protection Group (CECEP) and POWERCHINA Henan. Each partnership has different strategic value to help Tian Lun Gas to develop various low carbon businesses.
SPIC is a major electricity supplier in Henan with large exposure to coal and carbon emission. As it targets to achieve carbon peaking in 2023, Tian Lun Gas’ large customer base, particularly in rural area, is a good resource for SPIC to develop rooftop solar power to office SPIC’s carbon emission.
CECEP has already set up various pilot projects for renewable energy and integrated energy. With help from Tian Lun Gas in steady supply of natural gas. CECEP can speed up its development. Meanwhile, Tian Lun Gas can also extend into distributive heating services through this strategic co-operation.
Partnership with POWERCHINA Henan will enhance technical aspects of Tian Lun Gas with respect to project design, planning, engineering and relevant services in power and renewable energy. In addition, with the help from POWERCHINA Henan, Tian Lun Gas can upgrade its existing gas fuel stations into electricity charging station or energy storage station for electrical vehicles.
Tian Lun Gas is still looking for more partnerships, including government platform companies (to help governments in city planning to achieve carbon neutral), carbon management companies and technical expertise. These partnerships will further broaden Tian Lun Gas’ low carbon businesses. Pilot projects in rooftop solar, distributive heating services and integrated energy for industrial customers are under way. If materialize, Tian Lun Gas will build reputation and good track record in low-carbon business and help speed up development further.
Management’s target of low carbon business accounting for 10% of total revenue by 2024 remains intact. Total capex is budgeted at Rmb1.0-1.5bn, including the core gas distribution business and new low-carbon operation. We reckon the majority of funding can be financed by internal resources. Thus, new low carbon business will not put pressure on the balance sheet. Nevertheless, we have yet to factor low carbon business in our earnings forecast, pending more financial guidance. We reckon Tian Lun Gas is on the right track to transfer its business amid China’s carbon neutral plan. Our current rating is HOLD with TP of HK$9.00.