Impact of Return Cap for China's City Gas Distributors Hinges on Connection Fee Treatment
The shares of China city gas distributors took a hit May 15 following news that the government may impose a 6% cap on the annual rate of return on assets for natural gas distributors in urban areas. The share prices of China Gas Holdings, China Resources Gas Group, and ENN Energy Holdings dropped more than 10% from May 12, but we think the sell-off is overdone. In our view, the key to assessing the impact of the return cap is whether the earnings from gas connection are included in the calculati...China Resources Gas Group is an investment holding company. Co. operates a gas utilities group in China that is principally engaged in downstream city gas distribution business including piped natural gas distribution and natural gas filling stations operations. Co. and its subsidiaries' operating segments are as follows: sale and distribution of gas fuel and related products; which is engaged in the sale of natural gas and liquefied petroleum gas for residential, commercial and industrial use; and Gas connection, which engaged in the construction of gas pipelines networks under gas connection contracts.
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