Natural-gas distributor Zhengzhou Gas will apply to the mainland authorities for an A-share listing after May to raise money for its expansion plans in an increasingly consolidating marketplace.

Yesterday, the Hong Kong-listed company won approval from the Hong Kong Stock Exchange to issue no more than 420 million A-shares. The proposal will be presented at a general shareholders' meeting for approval in May.

"If our shareholders give the go-ahead, we will apply to the China Securities Regulatory Commission" for a Shenzhen listing, Chairman Yan Guoqi told reporters yesterday.

Shrugging off the impact of poor domestic stock markets, Yan said he believes they will do better amid the mainland's robust long-term economic growth.

No details about the deal size were given. But based on the firm's H-share price of HK$1.11 yesterday - which surged 10 percent - the A-share listing could raise about 420 million yuan.

The actual figure could be higher, as the A-shares of a firm usually have a higher premium than its H-shares.

Zhengzhou Gas reported a 15 percent jump in its 2007 net profits to 128 million yuan on Wednesday. It said the money will be used to build three gas-filling stations, more gas-pipe routes and supplementary facilities.

The company now has more than 100 million yuan cash in hand, but it needs between 700 million and 800 million yuan in the next three years for the expansion plans in order to secure enough gas supplies.

The money will also be used to fund future acquisitions, Yan said, adding that the firm has been in talks with the Puyang and Zhongmu governments, all in Central China's Henan province, for gas-supplying deals.

Zhengzhou Gas - which supplies gas to 705,000 households and 1,740 businesses in Zhengzhou - made its maiden acquisition out of the home city in Henan province earlier this month. The deal was for a 27 percent stake in Pingdingshan City Gas Corp for 30.5 million yuan.

Zhengzhou Gas wants to cut its reliance on a single city, as the mainland's once ultra-fragmented gas sector is experiencing a quick consolidation.

An analyst said Zhengzhou Gas' acquisitions and expansions will help it secure fresh profits from the fledgling, albeit lucrative, natural-gas markets.

The central government wants natural gas to account for 8 percent of the total energy consumption by 2010, up from less than 3 percent now.

Despite the long-term prospects, gas distributors are now suffering from a government-enforced price cap intended to freeze prices and tame inflation.

But Yan said the firm is likely to get the green light from the local government to raise the prices this year.

The change in price of public utilities, such as water, electricity and gas, are subject to government approval on the mainland.

(HK Edition 03/28/2008 page3)