CHINA: SINOPEC & ENN COOPERATION
ENN Energy Holdings Ltd., a distributor of natural gas in China, said it would increase cooperation with Sinopec's fuel stations business, as Asia's biggest refiner seeks buyers for about a third of the unit.
The accord with Sinopec Sales Co. covers areas including buying and transporting natural gas, ENN, based in China's Hebei province, said yesterday in a statement. The details of its agreement with Sinopec, officially known as China Petroleum & Chemical Corp., are still being discussed, it said.
State-controlled Sinopec is at the forefront of China's push to restructure government-backed companies and allow markets a bigger role in the allocation of resources. It's seeking to raise 100 billion yuan ($16.3 billion) from the sale of the retail unit, which operates the nation's largest fuel station network.
ENN is looking closely at the offer to invest in Sinopec Sales, although its agreement to co-operate doesn't mean it will buy a stake, Vice Chairman Cheung Yip Sang said at a press briefing in Hong Kong today, after the gas supplier posted a 65 percent increase in first-half net income to 1.21 billion yuan ($197 million).
"ENN has the potential to be one of the stake-buyers of Sinopec's retail unit," said Shi Yan, an analyst at UOB Kay Hian Ltd. in Shanghai. "Sinopec obviously wants to tap into ENN's expertise in the liquefied natural gas distribution business and add the fuel supply into its vast fuel station network across the country."
Sinopec Chairman Fu Chengyu has said he would favor strategic investors for the retail unit who could contribute commercial expertize to its growth. The sale would pave the way for an eventual listing of the unit, two people familiar with the matter said in July, noting that about 20 companies were in the bidding for the unit.
"Strategic cooperation with Sinopec Sales will benefit both the company and Sinopec Sales by utilizing their strengths in their respective businesses and thereby create further efficiencies, synergies and opportunities in the clean energy sector," ENN said in yesterday's statement.
Sinopec's Beijing-based spokesman didn't answer two calls to his office. The company has announced partnerships with three other companies in recent months for the retail unit, including one insurance company. Sinopec Sales operates more than 30,000 fuel stations in China and more than 23,000 convenience stores.
ENN and Sinopec previously partnered in a failed hostile takeover attempt of natural gas distributor China Gas Holdings Ltd. in 2011.
ENN currently operates about 60 LNG stations for trucks and larger vehicles within Sinopec's fuel retail network, and the plan is to expand that offering nationwide, Vice Chairman Cheung said today.
Sinopec said on Aug. 21 that Sinopec Sales had partnered with e-commerce platform yhd.com. The company signed Taiwan's Ruentex Group as a partner to develop its convenience chain store business earlier this month.
China Taiping Insurance Holdings Co. became Sinopec's first partner in its retail operations in May, when the insurer agreed to offer financial products at 1,500 convenience stores located at fuel stations by the end of the year.
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