PetroChina to sell gas pipelines in multi-billion dollar cash call

HONG KONG: PetroChina Co Ltd , the country's dominant oil and gas producer, said on Monday it plans to sell more multi-billion dollar pipeline projects to raise cash, cut capital spending and promote private investment in energy.
In a filing with the Hong Kong stock exchange, PetroChina said it would set up a company called PetroChina Eastern Pipelines Co Ltd to hold natural gas pipelines with an audited net value of 29 billion yuan ($4.7 billion), before selling off the unit through a public tender.
The unit will hold China's first and second west-to-east, cross-country gas pipelines, with total assets of 81.7 billion yuan and total liabilities of 52.7 billion yuan, based on an audit by KPMG Huazhen, the statement said.

"The equity transfer will help the company (PetroChina) optimize the resource allocation and financing structure and diversify the ownership structure of the company," it said.

PetroChina Co Ltd which divested part of its pipeline assets last year - said in March it would cut capital spending for the second straight year in 2014 to boost shareholder returns in the midst of a massive corruption probe.

In 2013, capital spending fell 9.6 per cent to 318.7 billion yuan, the first such decline since the company's 2000 debut on the Hong Kong and New York stock exchanges.

PetroChina has vowed to divest more non-core assets such as pipelines to reinforce investment in large upstream projects at home and abroad and boost shareholder returns.

This strategy mirrors the current trend in the global oil industry, and echoes plans by rival Chinese energy firm Sinopec Corp , which plans to sell up to 30 percent of its retail arm to raise up to $20 billion.

The asset sale plans by PetroChina and Sinopec can also be seen as a response to Beijing's calls to promote private investment in industries currently dominated by state-owned enterprises, analysts say.

Critics say PetroChina has invested too heavily in the downstream business - which includes pipelines, refining and petrochemicals - at the expense of more profitable oil and gas exploration and production.

Its runaway spending, combined with rising costs and hefty losses in the refining and natural gas import businesses due to government controls on domestic fuel prices, have eaten into returns and hurt the finances of PetroChina for several years.

Total liabilities ballooned to 1.07 trillion yuan at the end of 2013 from 348.3 billion yuan in 2008, while return on equity fell to 10 per cent in 2012 from a peak of 30 per cent in 2005.

PetroChina also said today, it will incorporate the pipeline unit in Shanghai's Pudong area with registered capital of 10 billion yuan and then auction the subsidiary through an equity exchange.