Gail India & China Gas to form Joint Venture Company

Gail India Ltd has announced that the Company & China Gas Holdings Ltd (China Gas) on June 26, 2007, signed a Joint Venture Agreement (JVA) for pursuing gas sector business opportunities. The agreement was signed by Mr. R K Goel, Director (Finance), the Company and Mr. Liu Ming Hui, Managing Director, China Gas in the presence of Dr. U D Choubey, Chairman and Managing Director of the Company.

Pursuant to signing of this JVA, a Joint Venture (JV) Company between the Company and China Gas with an equity participation of 50:50% shall be set up. The business of JV shall be primarily related to natural gas sector projects in the areas of CNG/City Gas, Coal Bed Methane (CBM), Pipelines and LNG in China, India and other countries also.

Speaking on the occasion, Dr. UD Choubey, CMD, of the Company expressed satisfaction at the progress thus far and urged that following the JV, action should be speeded up on the city gas front and also suggested that the JV could look into possible joint working in the area of modular LNG systems which China Gas had been pursuing.

Mr. Liu Ming Hui, Managing Director, China Gas made a presentation on the performance of China Gas and said, the Company was one of the first overseas strategic investors in the Company, and China Gas looks forward to greater opportunities for joint working with the Company in India and other countries

The JV Board shall comprise of four directors, two from each Company. Chairman of the Board shall first be nominated by the Company and such nomination shall rotate between the Company and China Gas in every two years. Both the Company and China Gas shall have equal representation in the management of JV. The management positions held by the representatives of the Company and China Gas shall also be rotated in every two years.

CNG and CBM project have initially been identified by the JV. After the due diligence study for the projects, the JV shall be formed for implementing the projects. Subsequently, more projects shall be identified and implemented by the JV. Project specific JVs will be formed along with local Government / Companies, wherever it is required.

The Company and China Gas recognize the potential of adding value to their businesses by cooperative approach based on their complementary skills and strengths to jointly exploit city gas / CNG and CBM opportunities. The Company's expertise in the midstream and downstream gas sector and China Gas's track record in securing contracts and rapid expansion shall be leveraged to make the JV a successful Company.

It may be recalled that in May 2005, the Company had made a strategic investment in China Gas by acquiring 210 million shares and it currently holds around 7 per cent equity interest in China Gas. The Company also received dividend from China Gas for the year 2005-06.

China Gas is performing well and its share price has also increased by more than 2.5 times in the last two years. Recently, Finance Asia rated China Gas as the Best Managed Company in the mainland China section of 2007 Asia's best managed Companies poll.

Source : Equity Bulls

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