#1ENN 新奥 ENN Energy Holdings Limited (Stock code: 2688) ENNI Company Presentation January 2015#2Contents 1. Our Strategies 2. Financial Highlights 3. Business Review 4. Appendix ENN 新奥#3Our Strategies DENNE CNG 加气站 ENNER City-gas projects Industrial parks Vehicle/Ship refuelling business Energy Trading ENN 新奥 140 city-gas projects with over 61 million connectable urban population Average gas penetration rate of 48.3% Continue organic growth in existing projects and acquire more new projects Acquire industrial parks nearby existing projects Tremendous volume growth potential from C/I users with limited CAPEX requirement Currently operating 2 projects with distributed energy system, another 7 projects under construction 277 CNG and 208 LNG refuelling stations in operation in China and acquired 33 LNG refuelling stations in North American Leverage on our first mover advantage and downstream operational experience to capture market growth in both CNG and LNG refuelling markets Continue to explore LNG bunkering business with a few trial projects Reinforce our bargaining power with the access to upstream gas source without heavy investment Better utilize existing dispatch system and gas transportation capacity ◆ Support downstream distribution businesses and peak- shaving 2#4Our Strategies - New Projects In 1H2014, the Group has secured 6 new projects in China, spanning across Guangdong, Hainan, Hebei, and Jiangsu, providing an additional connectable population of 630,000 and 10 industrial parks to be managed by existing projects. Province Project ENN 新奥 Industrial Parks Managed by Existing Projects Acquired in 1H2014 Guangdong Zhaoqing Southern China Renewable Resources Industrial Park (肇慶市華南再生資源產業園) Hainan Lingao Jinpai Harbour Provincial Province Project Connectable Population Hainan New Projects Acquired in 1H2014 Guangdong Yangxi County (EK) 110,000 Hainan Hainan Dingan County (定安縣) 100,000 Hainan Hainan Changjiang County (昌江縣) 130,000 Hainan Ledong County (樂東縣) 140,000 Henan Hebei Wangdu Economic Development ΝΑ Zone (望都經濟開發區) Henan Jiangsu Guannan Development Zone (灌南開發區) 150,000 Henan (嵩縣產業聚集區) Additional coverage: 630,000 Jiangsu Development Zone (臨高金牌港省級開發區) Maniao Bay Development Zone (馬裊灣開發區) Longbo Bay Development Zone (龍波灣開發區) Haikou Longwan Zone (海口龍灣區) Xinxiang Fengquan Industrial Zone (新鄉鳳泉區產業聚集區) Xinxiang Dakuai Town Industrial Zone (新鄉大塊鎮工業區) Song County Industrial Zone Xinghua Changrong Industrial Park Total connectable urban population in China: 61,645,000 (興化昌榮工業園區) Jiangsu Funing Goudun Town Industrial Park (阜寧溝墩鎮工業園區)#5Our Strategies - Operational Locations ENN 新奥 Beijing Municipality (1 project) 116,000 Inner Mongolia (1 project) 767,000 Inner Mongolia Liaoning Province Hebei (17 projects) 5,890,000 Beijing Municipality njin Floating minel China Sichuan (1 project) 600,000 Henan (8 projects) 5,408,000 Henan Province 0 Caofeidian Tagle Bobal Ginder construction Hebei Province Shandong Province Hunan (13 projects) 8,208,000 Anhui Province Niangsu ●Province Liaoning (4 projects) 1,144,000 Shandong (15 projects) 6,354,000 Qingdao (und Jiangsu (13 projects) 5,689,000 Rudong Anhui (12 projects) 2,866,000 Additional connectable urban population from new projects: 630,000 ➤ Total connectable urban population: in China (as at the end of June 2014) 61,645,000 Yunnan (2 projects) 484,000 Yunnan Province Sichuan Province Guangxi (3 projects) 1,370,000 Hunan Province Guangdong Province Guangxi Zhejiang Province Fujian Province Putia Zhejiang (15 projects) 4,335,000 Dapeng Zhuhai Shenzheng (under construction) Beihar Tieshen-Bort (under construction) Hainan (3 projects) 370,000 onstruction) Dongguan Jiufeng Yuedong (under construction) Fujian (11 projects) 2,986,000 Guangdong (21 projects) 15,058,000 Existing city-gas projects Projects acquired in 1H14 4#6Non-residential Natural Gas Price Hike On 12 August 2014, NDRC announced another round of city-gate price hike for existing volume in most provinces by RMB0.4/m³ (RMB0.12/m³ increase in Guangdong & Guangxi) effective from 1 September 2014. The price of incremental volume remains unchanged This is in line with PRC government's objective to fully liberalize natural gas pricing mechanism by 2015 On 28 June 2013, the NDRC published the Notice on Natural Gas Price Adjustment for non-residential natural gas consumption. The new ceiling city-gate prices are set based on two-tier pricing mechanism, (i) existing. volume (with price hike of not more than RMB0.4/m³) and (ii) incremental volume (to be priced at 85% of the weighted average prices of fuel oil and LPG with weighting of 60% and 40% respectively) The Group is proactively communicating with customers and local pricing bureaus to pass on the incremental gas cost. Pass Through Progress Price hike since September 2014 Average upstream cost adjustment for existing volume (RMB/m³) No. of city-gas projects affected No. of city-gas projects completed No. of CNG stations affected No. of CNG stations completed ENN 新奥 0.32 73 64 273 228 Price hike since July 2013 (completed) Average upstream cost adjustment (RMB/m³) No. of city-gas projects affected 0.49 55 Average tariff adjustment for C/I customers (RMB/m³) 0.49 No. of CNG stations affected 225 Average tariff adjustment for CNG stations (RMB/m³) 0.42 5#7Our Strategies - Vehicle Refuelling Stations in China ENN CNG Refuelling Stations CNG refuelling stations since 2002 LNG Refuelling Stations LNG refuelling stations since 2011 新奥 No. of new stations in operation 9 No. of new stations in operation 28 Aggregated no. of CNG refuelling stations in operation 277 Aggregated no. of LNG refuelling stations in operation 208 Example: Payback calculation of a CNG taxi Example: Payback calculation of a new LNG truck Average gasoline price¹ (RMB/litre) 6.3 Average diesel price¹ (RMB/litre) 5.8 Average CNG price (RMB/m³) 4.2 Average LNG price (RMB/m³) Gasoline consumption per km (litre) 0.05 Diesel consumption per km (litre) 4.7 0.4 CNG consumption per km (m³) 0.055 LNG consumption per km (m³) 0.44 Cost saved per km (RMB) 0.08 Cost saved per km (RMB) 0.25 Average driving distance (km/day) 400 Average driving distance (km/day) 400 Daily average savings (RMB) 32 Daily average savings (RMB) 100 Monthly average savings (RMB) 960 Monthly average savings (RMB) 3,000 Conversion fee (RMB) 3,500 Price difference of LNG truck & diesel truck² (RMB) 60,000 Payback period (months) 3.6 Payback period (months) 20.0 Note 1: Based on the national IV standard diesel price and national V standard gasoline price as of Dec 2014 Note 2: Diesel truck that complies with national IV fuel standard 6#8LNG Refuelling Stations Development in China ENN Riding on supportive government policies and its economic benefits, market potential for LNG refuelling stations is huge 500,000 400,000 300,000 LNG vehicles adoption and forecast 387,000 150,000 52,000 58,000 200,000 100,000 100,000 28,500 62,000 2,830 8,500 34,000 36,500 2,952 13,000 0 2010 2011 2012 LNG truck 2013 258,000 2014E 2015E 2020E ■LNG passenger vehicles Forecast on LNG consumption through displacement of diesel by 2020 LNG vehicles on road Average distance travelled/vehicle/year 645,000 100,000km 50,000 m³ Average LNG consumption/vehicle/year Potential LNG consumption on road 32 bil m³ Source: SCI, ENN internal research 新奥 Favourable government policy - More provincial governments are expected to implement policies to push forward the adoption of NGVs and gas refuelling stations construction, so as to achieve carbon emission reduction targets Competitive pricing – LNG pricing is market-driven, increasing supply of LNG through import and onshore liquefaction facilities sustain its price competitiveness, LNG can be sold at a discount to substitute energies Shorter payback period - Increasing production of NGVs and related equipment by manufacturers, together with the nationwide oil product upgrade will further reduce cost difference against diesel vehicles Well-established refuelling network propels adoption of LNG vehicles - 4,000 LNG refuelling stations are expected to be built-out by ENN and peers by 2020 7#9LNG Refuelling Stations Market Potential in North America Abundant natural gas resources Nearly 90% of the natural gas used in the U.S. is produced in the U.S. and U.S. dry gas production (trillion cubic feet per year) 30 ENN 新奥 Natural gas price is very competitive Natural gas price is cheaper and relatively more stable than oil price Annual average price in real 2013 USD per million BTU (MMBtu) nearly all the remaining History Projections 1% supplies come by pipeline from Canada U.S. has around 2,692tcf of natural gas supply, according to current 2210 25 Net imports 25 11% Shale gas 45% 14% 20 15 20% 9% Non-associated onshore 8% Non-associated offshore 8% 15 consumption rate, domestic 28% Tight gas 22% 5 10 natural gas resources 2% 8% 9% ensure future supply of 0 Coalbed methane Associated with oil Alaska 7% 1% 7% 5 more than 100 years 1990 2000 2009 2020 2035 Brent crude oil Asia gas Europe gas United States gas 2000 2010 2020 2030 Heavy Duty Truck Market Has Huge Potential 2040 NGV penetration rate of annual new orders: Class 3-10,001 to 14,000 Walk-in Box Truck City Delivery Heavy Duty Pickup Class 4-14,001 to 16,000 Currently, Class 8 Heavy Duty Trucks consume 28 billion gallon of fuel NGV addressable markets Transit buses Turnover/yr 5,000 NGV purchases 1,500-2,000 NGV % penetration 30-40 Refuse trucks 6,000-8,000 3,500-4,800 50-60 Large Walk-in Box Truck City Delivery Class 5-16,001 to 19,500 Bucket Truck Large Walk-in City Delivery Class 6-19,501 to 26,000 Deverage Truck Bingle do Class 7 -26,001 to 33,000 Refuse Furniture Class 8-33,001 & Over Coaches, shuttles, specialty Class Class 3 % of fuel use Total (ex-class 8) 4% Class 8 trucking market Class 4 2% Ochool Dus Rack Truck Class 5 1% Class 6 12% Cy Transit Bus Truck Tractor Class 7 3% Class 8 78% 3,000-4,000 600-750 15-25 14,000-17,000 250,000 5,600-7,550 33-54 2,000 0.8 Cement Truck Truck Tractor Dump Truck Sleeper Natural gas-powered vehicles penetration in Class 8 trucking market is much lower than other fleet types due to high conversion cost, inadequate infrastructure, when these issues solved, penetration should ramp up There are approx. 3 million heavy duty trucks on the road, it is expected that 7% of the fleet will be LNG-powered by 2020, LNG consumption will be approx. 2 billion DGE Sources: IHS 2014 Q4 report, EIA, DOT and broker reports 8#10Our Strategies - LNG Refuelling Stations in North America ENN 新奥 Improving economics accelerates LNG adoption Average life of a heavy duty truck is 5-10 years, payback period shorter than 2-3 years is attractive to truck owners The bulk of the incremental cost for LNG truck depending on the fuel tank and tank systems, Blu has launched the new fuel tank system for Class 8 trucks which reduced cost substantially Retail price of LNG is more stable than diesel Natural gas represents only 1/3 the cost of a DGE of LNG at the pump, the rest is taxes, liquefaction, infrastructure and margin, while 65-70% of diesel is tied to the commodity cost of oil $3.00 $2.50 $0.00 LNG ($/Gallon) Sales Tax $2.00 Payback calculation for LNG trucks State Excise Tax $1.50 Average diesel price¹ (USD/gallon) 3.3 Federal Excise Tax $1.00 Refueling Station Average LNG price² (USD/DGE³) 2.6 Fuel Price $0.50 Delivered Spread (USD/DGE) 0.7 Average miles travelled (miles/year) 100,000 LNG consumption (DGE/year) 18,000 Savings (USD/year) 12,600 Incremental cost for adopting LNG truck (USD) 70,000 Payback (years) 5.6 LNG ($/DGE) Diesel ($/DGE) Favourable tax policies Volumetric Excise Tax Credit (VETC) - The bill of $0.5/gallon fuel tax credit for the business use of natural gas as a transportation fuel has been extended for the calendar year 2014 - LNG Excise Tax Equalization Act The current federal highway excise tax for both LNG and diesel is $0.243/gallon, however, it takes 1.7 gallons of LNG to equal the same energy content as 1 gallon of diesel. Since the excise tax is volumetric basis, not energy content, LNG is taxed at 1.7x more than diesel. The bill proposing the change of excise tax on LNG to be based on energy equivalent basis was introduced in Senate, if it is passed, LNG trucks will pay 40% less on tax Excise Tax /gallon 24.3cents Current Tax Payment $4,374 2.8 Fuel Type Diesel LNG Annual Mileage 100,000 100,000 Gallons/year 18,000 30,600 24.3cents $7,436 9 With Blu v2. fuel system 35,000 Incremental cost for adopting LNG truck (USD) Payback (years) Notes: 1. Diesel price on West Coast on 29/12/2014 released on EIA 2. Average LNG retail price at the pump at ENN US stations in Dec 3. Diesel gallon equivalent#11ENN's Competitive Advantage in North America 1 ENN 新奥 Leader in the downstream gas distribution industry for over 20 years, with proven track record and exceptional execution ability 4 2 (Number of stations) Gas sales volume (million cum) Revenue (RMB million) Gas sales volume increased by 481x (2000-2013) Revenue increased by : 188x since (2000-2013) 11,215.1 8,124.9 4,149.4 16.9 122.3 471.5 2,056.8 2000 2005 The first mover and one of the most successful gas refuelling stations operators in China 600 500 2011-13 CAGR: 10.6% 485 448 400 2011-13 CAGR: 207.8% 330 180 208 300 238 86 200 19 100 219 244 268 277 0 2011 2012 CNG stations 2013 1H 2014 ■LNG stations Strong fundamentals and financial strength, while seeking for new growth drivers 2010 3 5 2013 22,966.0 Ability to bring in lower cost Chinese components to the North American market LNG Tank - Blu. V2A LHS Primary pressure relief valve Tank pressure gauge ondary pressure relief valve Fill receptacle Fuel level signal conditioner LNG excess flow valve LNG fuel valve Vent to station valve Vaporizer Fuel shut-off va Coolant hoses Economizer Prudent capital investment plan and financial risk management policies 10#12Future Expansion Strategy in North America Develop refuelling network at strategic locations Our LNG refuelling stations are located in major trucking corridors Pacific Ocean Blu. Blu. Blu. Blu. Blu. Blu. CANADA Blu. Blu. Customers Blu. LNG suppliers Blu. Blu. Atlantic Ocean Expand customer & supplier network ENN 新奥 Continue to sign up customers with guaranteed gas consumption contract More trucking companies and retailers are committed to purchase LNG trucks to reduce carbon footprint, i.e. UPS, P&G, Walmart, etc. Mining trucks can consume up to 400,000 gallons of fuel annually, and up to 40 trucks can operate at a single mine We have secured LNG supply with local LNG processing plants or local utilities companies Canada: Fortis BC, Citizens Energy Group US: Shute Creek, Applied LNG, Kinetrix MEXICO Gulf of Mexico Mode Volume Scale (Tons/Year) Sources: Federal Highway Administration We own 33 LNG refuelling stations in North America, is the second largest operator in terms of number of station in the region We will continue to build refuelling stations in major trucking corridors targeting heavy duty trucking fleets We will work with fleet operators to build refuelling stations at their backyard and provide operational services and gas supply We will work with chained diesel stations and truck stops to build up gas refuelling facilities, to facilitate the expansion of LNG refuelling network without heavy investment, and to accelerate LNG trucks adoption Single lane temporary station ENN LNG Fuel arncanada.com ENN LNG ENN 014 Blu TESORO 2.69 NOW Associated Food Store Four-lane standard station 11#13Contents 1. Our Strategies 2. Financial Highlights 3. Business Review 4. Appendix ENN新奥#14Financial Highlights ENN 新奥 (RMB million) 1H2014 1H2013 Change Revenue 14,351 10,386 38.2% Gross Profit 2,938 2,721 8.0% EBITDA 2,395 2,230 7.4% EBIT 1,982 1,871 5.9% Profit attributable to owners of 1,214 737 64.7% the Company EPS - Basic (RMB) 1.12 0.68 64.8% 13#15Revenue Breakdown ENN 新奥 1H2014 7.9% 0.2% 1.3% 14.8% 6.8% 0.3% 1.4% 2013 16.7% 13.4% 12.6% 63.2% 61.4% 2012 5.7% 0.7% 2.3% 20.2% 12.8% 1H2014 1H2013 Core Operating Segments Change % (RMB mil) (RMB mil) Gas connection 2,122 1,853 14.5% Sales of piped gas 9,070 6,465 40.3% Gas connection Vehicle gas refuelling stations 1,810 1,374 31.7% Wholesale of gas 1,139 543 109.8% Sales of piped gas 58.3% Revenue attributable to gas sales accounted for over 83%, which maintained steady growth year-on-year, ensuring the Group a long term and recurring revenue structure Contribution from connection fee income to the Group's total revenue will be reduced progressively Vehicle gas refuelling stations Wholesle of gas Sales of other energy (Distribution of bottled LPG) I Others (Sales of gas applicances and materials) 14#16High-Quality Customer Mix (By Revenue) 1H2014 Gas connection 26.1% Gas sales 73.9% Residential customers Commercial / Industrial "C/I" customers 2013 26.7% 73.3% ENN 新奥 Vehicle gas refuelling stations Wholesale of gas 27.1% 2012 5.4% 9.5% 4.9% 9.5% 16.7% 3.6% 11.1% 17.8% 18.0% 68.4% 67.8% 67.3% 72.9% 15#17Margins Analysis ENN 新奥 During the period, the gross profit margin dropped by 5.7ppts and net profit margin increased by 0.6ppts compared with the same period last year Gross profit margin 20.5% (1H2013: 26.2%) Net profit margin 10.7% (1H2013: 10.1%) Margins analysis Gross profit margin: 1. 2. 3. Continuous improvement in the Group's revenue structure due to more contribution from gas sales instead of connection fee Natural gas price hike since 2H2013 increased overall gas purchasing cost, we managed to pass through increased gas cost to most of the users and maintained stable dollar margin in affected projects Significant volume growth from Quanzhou project which has relatively lower margin than other city-gas projects Net profit margin: 1. 2. Stripping out impact from CB, net profit margin in 1H14 was 10.3% compared with 12.1% in 1H13, dropped by 1.8ppts Reduction in finance costs and better cost control partly offset the impact from decline in gross profit margin 16#18Financial Resources and Liquidity ENN 新奥 (RMB billion) Cash on hand At 30 Jun 2014 At 31 Dec 2013 Change 7.11 6.82 4.3% A/R Days 15 18 (3) Total Debts 12.04 12.44 (3.2)% |- Short-term loans 0.69 0.92 (25.0)% |- Long-term loans 2.94 3.10 (5.2)% - 10-year bonds 4.54 4.50 0.8% 3.87 3.93 (1.5)% 38.9% 47.3% (8.4)% 22.4% 21.3% 1.1% |- Convertible bonds Net Gearing Ratio ROE* *stripping out impact from the fair value change of CB Only 9 city-gas projects with project financing, and the remaining projects are clean, without loan, so the debt will not affect our dividend payment ability We continue to look for suitable investment opportunity in the downstream sector to better utilize our financial resources We do not have any swap and derivative contracts Revenue attributable to gas sales will further increase and such development will deliver long-term and stable cash flow to the Group 17#19Refinancing Plan As of 30 Jun 2014 (RMB billion) Total Debt Refinancing Plan 12.04 Short-term loans: Subsidiary level loans 0.69 Long-term loans 2.94 10-year bonds 4.54 Convertible bonds 3.87 • ENN 新奥 • • • . We have RMB7.11 billion cash on hand while our working capital demands RMB3-4 billion cash only, leading to a surplus cash of RMB3.11 billion, which is enough to refinance the short-term loans It is easy for utility company to roll-over short term loans in PRC banks because of stable cash flow and business model 5-year medium term notes which will be expired in 2017 at 5.55% per annum 7-year corporate bond which will be expired in 2018, at 6.45% per annum 15-year loan from China National Development Bank which will be expired in 2020, at PBOC rate 7-year long term loans from IFC which will be expired in 2020 at LIBOR + 2.75% per annum Will be expired in 2021, with a fixed coupon of 6.0% 1 of the few Chinese private enterprises assigned with an investment grade credit rating on corporate and bonds: - S&P 'BBB' (upgraded from 'BBB-' in July 2014), Moody's 'Baa3' and Fitch 'BBB' • Will be expired in 2018, zero coupon • Bondholders can convert their bonds into new shares anytime until 16 Feb 2018 at the conversion price of HK$48.62/share Assuming full conversion, approximately 80 million shares will be issued, representing around 6.9% of the enlarged issued share capital 18#20CAPEX RMB billion 4 3.5 3 2.5 2 1.5 1 0.5 3.57 3.15 2.65 2.10 1.69 1.69 1.42 1.28 1.02 1.37 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 1H2014 ENN 新奥 The Group had RMB202 million positive free cash flow in 1H2014 (1H2013: RMB78 million positive free cash flow) More CAPEX may be required depending on the progress of developing vehicle/ship LNG refuelling business as well as the availability of suitable downstream investment opportunity The current source of capital mainly comes from operating cash flow, current assets, bank loans and issued bonds. We have sufficient capital and banking facilities to finance future CAPEX and operational needs 19#21Contents 1. Our Strategies 2. Financial Highlights 3. Business Review 4. Appendix EN新奥#22Key Operational Data ENN 新奥 1H2014 1H2013 Change Coverage & Gas Penetration Rates of PRC Projects Number of project cities 140 126 14 Connectable urban population coverage ('000) 61,645 57,467 7.3% Connectable households coverage ('000) 20,548 19,156 7.3% Natural gas penetration rate 47.9% 43.8% 4.1% Piped gas (including natural gas) penetration rate (%) 48.3% 44.3% 4.0% Accumulated Connection of Piped Gas Residential (households) 9,931,749 8,489,432 17.0% C/I customers (sites) 43,156 34,464 8,692 Installed designed daily capacity for C/I customers (m³) 46,581,062 37,401,007 24.5% Connection of Piped Natural Gas Acc. connected / converted households 9,852,169 8,399,466 17.3% Increase in the Period (ex. acq & conversion) Acc. connected / converted C/I customers (sites) Increase in the Period (ex. acq & conversion) Acc. connected / converted C/I customers (m³) Increase in the Period (ex. acq & conversion) 46,524,925 37,355,317 650,484 630,183 3.2% 42,958 34,151 8,807 4,115 3,510 605 24.5% 4,653,800 3,973,117 17.1% 21#23Key Operational Data 1H2014 ENN 新奥 1H2013 Change Gas Infrastructure Length of intermediate & main pipelines (km) 25,179 22,588 11.5% Natural gas processing stations 141 129 12 Combined daily capacity of natural gas. 59,298 47,016 26.1% processing stations ('000 m 0 m³) Vehicle gas refuelling stations 485 376 109 Gas Sales Volume Piped natural gas ('000 m³) 3,969,354 3,058,283 29.8% Vehicle natural gas ('000 m³) 666,592 532,300 25.2% Wholesale natural gas ('000 m Total natural gas sales ('000 m³) m³) 3 364,599 138,317 163.6% 5,000,545 3,728,900 34.1% Other piped gas ('000 m³) 3,351 42,400 -92.1% Other vehicle gas ('000 m³) 9,249 6,411 44.3% Total gas sales ('000 m³) 5,013,145 3,777,711 32.7% 22#24Gas Sources 1. Take-or-pay contracts ◆Signed 15-25 years take-or-pay contracts with various pipelines, secured 7,068 million m³ of natural gas supply for 2014 Take-or-pay Contracts ENN 新奥 Gas Source Contracted Supply in 2014 (mil m³) Contracted Supply in 2013 (mil m³) 2. Other piped natural gas supply West-East Pipeline I 1,410 1,111 The Group also secured guaranteed gas supply contracts for its city-gas projects, e.g. Shaanxi-Beijing Pipeline II, Tai-Qing-Wei Pipeline and offshore gas fields in China West-East Pipeline II 3,683 2,643 Zhong-Wu Pipeline 583 583 3. Non-pipeline transmission system Able to dispatch a fleet of 700 LNG/CNG trucks with a total maximum one-time transmission capacity of over 15 million m³, facilitate the allocation of gas sources for city-gas projects, vehicle refuelling stations and wholesale business 4. LNG processing plants ◆ Disposed of the LNG processing plants in Ningxia, Beihai and Qinshui in 1H14 The Group continues to secure LNG supply from onshore processing plants nearby its gas projects and refueling stations Sichuan-East Pipeline 198 198 LNG Import Terminal 309 421 (Guangdong) LNG Import Terminal 700 700 (Fujian) CNOOC 185 185 (Yantai & Laiyang) Total 7,068 5,841 23#25Gas Sources ENN 新奥 There are over 60,000km of natural gas pipelines and 10 LNG import terminals with total annual receiving capacity of over 56 million tonnes in China currently There are over 100 LNG processing plants in China with a combined daily capacity of over 51 million m3 China continues to expand its natural gas supplying infrastructure, more pipelines and LNG import terminals are being constructed and will be put into operation in the coming years: Pipeline Name Capacity(mil m³/yr) Commencement Date Harbin-Shenyan Pipeline 10,000 2014 Gas source Daqing Oilfield Operator PetroChina West-East III 30,000 2015 Central Asia PetroChina Shaanxi-Beijing IV 25,000 2016 Shaanxi Changqing, Central Asia PetroChina West-East IV 30,000 2017 Central Asia, Xinjiang PetroChina Russia-China East Pipeline Location of LNG Terminal 38,000 2018 Hainan Capacity (mil m³/yr) 4,140 (3 mil tons) Commencement Date Russia Gas source PetroChina Operator 2014 Australia, Qatar CNOOC Shandong, Qingdao 4,140 (3 mil tons) 2014 Papua New Guinea Sinopec Shandong, Yantai 2,070 (1.5 mil tons) 2014 CNOOC's int'l gas portfolio/spot market CNOOC Shenzhen, Diefu 4,140 (3 mil tons) 2015 Australia CNOOC Guangxi, Beihai Tieshan Port 4,140 (3 mil tons) 2015 Australia Sinopec Tianjin, Binhai 4,140 (3 mil tons) 2015 Australia Sinopec 2,760 (2 mil tons) 2015 Middle East, Australia CNOOC Guangdong, Jieyang Sufficient gas sources ensure more gas projects of the Group will be able to enjoy stable supply of piped natural gas in the long run 24#26Contents 1. Financial Highlights 2. Business Review 3. Our Strategies 4. Appendix EN新奥#27ENN Energy - A Leader in the Industry ENN 新奥 ENN Energy (formerly known as Xinao Gas) is one of the first privately-owned clean energy distributor in the PRC. It was founded by Mr. Wang Yusuo and Ms. Zhao Baoju in 1993. In 1998, the Chinese government promoted the use of natural gas and encouraged privately-owned enterprises to invest in city infrastructures. ENN Energy seized the opportunity and obtained the exclusive rights for operating piped gas in other cities. ENN Energy was listed on GEM in May 2001 and transferred to the main board (stock code: 2688) in June 2002. ENN Energy is a leading privately-owned gas operator in China - - 4 cities when IPO launched in May 2001 140 cities in 16 provinces, and 1 international project as of June 2014, covering a connectable urban population of approximately 70,654,200. 1 of the few Chinese private enterprises assigned with an investment grade credit rating on corporate and bonds: S&P 'BBB', Moody's 'Baa3' and Fitch 'BBB' 26#28Gas Delivery Process Natural gas fields Pressure regulating plants (") Long distance pipelines OR Assets owned by the Group: 66666 Intermediate pipelines CNG or LNG trucks(") Main pipelines Branch pipelines Pressure regulating boxes Switches CNG trucks Processing stations Storage tanks (spherical or cylinder) Residential households (2) Industrial users (2) Notes: (1) Gas delivery using either intermediate pipelines or CNG or LNG trucks. Vehicle & ship gas users (2) Customers' pipelines and metres which are not owned by the Group are within the customers' premises and are not highlighted in this diagram. ENN 新奥 Commercial users (2) 27#29Immediate Revenue Inflow upon Connection Revenue / Cost Simplified model for a typical matured project · Year 1 Year 3 Year 5 Year 7 Year 9 Year 11 Total Revenue Gas usage fee Capex Free cash flow Connection fee ENN 新奥 Connection fee dominates in early years when the project companies are signing up new customers Gas usage increases as projects mature, becoming the major source of recurrent income Prior to the completion of the whole pipeline network in cities, revenue will be generated as soon as gas supply becomes available in certain districts. Each connection contract normally takes 6-12 months to complete In general, gas projects would generate positive free cash flow after 5 years operation 28#30Anhui (12 projects) Bengbu Operational Locations 927,000 Dongguan 7,050,000 Baoding ENN 新奥 Guangdong (21 projects) Hebei (17 projects) Hunan (cont'd) Liaoning (cont'd) 1,200,000 Huaihua 420,000 Huludao 990,000 Zhejiang (cont'd) Bozhou 225,000 Dongyuan Chaohu 370,000 County 96,000 Gaocheng Jingxing 180,000 Liling 222,000 Panjing Chemical 330,000 Liuyang Industrial Enterprise Zone Jinhua Lanxi 148,000 130,000 Chuzhou 543,000 Fengkai 81,000 Langfang 710,000 Park Xingcheng 134,000 Longwan 350,000 Dingyuan County TBC Guangning 81,000 Luanxian 82,000 Ningxiang 312,000 Shandong (15 projects) Longyou 125,000 Fengyang 110,000 Heyuan 300,000 Luquan 92,000 North-western 100,000 Nanxun Binzhou Zhanhua 491,000 Guzhen 92,000 Huadu 675,000 Lingshou 90,000 Liuyang Economic Dev Park Ningbo 484,000 Jieshou Industial Zone Huaiji 126,000 Laian 85,000 Luan 400,000 Jiangmen Hecheng Town Zone Luquan Green Island Dev Zone Wangcheng 151,000 Changqing 640,000 (Yinzhou) Xiangtan 879,000 Chengyang Quzhou 270,000 646,000 Rongcheng 70,000 Yongzhou 608,000 Wenzhou Huangdao 529,000 Quanjiao 114,000 Leizhou 350,000 Shenze 40,000 Suchu Modern Lianjiang 300,000 Shijiazhuang 2,766,000 Zhuzhou Zhuzhou County 1,280,000 Jiaonan 394,000 Wenzhou Wanquan 274,000 Jiaozhou 408,000 Light Industrial Base Industrial Park Lianzhou 155,000 Wenan Xiaoshan Luoding 295,000 Industrial Park Inner Mongolia (1 project) Tongliao Laiyang 300,000 686,000 767,000 Liaocheng 575,000 Yongkang 229,000 Panyu, 1,779,000 Wuji Beijing Municipality Guangzhou Xinji 80,000 200,000 Qingdao Jiangsu (13 projects) (1 project) Pinggu Sino-German Ecopark Shantou 1,489,000 Xingtang Dev Zone Gaoyou 213,000 Rizhao 395,000 116,000 Overseas Projects: Sihui 472,000 Zhengding 50,000 Haian 193,000 Xintai Dev Zone Xinyi 254,000 New Zone Hongze Fujian (11 projects) Yunan 75,000 Wangdu Economic Huaian 382,000 1,186,000 Yantai 1,800,000 Vietnam (3 projects) Yantai Dev Zone Anxi 121,000 Zhanjiang 658,000 Dev Zone Lianyungang 955,000 Zhucheng Dehua 101,000 Zhaoqing Dev 72,000 Henan (8 projects) Lianyungang Zouping 472,000 195,000 Hanoi Ho Chi Minh 6,449,700 Danang 429,800 2,129,700 Huian 139,000 Dev Kaifeng 867,000 Xuyu New Zone Zone, Jinan City Jinjiang 402,000 Zhaoqing 640,000 Luoyang 1,650,000 Suining Suburban Sichuan (1 project) Longyuan Dev 171,000 Yangxi County 110,000 Ruyang County 130,000 Project Liangshan 600,000 Zone Shangqiu 1,504,000 Taixing 240,000 Guangxi (3 projects) Prefecture Nanan 382,000 Guigang Weihui City 30,000 Wujin 1,026,000 394,000 Industrial Zone Ningde Xiapu Xinghua 440,000 Yunnan (2 projects) Guilin 976,000 Yacheng Dongyang Xinxiang 1,024,000 Yancheng 904,000 Kunming City 40,000 Guiping Industrial Park Xinan 103,000 Yancheng Evn Protection Industrial Park Hi-tech Zone Wenshan Yichuan 100,000 Industrial Park 444,000 Quangang 316,000 Quanzhou 1,101,000 Hainan (3 projects) Shishi Yongchun 99,000 154,000 Dingan County 100,000 Changjiang 130,000 County ● Ledong County 140,000 Hunan (13 projects) Changsha and Surrounding Towns Guannan Dev 150,000 Zhejiang (15 projects) Haining 227,000 3,661,000 Changsha County 301,000 Chenzhou City Liaoning (4 projects) Dayou Linhai Econ. Zone, Linghai City Projects acquired in 1H14 Haiyan 101,000 20,000 Huangyan 604,000 Huzhou 490,000 29#31New Projects Information Project Yangxi County (陽西縣) Dingan County (定安縣) (昌江縣) Province Guangdong Connectable Population 110,000 Stakeholding 100% Operational Location Administrative Region Registered Capital RMB20 mil Estimated Connection Fees & Gas Tariff - Residential (RMB/household) 2,500 Hainan 100,000 60% ENN 新奥 Changjiang County Hainan 130,000 60% Administrative Region Managed by Hainan Zhong Hai ( 南中海公司) with registered capital RMB50 mil Administrative Region Managed by Hainan Zhong Hai ( 南中海公司) with registered capital RMB50 mil 2,600-3,500 2,600-3,500 - C/I customer (RMB/m³/day) TBC Gas sales price (RMB/m³) Gas Source Major Industry 4.50 (Res) / 5.80 (C/I) Guangdong Dapeng LNG Terminal, Guangdong Yuexi LNG Terminal Food processing, construction material & glass manufacturing industry 500-600 2.60-3.80 (Res) / 2.70-5.80 (C/I) CNOOC Offshore gas fields, Hainan LNG Terminal Tourism, real estate, food and beverage & pharmaceutical industry 500-600 2.60-3.80 (Res) / 2.70-5.80 (C/I) CNOOC Offshore gas fields, Hainan LNG Terminal Tourism, real estate, rubber, steel and ore processing & construction material industry 30 30#32New Projects Information Project Ledong County (樂東縣) Wangdu Economic Development Zone (望都經濟開發區) Hebei NA ENN 新奥 Guannan Development Zone (灌南開發區) Jiangsu 150,000 Province Hainan Connectable Population 140,000 Stakeholding 60% Operational Location Administrative Region Registered Capital Managed by Hainan Zhong Hai ( 南中海公司) with registered RMB10 mil Estimated Connection Fees & Gas Tariff - Residential (RMB/household) - C/I customer (RMB/m³/day) capital RMB50 mil 2,600-3,500 500-600 Gas sales price (RMB/m³) 2.60-3.80 (Res) / 2.70-5.80 (C/I) Gas Source Major Industry 100% Industrial Park 100% Industrial Park RMB50 mil NA 2,300 130 3.60 (C/I) 200 2.60 (Res) / 3.80 (C/I) CNOOC Offshore gas fields, Hainan LNG Terminal Shaanxi-Beijing Pipeline I, II & III West-East Pipeline I Tourism, real estate industry Food processing, machinery & footwear industry Chemicals, metal processing & shipbuilding industry 31#33ENN 新奥 Connection Fee & Tariff Policy Connection Fee Amortisation: As of 30 June 2014, 12 projects have adopted amortisation method: Anhui Province - Fengyang Jiangsu Province - Huaian, Lianyungang Henan Privince - Xinxiang Hunan Province - Xiangtan, Changsha, Changsha County, Zhuzhou, Zhuzhou County, Wangcheng, Ningxiang Shandong Province - Rizhao Connection fee income will be amortised over the concession period instead of one-off recognition in the above projects. As for other projects, connection fee policy remain stable The average connection fees for households and C/I customers 2,785/household and respectively RMB residential were RMB 145/day/m³ Downstream Tariff Policies: As of 30 June 2014, we have 35 projects established automatic pass through mechanism and 20 projects established residential tier-pricing mechanism, which ensure the Group's ability to pass through upstream cost increase to most of the end users in a timely manner, and encourage efficient use of natural gas in the downstream market 32#34Latest Non-residential City-gate Prices in China ENN 新奥 Province Existing Volume Incremental Volume (RMB/m³ Incl. VAT) | (RMB/m³ Incl. VAT) Province Existing Volume (RMB/m³ Incl. VAT) Incremental Volume (RMB/m³ Incl. VAT) Beijing 2.66 3.14 Hubei 2.62 3.10 Tianjin 2.66 3.14 Hunan 2.62 3.10 Hebei 2.64 3.12 Guangdong 2.86 (unified city-gate price) Shanxi 2.57 3.05 Guangxi 2.69 (unified city-gate price) Inner Mongolia 2.00 2.48 Hainan 2.32 2.78 Liaoning 2.64 3.12 Chongqing 2.32 2.78 Jiling 2.42 2.90 Sichuan 2.33 2.79 Heilongjiang 2.42 2.90 Guizhou 2.37 2.85 Shanghai 2.84 3.32 Yunnan 2.37 2.85 Jiangsu 2.82 3.30 Shaanxi 2.00 2.48 Zhejiang 2.83 3.31 Gansu 2.09 2.57 Anhui 2.75 3.23 Ningxia 2.17 2.65 Jiangxi 2.62 3.10 Qinhai 1.93 2.41 Shandong 2.64 3.12 Xinjiang 1.81 2.29 Henan 2.67 3.15 Source: NDRC, price as of 1 September 2014 33#35China Natural Gas Industry Overview PRC Government's Commitment to Developing Clean Energy China's plan to achieve 40-45% reduction in carbon dioxide emission per unit of GDP by 2020 is driving national energy consumption towards cleaner fuels such as natural gas In connection with the 12th Five-year Plan, the PRC government targets to increase the natural gas portion of total energy consumption from 3.7% (100 bcm) in 2010 to 7.5% (230 bcm) by 2015, with continuous expansion of natural gas infrastructure The PRC government has also been focused on the development of a nationwide gas distribution and delivery system and several cross-border pipelines to mitigate the geographical mismatch between gas demand and supply. As a result, domestic natural gas supply and consumption will increase significantly ENN 新奥 4% 8% 18% 17% 1% 7% 1% Double the share 8% of gas 3% consumption within 5 years 71% 63% 2010 by 2015 Coal Other Hydro Nuclear Oil Gas Low Natural Gas Penetration Rate (1) in China Currently, the natural gas consumption in total energy consumption of China is merely 5.1%, substantially lower than the world average penetration rate of 23.7% The low penetration rate provides sufficient room for China to increase its national gas consumption going forward, given the country's continuous shift in energy structure. This will further drive the need for piped natural gas infrastructure investment - 59.9% 53.2% UK US Canada Japan Germany Indonesia Australia 36.4% 32.9% 29.6% 28.0% 22.2% 23.2% 20.5% 13.9% 8.6% 7.8% 3% 5.1%1 HK World Average: 23.7% India Chira Iran Russia Italy Source: Company filings, BP Statistical Review of World Energy June 2014. (1) Note: "Natural Gas Penetration Rate" is defined as natural gas consumption volume as a percentage of total primary energy consumption. 34#36Financial Information of North American Business ENN 新奥 2013 (Approximately) (audited) (Approximately) ENN US For the year ended 31 December 2012 (unaudited) For the nine-month ended 30 September 2014 (unaudited) (Approximately) RMB'000 RMB'000 RMB'000 Revenue 14,015 23,902 63,340 Gross profit/(loss) 3,162 (941) 9,493 Loss before taxation (39,813) (217,294) (147,648) Loss after taxation (39,813) (217,294) (147,648) ENN Canada For the year ended 31 December 2012 (unaudited) (Approximately) 2013 (audited) (Approximately) RMB'000 RMB'000 Approximately USD11 million non-recurring expenses incurred in 2014 due to compensation for laid-off employees, termination on land leasehold and interest expense from CDB For the nine-month ended 30 September 2014 (unaudited) (Approximately) RMB'000 Net asset value of ENN US is RMB744 million (US$121 million) Net asset value of ENN Canada is RMB83 million (US$14 million) Revenue Gross profit/(loss) 6,154 2,198 Loss before taxation (2,209) (33,395) (32,640) Loss after taxation (2,209) (33,395) (32,640) 35#37Approximate conversion factors Conversion of NG to other fuels in terms of same heating capacity Heating capacity 1 cubic meter of NG* = North American LNG business unit conversion 1 DGE LNG = 1 DLE LNG = 4,500kcal/kg 10,800kcal/kg. ENN 新奥 Fuels Coal Fuel oil LPG Diesel Gasoline Electricity 11,000kcal/kg 2.0kg 0.83kg 0.82kg 10,400kcal/kg 0.87kg 10,264kcal/kg 860kcal/kWh 0.88kg 10.47kWh DLE Kilogram Gallon Cubic meter mmbtu 3.8 2.9 1.7 4.0 0.14 1 0.8 0.45 1.1 0.037 To Natural gas and LNG billion cubic meters NG billion cubic million tonnes million tonnes feet NG oil equivalent LNG trillion British thermal units* million barrels ** oil equivalent From Multiply by 1 billion cubic meters NG 1 35.30 0.90 0.73 36.00 6.29 1 billion cubic feet NG 0.028 1 0.026 0.021 1.03 0.18 1 million tonnes oil equivalent 1.111 39.20 1 0.805 40.40 7.33 1 million tonnes LNG 1.38 48.70 1.23 1 52.00 8.68 1 trillion British thermal units** 0.028 0.98 0.025 0.02 1 0.17 1 million barrels oil equivalent 0.16 5.61 0.14 0.12 5.80 1 * Heating capacity of NG: 9,000kcal/cubic meter 1kg of LNG = 1.38 cubic meter of NG ** 28 m³ = 1 mmbtu Source: U. S. Alternative Fuels Data Center, BP Global Statistics, ENN Internal Research 36#38Awards & Honors 2014 All-Asia Executive Team Ranking: Best CEO, Rank no.1 (Power Sector) Best CFO, Buy Side Rank no.2 & Sell Side Rank no. 3 (Power Sector) asiam Be DAVID LI's HOT TICKET Institutional Investor magazine The Asset EuroWeek Platts FinanceAsia LACP Best IR Company, Ranked no.2 (Power Sector) Best IR Professional, Ranked no.2 (Power Sector) 2013 All-Asia Executive Team Ranking: Best Companies in China, Rank no. 1 (Power Sector) Best CEO, Rank no.2 (Power Sector) Best CFO, Rank no.3 (Power Sector) Best IR Company, Ranked no. 3 (Power Sector) Best IR Professional, Ranked no. 3 (Power Sector) 2012 All-Asia Executive Team Ranking: Best CEO, Rank no.1 (Power Sector) Best CFO, Rank no.1 (Power Sector) Best IR Company, Ranked no. 2 (Power Sector) "2012 China's Most Promising Companies - Hidden Dragon" "China's Most Promising Companies 2009: The Power and Public Utilities sector" "Best Asian High Yield Bond Issue of 2005" tts Top 250 G BEST UN Platts Top 250 Global Energy Companies" 2013 "Asia's Best Companies - Best Investor Relations" "The Best Small Cap in China" for 2005 "Best Financial Management" for 2002 "The Best Small Cap IPO" for 2001 "Gold, 2010 Vision Awards Annual Report, Energy: Oil, Gas & Consumable Fuels" Forbes China Affiliate of the Balanced Scorecard Institute IR Magazine 2004 國際華商 Yazhou Zhoukan 南方都市報更本 HK Polytechnic University 200 For A Small-Cap Annual International The Map 2013 China's Best CEO 2012 Asia's Fab 50 ENN 新奥 "Star Organisation of Strategy Execution in China" for 2008 "Top 100 for Investor Relations in Greater China" for 2013/14 "Mainland Enterprises Listed in HK Ranking - Best Company in Clean and Renewable Energy Industry" for for 2014 "1000 Global Chinese Enterprise" for 2007 "Chinese Business 500" for 2001, 2002, 2003, 2004, 2005, 2006 "Top 20 Chinese Enterprises of Assets Growth" for 2003, 2004, Assets Growth” for 200 2005 Bauhinia Cup Outstanding Entrepreneur Awards 2012 "Honor, Cover Design, Oil and Gas Production Services" for 2011 ARC Awards U.S. UN Transmission" for 2008 Hot Shots BILL TH Big Year for the Commonwealth Annual International Galaxy Awards "Honor, Overall Annual Report: Gas Distribution, Transport & Transmission" for 2004, 2006, 2007 "Gold, Annual Reports: Energy" for 2009 "Silver, Annual Reports: Energy" for 2004, 4, 2006, 2008 Mercury Excellence Awards "Silver, Annual Report" for 2004 The Hong Kong Management Association BEST COMPANIES 2014 "Citation for Design, The Best Annual Reports Awards" for 2009" Honourable Mention, "The Best Annual Reports Awards" for 2006 37#39ENN 新奥 ENN Energy - Share Price Performance Market Capitalization (as at 31 December 2014): 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Dec-01 Dec-02 Hang Seng China Enterprise Index Dec-03 Dec-04 Dec-05 ENN Energy Dec-06 Dec-07 Dec-08 -HSI Dec-09 Dec-10 ENN Energy Dec-11 HSCE HK$47.7 billion Hang Seng Index Dec-12 Dec-13 Dec-14 38#40ENN 新奥 Disclaimer The information provided to you in this presentation does not constitute or form part of any offer for subscription or sale of, or solicitation of any offer to subscribe for or sale of any securities of ENN Energy Holdings Limited (the "Company") nor shall it form the basis of, nor can it be relied on in connection with, any contract or commitment whatsoever Confidentiality The information provided to you in this presentation is given on a confidential basis and must not be passed to, or their contents disclosed to, any other person and no copy shall be taken thereof For Investor Relations Contact: Ms. Shirley Kwok / Ms. Hedy Shen Tel: +852 2528 5666 Fax: +852 2865 7204 Email: [email protected]/[email protected] Website: www.ennenergy.com 39