#1ENN 新奥 ENN Energy Holdings Limited (Stock code: 2688) 2011 Annual Results Analyst Presentation 28th March 2012 EXPANDING OUR HORIZONS ON SOLID FOUNDATION#2Contents 1. Financial Highlights 2. Business Review 3. New Projects 4. Appendix ENN 新奥#3Financial Highlights ENN 新奥 (RMB million) 2011 2010 Change Revenue 15,068 11,215 34.4% Gross Profit 3,902 3,012 29.5% EBITDA 3,130 2,374 31.8% EBIT 2,595 1,920 35.2% Profit attributable to owners of 1,253 1,013 23.7% the Company EPS - Basic (RMB) 1.19 0.97 22.7% EPS - Diluted (RMB) 1.18 0.95 24.2% 2#4ENN 新奥 Dividend Policy The Board of Directors has resolved to recommend payment of a final dividend of HKD36.23 cents (RMB29.37 cents) per share for FY2011. Our dividend policy: - More subsidiaries have stepped into the mature stage. ― The Group will balance the development of business and financial position to decide the dividend payout ratio. HK cent 40.00 40% 35% 30.00 30% 25% 20.00 20% 15% Dividend payout ratio 10.00 10% Dividend per share 5% Special dividend per share 0.00 (10th year listing anniversary) 0% 2004 2005 2006 2007 2008 2009 2010 2011 3#5Revenue Breakdown ENN 新奥 2011 2010 1.3% 4.4% 22.7% 2.1% 4.4% 7.8% 8.1% 23.5% 10.8% 10.8% 53.0% 51.1% 2009 10.7% 1.0% 30.4% 9.5% 48.5% Operating Segment 2011 (RMB mil) 2010 (RMB mil) Change % Gas connection 3,415 2,635 29.6% Gas connection Sales of piped gas 7,980 5,728 39.3% Sales of piped gas Vehicle gas refuelling stations 1,620 1,209 34.0% Wholesale of gas 1,172 905 29.5% Distribution of bottled LPG 192 240 (20.0%) Sales of materials 592 414 43.0% Sales of gas appliances 97 84 15.5% Vehicle gas refuelling stations Wholesle of gas Distribution of bottled LPG Others (Sales of gas applicances and materials)#6Analysis of Piped Gas Sales Natural gas is our primary gas sales. The sales revenue of natural gas accounted for 96.0% of the total sales of piped gas. We expect all other piped gas users will be converted to piped natural gas users. Volume 0.1% 7.7% 0.1% 92.1% Revenue 0.4% 3.5% 0.1% Natural gas LPG Coal gas SNG 96.0% ENN 新奥 5#7A Balanced Portfolio of Customers (by revenue) 2011 Gas Connection 28.5% ENN 新奥 Residential customers Commercial / Industrial "C/I" customers Gas refuelling stations Wholesale of gas 24.6% 2010 71.5% 75.4% Sales of piped gas, vehicle gas and wholesale gas 4.8% 11.8% 16.5% 66.9% 24.9% 2009 75.1% 4.9% 12.5% 17.7% 14.9% 16.0% 66.6% 67.4% 6#8Margins Analysis ENN 新奥 During the Year, the overall gross profit margin and net profit margin declined compared with 2010. Gross profit margin 25.9% (2010: 26.9%) Net profit margin 11.1% (2010: 12.5%) Reasons for change Gross profit margin: 1. 2. The continuous improvement in the Group's revenue structure due to increasing share of long- term gas sales compared with the share of one-off connection fee of higher profit margin Increased wellhead price of natural gas of over 10% since June 2010 Net profit margin: 1. One-off expense of RMB95 million arising from the early redemption of the USD200 million 7-year high-yield bond issued in 2005 2. Finance cost of RMB 187 million from the issuance of USD750 million 10-year bond during the Year 3. Arrangement fee of the bridging loan facility for acquisition, which was RMB57 million 7#9Financial Resources and Liquidity (RMB million) 2011 2010 Cash on hand 5,869 2,851 Change 105.9% A/R Days 16 18 (2 days) Total Debts 10,672 6,263 70.4% |- Short-term loans 3,213 2,379 35.1% - Long-term loans 2,823 2,568 9.9% 7-year bonds 0 1,316 -100.0% - 10-year bonds 4,636 0 N/A Net Gearing Ratio 54.3% 45.3% 9.0% ROE 17.8% 16.8% 1.0% ENN 新奥 Only 13 gas projects with project financing among 104 projects, and the remaining 91 projects are clean, without loan, so the debt will not affect our dividend payment ability. Apart from adding new projects in China, we keep an eye on the opportunities of securing overseas projects. We do not have any swap and derivative contracts. The income from gas sales (C/I and vehicle gas sales) attributable to the total revenue of the Group will further increase and such development will deliver long-term and stable cash flow to the Group. 8#10Refinancing Plan As of 31 Dec 2011 (RMB million) | Refinancing Plan Total Debt 10,672 Short-term loans: Subsidiary level 1,913 loans Short-term debenture 1,300 Long-term loans 2,823 10-year bonds 4,636 ENN 新奥 We have RMB5,869 million cash on hand while our working capital demands RMB600-700 million cash only, leading to a surplus cash of RMB5, 169 million. We have RMB5,594 million committed undrawn banking facilities in local PRC banks. So we have RMB10,763 million liquidity in total, 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. 1 year short-term debenture which is approved by National Association of Financial Market Institutional Investors (NAFMII) with an interest rate per annum of 5.9%. Part of it will be refinanced by another RMB1,200 million short-term debenture which has been approved by NAFMII when expired. 15-year loan from China National Development Bank which will be expired in 2020, at PBOC rate A 4-year loan of RMB878 million from BOC has been repaid in February 2012 7-year corporate bond which will be expired in 2018, at 6.45% per annum Will be expired in 2021, with a fixed coupon of 6.0% 1 of the only 2 Chinese private enterprises assigned with an investment grade credit rating on corporate and bonds: - S&P 'BBB-', Moody's 'Baa3' and Fitch 'BBB'#11CAPEX RMB million 3000 2500 2000 424 243 Injected by the JV partners when the project companies were formed. 19 156 100 170 1500 44 2,650 2098 1000 1687 1694 1416 1282 1022 500 0 2005 2006 2007 2008 2009 2010 2011 ENN 新奥 CAPEX for 2012 is estimated at RMB2,500 million, and the proportion injected by JV partners will depend on the scales of the JV partners More CAPEX may be required depending on the progress of developing LNG refuelling stations 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 the future CAPEX and operational needs 10#12Contents 1. Financial Highlights 2. Business Review 3. New Projects 4. Appendix ENN 新奥#13Key Operational Data ENN 新奥 2011 2010 Change Coverage & Gas Penetration Rates of PRC projects Connectable urban population coverage ('000) 53,142 46,868 13.4% Connectable households coverage ('000) 17,714 15,623 13.4% Natural gas penetration rate 37.6% 34.7% 2.9% Piped gas (including natural gas) penetration rate (%) 38.5% 36.0% 2.5% Coverage of International project Connectable urban population coverage ('000) 8,920 8,920 0.0% Connectable households coverage ('000) 2,973 2,973 0.0% Gas sales Volume Piped natural gas ('000 m³) 4,066,304 3,075,672 32.2% Vehicle natural gas ('000 m³) 683,785 509,100 34.3% Wholesale natural gas ('000 m m³) 260,928 222,833 17.1% Total natural gas sales ('000 m³) 5,011,017 3,807,605 31.6% Other piped gas ('000 m³) 349,870 330,413 5.9% Other vehicle gas ('000 m³) 12,656 11,338 11.6% Total sales of piped and vehicle gas ('000 m³) 5,373,544 4,149,356 29.5% 12#14Key Operational Data ENN 新奥 2011 2010 Change Pipelines & Stations Length of intermediate & main pipelines (km) 18,854 16,340 15.4% Natural gas processing stations 115 100 15 Combined daily capacity of natural gas processing 32,003 23,970 33.5% stations ('000 m³) Vehicle gas refuelling stations 238 192 46 Accumulated Connection of Piped Gas Residential (households) 6,815,165 5,618,583 21.3% Installed designed daily capacity for C/I customers (m³) C/I customers (sites) Connection of Piped Natural Gas Acc. connected / converted households 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) 5,178 25,273,724 6,823,476 23,969 18,424 5,545 25,767,276 18,175,160 41.8% 6,658,272 5,419,826 22.9% 1,029,727 875,744 17.6% 23,501 17,767 5,734 4,178 1,000 17,649,198 43.2% 4,619,944 47.7% 13#15Gas Sources ENN 新奥 To accommodate the anticipated fast-growing demand for natural gas, the Group has several ways to secure gas sources: 1. Take-or-pay contracts ◆ Signed 15-25 years take-or-pay contracts with various pipelines, secured supply of 4,155 million m³ of natural gas for 2012 2. Other piped natural gas supply ◆ The Group also secured guaranteed gas supply contracts for other project cities, e.g. Shaanxi- Beijing Pipeline II and offshore natural gas in China 3. Non-pipeline transmission system Able to dispatch a fleet of 526 LNG/CNG trucks with total maximum one-time transmission capacity of over 14 million m³, which help. securing important gas projects without piped natural gas source in near term as well as serving as our piped gas backup source Pipelines Take-or-pay Contracts Annual Supply in 2012 (mil m³) West-East Pipelines I West-East Pipelines II Zhong-Wu Pipeline Sichuan-East Pipeline 741 1,452 583 100 LNG Import Terminal (Guangdong) 475 LNG Import Terminal (Fujian) 700 104 4,155 14 CNOOC (Yantai & Laiyang) Total#16Gas Sources The phase-by-phase completion and commencement of operation of pipelines Pipelines West-East Pipeline II Qinshen Pipeline Designed capacity (mil m³/yr) 30,000 Operation schedule In operation since 2011 In operation since 2011 8,000 More LNG receiving terminals will be put into operation in the coming years ENN 新奥 Location Capacity (mil tons/yr) Operation schedule Gas source Operator Jiangsu, Rudong 3.5 In operation since 2011 Qatar PetroChina Liaoning, Dalian 3 In operation since 2011 Australia PetroChina Zhejiang, Ningbo 3 To be put into operation in 2012 Qatar CNOOC Shandong, Qingdao 3 To be put into operation in 2013 Papua New Guinea Hebei, Caofeidian Guangdong, Zhuhai 3.5 3.5 Guangdong, Jieyang 2 To be put into operation in 2013 To be put into operation in 2013 To be put into operation in 2013 Australia, Qatar Sinopec PetroChina Middle East, Australia Middle East, Australia CNOOC CNOOC More than 10 national natural gas pipeline projects including West-East Pipeline III & IV, China- Myanmar Pipeline and Shaanxi-Beijing Pipeline III will be completed and launched one by one by the end of 2015 Sufficient gas sources ensure piped gas projects of the Group will be able to enjoy stable supply of piped natural gas in the long run 15#17Gas sources - Upstream projects ENN 新奥 The Group has invested in various upstream projects to ensure secured gas sources in long run and to provide clean energy variety to ensure continuous business growth - Import and export rights of LNG and other kinds of energy - LNG plants The group has 5 LNG plants in China, and 3 of them have been put into operation Location Weizhou Island, Beihai, Guangxi Jincheng, Shanxi Yinchuan, Ningxia Pingdingshan, Henan Guye, Tangshan, Hebei - LNG plants Daily capacity (m³) Status 150,000 300,000 600,000 In operation (since Feb 2006) In operation (since Dec 2008) In operation (since Aug 2009) 260,000 To be put into operation in 1H12 300,000 To be put into operation in 2H12 The Group will continue seeking for other good upstream opportunities 16#18Vehicle Gas Refuelling Stations CNG refuelling stations LNG refuelling stations ENN 新奥 CNG refuelling stations since 2002 LNG refuelling stations since 2011 Number of approval obtained (including 28 refuelling stations through acquisition) 435 Number of approval obtained 87 Aggregated no. of CNG refuelling stations 219 Aggregated no. of LNG refuelling stations 19 199 Potential no. of CNG refuelling stations to be built 216 Potential no. of LNG refuelling stations to be built 68 80 Example: Payback calculation of a CNG taxi Example: Payback calculation of a New LNG truck Average gasoline price (RMB/litre) 7.5 Average diesel price (RMB/litre) 7.1 Average CNG price (RMB/m³) 3.5 Average LNG price (RMB/m³) 4.3 Gasoline consumption per km (litre) 0.05 Diesel consumption per km (litre) 0.4 CNG consumption per km (m³) 0.06 LNG consumption per km (m³) 0.5 Cost saved per km (RMB) 0.165 Cost saved per km (RMB) 0.69 Average driving distance (km/day) 400 Average driving distance (km/day) 400 Daily average savings (RMB) 66 Daily average savings (RMB) 276 Monthly average savings (RMB) 1,980 Monthly average savings (RMB) 8,280 Conversion fee (RMB) 3,500 Price difference of LNG truck & diesel truck (RMB) 80,000 Monthly maintenance cost (RMB) 175 Monthly maintenance cost (RMB) 150 Payback period (months) 2 Payback period (months) 10 17#19Contents 1. Financial Highlights 2. Business Review 3. New Projects 4. Appendix ENN 新奥#20Project Development ◆In FY2011, the Group has secured 15 new projects in China, spanning across Hunan, Hebei, Jiangsu, Liaoning, Shandong, Guangdong, Fujian, Yunnan provinces and Guangxi autonomous region, the additional connectable population is 4,530,000 We have one overseas project in Vietnam covering cities of Hanoi, Hochiminh and Danang, total connectable urban population amounts to 8,920,000 Province City/County Acquired in 1H2011 Hunan Yongzhou City () ENN 新奥 Connectable Population 600,000 Wangcheng County (4) 150,000 Ningxiang County Dev. Zone, Jinzhou 300,000 Hi-tech Zone (寧鄉縣開發區,金洲新區) Hebei Rongcheng County (容城縣) 70,000 Jiangsu Hongze County (洪澤縣) 381,000 Yancheng Environmental Protection Industrial Park(鹽城市環保產業園) N/A Liaoning Dayou Linhai Economic Zone, Linghai City (凌海市大有臨海經濟區) 20,000 Total coverage increased to Guangxi 62,062,000 connectable urban population The Group will continue seeking for good investment opportunity both in China and overseas. Recent example is the VGO to potentially acquire at least 51% stake of China Gas Holdings Hebei Fujian Guiping Industrial Park (桂平工業園) Anxi County (安溪縣) N/A 120,000 Yunnan Kuming City Hi-tech Zone (TÀ¥E) 40,000 Acquired in 2H2011 Jingxing County (井陘縣) 330,000 Zhengdingxin District (正定新區) 50,000 Guangdong Panyu, Guangzhou (5) 1,764,000 Yunan County (郁南縣) 75,000 Shandong Changqing zone, Jinan City (HE 清區) 630,000 19 Additional Coverage: 4,530,000#21Project Yongzhou City (永州市) Wangcheng County (望城縣) Ningxiang County Development Zone, Jinzhou Hi-tech Zone Province Hunan Hunan Connectable Population 600,000 150,000 Stakeholding 100% 55% Operational Administrative Location Region Registered RMB100 mil Capital (寧鄉縣開發區,金洲新區) Hunan 300,000 55% Dingzi Town, Qiaoyi Town, Development Zone Dongcheng Town, Chating Town Branch company of RMB30 mil Changsha project Estimated Connection Fees & Gas Tariff - Residential 2,200 1,800 (RMB/household) • C/I customer (RMB/m³/day) Gas sales price (RMB/m³) Gas Source 260 200-340 1,800 200-340 ENN 新奥 Rongcheng County (容城縣) Hebei 70,000 100% Administrative Region RMB5.35 mil 2,400 500 4 (Res) / 5.5 (C/I) 2.45 (Res) / 3 (C/I) 2.45 (Res) / 3 (C/I) West-East II West-East II / Zhong-Wu Pipeline West-East II / Zhong-Wu Pipeline 2.6 (Res) / 3.45-3.75 (C/I) Shaanxi-Beijing Pipeline II 2C#22Project Hongze County (洪澤縣) Yancheng Environmental Protection ENN 新奥 Dayou Linhai Economic Zone, Linghai City (凌海市大有臨海經 Guiping Industrial Park (桂平工業園) Industrial Park (鹽城市環保產業園) 濟區) Province Jiangsu Jiangsu Liaoning Connectable 381,000 N/A 20,000 Guangxi N/A Population Stakeholding 90% 100% 80% 100% Operational Administrative Region Industrial Park Dayou Linhai Economic Industrial Park Location Zone Registered Capital RMB10 mil HKD20 mil RMB5 mil USD3.5 mil Estimated Connection Fees & Gas Tariff - Residential 2,500-2,600 N/A TBC N/A (RMB/household) -O C/I customer 500-600 50 TBC TBC (RMB/m³/day) Gas sales price (RMB/m³) 3.85 (Res) / 4.6 (C/I) 3.73 (C/I) 3.5 (C/I) TBC Gas Source West-East II Jiangsu Oilfield Jilin Oilfield West-East II 21#23ENN 新奥 Project Province Anxi County (安溪縣) Kuming City Hi- tech Zone (昆明市高新區) Yunnan Jingxing County (井陘縣) Zhengdingxin District (正定新區) Fujian Connectable 120,000 40,000 Hebei 330,000 Population Stakeholding 60% 50% 55.8% Operational Location Administrative Region Development Zone Administrative Region Registered Capital RMB10 mil RMB480 mil Branch company of Shijiazhuang Kunlun Xinao Energy Co Ltd Estimated Connection Fees & Gas Tariff - Residential (RMB/household) • C/I customer (RMB/m³/day) 3,000 350 3,200 2,800 TBC 200 Gas sales price (RMB/m³) 3.8 (Res) / 4-4.2 (C/I) 4.2 (Res) / 4.5 (C/I) 2..45 (Res) 2.8 (C/I) Gas Source Fujian LNG Terminal China-Myanmar Pipeline Shaanxi-Beijing Pipeline III Hebei 50,000 60% Administrative Region N/A (Operated by Shijiazhuang Xinao Gas Co Ltd) 3,200 200 2.4 (Res) / 2.95 (C/I) Shaanxi-Beijing Pipeline II 22#24Panyu, Guangzhou Project (廣州番禺) Province Connectable Population Guangdong 1,764,000 Yunan County (郁南縣) Guangdong 75,000 Changqing Zone, Jinan City (濟南市長清區) Shandong 630,000 Stakeholding 60% Operational Panyu Zone Location Registered Capital RMB18 mil Estimated Connection Fees & Gas Tariff - Residential 3,300 (RMB/household) - C/I customer TBC (RMB/m³/day) Gas sales price (RMB/m³) Gas Source 100% Administrative Region 100% Changqing Zone HKD18 mil 2,000 TBC 3.45-4.35 (Res) / 4.85 (C/I) 4.6 (Res) / 4.8 (C/I) Guangdong LNG Terminal / West-East II West-East II RMB30 mil 3,400 600 2.7 (Res)/3.61 (C/I) West-East I ENN 新奥 23 23#25Operational Locations China Inner Mongolia (1 project) 767,000 44 Offshore gas project – Vietnam Hebei (7 projects) 3,599,000 Henan (6 projects) 5,193,000 Hunan (9 projects) 6,371,000 55 68 73 48 74 29 3 8 11,1 17 15 41 10 9 43 ENN 新奥 Liaoning (3 projects) 631,000 Beijing Municipality (3 projects) 534,000 Shandong (12 projects) 6,026,000 Jiangsu (10 projects) 5,409,000 Anhui (9 projects) 2,423,000 Connectable Urban Population: (at beginning of 2011) 57,532,000 Additional Connectable Urban Population: 4,530,000 Total Connectable Urban Population: (as at end of 2011) Zhejiang (14 projects) 62,062,000 4,034,000 Existing piped gas projects 24 23 38 40 49 19 26 25 14 58 20 65 66 63 21 16 32 79 27 72 57 Guangxi (3 projects) 1,238,000 82 75 39 89 36 90 42 Yunnan (2 projects) 292,000 1. Honoi 2,100,000 2. Ho Chi Minh 6,420,000 3. Danang 400,000 45 22 30 78 31 28 33 64 52- : 87 76 86 69 54 50 84 83- Guangdong (16 projects) 13,844,000 67 77 60 59 56 62 61 70 Fujian (9 projects) 2,781,000 Projects acquired in 1H11 Projects acquired in 2H11 24#26Operational Locations 25 ENN 新煲 26. Bozhou 338,000 224,000 Anhui (9 projects) 14. Bengbu 926,000 21. Chuzhou 300,000 22. Luan Guangdong (cont'd) 54. Zhaoqing 71,000 Development Zone 69. Zhaoqing 508,000 71. Zengcheng, Henan (6 projects) 24. Xinxiang 30. Chaohu 237,000 Guangzhou 229,000 1,013,000 40. Kaifeng 856,000 49. Shangqiu 1,490,000 55. Luoyang 1,632,000 66. Xinan 102,000 58. Fengyang 109,000 63. Laian 65. Quanjiao 114,000 76. Sihui 472,000 73. Yichuan 100,000 84,000 80. Huadu 662,000 83. Xinyi 252,000 Hunan (9 projects) 68. Guzhen 91,000 84. Luoding 291,000 36. Xiangtan 886,000 85. Fengkai 81,000 39. Changsha 2,422,000 Beijing Municipality (3 projects) 3. Miyun 6. Pinggu 173,000 116,000 86. Guangning 87. Huaiji 88. Lianzhou 154,000 Yunan county 75,000 81,000 42. Zhuzhou 124,000 82. Huaihua 1,009,000 437,000 89. Changsha county 297,000 8. Changping 245,000 90. Zhuzhou County 270,000 850,000 388,000 Fujian (9 projects) 56. Quanzhou 1,085,000 59. Nanan 376,000 45. Guilin 60. Huian 138,000 51. Guigang 61. Shishi 98,000 62. Jinjiang 397,000 67. Dehua 100,000 Hebei (7 projects) 70. Quangang 314,000 1. Langfang 549,000 77. Yongchun 153,000 Anxi County 120,000 Guangdong (16 projects) 37. Dongguan 6,950,000 47. Zhanjiang 652,000 50. Shantou 1,478,000 29.Shijiazhuang 2,428,000 48. Luquan 74. Luanxian 91,000 81,000 • Rongcheng County 70,000 Jiangsu (10 projects) 13. Gaoyou 150,000 16. Taixing 240,000 18. Yancheng 899,000 19. Huaian 1,175,000 20. Haian 193,000 12. Yantai 15. Zouping 194,000 17. Laiyang 255,000 23. Rizhao 311,000 41. Jiaozhou 405,000 ● Zhengdingxin 43. Jiaonan 391,000 District 50,000 Changqing Zone, Jingxing county330,000 Jinan City 630,000 Yongzhou City 600,000 Wangcheng County 150,000 Panyu, 1,764,000 Guangzhou Guangxi (3 projects) Guiping Industrial Park Ningxiang County Dev. Zone, 300,000 Jinzhou Hi-tech Zone (Yinzhou) 569,000 72. Haiyan 101,000 524,000 78. Longyou 124,000 470,000 79. Nanxun 497,000 10. Chengyang 481,000 11. Yantai Development Zone 1,796,000 Vietnam (3 projects) Hanoi 2,100,000 Ho Chi Minh 6,420,000 ●Danang 400,000 Jiangsu (cont'd) 25. Xinghua 438,000 32. Wujin 978,000 38. Lianyungang 955,000 Hongze County 381,000 Yancheng Environmental Protection Industrial Park Inner Mongolia (1 project) 44. Tongliao 767,000 Liaoning (3 projects) 4. Huludao 477,000 5. Xingcheng 134,000 Dayou Linhai Econ. Zone, Linghai City 20,000 Shandong (12 projects) Yunnan (2 projects) 81. Wenshan 252,000 Kunming City Hi-tech Zone 40,000 27. Haining Zhejiang (14 projects) 227,000 28. Quzhou 269,000 31. Lanxi 130,000 33. Jinhua 139,000 34. Wenzhou 35. Longwan 334,000 46. Huzhou 52. Taizhou 224,000 599,000 53. Yongkang 227,000 57. Xiaoshan 681,000 64. Ningbo 482,000 2. Liaocheng 7. Huangdao 9. Zhucheng 25#27Contents 1. Financial Highlights 2. Business Review 3. New Projects 4. Appendix ENN 新奥#28ENN 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 104 cities in 14 provinces, and 1 international project as of Dec 2011, covering a connectable urban population of approximately 62,062,000. 27#29Gas Delivery Process Natural gas fields Long distance pipelines 衛 Pressure regulating plants (1) OR Storage tanks (spherical or cylinder) Residential households (2) Industrial users (2) Assets owned by the Group: 66666 Intermediate pipelines CNG or LNG trucks() Main pipelines Branch pipelines Pressure regulating boxes Switches CNG trucks Processing stations Notes: (1) Gas delivery using either intermediate pipelines or CNG or LNG trucks. (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)#30Immediate Revenue Inflow upon Connection Revenue / Cost Simplified model for a typical matured project ENN 新奥 Year 1 Year 3 Year 5 Year 7 Year 9 Year 11 Total Revenue Capex Gas usage fee Free cash flow Connection fee 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 29 29#31ENN 新奥 Connection Fee Amortisation (8 projects) As of December, 2010, 8 projects have adopted amortisation method. (Xiangtan, Changsha, Zhuzhou, Rizhao, Huaian, Lianyungang, Xinxiang, Fengyang) Part of the connection fee income will now be amortised over the concession period instead of one-off recognition. The average connection fees for residential households and C/I customers were RMB 2,796/household and RMB 173/day/m³ respectively. 30#32Natural gas Price Reform in 2010 ENN 新奥 Objectives Further liberalise the natural gas market Narrow down the difference between gas tariff in the PRC and the international market Enhance the ability of importing LNG from overseas to further promote the utilisation of natural gas Content Raise the onshore benchmark wellhead price of natural gas by RMB 230 per thousand m³ since 1 June 2010. Policy On 22 July 2010, the NDRC has promulgated the Notice on Acceleating the Finalisation of Proposal on Natural Gas Price Adjustment Result Tariff adjustment can be successfully implemented to all projects with cost increment Latest progress on tariff pass-through Total number of PRC projects (as of Dec 2011) No. of project with upstream tariff adjustments Average upstream cost increment (RMB/m³) 104 26 0.29 No. of project with downstream tariff adjustments for C/I customers 26 No. of project with downstream tariff adjustments for residential customers 12 Average tariff increment (RMB/m³) No. of project with automatic pass-through 22 0.36 31#33New Natural gas Pricing Policy in 2011 ENN 新奥 Content A pilot reform on the pricing policy of natural gas was launched on 26 Dec 2011 in Guangdong Province and Guangxi Autonomous Region, with unified ceiling city- gate prices set at RMB2.74/m³ and RMB2.57/m³ respectively The price ceilings apply to both domestic-produced gas (including unconventional gas, eg. Shale gas, CBM, coal gas etc.) and imported gas transmitted through pipelines Retail prices remain at the control of the local government, and it is suggested to establish an auto pass-through pricing system Pricing Mechanism City-gate prices are based on a reference price of imported LPG and fuel oil prices in Shanghai times a factor of 0.9, and take into account a province specific discount/premium based pipeline fees, economic development and other factors The government will adjust the price level once a year at the beginning and then gradually increase the frequency to once half a year or quarterly Objectives To loosen the grip of the ex-factory prices which failed to factor in consuming demands ◆The prices of natural gas will be pegged to prices of substitute energies that are formed through market forces, price competitiveness remains to encourage the usage of natural gas Impact ◆Currently, our major gas sources for Guangdong and Guangxi projects are the imported LNG and trucked CNG/LNG, which costs are higher than the new city-gate prices Cost is expected to be lowered upon ramping up of gas supply from West-East II and other pipelines in the regions, thus, greater demand is expected ◆Cost pass-through process is expected to be shortened as the auto pass-through pricing system is encouraged by the NDRC 32#34China Natural Gas Industry Overview ENN 新奥 4% 8% 18% 17% 1% 7% 1% Double the share 8% of gas 3% consumption within 5 years 71% 63% 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 8.3% (260 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 Low Natural Gas Penetration Rate (1) in China Currently, the natural gas consumption in total energy consumption of China is merely 3.7%, substantially lower than the world average penetration rate of 23.8% 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 2010 by 2015 Coal Other Hydro Nuclear Oil Gas 58% 55% 39% 39% 27% 27% 26% 24% 19% 17% World Average: 23.8% 10% 10% 4% Iran Russia Italy UK Source: Company filings, BP Statistical Review of World Energy June 2010. (1) Note: "Natural Gas Penetration Rate” is defined as natural gas consumption volume as a percentage of total energy consumption. ՏՈ Canada Indonesia Germany Australia Japan India HK China 33#35ENN China Natural Gas Industry Overview (Contd Natural Gas Consumption - Natural gas consumption in China has grown from 2.4 bcf/d in 2000 to 10.6 bcf/d in 2010, representing a CAGR of 16.0% The main driver behind the growth in natural gas consumption is the growth in China's GDP since 2000 The continuing growth of China's GDP and increasing portion of natural gas in the total energy consumption will drive the increasing demand for natural gas in China in the future China Natural Gas Supply and Demand Natural Gas Production Natural gas production in China has increased from 2.6 bcf/d in 2000 to 9.1 bcf/d in 2010, representing a CAGR of 13.3% To meet the growing demand for natural gas, apart from increasing domestic gas production, China is aggressively importing long-distance piped gas from nearby gas- rich areas such as central Asia and Myanmar, as well as LNG from Qatar, Australia, and Malaysia Production/ Consumption (bcf/d) 10.0 8.0 1.6 0.8 6.0 4.0 0.0 (0.8) 2.0 0.0 (1.6) 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Production Consumption Surplus/(Deficit) According to the 12th Five-year Plan, natural gas consumption in China is expected to reach 25.1 bcf/d in 2015, representing a CAGR of 18.9% from 2010 On the supply side, natural gas production is expected to reach 14.5 bcf/d in 2015, representing a CAGR of 9.1% from 2010 The gap between supply and demand will be satisfied through imported natural gas The NDRC has taken efforts to bring domestic gas prices more in line with international prices by resorting to price increases Surplus/(Deficit) (bcf/d) China has invested substantially in developing a nationwide natural gas network to facilitate the bridging between consumption and production, with total installed pipeline capacity growing at a double-digit rate nearly each year since 2003 Trunk line construction in China has also ramped up rapidly in recent years It is expected that pipeline construction in China will continue to be driven by natural gas going forward Currently, around 10 natural gas pipeline network projects are under construction (including the West-East Pipelines Project) or in the planning stage Source: Company filings, BP Statistical Review of World Energy. *Note: "bcf/d" denotes billion cubic feet per day. 34#36Approximate conversion factors ENN 新奥 Το billion cubic Natural gas and LNG meters NG billion cubic feet NG million tonnes million tonnes oil equivalent LNG trillion British thermal million barrels oil equivalent units 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 1 trillion British thermal units 0.028 0.98 0.025 0.02 8.68 1 0.17 1 million barrels oil equivalent 0.16 5.61 0.14 0.12 5.80 1 Source: BP Global Statistics ** = 28 m³ 1 mmbtu 35#37Major Long Distance Pipelines in China West Siberia East Siberia China natural gas resources distribution map The three central Asian countries Capital Capital cities Huocheng Horges Hengl iu 1219 12MPa. 1415Kn Karamay Shihez Lunnan Xinjiang Friendship Peak Shanshan Hami Dunhuang Layout of West-East Pipeline I 2010 Gastratiissor capacity of 30 sillion The total gth of the pine is over 7000 Tibet Lhasa Star Gap Hongl iuyuan Change ing-Hohhot railway Sheans i-Beijing rai Zalantun Cicihar Daging Kianusy Hellelang Harbin Tongliao Jinzhou Changchun Jilin Siping Liaoning Shenyang Yingkou Anshan Yumenzhen Red gold tonen Dong-jin 1219 12MPa. 1064Km Mi yun Jiayugu Jiuquare Shimizd-hawn Zhangye Shandan C Xining Jingbian Golmud Qinghai Connaught-Hung Gorghes Lanzhou Can Tow Yonghe Huangzhong Yan' an Fuxiag Jing away Gansu : 426. 10. 6.3MPa gas transmission from west to east Zhongwei Nanchanz 1219. 12MPa. 183жKn D: 1016 10MPa, 3900Km sas transai coion capacity: 120 o Yanakeu Datong Linggiung Langfant Confeldian Shuozhouhan-Beijing railwa Yanga Tianjin 101614 00 Bach Danne "Baoding Changing-Ningxia railway Hohhot 426.313 Km Baotou Dongsheng Lanzhou Yinchuar, raila in County 610. 10MPa. 402Kn Yongchanlinghuan Yulia We iwu Zhonghongning Luhe Baoda Culian Shanxi Luguan Hebe Sailuang Anping Taiyuan Shijiazhuang Yulin Jinan 711101 Changzh Anyan Dozho Binzhou Daligh LNG Impert Penklai Dongyingazhou Finy Changyi Jing Shanghe Jinan Shengd Liaocheng Zibe Qinshu anh Xixiang Puyang Jincheng Zhongsha Kaifeng Shandong Gufu Rizhao Liepa LhG Import Yantai Laiyang Xuzhou Jiangsu Xianyangbao Luoyang naheng Shangai Pizho LMG Import LIG oport Yanchens Baoji Lantia Xiping Shan luopanfenixia. Neixian Nanyang Dengzhou Shi yan Pingdingshoutou Haiyo Sugi an Huaia LNG Import Anhui Bengbu Yizheg Yamong Huainan Xiangyang Zagyang Jiangyou Sichuan Dianjang Chengdu Dayi Leshan Bazhong Wanyan Yi loeDazhouguang Nanchong Dazhd Zhonghan Enshi Chonga hanshou Phongsar Chongqi Luzhojians tas transmission from Sichuan to Eastern China Puguang-Shanghai railway, which was started in 2007 will be constructed to main railway Line The length is 1700 kilometer, Qujin ling Kunming Yunnan Dali Baoghan RuiliLuxi Myanmar Anshun . Zunyi Guiyang Guizhou Ticha Dianjiang Feha Susonz Zhangulintao Wuhan Changsha Zhangshu Kiangtaranchang Shangra Hun 711. 6. 3 Pa. 273K hangah Nanchang Shanghai Xinyan:1 Liling ichun Xingan 1016. 10MPa. 783km Zhuzhou Fujian Xiangtan Nanchang Guangzhou 1016, 10MPa, 72 Ganzhou Ranxiong Fuzhou Putiary Quanzhou LhG Importan Zhangzhoiamen Narkene Dayu Hengyang shaoguan Ankang Xianafan Liuan Suizhou Jingmon Libe Anlu Huangp Aria inhizhou Liangping Chagh Xuanchenxing Hangzhough Zhuji Yue ang Huangsheng Ruichang Song Zhe vi Jirhua Quzhou Yongkang Jiangshant Yingtau Wenzhou Guilin Shantou CNG LNG plant Shaanxi-Beijing railway Yulin-Jinan pipelines under construction Shaanxi-Beijing railway llLayout of West-East Pipelinell Seningl anrailway Hebei-Nanjing railway Zhongxian-Wuhan railway Layout of pipeline from Sichuan to Eastern China Layout of imported pipe networks Yingge gas field West-East Pipeline Special Administrative Region Municipalities Along the city Source: ENN Energy China-Burma railway Guangxi Guangzhou Narning 813. 10MPa, 034Km Nanning Guangdong ingyun gang Zhaoq Guangzhou Wuzhou Yunfo Dongzhou Gui carterangsan Hengxia in Qinzhou Beiha Hepu zhou Island Zhanjiang LNG Import Haikou Yangpu Fushan Dongfang Qionghai Haipeth Złup Shenzhen Hong Kong Nacao Pinggau Field ENN 新奥 Sahal in natural gas field Khabarovsk: Shandong LNG distribution market Zhejiang LNG distribution market Hangzho Mingboa Ningha Jinhua J LNG import Laixi Jime Chengyang Huangyan NG Import Lishul fil Jiaona Fujian LNC distribution market Fuzhou Putian Quan Zhengcho LNG Import Guangdong LNG distribution market gine Oguangcheu Fosh Dongguan Huizhou Jianfeng Shenzhen Zhuha LNG import#38Awards from International Media and Organisations AsiaMoney astamone DAVID LI's HOT TICKET EuroWeek FinanceAsia LACP Forbes Global China Affiliate of the Balanced Scorecard Institute "Best Small Cap Company (China)" for 2001, 2002, 2003 "Overall Best Managed Company (China)" for 2001, 2003 "Overall Best Medium-Cap Company (China)" for 2004 "Asia's Best Managed Company (Medium Cap in China)" for 2005 "Best Asian High Yield Bond Issue of 2005" A marriage made in heaven Is an aviation megamerger on the cants "The Best Small Cap IPO" for 2001 "Best Financial Management" for 2002 "The Best Small Cap in China" for 2005 "Gold, 2010 Vision Awards Annual Report, Energy: Oil, Gas & Consumable Fuels" BILLION COMPANIES FOR 2003 "The 200 Best Under a Billion" for 2001, 2002, 2003 "Star Organisation of Strategy Execution in China" for 2008 Yazhou Zhoukan ENN 新奥 "1000 Global Chinese Enterprise" for 2007 ARRANTY ASHERSEN + "Chinese Business 500" for 2001, 2002, 2003, 2004, 2004 國際華商 500 Annual International ARC Awards 200 For 2003 2005, 2006 "Top 20 Chinese Enterprises of Revenue Growth" for 2002, 2003 "Top 20 Chinese Enterprises of Assets Growth" for 2003, 2004, 2005 "Honor, Cover Design, Oil and Gas Production Services" for 2011 "Gold, Overall Annual Report: Gas Distribution, Transport & Transmission" for 2008 FortHo A Small-Cap Portfolio "Honor, Overall Annual Report: Gas Distribution, Transport & Transmission" for 2004, 2006, 2007 Annual Be-Silver, Annual Reports: Energy" for 2004, 2006, 2008 That Spans International UND "Gold, Annual Reports: Energy" for 2009 Galaxy Awards Ani y Awards Gold, Anr Big Year for the Mercury Excellence wealth Awards The Hong Kong Management Association The Asset "Silver, Annual Report" for 2004 "Honourable Mention, The Best Annual Reports Awards" for 2006 ASIAN REVIEW OF THE YEA "Citation for Design, The Best Annual Reports Awards" for 2009" "China's Most Promising Companies 2009: The Power and Public Utilities sector" & OUTLOOK 2006 January 2006#39ENN Energy - Share Price Performance 2,500 2,000 1,500 1,000 500 Mar-01 Mar-02 Hang Seng China Enterprise Index Mar-03 Mar-04 Mar-05 Mar-06 -ENN Energy GOOOO "Hang Seng Index Mar-07 Mar-08 Mar-09 ENN Energy Mar-10 Hang Seng Index Mar-11 Hang Seng China Enterprise Index Mar-12 38 ENN 新奥#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 39