Press Releases

[New Delhi, February 22, 2005]

GAIL Board approves up to 10 per cent equity stake in China Gas
(Sl. No. ND/CC/05/18)

GAIL Board has approved acquisition of upto 10 per cent equity stake in China Gas Holdings Ltd. The transaction advisors to GAIL were HSBC, KPMG and Dua Associates. Mr. Proshanto Banerjee, Chairman and Managing Director, GAIL and Mr. Liu Ming Hui, Managing Director, China Gas signed the Share Subscription Agreement. As part of the agreement, GAIL will subscribe to 210 million new shares of China Gas Holdings Ltd.

China Gas and GAIL have further agreed to establish strategic co-operative partnership and to co-operate with each other. Both the companies will form a joint venture to conduct the projects in china, India and third countries subject to viability and attractiveness. The JV will work for the operation and management of city gas pipeline networks including the purchase, sale and distribution of natural gas through these networks. The JV will also work for the construction, management and /or operation of long distance natural gas and / or other energy fuel pipelines and purchase , imports, production and sale and distribution of LPG, LNG, CNG and / or other energy fuels.

GAIL and China Gas will hold a 50:50 % interest in the joint Venture, and if agreed between the parties, GAIL may hold a higher percentage interest in the Joint Venture. The JV will invest directly or indirectly in the Project(s) after completion of the required due diligence on the relevant Project(s). GAIL will provide certain senior management with project planning, execution, operation and technical expertise for the Project (s), the cost of which should mutually agreed by the Parties will be borne by the Joint Venture. In the area of supplying CNG to motor vehicles, GAIL will be considered for control over the management and operation of such Joint Venture(s). GAIL will also provide training programmes for the employees of the Group in the aspects of the gas business where GAIL has the requisite experience.

About China Gas

China Gas is a retail natural gas distribution company in China and is listed on the Hong Kong Stock Exchange with current market capitalization of over US $ 300 million. The company is mainly focusing on gas supplies to residential, commercial and industrial users in China. China Gas has established a number of Joint Ventures (JVs) for retail gas distribution in various provinces / cities and currently has operations covering major cities such as Beijing, Wuhu, Yichang and Huainan. China Gas has forty-two concessions in China, of which twenty-four are already operational. GAIL will give its expertise on CNG in all the cities where China Gas is in operation.