Santos announced on the AXS today that the ENN Group had proposed the 11.7 per cent acquisition of Hony Capital’s shareholding, worth US$750 million.
The ENN Group is a large private distributor of gas into the growing Chinese market.
Santos said it had agreed to transfer to the ENN Group under the terms of the subscription agreement entered into at the time of Santos’ capital-raising in 2015.
The two companies also agreed that Hony would become a strategic investor of in ENN through a private placement of new shares, equivalent to US$380 million, supporting ENN’s natural gas growth plans.
The Santos share acquisition, which is subject to ENN shareholder approval, will be the ENN Group’s first exposure to the upstream part of the value chain, consistent with its strategy to develop into a “vertically integrated international natural gas company”.
ENN Group chairman Wang Yusuo, said: “The proposed acquisition is an exciting move for ENN.
“This introduction to the upstream sector takes us a step forward in our aim to generate value across the entire natural gas value chain, and allows us to learn and build experience.
“Equally importantly, we are gaining a strategic investor and partner in Hony Capital whose deep China experience and global outlook can help us accelerate future growth overseas.”
ENN Group stated its growth of natural gas sales volume from 2001 to 2015 had established it as the largest private natural gas company in China.
It sold 11.3 billion cubic metres (423 pJ) of natural gas in 2015 and supplies natural gas to more than 12 million households in 152 cities across China and more than 56,000 industrial and commercial users.
ENN operates a network of 576 liquefied natural gas and compressed natural gas refueling stations.
It distributes 1.88 million tons of LNG annually accounting for about 20 per cent of the LNG trade volume in China.
ENN is also building China’s first private LNG receiving terminal in Zhoushan, Zhejiang Province, to receive imported natural gas.
It will have an annual capacity of three million tons when its first phase is completed in 2018, with scope for further expansion.
ENN says Hony Capital is a leading M&A focused private equity company with a track record of success in helping Chinese companies expand overseas through strategic cross-border acquisitions and providing long-erm support for these companies.
Hony Capital chairman John Zhao said Santos was chosen because of its strategic position in Australia and relationship with the growing China energy market
“Hony prides itself on taking a long term view and focusing on value creation for the companies in which we invest.
“We chose to invest in Santos because of its strategic position in Australia and synergies with the rapidly growing China energy market.
“Bringing in ENN as a strategic investor will help Santos connect to that opportunity in China, and at the same time we are helping a Chinese company expand internationally.
“We have confidence in the ENN Chairman and his management team. After becoming a major shareholder in ENN-EC, we will continue to support its national and international growth.”
The deal remains subject to ENN-EC shareholder approval and customary regulatory filings in China.
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