09:43 CHINA GAS HOLD<00384> - Announcement & Resumption (3) The Company is required to comply with all the requirements under the Listing Rules in respect of any additional financial assistance provided by the Group to the Yiyang JV. Yiyang City, situated in the Hunan Province, comprises eight direct governance county districts which cover a total area of 12,144 square kilometres. Yiyang City is the hub of communications with the central and northern part of the Hunan Province and one of the economic and trade centres in the Dong Ting Hu district. Yiyang City at present has a total population (in both the urban and rural areas) of approximately 4,600,000. According to the feasibility studies of the Natural Gas Project, it is estimated that at present there are 217,000 subscribers using liquified gas, of whom 55% are urban subscribers. There is as yet no installation of natural gas pipelines in Yiyang City and liquified gas and/or coal gas are the major energies available for consumption. In view of urban development, most buildings in Yiyang City are high rise buildings. Given that coal gas is still mostly used as the heating energy, the city environment of Yiyang City is seriously polluted. For the sake of environment protection in urban development, it is anticipated in the feasibility studies that the Natural Gas Project will be launched in full force in Yiyang City by the end of 2004 when the gas consumption in Yiyang City will reach 26,000,000 cubic metres, which will rise to 80,000,000 cubic metres in 2010. Also, it is anticipated in the feasibility studies that in 2015 the urban population in Yiyang City will reach approximately 700,000. Investors are advised that the above figures quoted from the feasibility studies of the Natural Gas Project may not be realized. The board of directors of the Yiyang JV will comprise 7 directors, 2 of whom will be appointed by Yiyang City Development, 3 of whom will be appointed by China City Gas and 2 of whom will be appointed by Shenzhen Natural Gas. The chairman of the board of directors of the Yiyang JV will be nominated by China City Gas and each of the two vice chairmen will be nominated by Yiyang City Development and Shenzhen Natural Gas, respectively. The persons nominated by the Group to the Yiyang JV will represent the majority of the board of the Yiyang JV. Upon establishment of the Yiyang JV, all the parties to the Yiyang JV is entitled to share profits generated from the Natural Gas Project in proportion to its shareholding in the Yiyang JV. As at the date of this announcement, the JV Company is yet to be set up and in this regard the audited/unaudited assets of the JV Company are not available. The Proposed Investment Pursuant to the terms of the Agreement, Yiyang City Development, China City Gas and Shenzhen Natural Gas will make a total investment of RMB44,000,000 in the Yiyang JV, i.e., as to RMB8,800,000 to be contributed by Yiyang City Development in the form of land use rights, with valuation thereof by independent valuer acceptable to Yiyang City Development, China City Gas and Shenzhen Natural Gas, HK$ equivalent to RMB21,560,000 to be contributed by China City Gas and RMB13,640,000 to be contributed by Shenzhen Natural Gas. The Group will make a total investment of RMB35,200,000 (equivalent to approximately HK$33,207,547.17) in the Yiyang JV, which will be contributed by the Company from its internal resources by way of shareholders' loans to China City Gas and Shenzhen Natural Gas, respectively, which will in turn use such money to pay up the registered capital in the Yiyang JV. Apart from paying up the registered capital of the Yiyang JV, the Group is not required to make further capital contribution to the Yiyang JV. Any difference between the Total Yiyang JV Investment Amount and the registered capital of the Yiyang JV will be financed with funds drawn from the profits generated by the Natural Gas Project. The Company will make further announcement in case the financing arrangement on the difference between Total Yiyang JV Investment Amount and the registered capital of the Yiyang JV is changed. The Group will obtain a legal opinion from a firm of lawyers in the PRC in relation to issues including without limitation the legal status, validity of establishment and continued existence of the Yiyang JV. Reasons for the Proposed Investment The Group is principally engaged in investment in, among others, natural gas/energy and property projects. The Directors consider that the Proposed Investment represents a good opportunity for the Company to further invest in the natural gas business in the PRC which is in line with the Company's strategy to expand into natural gas industries in the PRC whereupon the Yiyang JV will be treated as a subsidiary of the Company upon establishment.