Deal to Bolster Clean Energy in China

Air pollution in China, mostly coming from coal-fired power plants, is a serious concern. © Alejandro Perez / IFC

Natural gas is an affordable and clean-burning fuel that offers great potential as a power source in fast-growing emerging markets.

This is especially true in China, where heavy smog hanging over cities often makes front-page headlines and reducing air pollution linked to coal and other fuels is a major government priority.

With this in mind, IFC has arranged a $300 million financing package for China Gas Ltd. to help the Hong Kong-listed company increase the availability of natural gas in Chinese cities, making the low-carbon fuel available to millions of Chinese households as well as for industrial and road transportation use.

“Natural gas holds great potential for supporting China’s continued economic growth,” said Lance Crist, Global Head of Extractive Industries. “IFC’s long-term financing will help China Gas make this clean-burning fuel available in more places at a time when Chinese cities are growing quickly.”

The deal, IFC’s largest infrastructure investment in East Asia to date, includes an $86 million loan from IFC’s own account and $64 million from the IFC Managed Co-Lending Portfolio Program, plus $150 million in syndicated loans from 19 commercial banks. It is the first MCPP loan for a project in China.

The financing package for China Gas aims to fund the company’s construction of 200 natural-gas refilling stations a year and the expansion of its municipal gas-distribution infrastructure in a number of medium-sized cities.

“IFC’s global vision and sector expertise made this multi-party financing package possible, providing us with the necessary capital to pursue our expansion plans,” said Liu Ming Hui, Executive Chairman, Managing Director, and President of China Gas.

Coal accounted for 68 percent of China’s primary energy consumption in 2013, and natural gas for only 5 percent. 

“We are partnering with businesses and the government to help China achieve greener growth and also increase access to affordable and efficient energy. This deal is an important part of that effort,” said Vivek Pathak, IFC Director, East Asia and the Pacific.

The China Gas investment is IFC’s third financing deal in China’s natural-gas distribution sector, after a $40 million loan to ENN Energy Holdings Ltd. in 2004 and a $150 million debt financing to the same company in 2013. It is part of IFC’s plan to fund more than $1 billion of infrastructure projects in China over the next 12 to 18 months—nearly the same amount as it has invested in climate-friendly projects in China over the past decade.