China has committed to convert the energy source of industrial boilers from coal to natural gas. © China Gas
More than 90 percent of the world’s population is affected by air pollution—a public health emergency in dire need of a solution. China, which ranks among the top 10 countries worldwide for number of deaths from air pollution, is leading the way by creating policies to address the challenges posed by the toxic smog present in most of its large cities as a result of the wide use of coal and oil.
China’s 13th Five-Year Plan—a series of social and economic objectives designed to guide the country’s development—emphasized the urgency to reduce air pollution and greenhouse-gas emissions, particularly those arising from heavy industry and infrastructure construction. Of special interest: how to scale the use of cleaner fuel types such as natural gas—a clean-burning and affordable fuel source with 99 percent lower emissions of particulate matter and 40 percent lower carbon emissions than coal.
To support this effort, IFC has backed one of China’s growing natural gas companies, China Tian Lun Gas Holdings, to help increase gas supply to meet rising demand. With IFC’s support, which included an equity investment of $150 million and a subsequent loan of $60 million, Tian Lun Gas is improving its corporate governance and financial management, alongside its safety, environmental, and social practices that will ensure sustainable growth.
As a result of China’s heavy dependence on coal as its energy source, air pollution has negatively affected Chinese citizens’ quality of life in many ways. In late 2015, for example, Beijing issued its first red alert for smog—closing schools, canceling flights, and restricting the number of cars on the road.
To improve air quality, the Chinese government has made a commitment to gradually promote the use of natural gas and convert the energy source of industrial boilers from coal to natural gas.
IFC’s support to Tian Lun Gas is expected to have a demonstration effect to show that natural gas is a viable and cleaner fuel that could substitute coal and oil. By providing access to long-term financing, IFC helped the company strengthen its balance sheet and enabled it to expand its investor base.
Tian Lun Gas is a fast-growing, medium-sized natural gas distributor with 52 city gas concessions and 44 gas refueling stations across 15 provinces. It is well positioned to spur natural gas usage across its concession areas and meet the increasing energy demand resulting from urbanization, in response to the new government emissions-reduction goals. Its natural gas service reduces more than 170,000 tons of greenhouse emissions annually.
Our support for Tian Lun Gas fits in with our greater efforts in China, which focus on investing in commercial enterprises and private sector projects that deal with climate change issues and promote sustainable development.
China is IFC’s third-largest portfolio country in terms of commitments. This investment in Tian Lun Gas was the first investment project for IFC’s Global Infrastructure Fund, and when combined with IFC’s own exposure, it is IFC’s largest infrastructure equity investment in East Asia.
The Chinese government’s commitment to increase the proportion of natural gas in its energy mix presents a great opportunity for development institutions like IFC to increase development impact, improve sustainability, and support business plans from companies to meet rising energy demand. Tian Lun Gas is one of those companies.
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Published in November 2016