Ladies and gentlemen, on behalf of China Oil And Gas Group, it will be a pleasure for me to welcome you all to our 2021 annual result conference call. Today, our executive director, Xu Ran, will present the group's 2021 annual result, and myself will answer any questions you have after the presentation. Our presentation material for today has been uploaded to our official website at www.hk603.com under investor relations, and then roadshow presentation. Or you can also access it through the link attached in our announcement email from yesterday. We will first talk about the financial highlights and performance of the group, followed by the operating performance of our core business, natural gas distribution business, and then our upstream oil and gas production business in Canada. The presentation will take around 20 minutes, and we will have a Q&A session at the end. Ran, please go ahead. Thank you.
Thank you, Jenny. Morning, everyone. Thank you for joining China Oil And Gas Group Limited 2021 Annual Results Conference Call. Let's start with the financial performance. On the PowerPoint we sent out, page three summarizes the major highlights of the group for 2021. The total turnover was HKD 14.342 billion, a year-on-year increase of 37%. The main reason was the increase in the group's natural gas sales volume and upstream oil prices. Natural gas sales rose 12% year-on-year to 4.852 billion cubic meters, compared with 4.35 cubic meters last year. Gross profit rose 27%. Profit for the period was HKD 1.514 billion, a year-on-year increase of 194%. Profit attributable to company owners was HKD 904 million, a year-on-year increase of 3,017%. Earnings per share increased 1,987% to HKD 0.18.
On page five, after deducting one-off items, profit attributable to company owners increased by 5%. On page seven, the group's principal activities are divided into four segments. Namely, sales and distribution of natural gas and other related products, gas pipeline construction and connection, exploitation and production of crude oil and natural gas, and the newly added production and sales of coal gasification and other related products. Revenue was HKD 12.58 billion, HKD 971 million, HKD 511 million, and HKD 601 million respectively, representing an increase of 31%, 27%, and 82% respectively. The gross profit margin of the segment sales and distribution of natural gas and gas pipeline connection and construction services income were similar as last year. Due to the increase in global crude oil prices, the gross profit margin of the exploitation and production of crude oil and natural gas has increased from 7% in last year to 13%.
On page nine, the group's EBITDA increased 32% to HKD 2.23 billion. On page 10, the total assets of the group are HKD 22.649 billion, an increase of 18% from the HKD 19.27 billion at the end of 2020. The net assets are HKD 8.819 billion, an increase of 20% from the end of 2020. On June 23rd, 2021, the group successfully issued an additional U.S. dollar 400 million five-year senior note with a coupon of 4.7% to redeem the $ 350 million senior notes due in 2022. The group completed the early redemption on August 2nd, 2021. As of December 31st, 2021, the group's total debt, including bank borrowings, other borrowings, and senior notes, was HKD 8.72 billion.
Cash and cash equivalent and time deposits were HKD 3.766 billion, compared with HKD 3.763 billion at the end of last year. The group's net debt to assets ratio is 21.9%. Finance cost, net of capitalization, was similar to last year at HKD 344 million. The weighted average cost of all debts of the group was 4.44%, compared with 5.26% last year. The main reason was that China Petroleum Finance Corporation. gave the group an interest discount. At the end of 2021, the group's net cash generated from operating activity was HKD 2.175 billion, a 36% year-on-year increase in compared with HKD 1.602 billion in last year. Now let's talk about operating performance of the group. On page 12 to 13, the group's total gas sales in 2021 increased by 12% year-on-year.
Total gas sales and transmission volume increased by 13%. On page 14, the proportion of gas sales by various users is relatively stable. Industrial and commercial user accounts for 68% of the gas sales. Residential user accounts for 23%, and the gas station sales are 9%. On number 15, the growth of gas sales volume in Shaanxi and Jiangsu decreased the proportion of other provinces. On page 16, the blended dollar margin is CNY 0.44 per cubic meter, consistent with the past year. On the next page, in 2021, the group connected more than 160,000 new residential users, an increase of 10% year-on-year. The cumulative connections of residential users was reaching 1.8 million. 1,283 new industrial and commercial users were connected, and the cumulative number of industrial and commercial users connected reached 15,6 00.
During the period, the group managed to land the DCN industrial cluster gas connection projects in Yinfeng, Shaanxi Province. The group also added one new branch pipeline project in Guizhou Province. In July 2021, the group successfully launched the merger and acquisition of Shandong Shengli. Shandong Shengli Limited is a company listed by shares established in the PRC, and its issued share are listed and traded on the main board of the Shenzhen Stock Exchange in accordance with the regulations. Shengli has extensive business resources in natural gas field. The group intends to corporate in-depth with Shengli to promote the sustainable and high-quality development of the group, and is in the interest of the company and its shareholders as a whole. As of November 2021, the group has acquired a total of 22.16% of Shengli.
Up to now, the group has 71 city gas concession rights in 16 provinces in China and has 63 L-CNG stations. Now let's go to page 21 and talk about upstream business. The upstream oil and gas production business achieved an average output of 4,936 barrels of oil equivalent per day in 2021. The group achieved an average crude oil price of CAD 78.51 per barrel of oil equivalent, an increase of 80% from last year's CAD 43.66 per barrel of oil equivalent. Operating netback increased by 123% to CAD 35.15 per barrel equivalent. Our Canadian team remained cautious with the drilling plan, drilled 14 wells with a success rate of 100% throughout the year. Thank you, everyone. That's all for my presentation. Please feel free to raise any questions. Thank you.
Thank you, Xu Ran. We will now go for question. If you have any question, please press star one on your telephone. Ladies and gentlemen, that is star one to register for questions. Thank you. Our first question comes from Nan Nan from T. Rowe Price. Please go ahead.
Hi, Jenny. Hi, Xu Ran. Thanks very much for the presentation. My first question is regarding the volume growth. What is your expectation for volume growth this year? We did acknowledge that our C&I users increased a lot last year. Does it include any one-off effects which would not be repetitive this year? Happy to hear your thoughts.
Okay. Hi, Nan Nan. Our expectation for 2022 will be around 15% growth. One-off is not one-off. Actually, we see the COVID-19 is getting recovered in China and all the C&I user are getting more active. So we have expanded our area as well. So we expect our natural gas growth will be around 15% in 2022.
Thanks. I do realize the A receivable base actually increased a lot last year. Was it because of the increase in contribution from the C&I users, or have you observed any delayed payment from C&I users on the ground?
No delayed payment, and we see most of them are from active C&I users. They will be recurring users as well.
Should I expect the receivable days to stay at over 22 days this year?
Yes, around there.
Okay, thanks.
Thank you.
Second question is regarding the connection fee. Have you seen any trend of the connection fee last year?
Not really. We still have around the same. I think it is close to CNY 3,000 per user average, and you can see from in our announcement, the gross profit of the connection fee is around the same, too.
Okay. Thanks. My third question is for the upstream business. About the operating netback, is it possible for you to give us any number guidance for this year?
Yes. We expect the operating netback will be above the average for QOG1. Our operating netback this year is 35.15, and because the oil price is still quite high right now, we expect it will be close to 38 operating netback.
For 2022.
In QOG2. Yeah.
Okay. Got it. Last question, as usual, is about CapEx this year.
CapEx will be around the same. We have HKD 1.3 billion last year. It will be around HKD 1.5 billion in QOG2.
Okay. Sorry, one more question about the total debt. It increased somewhat last year. Is that because double count of the I didn't know they said you borrowed the same loan to replace the senior note. Just want to have an idea of the breakdown there.
Okay. The breakdown for the total debt in 2021 is actually increased from CCNG, from our PLC operation, CCNG and our wholly-owned subsidiary as well, a little bit. Because we have acquired Shengli last year, so they have increased their bank loan to do the acquisition. Otherwise, for the syndicate loan, we draw down last week, actually. This is after QOG1. We did it in QOG2.
Okay, got it. So what is the size of the same loan? Is that still 350?
Actually, the total amount is $290 million . We call back the loan for 250 million, the QOG3 loan, we call it back right now. What we are going to do, because the premium will be less in half after July 25th, so we will do the remaining part after July 25th to save cost. That's all. Yeah.
Okay. Is that fair if I assume the total debt will stay at the same level this year?
Pardon me?
Is it fair for me to assume the total debt will stay at current level?
Yes
for 2022?
Right.
Okay. Got it. Thanks very much, Jenny. No more questions.
You're welcome.
I'll just jump back to the queue.
Sure. Thank you.
Hi, can I move to the owner, next question? Hello?
Hello. Sorry.
Our next question comes from Mr. Tim Yip from HSBC. Please go ahead, sir.
Hi. Thank you for the presentation. I guess I have a few questions. The first one is, can you kind of break down the cash level between your JV and also at the Holdco level?
Okay. Total cash and cash equivalent on hand in Hong Kong Holdco level, we have around 15%. The remaining 85%, around 80% is from CCNG and 20% is from BCC2, our wholly-owned subsidiary.
Okay. So 15% at the Holdco, and then the remaining is, how much of them are in the JV or?
80/20. 80 in the JV and 20 in our wholly-owned subsidiary.
Okay. Thank you. Can you talk a little bit more about the rationale of purchasing some of the stocks, and what is the future plan for this? Are you planning to further increase your stake? Can you also confirm that after any requirement from the Shenzhen Stock Exchange that you have to follow any general mandatory general offer if you cross any threshold of shareholding?
Okay. For Shengli, we actually acquired because we have a winning situation. We have two platforms right now. We have the Hong Kong Stock Exchange, and we have the Shenzhen Stock Exchange. For natural gas business, the valuation in China is actually way higher in Hong Kong right now. When we are doing more acquisition in the future, we can use Shengli as a guideline for the valuation, right? Also because of Shengli, we expand our area as well. In Shengli, this company, they may need some gas resources, which COG can help to talk to PetroChina or Sinopec so that we can have a lower gas cost for Shengli. At the same time, we can share our resources in different areas. Yeah.
Okay. So far, Shengli was not consolidated into the financial result, right?
It's only our associate company. We own 22.16%.
Yeah. Any plan to consolidate it?
Well, if we have to consolidate, we may need to hold up to, say, 40% to 50% for sure. I don't think it's necessary for now.
Okay, sure. You mentioned just a few minutes ago that your onshore investment platform actually took out a loan against the purchase of some of the shares. Can you talk about what is the size and tenure and also any security of it?
Sorry, I didn't quite get your question. You mean when we do the acquisition or
Yes. Right. Because I think you just mentioned that is by your onshore investment platform. You guys took out a loan to purchase the Shengli shares, stocks, right?
Right.
Yeah. Can you talk about what is the size of the loans and the tenure and also if that
Oh, okay. The size of the loan actually is from our PRC company. So the size of the loan is around, I think less than CNY 1 billion, but it's from different banks. They have different banks to perform that. But I think the total we draw down is only around CNY 300 million. Oh, no. Sorry. Yes. CNY 300 million. Yeah.
Is all this Shengli shares are pledged to the loan?
Pledged to the loan? No, I don't think so.
Okay.
No, I don't think so. But I have to check. I don't think so.
Okay. Thank you. That's all for me.
Yeah. Thank you.
Thank you. Our next question comes from Jocelyn from Amundi.
Hi, Jenny.
Hi.
Hi. Thank you for the presentation. I wanted to clarify on the CapEx. I think in FY 2021, you have HKD 1.3 billion of CapEx. Can you break this down for me into the PRC gas distribution business and the O&G business? For the CapEx guidance that I think you say, was it HKD 1.5 billion for FY 2022? What is the breakdown for the two as well?
Okay. For the upstream, it is around HKD 300 million. The remaining is from PRC.
That was last year, right?
Pardon me?
1.3 billion last year, out of the 1.3 in FY 2021, HKD 300 million.
No. In 2021, the upstream business, the CapEx constituted around HKD 300 million. The remaining around HKD 1 billion is from our PRC operation.
Okay. The CapEx guidance of HKD 1.5 billion this year-
Yes.
Can you break it down into the two for me as well?
Around HKD 350 million will be from upstream. The remaining is for PRC.
For this CapEx that looks a bit higher for the O&G business, can you guide, are you increasing the production level in the oil and gas business this year?
Yes, because oil price is quite good right now. We target that we will drill more wells in 2022. When you go back to a few years ago when the oil price is very low, we actually drill three or four wells per year. The guideline for this year, we will drill around 11 to 12 wells for now. We will change. Well, it depends on the oil price, and we may add, or we may reduce from our budget.
Okay. But the CapEx for the oil and gas business will be fully supported by their side and without any support from the Holdco corporation?
Yes.
Okay. And for that, is there any annual production per day that you can guide us for this year?
Sorry, what production?
I think that was an average daily production that you have about, I don't know, 5,000-6,000.
You mean the production per day?
Yes.
The production per day is around 5,100 average. 5,100 to 5,200 in average for 2022.
For 2022. Okay, thank you. Is there any from the O&G business, oil and gas business, right, do you expect what kind of dividend or interest income that you are expecting from this business? Can you remind us?
Yes. They actually gave us HKD 13 million last year for the interest expense, because when we do the acquisition, we have 60% of that and 40% is equity. So on the 60%, they have an interest. I think it is around 8 point something percent per year. So they have to pay us the interest per year, and it is around HKD 13 million. Sorry, CAD 13 million.
Canadian dollar. And, outside of this interest income that you earn, do they actually give you any dividend yet?
We don't acquire it to give us dividend, because dividend has 30% withholding tax, as I remember. For interest income, it only constitute around 10% of withholding tax. Because of the tax purpose, we rather get interest income instead of dividend. We can do that if we need to.
Understand. Is there an expectation on whether or not there will be an increase in this dividend income that is coming from them?
We can do that anytime because we hold it 100%. We can even ask them to repay the loan.
I see. Is there any expectation for that this year, given the rise in the, in the?
For sure, we will get the interest income, CAD 13 million for sure. Then we would decide if we need any more from that. Yeah.
Mm-hmm. Thank you. The next one is on the gas sales volume growth. I think if I look into the gas sales volume growth, it seems like last year, there has been a little bit of dip in the second half because of the, I guess C&I weaker growth. Maybe you can comment whether this is a right observation? You also mentioned that you are expecting 15% year-on-year growth this year. So I am just trying to understand whether, how achievable is this given the slowing macro and all that. Just to hear your comment on that side.
I think it is just the timing of the growth. In the first half of 2021, when we compare to the first half of 2020, everywhere is locked down in China in 2020 because of COVID-19. So the growth is like 20% compare, half year to half year, right. For the full year when everything get back to normal, for sure the second half, the growth rate will not be as much as the first half. That is why, yeah. So for 2022, we expect that because 2021 is a year that is quite stable, and we have more concession rights in 2022 to start with, so our growth rate will be from organic growth mostly, and we may have new concession right to constitute the 15% growth in 2022.
Mm-hmm. Thank you. Since this, you mentioned about the concession area growth, in the CapEx guidance for the HKD 1.5 billion of which about 1.2 is for the PRC, right? Have you included acquisition for new concession area, or this is only the maintenance for the existing concessionaire?
It's just the expansion of our natural gas pipeline. We didn't include anything for acquisition. We don't expect much acquisition because for concession right, we usually just deal with the local government. We seldom really acquire them. Yeah.
Right. The HKD 1.2 billion of CapEx for the PRC business then is really to do with ongoing maintenance and maybe small expansion in the adjacent or in existing concessionaire.
Right. Yes.
Okay. Thank you. Sorry, on the connection fee. Sorry, I'm not sure if I missed it earlier. What is the average connection fee for FY 2021 that you have achieved?
Around CNY 3,000 .
3,000. What is the expectation for this year?
Around the same.
Around the same. Thank you. What is the connection household that you expect to connect this year?
Yes. I think we will have around the same figure for 2022, 160,000.
160,000. Thank you. On the dividend from CC NG, right, in FY 2021, can you maybe mention what is the number here since the annual report is not available yet and the expected dividend in FY 2022?
We have reserved CNY 100 million, around there. We will have the same in 2022.
Okay, thank you. What was the level of the cash that you mentioned earlier that was kept onshore, offshore, and all that? What is the expected level of cash that you want to maintain actually? Now you have that HKD 3.8 billion. Is this the level of cash that you would like to maintain on the balance sheet as well as the 15%, 85% ratio that you mentioned earlier for onshore?
Yes, we intend to remain this kind of structure, so we always have cash on hand just to be conservative.
Mm-hmm. Okay. On the 2023 bonds, I think I hear you were saying something about syndicated loans that you have taken out. Can you update a little bit more on that? I may have missed the update. Have you drawn down this already? When is your intention, I guess, to do a call tender, is it? For the 2023.
We drew down the syndicate loan last Friday, on March 25th. We drew down $290 million, and we already called the U.S. dollar bonds of January 2023 ones. We called back $250 million for now, and we will wait until July 25th, after July 25th, because the premium will cut into half, just to save cost when we do the call back for the remaining $100 million. Yeah.
Okay. Can I understand the interest cost that you get from the syndicated loans provider?
The all-in cost is around 3%.
Can you come again? I missed that. Can you come again?
3%.
3%. Okay. The provider of these loans are the bank?
We have seven banks together.
Oh, okay. Is it possible to name a few for us? Just half a dozen.
We have HSBC, we have Citibank, we have Ping An, and more than- Yeah.
Right. Thank you. Finally, I think, my last one is on the dividend policy. Is there anything on the dividend policy that you can update us?
Which dividend policy? COG or?
Dividend policy for China Oil And Gas.
Oh, for China Oil and Gas. We probably won't pay dividends for now. Because the directors, we have a board meeting yesterday. All directors have some discussion that we rather save some cash for investment in our pipeline and our natural gas business instead of paying dividends to our shareholders.
This pipeline that you are mentioning is really growing the concession in the existing assets-
Yes
first, right?
For the maintenance to expand our areas and to expand our pipelines to different networks to connect more C&I user and residential user.
Mm-hmm. Okay. Thank you. That is all I have for now. Thank you very much, Jenny.
You are welcome.
Thank you. Our next question comes from Mr. Prashant from GSAM. Thank you.
Hi, Jenny. Morning. Congratulations.
Morning
for the good set of numbers. I have just two or three questions. First one is on the dollar margin and the new connection. If I heard you right in the earlier, you mentioned that your expectation on new connection for 2022 would be largely similar to 2021. If I look at various other gas distribution companies in China, which have already reported, they are guiding for a decline in new connection, which is kind of intuitive given the property slowdown. Just curious, how are you expecting the number to be flat year-over-year?
Sorry, I hope I get your question correct. You are asking about the dollar margin?
There are two questions. One is on the new connection. I think you mentioned earlier that you are expecting new connection for 2022 to be flat to 2021, like similar 150,000. If I look at most other gas distribution companies in China, they are guiding for a slowdown and a year-over-year decline. Curious to know, what are you seeing such that you do not seeing any decline or slowdown in new connection?
Okay.
The second question is your expectation on the blended dollar margin for 2022.
The blended dollar margin is easy. We target it will be stable around CNY 0.44 in 2022. For your first question about the connection, why we expect that we can do it as the same in 2021, because most of our new connections, they are not from new buildings. They are from original buildings that already have in the area. They just switch from coal to gas, or they just switch from electricity to natural gas, because natural gas is more stable, and in their mind, they will have more after service for our natural gas too. We expect the new connection in 2022 will be around 160,000 household as well.
Got it.
That's a few goods.
Is there any particular reason for roughly, if you take, let's say, this year as example, 2021, of the 150,000 new connection, how much would be existing buildings versus a new, fresh building, just broadly?
Well, usually we have around 80%-90% are from old buildings.
Okay.
Apart from the new buildings, yeah.
Why is that for your business versus other guys different? Because the cities in which you are present is not having new housing starts? Or why that mix is slightly different versus, let's say, other companies?
Because we are a natural gas company, not a construction company. With some other companies,
No, no.
What they do is that they will receive the connection fee from the developer. They may not
Right
use us to use the natural gas, but they receive the connection fee already. But for us, we make sure that the end user, they will use our natural gas, and then we'll do the connection for them.
Hmm, I see. Got it. Understood. On the dollar margin, you had CNY 0.45 for the full year. You're expecting similar. Most companies having higher input cost because of, we all know. How are you not seeing compression in that margin? I remember most of the companies have meaningful decline in dollar margins in second half versus first half. To your credit, your dollar margin in second half was also flat to first half. I'm just a little bit trying to understand what drives much more stability in your dollar margin versus other gas distributors in your space.
For dollar margin, it has a lot of calculation inside, because we have different geographical areas. Say, in Shanghai, the dollar margin is lower in Shanghai than in Guangdong. Guangdong may have higher, they may have CNY 0.60 or CNY 0.70. But in Shanghai, they may only have CNY 0.20. So it's a mixture of the geographical area. That's the first question, and this is the first ingredient in this formula. The second part is that we may need to purchase some LNG to maintain that we have stable gas sources for all of our users. So we actually purchased less than 10%, I think around 8% of LNG last year, especially in the second half of 2021. Because when everywhere is lack of natural gas, we need to purchase some LNG. So the cost may be a little bit higher.
So you can see the dollar margin will remain the same, but the ASP and the APP, the selling price and the cost is actually increased in both ways.
No, I think the first point which you explained, the differential between, let's say, Shenzhen, Guangdong versus Shanghai, it's different. That I understand.
Yeah.
Which derives the absolute level. For example, if I take Kunlun Energy or I take China Resources Gas, or I take ENN Energy Holdings Limited, not to take any names, but those dollar margins are much higher than yours. That probably is determined by the geographic mix. But what I'm telling-
Right
What I'm asking is, as a decline which everyone is seeing because of the high input cost, which they're unable to pass through fully, you're able to pass through fully. Why is that versus other companies? Is there some different in strategy or the cities you are in, the regulator has allowed you to already fully pass on? Or is it a mix between residential and C&I? I'm just trying to understand, because it's consistently every company is reporting lower dollar margin in the second half, but yours was quite flat. I'm not able to tie that up.
I see. It's actually, we have signed different contract with local government. The local government allow us to directly pass through our costs to our end user. We just directly pass through. Even though our costs may increase, we just pass through to our end user.
You don't have to get any approval, you just straight away input costs and you pass it on to the C&I and residential both?
We got approval from local government. We need to sign contract, and we get approval from local government for us to do that.
How many days do you have the lag between input cost increase versus the refresh of the rate card for the consumer? Like a 7-10 day lag or two, three months? What's the typical lag?
I don't really have that number, but you can see from our dollar margin. We can keep it that stable, which means the lag time is very low.
Yeah. Even, maybe last question before, let's say two months of this year has already gone by. No, actually three. Would you say the numbers or the prices based on the first three months would suggest that the dollar margins have been stable already for the first quarter, give or take?
Yes.
Okay. Perfect.
Yeah.
Cool.
Yeah. Thank you.
Yeah, thanks. I will go back in queue. Thanks.
Yeah. Thank you.
Thank you, ladies and gentlemen. Should you have any question, please press star one. Thank you. Ladies and gentlemen, that is star one to register for question. Thank you. We have a following question come from Jocelyn.
Hi, Jenny. Just to follow up on the dollar margin discussion earlier. I also see that there is some increased gas sales volume from geographies like Jiangsu and Guangdong, for example. Oh, sorry, Jiangxi, for example. May I know whether these few locations, what are the dollar margins? What are the dollar margins for these few locations? Is this the reason why the dollar margin has been rather stable because of the increased gas sales volume from other geographies which have a higher dollar margin? Just to understand this please.
Yes, you are correct. We didn't really disclose the dollar margin because for different gas, for the ASP, for the sales, we receive different from residential, we receive different from industrial, commercial, and we have tons of other kinds of users actually. We just categorize them to residential and C&I and gas stations. Your question is quite hard to answer, like what is the average dollar margin in each area? But our group average is CNY 0.44. But I can say in Jiangsu is the highest, I remember. Jiangsu may have CNY 0.70 or CNY 0.80 for C&I user. And for residential user, their dollar margin is usually lower.
Mm-hmm. Following up on this cost pass-through, the residential cost pass-through, do you still need to go for the hearing again or just for the residential one. I understand that the C&I pass-through could be more automatic, but is it the residential one that needs a little bit of time?
Residential, we have the automatic pass-through also for the past three years. We don't have any more hearings.
Oh, I see. C&I customers, how fast do you think the pass-through has been? Is it really as automatic as we have discussed before, or you see some lag last year or recently because of the hike in input prices?
Sorry, I did not get your question. Sorry. I just have phone call getting in. Sorry. Can you repeat the question?
Yeah. Just trying to understand whether the C&I customers also have a little bit of lag or it is really automatic, notwithstanding that the input costs have been higher in recent times.
C&I cost is higher?
The pass-through of the input cost for the C&I customers. Has it been-
Oh
automatic? Yeah.
Yeah, just automatic pass-through. If our upstream increase us CNY 0.30 on our cost per cubic meters, we just pass through the CNY 0.30 to ourselves.
Mm-hmm. Even though the input costs are higher, they still-
What do you mean by input cost? What is input cost?
I mean, like the gas cost, right? If some of the requirement you have to purchase from the, say, LNG, instead of getting it from the pipe gas, right? I think you say 8% last year or something.
Oh, okay.
You have to. Yeah. So those procurement costs that were higher because of LNG, because of the
Yes, of course. We will not pass through that. Yeah. That's why we have to do the calculation. Why we have stable margin, because we have to calculate how much cost we are passing in. And the ASP is the standard because the local government just let us to pass through our pipe cost, right? Our upstream increase, like CNY 0.30 , we can pass through CNY 0.30 . But if I have to purchase extra from LNG, which mean I have to bear the extra cost. Because LNG is just for a support gas sources. What we usually have is 95% are from our pipeline gas. That's why we need to find long-term procurement contract with PetroChina and Sinopec, right?
Mm-hmm. Those has actually helped you to defend your dollar margin somewhat, even though the cost was higher.
Yes.
Okay. I think that is all from me. Thank you.
Okay. You are welcome.
Our next question comes from Tim Yip from HSBC. Thank you.
Hi. Sorry, I have one follow-up question related to all this dollar margin discussion. I just want to understand that if the government wants to make amendment to the formula calculating the purchase price and your sales price, what kind of process that they have to go through, for example, NDRC, do they have to go through the national congress? I just try to get a sense about that. What is the mechanism for them to adjust the formula?
Just the local government.
Okay. The local government NDRC.
Yes.
How often that they actually adjust the formula? I understand this, I think they calculate the formula month to month, but when was the last time they actually make adjustment to the way how they do the formula?
I think all of our concession, right, they signed the contract with local government last year. I do not see they have changed anything else because they just let us direct pass through, right? You do not need to change the agreement.
Okay, sure. Does that mean it is like during the concession period, the local government is still able to adjust the formula without signing a new concession with you?
I do not get your question. You mean the concession right period?
Yeah, but for the formula of the gas price that you purchase from Sinopec, and also the pipe gas cost and also the sales price.
We do it with PetroChina and Sinopec. We don't need to deal with local government.
Yes.
Yeah.
But the formula that calculates the price, how much you are buying from them. It's like if you want to adjust the formula for the calculation of the purchased gas price that you have, what kind of-
They have to go through the NDRC. Beijing NDRC. We don't need to deal with it. PetroChina need to talk to NDRC if they want to increase the cost.
Okay. Sure.
Yeah.
Okay. Thank you.
You're welcome.
Thank you. We have another phone question come from Nan Nan. Please go ahead, ma'am.
Hi, Jenny. Can I follow up with one question regarding the liquidity of the parent company as far as cash flow of the parent company? You mentioned about that 15% of cash sits with parent company. Just want to confirm how much debt is with parent company. I would assume the senior notes are with parent company. Just wonder, with the same loan
U.S. dollar, yeah.
with the parent company?
The same loan, we are just going to repay the bond, right? It will be the same.
Okay.
Yeah.
The same loan, same senior note.
Yes.
Got it. The annual dividend income you mentioned from subs or JVs, how much would that be?
You mean from CCNG for 2022?
2021 would be a good example.
Oh, 2021 is CNY 100 million.
How much interest payment and tax payment usually is required for Holdco?
Tax payment?
Yeah. When I talk about Holdco, I refer to 603.
Okay.
The Holdco company.
How much interest we are paying? We are paying the two senior loans last year, the coupon.
And tax payment? Hello?
Yes.
Sorry, I lost your reception.
Oh. The Holdco company needs to pay the two U.S. dollar bond coupons in 2021, and that's all our interest expense.
Is there no tax payment at all?
No tax payment.
Okay, got it. What is the general operating expense at Holdco level?
Around HKD 20 million for the full year.
HKD 20 million.
Yeah.
Okay, got it. Yeah, thanks.
Thank you, ladies and gentlemen. That is star one to register for a question. Thank you. Ladies and gentlemen, that is star one to register for a question. Thank you.
I guess as we have no further questions for now, I would like to bring our meeting to an end. Is it okay, operator?
Of course. Please go ahead, ma'am.
All right. If you have any follow-up questions, please feel free to contact us. You can send email to info@hk603.com, or you can call us at 22002000. Thank you very much for joining us here today, and our group appreciate your continued support. We wish you all have a splendid day ahead, and thank you. Goodbye.
Thank you for your participation. This concludes the conference. Thank you.
Thank you.
Thank you.