In response to China’s rural rejuvenation strategy and rural construction policy as well as assist the country in implementing the “Fighting for the blue sky Campaign”, China Gas has started to invest in and implement the village gasification strategy and promote the green transformation of production models, extending to the lifestyles and habits of citizens and industrial and commercial users early in 2016. The Group has built up considerable technologies and amassed extensive experience in market development and sound operation in related fields. Following eight years of research and execution, the Group has commenced the adoption of its unique and innovative township LPG Smart MicroGrid technology in Central and Southern China and coastal areas via light asset investment.
China Gas has learned from mature technologies from foreign countries and introduced new technologies such as IoT and smart and cloud platforms to develop more advanced, cost-effective and safer LPG Smart MicroGrid integrated energy utilization platforms. The consumption pattern of the Smart MicroGrid is the same as piped natural gas, but the former boasts lower construction costs. Also, the Smart MicroGrid is more cost-effective and safer than liquefied natural gas (LNG) supply and bottled LPG gas, making it a revolutionary gas supply model suitable for large-scale promotion in villages across China.
Smart MicroGrid is unique technology developed by China Gas that is aimed at creating a low-carbon livable environment, following the industrial “coal to gas” and village “replacement of coal with gas” projects. The Group is also able to invest in Smart MicroGrid technology for application in villages, townships and small communities across the country, in particular, Central and Southern China and coastal areas. These geographical locations currently represent a huge untapped market involving approximately 90 million families.
The Smart MicroGrid technology was successfully applied in certain projects in the Qinghai and Hubei provinces in 2019. This has paved the way for the pursuit of “bottle to pipe” reform in rural areas, establish “beautiful villages” and improve the living standards of farming families, and have gained significant recognition from the government. Currently, it is widely used in other provinces, such as Yunnan and Zhejiang. Since China Gas mapped out its investment in the Smart MicroGrid business in June 2020, market development has proceeded smoothly, and provincial agreements have been signed in Qinghai, Hainan, Yunnan and Guangdong. China Gas has also signed strategic agreements with 15 provincial-level municipalities and 11 counties, serving over 25 million households. Furthermore, its accumulated residential user contracts amount to over 1 million households, with engineering design and construction work proceeding expeditiously.
Considering the enormity of the township market, which is projected to connect 3 million urban users a year in the coming four to five years, China Gas will be able to connect to more than 15 million township users, generating over RMB 15 billion in profit. Based on a conservative estimate, its total revenue will grow at a CAGR of over 20%, which is much higher than the industry average. Hence, China Gas’ valuation will still have significant room for growth.
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