Xinao Gas Holdings Limited

(26 April 2001, Hong Kong) - Xinao Gas Holdings Limited ("Xinao Gas" or "the Group"), a non state-owned piped gas distributor, today announced the issue of 180 million new shares at a price of between HK$1.15 to HK$1.25 per share. All the 180 million new shares will be offered by way of placing. Approximately HK$207 million to HK$225 million will be raised based on the price range of between HK$1.15 to HK$1.25 per share. Approximately 80% of the net proceeds will be used for the construction of the pipeline infrastructure; approximately 18% will be used to acquire companies, and the remaining 2% will be used to develop internal capabilities to manufacture stored value card gas metres.

Mr. Wang Yusuo, Chairman and Executive Director of Xinao Gas, said, "The current market sentiment has improved and the stock market is now more active. Together with the reduction of the U.S. interest rates, investors have become more confident in making investments. In view of this, we have decided to proceed with our listing plan."

Xinao Gas was founded by Mr. Wang Yusuo, Chairman and Executive Director of the Group and his wife, Ms. Zhao Baoju in 1993. Business operations began when Mr. Wang and Ms. Zhao formed Langfang Xinao in Langfang, Hebei Province in the investment in, and operation and management of, the gas pipeline infrastructure and the sale and distribution of piped gas. The Group's other services include the sale of gas appliances and equipment, as well as the provision of repair and maintenance services. The Group's business has expanded from Langfang City in Hebei Province to Liaochang, Miyun and Huludao, located in Shandong Province, Beijing Municipality, and Liaoning Province. Following the listing, the Group's business will further expand through the acquisition of companies in Pinggu, Huangdao and Changping,and the establishment of new companies in Jingzhou, Chengyang, and Zhucheng. These projects are located in Hubei Province, Beijing Municipality and Shandong Province. After the completion of acquisition and establishment of new companies, the Company will have 10 gas projects in total.

Mr. Wang continued, "As a leading non state-owned piped gas distributor in the PRC with competitive advantages and promising business prospects, the Group possesses clear business focus and strategies, an experienced and capable management team and a diversified client base including residential, commercial and industrial users, enabling us to have a balanced mix of revenues. At the same time, the Group enjoys exclusive rights/first right of refusal of operations in the gas business in each of the ten projects. In line with the active promotion and support of the use of natural gas by the PRC government, with the aim of alleviating pollution problems from coal combustion, we believe that the natural gas market presents tremendous potential for growth."

As at 28 February 2001, Xinao Gas has four gas projects in operation, which together have 257 km of intermediate pipelines and main pipelines and 7 processing stations. The combined designed daily capacity of the four existing projects amounted to 561,800 cubic meters. The Group currently has approximately 80,000 contracted gas supply locations and has already connected to approximately 68,000 residential households and 260 commercial and industrial customers. The installed designed daily capacity for commercial and industrial customers exceeds 148,000 cubic meters, and the total amount of gas supplied in 2000 reached 16.9 million cubic meters.

Connection fees and gas usage charges are the major sources of income for the Group. The compound annual growth rate of the Group's turnover in the past three years was 72.5%. Turnover in 2000 amounted to RMB122.3 million, representing a sharp increase of 130% compared with 1999's turnover. The Group also achieved outstanding earning performance and significant growth in net profit. Gross profit margins for the past three years exceeded 50%. Net profit for 1998, 1999 and 2000 were RMB9.3 million, RMB15.1 million and RMB37.4 million respectively, representing compound annual growth rate of 100% for the past three years.

Mr. Wang concluded, "Looking ahead, we will continue to strengthen our position as a leading non state-owned piped gas distributor. Apart from developing existing operational areas, we will continue to extend our business across the regions within the reach of the West to East Pipelines, thus enlarging our customer base and scale of operations. The Group will focus on business expansion in Shanghai and Tianjin Municipalities and Jiangsu, Zhejiang and Auhui Provinces. We are confident that the Group will achieve escalating growth rates and generate significant returns to our shareholders."

Dealings in the Company's shares on GEM of The Stock Exchange of Hong Kong Limited is expected to commence on Thursday, 10 May 2001. The stock code is 8149. N M Rothschild & Sons (Hong Kong) Limited is the Sponsor to the listing and ICEA Capital Limited is the Global Co-ordinator, Lead Manager and Bookrunner for the placing.

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