Xinao Gas Holdings Limited

(31 May 2001, Hong Kong) - Xinao Gas Holdings Limited ("Xinao Gas" or the "Group") (Stock Code: 8149), a non state-owned gas distributor, today announced that it has successfully obtained an exclusive right to operate and manage gas pipeline infrastructure, and to sell and distribute piped natural gas in the Yantai Economic and Technical Development Zone, Shandong Province from the Administrative Committee of Yantai Economic and Technical Development Zone for a period of 30 years. The project will be operated by Yantai Xinao Gas Company Limited, a wholly-owned subsidiary of Xinao Gas. Initial investment for the project amounts to US$2.1 million.

Mr. Wang Yusuo, Chairman and Executive Director of Xinao Gas, said, "I am delighted that the Group has successfully obtained the exclusive right to operate piped gas distribution in the Yantai Economic and Technical Development Zone. This reinforces the Group's excellent business track record and the goodwill, trust and support that we have won from local governments. It also demonstrates the rapid growth of our business."

The Yantai Economic and Technical Development Zone, with a planned area of 36 square kilometers, is located at the western coast of Shandong Province, an important industrial base for Yantai City and Shandong Province. Yantai had a total population of 6,450,000 in 1999 and has more than 200 foreign enterprises.

Mr. Wang continued, "The Yantai local government strongly encourages the use of natural gas. From the date when the exclusive right was granted to the Group, the government has restricted the construction of new bottled LPG stations as well as piped gas distribution projects within the operational location of the Group in Yantai. The government also requires piped gas facilities to be included as one of the approval criteria for new property development projects. I believe that the Group's business development in Yantai will greatly benefit from these two policies."

In addition, Xinao Gas also announced recently the completion of its acquisition of a 90% interest in Qingdao Xinao. The acquisition price was RMB18 million, equivalent to the registered capital invested in Qingdao Xinao by the vendor. Qingdao Xinao was granted the right of first refusal to develop piped gas supplies in Huangdao by the Huangdao District People's Government. As at 28 February 2001, the contracted number of gas supply locations is 1,184 households, representing approximately 1.9% of the current estimated residential households. Therefore, there is tremendous room for development.

Besides, Xinao Gas has also completed the necessary procedures in establishing Sino-foreign joint-ventures in Zhucheng City and Chengyang District of Qingdao City, both located in Shandong Province, to develop piped gas business this week. The operational period is also 30 years. Currently, subsidiaries of Xinao Gas have secured a total of four exclusive rights and right of first refusal to develop piped gas business in Shandong Province.

Mr. Wang concluded, "Xinao Gas will continue to leverage its advantages as a first mover, with a good business track record, exceptional goodwill and an experienced and capable management team to compete for the exclusive rights in other areas, further boosting growth of the Group."

Company background

Xinao Gas is mainly engaged in the investment in, and the operation and management of, gas pipeline infrastructure and the sale and distribution of piped gas. The Group's other business activities include the sale of gas appliances and equipment, as well as the provision of repair and maintenance services. Currently, the Group's business has expanded from Langfang City in Hebei Province to Liaocheng, Zhucheng, Yantai and Huangdao and Chengyang of Qingdao City, which are all located in Shandong Province, Miyun in Beijing Municipality and Huludao in Liaoning Province, resulting in eight operational locations all together. The Group's business will further expand through the acquisition of companies in Changping and Pinggu in Beijing Municipality and the establishment of a new company in Jingzhou in Hubei Province.

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