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Natural Gas Business

1. Business review of natural gas

(1) Significant increase in sales volume of natural gas as compared with 2016

During the reporting period, the Group recorded an increase in its sales volume of natural gas as affected by the recovery of real economy and the policy of “replacing coal by gas”, and realized a sales volume of 1,879 million cubic meters for the year, representing an increase of 69.08% as compared with 2016, of which the wholesales volume amounted to 1,092 million cubic meters, representing an increase of 38.97% as compared with 2016 and accounting for 58.13% of total sales volume; the retail sales volume amounted to 699 million cubic meters, representing an increase of 175.01% as compared with 2016 and accounting for 37.21% of total sales volume; the sales volume of CNG amounted to 88 million cubic meters, representing an increase of 23.08% as compared with 2016 and accounting for 4.65% of total sales volume.

(2) Actively promoting the construction of infrastructural projects

The Group increased 903.97 kilometers of natural gas pipeline in 2017. As of 31 December 2017, the Group operated a total of 3,087.67 kilometers of pipeline, including 846.29 kilometers of long-distance transmission pipeline and 2,241.38 kilometers of city gas pipeline; and operated a total of 16 distribution stations and 10 gate stations.

During the reporting period, Shanxi Licheng-Hebei Shahe coalbed methane pipeline network project was put into operation. The pipework for ten counties in middle Hebei Province (Phase II) was put into trial operation. The construction of Xiaoxinzhuang branch ( 小辛莊支線) was basically completed, while the construction of Xinji branch ( 辛集支線), Xiaoxinzhuang terminal ( 小辛莊末站) and Xincheng terminal ( 新城末站) was completed by 35%, 65% and 20% respectively. Shahe LNG liquefaction plant completed inter-connection and trial operation was in progress.

(3) Continuous exploration of downstream markets of natural gas

During the reporting period, the Group actively explored the natural gas market. In particular, new non-residential users increased by 654 (including 352 small business users) to a total of 2,668 users (including 1,673 small business users). New residential users increased by 61,263 (including 51,810 new cards users) to a total of 234,212 users (including 177,690 existing cards users).

During the reporting period, the Group steadily promoted the expansion of large business users, and set up branch companies in Luancheng District and Luquan District, Shijiazhuang, Hebei Province so as to focus on the expansion of gas-fired power project in Hebei Province.

(4) Developing CNG and LNG businesses in a prudent manner

During the reporting period, the Group developed its CNG and LNG businesses in a prudent manner, and Anping CNG primary filling station was put into operation. As of 31 December 2017, the Group operated a total of 7 CNG primary filling stations and 7 CNG secondary filling stations.

(5) Management of an innovative and effective operation

During the reporting period, Hebei Natural Gas, the subsidiary of the Group, continued to adopt the innovative management model, and three management innovation achievements including “The building and implementation of construction model for gas industry team”, “The innovation and practice of production and management platform for natural gas based on GIS” and “The innovation research on the management system for the Group’s human resources” won the second prize in the Enterprise Management Innovation Achievement Award of Hebei Province.