Xinao Gas Holdings Limited is listed on the Hong Kong Stock Exchange with a market capitalization of approximately $463 million equivalent as of March 1, 2004. Xinao’s Co-founder and Chairman Mr. Wang Yusuo and his wife Ms. Zhao Baoju own approximately 49% of Xinao’s shares. The balance is owned by the public.

The total project cost is estimated at $166 million. IFC is exploring a possible cooperation with the company to finance part of this expansion program.

35.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	25.0
Equity	10.0

* These investment figures are indicative

Xinao’s 39 operating locations are located in provinces of Liaoning, Hebei, Shandong, Henan, Jiangsu, Anhui, Zhejiang, Hunan, and Guangdong, and the Beijing Municipality. As of June 30, 2003, Xinao’s operating companies have 1,291 km of distribution pipelines and 28 gas processing stations.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising information submitted by the project sponsor and a report prepared by a technical consultant to IFC. The review addressed the compliance status of Xinao''s current operations as well as its management system for the environmental, social, and safety aspects of its current and future operations. The company''s procedures for land acquisition and how liabilities such as land contamination and labor obligations are managed were reviewed. Opportunities for social responsibility and community development programs were also assessed.
Location of environmental documents in locally affected community
The environmental documents will be made available at the following locations: Shijiazhuang XinaoMain office of Shijiazhuang Xinao No. 558 Heping East Road, Shijiazhuang China Postcode: 050810 Shijiazhuang, Hebei Province Bengbu XinaoMain office of Bengbu XinaoNo 1306 Huaihe West Road Bengbu China Postcode: 233000 Bengbu, Anhui Province Xiangtan Xinao Main office of Xiangtan Xinao No. 113 Yuhu Road Postcode:411100 Xiangtan, Hunan Province

The project supports China’s stated policy to develop the natural gas industry. The project would help Xinao develop gas distribution infrastructure and gas utilization in cities in northern and eastern China, where the growth in gas consumption is expected to be the highest. Substituting coal energy with natural gas is an effective means of reducing air pollution. Combustion of natural gas results in virtually no atmospheric emissions of sulfur dioxide and particulates, and far lower emissions of other harmful pollutants such as nitrogen oxides (which contributes to urban smog) and carbon dioxide (the main contributor to global warming). IFC has a strong role in supporting the development of private infrastructure companies whose product results in significant environment and economic benefits by reducing harmful emissions, alleviating air pollution (a major health issue in China) and lowering energy costs. IFC would also be supporting a local Chinese gas distributor which competes with other local and international operators. This will have a strong demonstration effect and lend credibility to other local firms seeking international funding in the Chinese gas distribution market as well as the broader infrastructure market.