Affinity Equity Partners has invested HK$2.80bn in energy company Towngas China to accelerate its evolution into an integrated smart energy company.

Towngas China, formerly Panva Gas Holdings, is a major player in the natural gas businesses in China. The investment representes 13.3% of the enlarged capital of Towngas China.

The investment will support Towngas China’s evolution into an integrated clean energy provider, accelerate the roll-out of distributed solar photovoltaics as part of the smart energy implementation and secure long-term growth.

To reflect the new strategic focus, Peter Lee Ka-kit has been appointed chairman of the renamed Towngas Smart Energy. Affinity’s Asia Pacific Fund V will nominate one representative to act as a member of the board.

“We are thrilled to partner with Affinity, which has a consistent track record of providing practical support to portfolio companies across Asia Pacific,” said Lee Ka-kit. “I have long been passionate about supporting China’s energy transition and to building a sustainable energy future. Affinity shares this vision and I am excited by what we can achieve together. It is our privilege to continue leading the development of China’s natural gas industry and to support the ongoing transition towards cleaner and more efficient energy sources. We look forward to collaborating with the government, business community and our customers, alongside Affinity and other strategic partners, in this transition to a smart energy future.”

This investment should help Towngas accelerate its long-term vision to create an integrated, sustainable and tangible smart energy business, built on three core pillars of integration, digitalisation and decarbonisation.

In addition to providing clean and reliable natural gas, Towngas will also offer solar energy to both its commercial and industrial customers. This will be integrated with the company’s distributed energy system, power storage offering, microgrid management and live efficiency monitoring services.

Towngas is expanding its digital capabilities through cloud computing technology, smart energy management systems and partnerships with companies such as Tencent.

It believes carbon is becoming an asset class in its own right and will begin offering carbon auditing, asset management and trading capabilities for its commercial and industrial customers.

“Towngas China is a leading city gas operator in China, a core business which has proved to be very resilient and which enjoys robust growth potential in the long term,” said Tang Kok Yew, managing partner at Affinity. “It can be a key enabler in the pathway to carbon neutrality. More importantly, it can act as a platform for the rapid roll-out of an integrated smart energy business that can create substantial additional value to its shareholders. Affinity Fund V’s investment is envisaged to provide the company with the capital and resources to advance this ambition. With the company’s established long-term track record, operational excellence and experienced management team, as well as the enormous growth potential for smart energy in China, I firmly believe that Towngas China has the necessary long-term strategy, market positioning and management resources to succeed in this market. “

Towngas China, together with its parent company, Hong Kong & China Gas, has a strong and stable city-gas distribution business, which serves over 40 million customers. The company will continue to invest in and grow this business.

Having founded its smart energy business five years ago, Towngas says it has established the framework, digital platform and strategic partnerships that will enable it to leverage its expertise and long-term trust with government and customer relationships, for the benefit of its customers.

There are around 2600 national and provincial level industrial parks in China, accounting for 60% of the country’s annual carbon emissions. By 2025, Towngas China aims to offer smart energy options to around 200 industrial parks, which cover approximately five per cent of China’s annual carbon emissions, or around 500 million tonnes CO₂e out of ten billion tonnes.

Towngas China plans to combine integrated energy platforms, technological innovation and decarbonisation efforts to offer greener, cheaper and more efficient energy for its industrial customers.

Towngas China is an integral part of Towngas, a sustainable energy player with close to 160 years of experience in providing clean and reliable energy to its customers in China. The group has successfully navigated several energy transitions since its founding in 1862, including the transition from coal to natural gas.

Due to the investment, Towngas China will issue 116,783,333 new shares at the price of HK$5 per share and convertible bonds in the principal amount of HK$2.22bn at a conversion price of HK$6.33 per share.