Mainboard-listed Yangzijiang Shipbuilding says it has established a proposed joint venture company, Jiangsu Run Yuan Energy with Wuxi China Resources Gas and Jiangyin Xinyangchuan Enterprise Management Center with an initial issued and paid-up capital of RMB20 million ($4.1 million).
The joint venture agreement was signed by Yangzijiang’s wholly-owned subsidiary Yangzijiang Terminals China Holding and the companies on Jan 14.
Wuxi China is a subsidiary of China Resources, one of the largest state-owned conglomerates and a leading gas utilities group in China, that is in the downstream city gas distribution business.
Jiangyin Xinyangchuan is a limited partnership established in China. It is mainly in the business of investing in companies operating in various industries such as energy, manufacturing and property development.
SEE: Encouraging outlook for Yangzijiang Shipbuilding ocean freight spot rates continue uptrend
Jiangyin Xinyangchuan is 41%-owned by Ren Yuanlin, who is the honorary chairman and substantial shareholder of Yangzijiang, and his son, Ren Letian, who is Yangzijiang’s executive chairman and CEO.
Accordingly, Jiangyin Xinyangchuan is an associate of Ren Yuanlin, making the joint venture with Yangzijiang an “interested person transaction”.
Under the agreement, Yangzijiang Terminals, Wuxi China Resources Gas and Jiangyin Xinyangchuan will subscribe for 30%, 51% and 19% interest in Jiangsu Run Yuan Energy respectively.
This means that the initial capital contribution by Yangzijiang into Jiangsu Run Yuan Energy will be RMB6 million (or 30% of RMB20 million).
According to the filing on SGX, the principal activities of Jiangsu Run Yuan Energy is related to the investment and operation of the Jiangyin LNG project including the construction of LNG storage facilities, natural gas trading and businesses in relation to other parts of the LNG supply chain.
On the rationale of the JV company, the board says that the proposed establishment is in its long-term interest, as it will provide Yangzijiang with an initial exposure to a broader range of LNG-related businesses.
The establishment of the JV company will be funded internally and will not have any material impact on the earnings per share (EPS) or net tangible assets (NTA) of Yangzijiang.
As at 10.36am, shares in Yangzijiang are trading flat at $1.07.
