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Edited Transcript of 2688.HK earnings conference call or presentation 23-Aug-19 2:00am GMT

Half Year 2019 ENN Energy Holdings Ltd Earnings Presentation (Chinese, English)

HK Sep 9, 2019 (Thomson StreetEvents) -- Edited Transcript of ENN Energy Holdings Ltd earnings conference call or presentation Friday, August 23, 2019 at 2:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Dongzhi Wang

ENN Energy Holdings Limited - Executive Director

* Jianfeng Liu

ENN Energy Holdings Limited - CFO

* Jishen Han

ENN Energy Holdings Limited - CEO & Executive Director

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Conference Call Participants

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* Elaine Wu

JP Morgan Chase & Co, Research Division - Lead Analyst

* Ming-Hon Li

HSBC, Research Division - Head of Utility and Alternative Energy and Analyst

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Presentation

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Unidentified Company Representative, [1]

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[Interpreted] Good morning to you, everyone. Welcome to the 2019 Interim Results of ENN Energy Holdings Limited. First of all, I would like to introduce to you the management on the stage. First of all, we have the CEO and Executive Director, Mr. Han Jishen in the middle. And we have Mr. Wang Dongzhi, Executive Director; our CFO, Mr. Liu Jianfeng Andrew; and we have the Finance Director, Ms. [Muni Ni]; and Financial Control and Company Secretary, Ms. Christy Liang.

First of all, the rundown for today is that Mr. Liu will be going through the 2019 first half results, and then we will have a Q&A session after that. First of all, Mr. Liu.

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Jianfeng Liu, ENN Energy Holdings Limited - CFO [2]

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[Interpreted] First of all, I would like to thank everyone for coming to the 2019 interim results for ENN Energy Holdings. Our report today consists of 3 parts. First of all, I will be reviewing the operations then the financials, and then we will be talking about the development strategies going forward. First of all, for our first half results highlights. There are 4 points we would want to highlight. First of all, our core profit. Our core profit was up 14.4% to RMB 2,700 plus million. So we have a 15%, 20% target, we'll be able to reach that. And of this, I would want to mention that the dividends for last year is -- there's a bigger difference with the dividend payout this year. And our core profit, actually, core business profit, in fact, had risen 15% as well.

Another highlight is that for our steady growth of gas sales and integrated energy business, it is already over 15% of the whole. And also it is about CNY 1 billion in terms of total turnover. Third point, our newly added projects. For the first half, we have 4 -- 34 city-gas and integrated energy, that is IE projects in order to accelerate business growth. This is through new -- about 20 new projects and some of them are M&A projects. And we are able to build a very good foundation for further growth given these newly added projects. Operating cash flow grew strongly by 124.9% to RMB 4,294 million. This kind of high and strong growth is because of our efficiency of management and also our strategy as well as good cash flow management. And with this kind of growth and especially with newly added projects, this has built a very good foundation for our future development and growth.

Next, I will just go over some of the breakdowns for you. First of all, in terms of C/I customers' development and also for residential. First of all, for C/I customers, it -- for the first half, it had exceeded 12,000. And our residential customers' development household is 1,286,000 plus. And this had increased -- the increase had allowed us for the second half of the year to increase our revenue as well as our profit. In terms of our volume growth for the first half of the year in million cubic meter terms, for I&E (sic) [IE] it was 7,200. Residential was 1,800 plus, and in particular, for our retail side, it had risen by 15.5% -- 15.1%. And this is a year for the industry, the increase is 10.8%, and ours was 15.1% in terms of sales volume growth. So we outpace the industry. And in particular, for IE -- I&E (sic) IE gas, it is some 75% of our total gas sales, and we have been focused all along on C/I customers' growth and also cultivation. And this will build us a very good dollar margin going forward. And coming to our dollar margin, which, of course, you are concerned about. And we see for the first half for overall dollar margin, it is 0.58, and this is slightly lower year-on-year and quarter-to-quarter.

There are 3 reasons. The customer mix, as I have mentioned, as C/I increase and also refueling stations. That is to say, commercial and refueling stations are higher in terms of dollar margin than residential. And the share of vehicle and commercial gas sales volume with higher DM had dropped, that's one reason. And also government subsidies on gas fee for rural households had not been distributed yet. And also we have been developing our industrial users, and we have offered discounts to them, and we have voluntarily provided this discount to attract some major industrial users, especially for those over 100,000 cubic meters of consumption volume for these customers and for valued customers, especially during the bonds under pressure, we have voluntarily offered price adjustments that is discounts. I just want to point to some figures here. First of all, and our average cost had come up by 1.3 million and our dollar margin is 0.58 and so excluding VAT. In fact, for the first half, it is 1.7 million increase, which is higher than the average cost increase, it shows that, in fact, we have been growing our I&E (sic) IE customers, and we are able to pass on some of the cost increase to our customers.

Next, we will be talking about some of the strategic developments that we have for the second half to increase our dollar margin or to stabilize the dollar margin that will be later. Next, let us first look at the city-gas concessions as we continue to expand as we acquire new projects and also come up with new concessions. We continue to expand in this area. We had altogether 18 new projects. We acquired 14 of them, and 3 are new concessions nearby the existing projects. And we have also one further, which has -- is already being contracted. And so there will be 18 altogether. And in this, I would want to talk about the fine analysis. We have a number of new projects, and we have been acquiring new projects. And we have been dealing with some of the companies, which have multiple projects on hand. So when we contract with them or negotiate them -- with them, we will be able to fast grow our number of new projects. Let us look at the distribution of our new projects among the provinces.

As we acquire new projects, we are also cognizant of risk management. We are focusing on the existing quality cities for 9 of the new ones are in Hebei, Shandong and Henan, and Hebei had always been #1 in terms of our volume. And we have a lot of capability and integration synergy capabilities in that province. So as we grow after acquisition, there will be good control and management and synergistic effects. And further, we continue to insist on IRR of over 30% for our acquisitions and also in our assessment of the projects we look at, at the same time, the future trends of development, including regional developments and also the risks attached to them.

Next, let's us look at the first half. IE business, basically, we see that there had been exponential growth in terms of revenue and also from gross profit and also projects in operation as well as sales volume. In this first half, there is major growth in each and every one of them. As we grow our scale, we are also changing our focus to I&E (sic) IE business, integrated energy business. In the first half of the year, revenue had grown 2.76x, gross profit had grown 7.36x and this is very encouraging. These figures growth show that for last year and the first half of the year with our IE business emphasis, our gross profit for each of the projects have increased. And this also provides a good business model and management model foundation for our future projects. And we have 82 projects in operation and this will -- and with the size of these projects, it will be able to build our long-term overall business development. This is a very good foundation, indeed.

And here, we have the IE business development, adapting to local conditions and the distribution. We have 119 IE projects, in operation is 82 with 37 under construction. And the total energy demand is 30 billion kWh. And in the future, this will provide us with faster revenue income, or the more -- a better revenue stream. And we have 4 categories of IE business into -- we divide them into natural gas, industrial waste heat, biomass and also renewable energy and others. For natural gas, there is a breakthrough. And we are able to -- from the business angle, analyze the market anew and to meet the customers' needs afresh.

Next page is our geographical coverage of our distribution. Our energy distribution and here is a consolidated map for you. And overall, you are able to see our strategic locations for gas and also for energy, for city-gas, especially for the coastal regions such as Shandong, Hebei, Zhejiang, Jiangsu, Guangdong areas, we continue to put in investments there. And also according to the different regions and also the country's overall regions policy, you see that we have planned our quality projects in these areas, including in Heilongjiang. This is our first plant or our first project, and this is another breakthrough.

From the regions point of view, we have a even finer demarcation. We put the map into 4 areas. The northeastern area firstly. There are 2 points there. First of all, it is an opportunity for use of clean coal policy. It is in itself a very big energy province for the 3 northeastern provinces. And also for the country, there had been huge development into major industrial projects, and this is another breakthrough in terms of our customers to support our business development going forward. And then there is The Greater Bay area as well as the Yangtze River Delta area. For the Guangdong province, it is one of the identified quality provinces. We have 25 projects, and we have in operation 11 of them. And in the future, we will continue to invest heavily into Guangdong province in order to extend it to The Greater Bay area.

Next, let us talk about our value-added services. From C/I customers and our residential customers, this is our starting point. In the past 2 years, also we have been rapidly developing our value-added services. In the first half of the year, there had been major growth, and it had been an increase of 2.25x in terms of revenue and 2.96x in terms of gross profit for value-added services. We have already very good 2B and 2C business lines for value-added services, both for customers and also residential customers. We are servicing 25 million households. And they will continue to provide us with extendable businesses so as to bring on long-term opportunities for the company. This is high gross margin, low asset kind of business. So this will continue to benefit us in terms of our profitability.

Next, let us look at our technological innovation, perhaps you are very familiar with our residential customers and also gas services, pipelines and value-added services and also some of our other products and services. But for our C/I customers, you are less familiar. And here, through our experts and our teams, we analyze the C/I customers, their need. And we come up with technological innovation in order to drive our business growth, in particular in the C/I customers. And I would want to share with you an example, a case, and this is the coal-to-gas project for a ceramic producer in Quanzhou CNN (sic) [ENN] in Fujian, so this is redesigning of a burning process to replace a coal boiler with gas-fired oven to improve the ignition efficiency for the ceramic producer. So this is an innovation through our experts. They are able to help the producer through the innovation of technology and raising of the level of technology, be able to lower the cost of production significantly by RMB 670,000 per year for this ceramic producer and energy consumption dropped by 40% for this customer, so this is what we have been able to do for this ceramic producer. And also there had been other benefits as well, including attaining industrial indices for this ceramic producer. And this will continue to develop.

So this is not just for this particular customer but -- and it is not only true for other ceramic producer in Fujian, but rather, if we extend it to, and we will be doing so to other ceramic producers in other provinces that we have identified, Shandong, Anhui, et cetera, where there is a concentration of ceramic producers, we will be able to provide this service as well to metallurgical producers. This technology can be extended to them. And we will continue to profit from this. This is another case, case 2, which is in Anhui. This is about industrial waste heat recycled project. And our company and our energy experts proposed an innovative business model to provide retrofitting services to better utilize the low-cost heat resources available in this industrial park. So we have been able to invest into this technology. And to very effectively utilize this resource to help the customer reduce their energy bill significantly. And the dollar margin is close to -- is about RMB 80 per unit and the sell price is RMB 220. And this is still lower than other ways of heat generation for this particular customer. So this is through industrial waste heat recycling. We not only provide the customer with efficiency, lower cost, but also the environmental impact positively is also very obvious. So that is the review in terms of our business.

Next, we will review the financials. This page is about our results achieved, the key financial highlights. Revenue, gross profit, EBITDA as well as core profit have all increased all in double digits. So for the first half of the results, we have been able to grow our core profit by about 15% -- or 14.4%. Apart from the dividend pay -- dividend, in fact, it is over 15% for the first half. So for the entire year, we are confident that it will be between 15% to 20% for our core profit increase. So for solid results achieved, let us do some analysis. We have been increasing in our retail sales change of -- increase of 24.7%. Sales of IE and services, 176%. Wholesale gas, 41%. Construction installation, 29%. Value-added services, 125%. And we have strong gross profit growth in all areas. And the overall is 20.1% growth in our gross profit margin for our business mix.

Next, with this kind of business growth and also our profit growth we have a very good -- strong balance sheet and liquidity. We continue to optimize the debt. And we have total debt decrease of 5.3%, short-term decrease, 28.2%, long-term increase of 25.2%. Our net gearing ratio is -- dropped by 7.4 percentage points to 40.8%. Our net debt-to-EBITDA is 1.0x, and our rating agency had given us very good ratings. This is our debt structure, which is healthy. Our average effective interest rate is at 4.06%, for the industry or even outside of the industry, we are very competitive in this regard.

For our capital allocation and cash flow, our growth CapEx, we very stringently control that, and it is basically to support our strategic development. So CapEx is unchanged. RMB 3,384 million is first half's CapEx. And our core CapEx is basically in our traditional gas business, including pipes, et cetera, our traditional business. And it is RMB 2,378 million. And then we have some new projects. In integrated energy business, it is RMB 650 million and new projects acquisition is RMB 356 million. And we have a very strong growth in cash flow, some 86.8% growth and this is partly because of our revenue and also because of our receivables dropping. And further, in the second half of the year and also in the future in our expansion and our CapEx, this had built a very good foundation. Our LCF is positive for the entire year. And also our cash in hand is also healthy.

Next, we will be talking about our strategy for future development. First of all, we would want to look at the second half of this year. Some of the challenges and opportunities. There are a number of challenges and also a number of opportunities. For challenges, they come from 3 areas. First of all, overall economic slowdown for the country. This has to do with the trade war and other factors, all sides, bringing to perhaps a bigger slowdown in economy. Secondly, upstream gas price hike in the past 2 years in the industry, this had been a major industry risk. And thirdly, intensified competition in IE business because we -- of our business model and also with IE business maturing, there are competition and this competition is intensifying in the country. But on the other hand, we see opportunities are more -- are stronger than challenges.

For opportunities, there are 3 areas. First of all, intensified reform in energy sector with an increasing transparent regulatory environment. With increasing demand for clean, economic and efficient energy, the change from passive acceptance to active deployment of energy has led to the development of demand-driven IE service. So this is from the customer side. The policy help us in providing a better operation environment and a more transparent regulation. This is a very good foundation for us. Next is the stringent control on environmental protection. This includes air pollution, driven by the implementation of the 3-year action plan to Win the Blue Sky Defense War. This is especially beneficial for us in developing natural gas, which -- the demand of which is growing steadily. And with the challenges and opportunities, our company had done some internal searching, and we have come up with a number of key measures to achieve our performance guidance. And we have come up with new KPIs to focus on these key measures.

First of all, in developing new customers, we will be more proactive, and we will strengthen our business development to conduct coal-to-gas and provide energy-saving technology and services for C/I customers so as to encourage gas consumption. We'll develop over 18 million cubic meters installed daily capacity for our C/I customers and develop over 2.3 million residential households. And we will also be promoting coal-to-gas connection. And we have increased by 15% to 20% in terms of gas provision last year. We continue to look at the market for natural gas. So retail natural gas sales volume was up 15 point -- 15% to 20%, and we believe that this will continue to grow, and we will also be increasing our dollar margin or at least keeping it stable. And at the same time, we will be expanding new projects and going into new areas, we will acquire 20 to 30 new gas projects and our revenue for IE business will be RMB 3 billion to RMB 4 billion.

Also we will be working together with our major shareholders, and we will be promoting value-creation corporate culture, and we will be keeping close to our customers, especially for some major customers, we will provide value-added services to increase our stickiness and also to provide a good revenue source going forward. For the new projects, we will be grasping opportunities presented by the market and the industry, and we will be careful in the operation and also in the integration of the gas projects. And also we will be accelerating the construction and operation of quality, IE projects. And for value-added services, we will be looking at customer needs, and we will be providing a more varied products and services in -- provided in multichannels to reach our customers. And also to lower our operating and management costs. We firmly believe that if we continue to work towards these key measures and to achieve the -- we will be able to achieve our performance guidance for the year with no problem. Thank you.

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Questions and Answers

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Unidentified Company Representative, [1]

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[Interpreted] Thank you very much for the introduction, Mr. Liu. Next, we will have the Q&A session. (Operator Instructions)

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Unidentified Analyst, [2]

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[Interpreted] I'm (inaudible). I have 2 questions. First question about the value-added services. Our gross profit is 3x higher. My question is for value-added services. What do you think would be the profitability going forward? And also for IE business, in 3 to 5 years, for there to be 30% profitability or gross profit margin, do you think it is possible because for the other sectors, it is rather balanced in terms of the mix and value-added services. How do you see in the future, how much of the total revenue will be from its contribution? Second question, we see that Kunlun Energy emphasizes that they want to extend into downstream business and the management of your company had mentioned before that our cooperation with Kunlun is that we can go into midstream pipes. And my question is, how do you see downstream business? For example, Kunlun in terms of the cooperative relationship with them in the future? Will it become a competitive relationship or rather, is it going to be still cooperative?

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Dongzhi Wang, ENN Energy Holdings Limited - Executive Director [3]

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[Interpreted] For value-added service, it is a very important area for increasing the stickiness of our customers. And there are 2 areas. And we have talked about 2 cases, just now. In the future for value-added service in the period of time, it will be growing stably. It will be 20% of our net profit. This is our target.

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Jishen Han, ENN Energy Holdings Limited - CEO & Executive Director [4]

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[Interpreted] As for natural gas competition, at present, going into the consumer market. At present, we are not affected by Kunlun moving downstream. Our cooperation with Kunlun had been long term, and we have a number of projects which we are working on. Some of them are major projects in developing the market, we are working together. At present, there is no negative impact at all. In fact, we will be opening up the market wider cooperatively with Kunlun.

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Unidentified Analyst, [5]

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[Interpreted] I'm (inaudible) of Citibank. My first question is, the company just now said that for this year, there will be 30 to 40 new projects. And it seems that there are more new projects than before. What do you think is the -- in the industry, what are some of the changes? And why is it that, that you have increased projects and will there further be increase in new projects, please? And secondly, the performance of the company is good. And the cash flow -- positive cash flow is about CNY 900 million. I would like to know what have you done to have increased the cash flow by so much in the first half and also in the second half. And next year, what is the cash flow projections, please?

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Jianfeng Liu, ENN Energy Holdings Limited - CFO [6]

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[Interpreted] First of all, on acquisitions, just now, we have mentioned 20 to 30, that's our target, not 30 to 40, as you have mentioned. We should be able to reach this target for the entire year, 20 to 30 new projects. And for the acquisitions. Why are we able to make them successful. First of all, it is because of the industry. You are analysts in the industry and you all know about this, and we have come to a period of consolidation for the industry. And ENN included, there are a few companies which are leading the market, and they are very strong in a number of areas in operation and efficiency and cost control, et cetera. And so there are opportunities.

And secondly, in terms of the capital markets, some of them are -- the companies have already been listed, and they have the characteristics and the conditions to grow into medium or big companies, not so for some other companies. So these are the reasons that have presented opportunities. And also we hold fast to a couple of principles. First of all, we will focus on the areas and regions that we have focused for Hebei, Shandong, Henan, Zhejiang. These are the areas in which we have very good sales, gas sales volume. And also we are the leader, #1 or #2 company in these areas. And the sale price is good. Also, we see that there are advantages in these areas. Only then we will be negotiating or approaching some of our targets for acquisition. So as to lower our cost of production and also increase our sales volume. And we -- our assessment criteria had not changed. Perhaps we will be raising them because there are more opportunities, more targets in the market. As I've mentioned, we may have 20 to 30 projects, and there will be CNY 2 billion to CNY 3 billion in terms of CapEx in this area, but we will continue to be selective in our projects.

As for the cash flow in the first half, there had been increase for 3 reasons. First of all, business growth, bringing on about CNY 1 billion positive cash flow. Secondly, operation cost control and also receivables compared to end of 2018, there is a lowering of about CNY 1 billion. And thirdly, with certain policies, such as tax, it is another CNY 200 million to CNY 300 million positive cash. And this year, we have CNY 8 billion in terms of cash flow, and we will have a positive cash flow for the entire year. It was about CNY 800 million positive cash flow for the first half. And for the future year, we believe that we will grow according to the business scale growth. So the cash flow will continue to grow, we believe.

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Elaine Wu, JP Morgan Chase & Co, Research Division - Lead Analyst [7]

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[Interpreted] JPMorgan, Wu Elaine. For your integrated energy, what is your revenue guidance for next year? And then in the first half of the year, your gross profit had decreased for one of your sectors and you say that it is because of competition, how do you see second half for this particular sector?

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Dongzhi Wang, ENN Energy Holdings Limited - Executive Director [8]

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[Interpreted] About IE, integrated energy for the first half, we have 82 projects in operation, and then we have some other projects, which will be -- which are under construction. And there will be 14 national provincial-level industrial parks, and there will be a breakthrough in terms of our gas production. So altogether, there will be 10 billion in terms of production units. And then we will have new projects, which will be coming under operation, but of course, for next year, we will be -- when the -- at the suitable time, we will be sharing with you. And also for LNG, it is not only not profit making but there had been major changes in the market. For the second half, I think it may ameliorate. We see that for the second half, where LNG may pick up again because of the seasonality, winter. So LNG wholesale in terms of the gross margin, it will pick up a little bit for LNG.

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Ming-Hon Li, HSBC, Research Division - Head of Utility and Alternative Energy and Analyst [9]

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[Interpreted] Li Ming-Hon, HSBC. First question concerning the rural coal-to-gas project. As it grows in proportion, will that change our dollar margin in the future? Will it decrease as a result? And what is the dollar margin for rural coal-to-gas? And has it changed over the years? And secondly, on CapEx, I remember the company had said that you want to grasp the opportunity for this year and next year in IE business to grow IE business significantly. And after 2020, perhaps the window would have closed for IE business exponential growth. So for 2021 and after, the CapEx will it be much lower than what it is now for you, please?

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Jishen Han, ENN Energy Holdings Limited - CEO & Executive Director [10]

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[Interpreted] Rural coal-to-gas. We are cautious about that, especially in investment, we are cautious. For rural coal-to-gas, we would want to extend to these rural areas only where the gas supply is abundant. And also with government support, government policy where it is supportive because the investment in rural is very high and the number of customers is low. So in the future there, I see that there may still be certain risks, so we are cautious in investment in this area. And also we have certain volume, about 500,000 households -- 500,000 or 400,000 households, which are in the areas around the major cities, so we still have these customers to serve and connect up.

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Jianfeng Liu, ENN Energy Holdings Limited - CFO [11]

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[Interpreted] For rural, the contribution was 20%, and this year was 19%. So the contribution is stable for rural coal-to-gas. And overall, it is basically stable for dollar margin as well. So I don't think it will impact dollar margin much from coal-to-gas rural. And further, you questioned our future CapEx and growth. Well, in fact, that question had been answered earlier. We have very good cash flow. We have good cash on hand, and we have the cash reserve. And also we have the positive cash flow in the future to sustain us grasping our projects and also grasping market opportunities. We totally have the capability to make investments. There are no limitations to speak of.

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Jishen Han, ENN Energy Holdings Limited - CEO & Executive Director [12]

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[Interpreted] For rural coal-to-gas, if the region is industrializing or we will be helping to push forward coal-to-gas conversion.

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Unidentified Analyst, [13]

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[Interpreted] First of all, I would like to congratulate you in the very good performance. I'm Jefferies' [Raymond]. First of all, the connection fee, it is 19% -- 29% increase in terms of connection, but your revenue from that is only 19% increase. Why is that? Is it because the -- because of cost? And I look at the gross margin drop is rather rapid. And in terms of gross margin, it has not really grown, but the connection had increased. Why is that? And secondly, for IE business, I look at the gross margin, it's growing significantly in 2018 and the 3 half years from gross margin from 8% to 15% to 20%, that's been the growth trend. And I have analyzed the situation. I would like to ask a question. From what I see from the gross margin increase, the major driver seems to be from the ASP for first half, it was 3.6% and then 3.4% for first half -- it's 5, now ASP. That's an increase of 44% from 2018 second half. Why is that? Why has the ASP increased so much? And will this be sustainable? For example, what is the guidance for this and for the next year, if we have RMB 10 billion as revenue. What would be the ASP be?

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Jianfeng Liu, ENN Energy Holdings Limited - CFO [14]

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[Interpreted] First of all, on the connection. First of all, you mentioned the change, the 4 per kWh, that is our unit. But on the other hand, we have other services. We have other products, and we cannot just say that this is an all kWh. That is to say the unit may be different. In fact, some of it may not be electricity. So that is to say, it is not exactly comparable. So given that for per unit product, ASP difference. There is that difference, so this is how you should read into the change or increase in the per unit price. And our beginning of the year guidance on our per unit sale price per kWh. That is constant. But on the other hand because of our new projects and also for the size of the projects and also with our diversified products and services, there is this change in per unit price.

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Dongzhi Wang, ENN Energy Holdings Limited - Executive Director [15]

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[Interpreted] As for the gross margin of our integrated energy business. We have acquired a company, an asset from our parent company, and its business is to provide plant design for our customers. And the gross margin from that business is very high. As a result, the second half of last year and first half of this year is not comparable as a result.

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Unidentified Company Representative, [16]

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[Interpreted] Concerning connection fee change, there are 2 reasons. First of all, because of our accounting change, accounting principle. According to -- in the principle, in the first half, we have CNY 270 million, which had been recorded our revenue. And this had caused our overall growth margin coming down. That is the reason. And also for rural coal-to-gas, it had increased by 130,000 households, and this is lower than the city households. And this has also hit our gross margin as a result.

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Unidentified Company Representative, [17]

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[Interpreted] We have time for another question, please.

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Unidentified Analyst, [18]

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[Interpreted] [Jamie] from Southern. I would like to know government subsidies. How much is it of our revenue? I know for some new energy companies, they rely on subsidies for their operation, that is government subsidies. So they are much affected by government policies. And as we receive subsidies, what is the delay? Or are they timely in their payment if the government had promised to pay at a certain time, they really do distribute that subsidy. What is the situation, please? And some of the industries also say that receivables is a result of delayed payment of government subsidies. I would like to know what is your company. Is it a big impact for you? Or is it not? And -- or has it not happened to the areas and the governments that we are dealing with?

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Dongzhi Wang, ENN Energy Holdings Limited - Executive Director [19]

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[Interpreted] We specifically -- we have CNY 120 million in terms of government subsidy, and we disclose this singly, and this is definitely not one of the major considerations when we make any investment decisions, the government subsidies. So for rural areas for some of the projects involving coal-to-gas, we have government subsidies. And in the wintertime, there will be LNG government subsidies as well, so we would be recognizing these subsidies when we receive them into our revenue.

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Unidentified Company Representative, [20]

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[Interpreted] Now because of time, we will close the briefing here. Thank you very much for attending.

[Portions of this transcript that are marked Interpreted were spoken by an interpreter present on the live call.]