Hong Kong and China Gas : Annual Report

April 21, 2021 at 04:52 am EDT

2O2O

ANNUAL REPORT

The Hong Kong and China Gas Company Limited

( STOCK CODE: 3 )

C O N T E N T S

Business Coverage in 2020

Business Highlights
Five-YearSummary
Chairmen's Statement

Board of Directors

Executive Committee
Mainland Utility Businesses

Hong Kong Gas Business

New Energy and Diversified Businesses

Sustainability

Business Projects in 2020

Risk Factors

Financial Resources Review

Five-YearFinancial Statistics
2020 Financial Analysis
Comparison of Ten-Year Results

Report of the Directors

Corporate Governance Report

Independent Auditor's Report

Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

Notes to the Consolidated Financial Statements

Corporate Information and Financial Calendar

E N E RG I S I N G

EVERY DAY

2O2O AWARDS AND RECOGNITIONS

1 Hong Kong Awards for

Environmental Excellence

GOLD AWARD - PUBLIC AND

COMMUNITY SERVICES SECTOR

by Environmental Campaign Committee

2 Constituent Companies of the Hang Seng Corporate Sustainability Index Series

by Hang Seng Indexes Company Limited

| TOWNGAS AND TOWNGAS CHINA |

3 IFAPC Outstanding Listed Company Award 2020

by The Hong Kong Institute of Financial Analysts and Professional Commentators Limited

4 Hong Kong Business

Sustainability Index

EXEMPLAR RATING

Greater Bay Area Business

Sustainability Index

EXEMPLAR RATING

by Centre for Business Sustainability, The Chinese University of Hong Kong Business School

5 Global 2000

by Forbes

6 The 8th Hong Kong

Volunteer Award

CORPORATE AWARD

by Agency for Volunteer Service

BUSINESS COVERAGE IN 2O2O

Based in Hong Kong,

our portfolio currently includes

436 projects*

in 27 provinces, autonomous regions and municipalities in mainland China, as well as one in Thailand.

Gansu

Towngas Group Hong Kong headquarters

Piped city-gas projects (Towngas)

Piped city-gas projects (Towngas China)

Liquefied natural gas receiving stations

Provincial natural gas pipeline networks

City high pressure pipeline networks/ Underground gas storages (Towngas)

City high pressure pipeline networks (Towngas China)

Upstream projects (Towngas)

Upstream project (Towngas China)

Smart energy Distributed energy systems

CNG/LNG refilling stations (Towngas) CNG refilling stations (Towngas China) Water/Waste treatment Telecommunications

Coal mining Coal-based chemicals Coal logistics Biomass

Oilfield

Others (Towngas) Others (Towngas China)

Thailand

Phetchabun

2019 year end: 406 projects, inclusive of city-gas projects re-invested by the Group's companies

Heilongjiang

Jilin

Liaoning

Inner Mongolia	Beijing
Hebei
Shanxi
Ningxia	Shandong Yellow Sea

Henan	Jiangsu
Shaanxi
Sichuan	Anhui
Hubei	Shanghai

Chongqing

Zhejiang

East China Sea

		Hunan
Guizhou		Jiangxi	Fujian
Yunnan	Guangxi	Guangdong

Hong Kong

Hainan

BUSINESS HIGHLIGHTS

	2020	2019	Change %

Operating (Company)
Number of Customers as at 31st December	1,943,777	1,933,727	+1
Number of Customers per km of Mains	564	565	-
Installed Capacity, thousand m3 per hour	525	525	-
Peak Hourly Demand, thousand m3	511	473	+8
Town Gas Sales, million MJ	27,947	28,712	-3
Number of Employees as at 31st December	2,130	2,096	+2
Number of Customers per Employee	913	923	-1

Financial
Revenue, HK million dollars	40,927	40,628	+1
Profit Attributable to Shareholders, HK million dollars	6,007	6,966	-14
Dividends, HK million dollars	6,220	5,924	+5

Shareholders
Issued Shares, million of shares	17,771	16,925	+5
Shareholders' Funds, HK million dollars	66,759	64,209	+4
Earnings per Share, HK cents	33.8	39.2*	-14
Dividends per Share, HK cents	35.0	33.3*	+5
Shareholders' Funds, HK dollars per share	3.76	3.61*	+4
Number of Shareholders as at 31st December	13,965	13,945	-

Adjusted for the bonus share issue in 2020

FIVE-YEAR SUMMARY

Town Gas Sales

Company (million MJ)

30,000

25,000

20,000

15,000

10,000

5,000

Industrial

Commercial

Residential

Profit Attributable to

Shareholders (HK$ million)

10,000

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

16 17 18 19 20

The Hong Kong and China Gas Company Limited2 Annual Report 2020

Number of Customers per Employee Company

1,000

900

800

700

600

500

400

300

200

100

Dividends

(HK$ million)

7,000

6,000

5,000

4,000

3,000

2,000

1,000

CHAIRMEN'S STATEMENT

The Year's Results

The coronavirus disease causing pneumonia (COVID-19) spread globally and severely hit the world economy in 2020. Following the implementation of effective measures to prevent and control the epidemic, mainland China has gradually resumed steady economic growth since the second quarter of last year. Despite the

epidemic affecting the Group's businesses in mainland China and Hong Kong, the Group's active response, by increasing revenue and reducing expenditure, has been effective, thus mitigating the impact of the epidemic on its businesses. Furthermore, benefiting from the commissioning of new projects during the year, the Group's businesses maintained sustainable development.

The Group's operating profit of principal businesses after taxation for the year amounted to HK$7,256 million, an increase of HK$243 million, up by approximately 3 per cent, compared to 2019.

The Group's profit after taxation (exclusive of the Group's share of a decrease in revaluation from an investment property, the International Finance Centre complex) amounted to

Lee Ka-shing

Lee Ka-kit

The Hong Kong and China Gas Company Limited3 Annual Report 2020

HK$6,484 million, a decrease of HK$282 million, down by approximately 4 per cent, compared to 2019. Inclusive of the decrease in revaluation of the investment property, profit after taxation attributable to shareholders of the Group for the year amounted to HK$6,007 million, a decrease of HK$958 million, down by approximately 14 per cent, compared to 2019. Earnings per share for the year amounted to HK33.8 cents.

During the year under review, the Group invested HK$7,295 million in production facilities, pipelines, plants and other fixed assets for the sustainable development of its various existing and new businesses in Hong Kong and mainland China.

Development Strategy of the Group

As a common challenge facing the world, climate change is receiving unanimous attention from governments around the world. By setting a clear goal to limit the increase in global average temperature, the Paris Agreement signed in 2016 advocates reducing greenhouse gas emissions and accelerating transition to a green and sustainable growth model.

All participating countries have now set out their own goals and policies to reduce carbon emissions, forming a global climate governance framework.

At a critical moment when the world was facing the dual challenges of the coronavirus pandemic and climate change, President Xi Jinping announced at the United Nations General Assembly in September 2020 that China's goal, in response to climate change, would be to strive to have carbon dioxide emissions peak before 2030 and achieve carbon neutrality before 2060.

The Group has always taken clean energy as a focus in formulating its development policy. Over the years, the Group has developed natural gas markets on the mainland, effectively helping to reduce air pollution and carbon emissions, and thus promote transformation of the national energy mix. As natural gas is the cleanest fossil energy source, mainland China has developed large-scale natural gas infrastructure facilities and accelerated the establishment of natural gas production, supply, storage and marketing systems to enhance gas supply capabilities. Therefore, in the process of striving to achieve carbon neutrality, high-quality development and broad market prospects for city-gas are foreseeable.

Meanwhile, renewable energy sources such as photovoltaics, wind energy, hydrogen energy and biomass energy, which are in line with the country's long-term goal of carbon neutrality, are poised to enter a state of rapid development.

Leveraging on the huge market and customer resource advantages of city-gas businesses, alongside the support of national policies, the Group has actively developed a distributed energy system business over the past few years, creating energy-efficient applications and enhancing customer benefits. More recently, the Group has broadened its revenue sources by launching a smart energy business, using photovoltaic power generation on the rooftops of large factory buildings, and combining this with power storage functions, the Internet and big data analytics and dispatch management platforms, to effectively reduce demand for purchasing electricity from the grid. Besides, energy innovation is a development trend encouraged by national policies. The Group has set up research and development bases in Shanghai city and Suzhou city, focusing on the conversion and utilisation of biomass to produce advanced biofuels using agricultural waste and inedible bio-grease feedstock. The Group's project, located in Jiangsu province, which converts bio-grease feedstock into hydro-treated vegetable oil ("HVO") using its self-developed technology, with an annual production capacity of 250,000 tonnes, was fully commissioned during the third quarter of 2020. Our HVO has been accredited under the "International Sustainability and Carbon Certification Scheme" of achieving a 90 per cent emission reduction.

CHAIRMEN'S STATEMENT

It is qualified as an advanced biofuel for the European markets, generating good environmental and economic benefits with promising prospects. As the next step to realise research and development achievement, the Group is planning to put into trial production sustainable aviation fuel (SAF) using biofuels as a base within this year in order to foster new market growth area.

In summary, the Group's future development strategy is to harness its city-gas businesses to, corresponding to the country's energy plan, promote natural gas as a clean energy for different applications as a substitute for high-emission fossil fuels such as coal and petroleum. Concurrently, the Group will accelerate the development of renewable energy production and utilisation by, on one side, taking photovoltaic power generation as a focus to develop smart energy, and, on the other side, by producing biofuels, environmentally-friendly chemical products and materials on a commercial scale using agricultural waste through innovative research and development, thereby paving the way towards greater use of renewable energy.

To conclude, the Group's development strategy is to be in line with both global environmental protection trends and mainland China's goals and policies for carbon neutrality. The Group's development experience of over 20 years in mainland China,

with businesses now spread across 27 provincial areas, will facilitate sizeable growth of other new businesses. Coupled with innovative research and development and favourable operating resources across different areas, the Group foresees long-term and broad development prospects. Furthermore, the Group has always paid attention to strengthening and improving its ability to perform well in the three aspects of environmental, social and governance ("ESG") sustainability and has formulated guiding policies and goals for implementation of an holistic strategy over the years. The Group's core business development, in particular, is linked to environmental protection focused on clean energy, sewage treatment and coal-to-gas conversion, amongst others, to realise its vision of blue skies, white clouds, green mountains and clear water. In 2020, the Group was presented with the "Gold Award in the Public and Community Service sector" in the "Hong Kong Awards for Environmental Excellence", and was also ranked in the "Exemplar tier of the Greater Bay Area Business Sustainability Index", demonstrating the Group's leading position in ESG performance.

The Group will continue to invest resources in the research and development of more environmentally-friendly innovative technologies to fulfill its responsibilities for protecting the environment, and to create a better future for the next generation.

Town Gas Business in Hong Kong

The Hong Kong economy was severely impacted by the coronavirus pandemic in 2020. With inbound tourism coming to a standstill and restaurant, retail and hotel sectors strongly hit, the local economy contracted sharply by

per cent in 2020 compared to 2019. As a result, during 2020, volume of commercial and industrial gas sales decreased notably, whilst volume of residential gas sales increased owing to a rise in both household cooking and use of hot water, both compared to 2019. Overall, total volume of gas sales in Hong Kong for 2020 was approximately 27,947 million MJ, a slight decrease of 2.7 per cent, whilst the number of appliances sold also decreased by 12.7 per cent due to a drop in people moving into new properties and lower consumer sentiment impacted by the epidemic, both compared to 2019. Despite this, with an effective market strategy, appliance sales decreased only slightly by

per cent compared to 2019.

The Company proactively supported the catering sector, which was significantly hit by the epidemic, by extensively assisting eateries to implement infection control and by launching a "Supporting F&B and the Economy" campaign in May 2020, aiming to help recovery of this sector when the epidemic eased.

The Hong Kong and China Gas Company Limited4 Annual Report 2020

Given the slowdown in people moving into new properties due to the epidemic, the number of customers was 1,943,777 as at the end of 2020, a slight increase of 10,050 compared to 2019.

Businesses in

Mainland China

The Group's mainland businesses continued to progress steadily during 2020. Overall, inclusive of projects of the Group's subsidiary, Towngas China Company Limited ("Towngas China"; stock code: 1083.HK), the Group had

436 projects (2019 year end:

406 projects, inclusive of city-gas projects re-invested by the Group's companies) on the mainland, as at the end of 2020, spread across 27 provincial regions. These projects encompass upstream, midstream and downstream natural gas sectors, environmentally-friendly energy, smart energy, water sectors and city-waste treatment, as well as telecommunications.

Utility Businesses

During the first quarter of 2020, the coronavirus epidemic led to city lockdowns and suspension of work, production and transportation in most regions on the mainland, all negatively impacting economic activity. By March 2020, mainland China was gradually bringing the epidemic under control with work and production resuming in an orderly manner throughout the country. The mainland economy has since

gradually recovered, with gross domestic product turning from contraction in the first quarter of 2020 to positive growth in the three consecutive quarters thereafter, recording a 2.3 per cent increase for the year 2020 compared to 2019.

During the coronavirus epidemic on the mainland, enterprises under the Group actively responded to full deployment. This was particularly important for the Group's public utility businesses which had to ensure a safe supply of both city-gas and water alongside provision of services, whilst also making sterling efforts to ensure epidemic prevention and control measures were properly implemented within its enterprises. The Group's various businesses on the mainland have gradually resumed normal operations since the second quarter of last year. However, the epidemic worldwide reached "pandemic" status by mid-March 2020 and continues to fluctuate in a number of countries, leading to periodic city lockdowns to prevent its spread. The pandemic has, therefore, severely hit the global economy, leading to a fall in demand for commodities. Coupled with an adverse business environment arising from various factors, including trade disputes between mainland China and the United States, gas and water demand in commercial and industrial sectors on the mainland were adversely affected. In addition, as local governments on

the mainland have launched measures to support small and medium-sized enterprises, public utility enterprises have been required to reduce fees, defer fee payments, etc. and these temporary measures have impacted the results of the Group for the year 2020.

As at the end of 2020, inclusive of Towngas China, the Group had a total of 282 city-gas projects on the mainland (2019 year end:

273 projects, inclusive of city-gas projects re-invested by the Group's companies). The total volume of gas sales for these projects in 2020 was approximately 26,900 million cubic metres, an increase of

5 per cent compared to 2019.

As at the end of 2020, the Group's mainland gas customers stood at approximately 31.81 million,

an increase of 7 per cent over 2019.

The Group added several smart energy projects to its portfolio in 2020, including installation of solar photovoltaic power generation systems on rooftops of large production plants and logistics warehouses, and establishing energy storage facilities. With substantial demand for these renewable energy facilities, business prospects are promising. Coupled with application of big data, artificial intelligence and the Internet to enhance energy utilisation and dispatch efficiency, the Group is endeavouring to achieve energy conservation and emission reduction, whilst also generating economic benefits.

CHAIRMEN'S STATEMENT

Construction of the Group's natural gas storage facility in underground salt caverns in Jintan district, Changzhou city, Jiangsu province, is progressing in phases. This project, the first of its kind built by a city-gas enterprise, will eventually comprise a total of 25 wells with a total storage capacity of 1.1 billion cubic metres, to be built in two phases, four wells of which have now been commissioned and successfully interconnected with the West-to-East Gas Pipeline and the Sichuan-to-East Gas Pipeline, being two large-scalenational-level natural gas transmission pipelines. Located in economically active eastern China with a superior geographical location, the Group's storage facility enables city-gas projects to supplement gas supplies in this region during the peak winter period. In the longer term, it is planned that the facility will supply gas to other regions through interconnected pipeline networks. As the mainland's national pipeline network has already been officially commissioned, this is also an opportunity to explore a new means of commercially operating the Group's gas storage facilities.

During the year, the Group also acquired a storage tank project at the liquefied natural gas ("LNG") receiving terminal in Tangshan city, Hebei province. The Group has been granted the right to use two storage tanks of 400,000 cubic metres in total alongside a jetty for

importing 1 million tonnes of LNG per annum for a contract term of

50 years. Use of the storage tanks will start before the end of 2023 but use of the jetty will be exercised earlier - by the end of 2022. This project will significantly enhance the Group's gas storage capacity and reduce the need to build separate gas storage facilities by different companies under the Group. The Group can also purchase gas directly from overseas to reduce costs.

Environmental governance businesses have broad development prospects. Leveraging on the rich experience in sewage treatment gained from the Group's water sector "Hua Yan Water", the Group successfully developed an urban organic waste resource utilisation project in Suzhou Industrial Park, Jiangsu province in 2019. This project has cumulatively processed more than 170,000 tonnes of organic wastes and produced nearly 5 million cubic metres of bio-natural gas. Construction of phase two of this project, to increase daily processing capacity from

500 to 800 tonnes, is in progress, expecting to commence operation in the second quarter of 2021. Furthermore, in order to coordinate the development of its environmental governance businesses, the Group has formed an investment platform company, "Hua Yan Environmental", in Changzhou city, Jiangsu province, to develop a waste incineration business in the city. A food waste

resource utilisation project already operating in Tongling city, Anhui province has also been successfully acquired. The Group is also developing food waste treatment, waste incineration power generation, industrial wastewater and sewage treatment projects in other cities so as to further bolster the Group's environmental protection businesses.

Operation and management of businesses encompassing midstream natural gas, city-gas, water and municipal environmental protection businesses are creating ever-greater synergy. Furthermore, these businesses generate stable incomes. The Group will therefore keep on investing in high-quality utility projects of these kinds.

Emerging

Environmentally-Friendly

Energy Businesses

The research and development team of ECO Environmental Investments Limited ("ECO") under the Group has long been striving hard for breakthroughs in the field of biomass utilisation. Several patented technologies which target on the utilisation of inedible bio-grease and agricultural waste as two different feedstocks, are now gradually being implemented in a number of projects.

The first project, located in Jiangsu province, which converts inedible bio-grease feedstock into HVO

The Hong Kong and China Gas Company Limited5 Annual Report 2020

using ECO's self-developed technology, with an annual production capacity of 250,000 tonnes, was fully commissioned during the third quarter of 2020. Having gained the accreditation under the "International Sustainability and Carbon Certification Scheme" and thus qualified as an advanced biofuel defined by the European Union, ECO's HVO is entirely exported to European markets. With European countries paying keen attention to climate change and setting specific emission reduction policies, the market potential for advanced biofuel is substantial. Successful implementation of our project in Jiangsu province has laid a solid foundation for ECO's further development of its biomass utilisation business.

ECO's another set of patented technologies is to refine agricultural waste through pyrolysis and hydrolysis into a product scope encompassing biofuels, biochemicals and biomaterials. For this, ECO is now developing two pilot projects in Hebei province - one producing furfural and paper pulp as main products expected to commence trial production in the second quarter of 2021, followed by another one producing furfural and cellulosic ethanol expected to commence trial production in the fourth quarter of 2021. Cellulosic ethanol is yet another highly

demanded advanced biofuel as defined by the European Union.

Following its formulated new energy business strategy, ECO is now in full swing to develop green and sustainable low-carbon businesses founded on its self- developed innovative technologies.

Towngas China

Company Limited

(Stock Code: 1083.HK)

Towngas China, a subsidiary of the Group, recorded profit after taxation attributable to its shareholders for the year amounting to HK$1,447 million, an increase of approximately

11 per cent compared to 2019. As at the end of December 2020, the Group held approximately 2,025 million shares in Towngas China, representing approximately

68.21 per cent of Towngas China's total issued shares.

Facing the sudden outbreak of the coronavirus epidemic in 2020, staff at all levels in Towngas China actively responded to and performed their duties diligently to ensure a safe supply of gas, aiming to fight the epidemic alongside their customers. Despite great challenges, the business as a whole continued to record steady growth for the year.

Following the execution of a capital increase agreement among Towngas China, Shanghai Gas

Co., Ltd. ("Shanghai Gas") and Shenergy (Group) Company Limited in October 2020, all parties are now liaising on various business aspects to proceed further as scheduled. With a population of over 24 million, Shanghai city is a huge gas market. Shanghai Gas has a customer base of 6.3 million with natural gas sales reaching over 9,000 million cubic metres per annum. Through this cooperation, Towngas China will not only extend its city-gas business

to Shanghai city, the most economically developed city on the mainland, but will also create extensive synergy for its businesses in Shanghai city with those in eastern China and the entire Yangtze River Delta region, helping to expand the company's business scale and enhance the quality of its business development. In addition, Towngas China will be able to expand its channels for purchasing natural gas directly from overseas through the LNG receiving terminal at Yangshan Port operated by Shanghai Gas.

Apart from continuing to pursue in-depth development of city-gas markets and to explore distributed energy and smart energy sectors, Towngas China will also proactively advocate development of its extended businesses to achieve economies of scale with the Internet platform as a backbone to enhance value-added service capabilities, thus fostering new horizons.

CHAIRMEN'S STATEMENT

Towngas China added five new projects to its portfolio during 2020, of which three are centralised heating projects located in Eastern Park of Tongling Economic and Technological Development Zone, Anhui province, and in Fuxin Industrial Park and Xiliu Textile Industrial Park, Haicheng city, both in Liaoning province. The other two comprise a shale gas project and an extended business project, both in Sichuan province.

Financing Programmes

In order to tap funding in a timely and flexible manner, the Group established a medium term note programme in 2009 under HKCG (Finance) Limited, a wholly- owned subsidiary of the Group. Medium term notes totalling HK$5,986 million, with a tenor of 3 to 30 years, were issued in 2020. In line with the Group's long-term business investments, as at

31st December 2020, the total nominal amount of medium term notes issued has reached HK$20.7 billion with tenors ranging from 3 to 40 years, mainly at fixed interest rates with an average of 3.0 per cent per annum and an average tenor of 15 years.

Furthermore, the Group also made use of perpetual securities for long term funding. As at 31st December 2020, the Group had Perpetual Subordinated Capital Securities (the "Perpetual Securities") of US$300 million, issued in February 2019, with a

coupon rate at 4.75 per cent per annum. The Perpetual Securities are redeemable at the option of the Group in February 2024 or thereafter every six months on the coupon payment date.

Employees and

Productivity

As at the end of 2020, the number of employees engaged in the town gas business in Hong Kong was 2,130 (2019 year end: 2,096), the number of customers was 1,943,777, and each employee served the equivalent of 913 customers. Inclusive of employees engaged in local businesses such as telecommunications, liquefied petroleum gas vehicular refilling stations and engineering contractual works, the total number of the Group's employees engaged in businesses in Hong Kong was 2,495 as at the end of 2020 compared to 2,474 as at the end of 2019. Related manpower costs amounted to HK$1,233 million for 2020. In 2020, there was an approximately 2 per cent average increase in remuneration over 2019. The Group will continue to offer employees rewarding careers based on their capabilities and performance and arrange a variety of training programmes in order to constantly enhance the quality of the Group's customer services.

Exclusive of businesses in Hong Kong, the total number of the Group's employees in mainland China and other places outside

Hong Kong was approximately 51,270 as at the end of 2020, an increase of approximately 860 compared to 2019.

On behalf of the Board of Directors, we would like to thank all our employees for their dedication and hard work in creating value for shareholders and customers. During the coronavirus epidemic, in particular, staff at all levels have performed their duties diligently and tackled different challenges proactively to ensure the safe operation of the Group's public utility businesses in both

Hong Kong and mainland China, and to maintain the stable and sustainable development of the Group's other businesses.

Bonus Issue of Shares

The Directors propose to make a bonus issue of one new share for every twenty existing shares held by shareholders whose names are on the Register of Members of the Company as at 10th June 2021.

The necessary resolution will be proposed at the forthcoming Annual General Meeting on 2nd June 2021, and if passed, share certificates will be posted on 21st June 2021.

Final Dividend

The Directors are pleased to recommend a final dividend of HK23 cents per share payable to shareholders whose names are on the Register of Members of the Company as at 10th June 2021. Including the interim dividend of

The Hong Kong and China Gas Company Limited6 Annual Report 2020

HK12 cents per share paid on 14th September 2020, the total dividend payout for the whole year shall be HK35 cents per share.

Barring unforeseen circumstances, the forecast dividends per share for 2021 after bonus share issue shall not be less than the interim and final dividends for 2020.

Business Outlook for 2021

A number of countries worldwide have successively launched coronavirus vaccination programmes since the end of last year. The Government of the Hong Kong Special Administrative Region began to arrange vaccinations for its citizens in late February this year. Although the pandemic is expected to stabilise, to a certain extent, uncertainties still remain at this stage. Despite this, the Company predicts steady growth in its number of customers in Hong Kong during 2021. The Group is adopting measures to broaden sources of revenue,

cut expenditure and costs appropriately and optimise work flow, and is also endeavouring to promote smart innovation to enhance customer services and operational efficiency whilst also continuously developing new town gas applications to increase volume of gas sales. All these aim at maintaining a stable development for its gas business in the territory.

In respect of mainland businesses, Towngas China under the Group will acquire a 25 per cent equity

interest in Shanghai Gas after the latter's increase of registered capital in 2021 as planned, thereby increasing the Group's gas customers to 40 million, making the Group a more sizeable city-gas enterprise overall. This project will also increase channels for the Group to import LNG. Through this project, the Group can also participate in the long-term integration development of the Yangtze River Delta. With public utilities forming its core business, the Group has a relatively strong resilience to the impact of economic downturns. It is expected that when the epidemic is over, the Group's businesses will return to better growth within a relatively short period of time. ECO's self-developed advanced biofuel business is operating well, expecting to generate stable revenue growth for the Group. With its HVO project located in Jiangsu province successfully commissioned in August 2020 and seeing the ever-increasing demand in European countries for low carbon emission fuels, ECO is taking steps to enhance its HVO production capacity within the year 2021.

The agricultural waste utilisation projects located in Hebei province will construct a sophisticated feedstock supply chain to implement the comprehensive and efficient use of agricultural waste by transforming it into biomass products that help reduce carbon emissions and alleviate pollution problems caused by incineration,

thus contributing to the improvement of the local environment.

Mainland China's Fourteenth Five-Year Plan commenced in 2021. The central government has also set a long-term vision for up to 2035, aiming at enhancing the country's economic and technological strength and fostering a new development paradigm featuring "dual circulations", with domestic circulation as the mainstay and domestic and international circulations reinforcing each other. Under a national policy of green development, support for natural gas, smart energy, renewable energy and biofuels sectors, etc. is expected through corresponding environmental protection policies, which in turn are predicted to bring long-term growth for the Group's related businesses. The Group thus anticipates a more prosperous development for its various businesses in the future.

Lee Ka-kit

Lee Ka-shing

Chairman Chairman

Hong Kong, 19th March 2021

BOARD OF DIRECTORS

Dr. Lee Ka-kit

G.B.S., J.P., D.B.A. (Hon.),

Chairman & Non-executive Director

Aged 57. Dr. Lee was appointed to the Board of Directors of the Company in 1990 and subsequently appointed Chairman in May 2019. He was educated in the United Kingdom. He is a Chairman and Managing Director of Henderson Land Development Company Limited ("Henderson Land Development") and a Vice Chairman of Henderson Investment Limited. Dr. Lee was previously a Non-executive Director of

The Bank of East Asia, Limited and an Independent Non-executive Director of Xiaomi Corporation. All the above companies are listed public

companies. He is also a

Vice Chairman of Henderson Development Limited ("Henderson Development") and a Director of Hopkins (Cayman) Limited ("Hopkins"), Rimmer (Cayman) Limited ("Rimmer") and Riddick (Cayman) Limited ("Riddick"). Henderson Land Development, Henderson Development, Hopkins, Rimmer and Riddick have discloseable interests in the Company under the provisions of the Securities and Futures Ordinance (please refer to the notes on "Substantial Shareholders and Others" on page 68 of this Annual Report for details). Dr. Lee is

a Member of the Standing Committee of the 13th National Committee of

the Chinese People's Political Consultative Conference and

a Member as well as the Chairman of the Board of Directors of One Country Two Systems Research Institute. He was appointed as

a Justice of the Peace by

the Government of the Hong Kong Special Administrative Region (the "HKSAR") in 2009, and was awarded the Gold Bauhinia Star by the Government of the HKSAR in 2015. Dr. Lee was awarded an Honorary University Fellowship by The University of Hong Kong in 2009, and was also awarded an Honorary Degree of Doctor of Business Administration by Edinburgh Napier University in 2014. He is the son of Dr. Lee Shau-kee, a controlling

The Hong Kong and China Gas Company Limited7 Annual Report 2020

from left to right

John Ho Hon-ming

Alfred Chan Wing-kin

Moses Cheng Mo-chi

David Li Kwok-po

Lee Ka-kitChairman

Lee Ka-shingChairman

Poon Chung-kwong

Colin Lam Ko-yin

Peter Wong Wai-yee

shareholder of the Company and the brother of Mr. Lee Ka-shing,

Chairman and Non-executive Director of the Company.

Mr. Lee Ka-shing

J.P.,

Chairman & Non-executive Director

Aged 49. Mr. Lee was appointed to the Board of Directors of the Company in 1999 and subsequently appointed Chairman in May 2019. He was educated in Canada. He is a Chairman and Managing Director of Henderson Land Development Company Limited ("Henderson Land Development"), the Chairman and Managing Director of Henderson Investment Limited as well as the Chairman and Chief Executive

Officer of Miramar Hotel and Investment Company, Limited, all of which are listed public companies. Mr. Lee is also a Vice Chairman of Henderson Development Limited ("Henderson Development") and

a Director of Hopkins (Cayman) Limited ("Hopkins"), Rimmer (Cayman) Limited ("Rimmer"), Riddick (Cayman) Limited ("Riddick"), Disralei Investment Limited ("Disralei Investment"), Medley Investment Limited ("Medley Investment"), Faxson Investment Limited ("Faxson Investment"), Chelco Investment Limited ("Chelco Investment"), Macrostar Investment Limited ("Macrostar Investment") and Timpani Investments Limited ("Timpani Investments"). Henderson

Land Development, Henderson Development, Hopkins, Rimmer, Riddick, Disralei Investment, Medley Investment, Faxson Investment, Chelco Investment, Macrostar Investment and Timpani Investments have discloseable interests in the Company under the provisions of the Securities and Futures Ordinance (please refer to the notes on "Substantial Shareholders and Others" on page 68 of this Annual Report for details). Mr. Lee was appointed as a Justice of the Peace by the Government of the Hong Kong Special Administrative Region in

2017. He is a Member of The Court of The Hong Kong Polytechnic University and a member of the Council of City University of Hong Kong. He is also

Board of Directors

a Committee Member of the 13th Beijing Committee of the Chinese People's Political Consultative Conference. Mr. Lee is the son of Dr. Lee Shau-kee, a controlling shareholder of the Company and the brother of Dr. Lee Ka-kit,

Chairman and Non-executive Director of the Company.

Dr. Colin Lam Ko-yin

S.B.S., F.C.I.L.T., F.H.K.I.o.D., D.B. (Hon.),

Non-executive Director

Aged 69. Dr. Lam was appointed to the Board of Directors of the Company in 1983. He has more than 47 years' experience in banking and property development. He is the Deputy Chairman of The University of Hong Kong Foundation for Educational Development and Research, a Director of Fudan University Education Development Foundation, an honorary Court member of Hong Kong Baptist University, a member of the Court of The Hong Kong University of Science and Technology and a member of the Court of City University of Hong Kong. Dr. Lam was awarded the Silver Bauhinia Star by the Government of the Hong Kong Special Administrative Region in 2017. He was also awarded an Honorary University Fellowship by The University of Hong Kong in 2008, an Honorary Fellowship by The Chinese University of Hong Kong in 2019 and was conferred a degree of Doctor of Business (Honoris Causa) by Macquarie University in 2015. He is a Fellow of The Chartered Institute of Logistics and Transport in Hong Kong and a Fellow of The Hong Kong Institute of Directors. Dr. Lam is a Vice Chairman of Henderson Land Development Company Limited

("Henderson Land Development") and Henderson Investment Limited, the Chairman of Hong Kong Ferry (Holdings) Company Limited, and an Executive Director of Miramar Hotel and Investment Company, Limited, all of which are listed public companies. Dr. Lam is a Director of Henderson Development Limited ("Henderson Development"), Hopkins (Cayman) Limited ("Hopkins"), Rimmer (Cayman) Limited ("Rimmer"), Riddick (Cayman) Limited ("Riddick"), Disralei Investment Limited ("Disralei Investment"), Medley Investment Limited ("Medley Investment") and Macrostar Investment Limited ("Macrostar Investment"). Henderson Land Development, Henderson Development, Hopkins, Rimmer, Riddick, Disralei Investment, Medley Investment and Macrostar Investment have discloseable interests in the Company under the provisions of the Securities and Futures Ordinance (please refer to the notes on "Substantial Shareholders and Others" on page 68 of this Annual Report for details).

Dr. the Hon. Sir David Li Kwok-po

GBM, GBS, OBE, JP, MA Cantab. (Economics & Law), Hon. LLD (Cantab), Hon. DSc. (Imperial), Hon. LLD (Warwick), Hon. DBA (Edinburgh Napier), Hon. D.Hum.Litt. (Trinity, USA), Hon. LLD (Hong Kong),

Hon. DSocSc (Lingnan), Hon. DLitt (Macquarie), Hon. DSocSc (CUHK), FCA, FCPA,

FCPA (Aust.), FCIB, FHKIB, FBCS, CITP, Officier de l'Ordre de la Couronne, Grand Officer of the Order of the Star of Italian Solidarity, The Order of the Rising Sun, Gold Rays with Neck Ribbon, Commandeur dans l'Ordre National

de la Légion d'Honneur,

Independent Non-executive Director

Aged 82. Sir David was appointed to the Board of Directors of the

Company in 1984. Sir David is the Executive Chairman of The Bank of East Asia, Limited. He is an Independent Non-executive Director of Guangdong Investment Limited, The Hongkong and Shanghai Hotels, Limited, San Miguel Brewery Hong Kong Limited and Vitasoy International Holdings Limited.

He was previously an Independent Non-executive Director of PCCW Limited. All the above companies are listed public companies. Sir David

is a Member of the Council of the Treasury Markets Association. He is Founding Chairman of The Friends of Cambridge University in Hong Kong Limited, Chairman of the Advisory Board of The Salvation Army, Hong Kong and Macau Command, Chairman of the Executive Committee of St. James' Settlement and a Fellow of the Hong Kong Academy of Finance. He was a Member of the Executive Council of Hong Kong from 2005 to 2008 and the Legislative Council of Hong Kong from 1985 to 2012.

Prof. Poon Chung-kwong

G.B.S., J.P., Ph.D., D.Sc.,

Independent Non-executive Director

Aged 81. Prof. Poon was appointed to the Board of Directors of the Company in 2009. Prof. Poon is currently the Chairman of Virya Foundation Limited (a registered non-profit charitable organisation). Prof. Poon is an Emeritus Professor and the President Emeritus of The Hong Kong Polytechnic University. He had devoted 40 years of his life to advancing university education in Hong Kong before he retired in January 2009 from his 18-year presidency at The Hong Kong Polytechnic University. Prof. Poon is

The Hong Kong and China Gas Company Limited8 Annual Report 2020

Non-executiveDirector of Lee & Man Paper Manufacturing Limited and an Independent Non-executive Director of Henderson Land Development Company Limited ("Henderson Land Development") and Chevalier International Holdings Limited. He was previously an Independent Non-executive Director of Hopewell Highway Infrastructure Limited (now known as Shenzhen Investment Holdings Bay Area Development Company Limited). All the above companies are listed public companies. Henderson Land Development has discloseable interests in the Company under the provisions of the Securities and Futures Ordinance (please refer to the notes on "Substantial Shareholders and Others" on page 68 of this Annual Report for details). Prof. Poon was appointed as a Justice of the Peace in 1989 and received the OBE award in 1991, the Gold Bauhinia Star award in 2002 and also the "Leader of the Year Awards 2008 (Education)".
In addition, he was appointed as a member of the Legislative Council (1985 - 1991) and a member of the National Committee of the Chinese People's Political Consultative Conference (1998 - 2013). Prof. Poon obtained a Bachelor of Science (Honours) Degree from The University of Hong Kong, a Doctor of Philosophy Degree and a Higher Doctor of Science Degree from the University of London. He was a Postdoctoral Fellow at the California Institute of Technology, University of Southern California and University of Toronto. He also held the Honorary Degree of Doctor of Humanities from The Hong Kong Polytechnic University in 2009.

Dr. Moses Cheng Mo-chi

G.B.M., G.B.S., O.B.E., J.P.,

Independent Non-executive Director

Aged 71. Dr. Cheng was appointed to the Board of Directors of the Company in January 2019. Dr. Cheng is a practising solicitor and the consultant of Messrs. P.C. Woo & Co. after serving as its senior partner from 1994 to 2015. Dr. Cheng was a member of the Legislative Council of Hong Kong. He is the founder chairman of the Hong Kong Institute of Directors of which he is now the Honorary President and Chairman Emeritus. Dr. Cheng is now also serving as the Chairman of the Insurance Authority. In addition, he is a Fellow of the Hong Kong Academy of Finance. Dr. Cheng has been an independent non-executive director of Towngas China Company Limited, a subsidiary of the Company, since May 2007. He also currently holds directorships in China Mobile Limited, China Resources Beer (Holdings) Company Limited, Guangdong Investment Limited, K. Wah International Holdings Limited, Liu Chong Hing Investment Limited and Tian An China Investments Company Limited. All the above companies are listed public companies. He was previously a Non-executive Director of Kader Holdings Company Limited.

Mr. Alfred Chan Wing-kin

B.B.S., Hon.F.E.I., Hon.F.I.I.U.S., C.Eng.,

F.H.K.I.E., F.I.Mech.E., F.I.G.E.M., M.Sc. (Eng),

B.Sc. (Eng),

Managing Director

Aged 70. Mr. Chan joined the Company as the General Manager - Marketing in 1992 and was appointed as the General Manager - Marketing & Customer Service in 1995. He was appointed to the

Board of Directors of the Company in January 1997 and as the Managing Director in May 1997. Mr. Chan is a director of major local and overseas subsidiary companies of the Company. He is also the Chairman and President of Hong Kong & China Gas Investment Limited, an investment holding company in mainland China and chairman, vice chairman or a director of a number of the project companies in mainland China.

Mr. Chan is the Chairman of Towngas China Company Limited, and the Vice Chairman of Shenzhen Gas Corporation Ltd. and Foran Energy Group Co., Ltd., and was previously a Non-executive Director of the tenth session of the board of directors of Shanghai Dazhong Public Utilities (Group) Co., Ltd., all of which are listed public companies. He is an Honorary President of The Hong Kong Management Association and a Vice Chairman of China Gas Association. Mr. Chan is a Member of the Standing Committee on Judicial Salaries and Conditions of Service of the Government of the Hong Kong Special Administrative Region. He was previously the Deputy Chairman of the Council of The Hong Kong Institute of Education (now known as The Education University of Hong Kong) and a Member of the Board of Stewards of The Education University of Hong Kong Foundation. Mr. Chan received the Executive Award under the DHL/SCMP Hong Kong Business Awards 2005, the Director of the Year Awards - Listed Companies (SEHK - Hang Seng Index Constituents) Executive Directors from The Hong Kong Institute of Directors in 2006,

Board of Directors

the Leadership Award in Gas Industry Award 2015 from the Institution of Gas Engineers & Managers and the Energy and Utilities Alliance of the United Kingdom, "The CEO of the Year 2017" Award from China Newsweek in 2017 and was named consecutively as one of "The 100 Best-Performing CEOs in the World" by Harvard Business Review from 2015 to 2019. He was awarded

an Honorary Fellowship by The Hong Kong Institute of Education (now known as The Education University of Hong Kong) in 2016. Mr. Chan, a Chartered Engineer, is also Honorary Fellow of the Energy Institute of the United Kingdom, Fellow of The Hong Kong Institution of Engineers; Fellow of The Institution of Mechanical Engineers, Fellow of the Institution of Gas Engineers & Managers of the United Kingdom and Honorary Fellow of International Institute of Utility Specialists.

Mr. Peter Wong Wai-yee

C.P.A. (CANADA), C.M.A., C.P.A. (HK), A.C.G., A.C.S., F.I.G.E.M., F.H.K.I.o.D., M.B.A.,

Deputy Managing Director

Aged 69. Mr. Wong joined the Group in 1997, initially as its Financial Controller. Since 2002, he has been deeply involved in the development of the Group's mainland utilities business, operating from its headquarters in Shenzhen, China. Mr. Wong was appointed to the Board of Directors of the Company in February 2013 and was appointed as Deputy Managing Director of the Company with effect from 1st April 2021. Mr. Wong holds directorships in various subsidiaries of the Group. He is also an Executive Director and the Chief Executive Officer of

Towngas China Company Limited and a director of Shenzhen Gas Corporation Ltd.. He was previously the Vice Chairman of Foshan Gas Group Co., Ltd. (now known as Foran Energy Group Co., Ltd.) and a director of China-Singapore Suzhou Industrial Park Development Group Co., Ltd. ("CSSD") until his retirement at CSSD on 29th June 2020. All of which are listed public companies. He is a Member of the Mainland Business Advisory Committee of the Hong Kong Trade Development Council. He was named consecutively as one of "The Best CEO of Chinese Listed Companies" by Forbes in 2012 and 2013. He is a chartered professional accountant of Canada, a certified public accountant of Hong Kong and a chartered company secretary in both Hong Kong and the United Kingdom.

Mr. Wong is a Fellow of The Hong Kong Institute of Directors and a Fellow of the Institution of Gas Engineers & Managers of the United Kingdom. He completed the Advanced Management Program from Harvard Business School in the United States. Mr. Wong was formerly a director of the Certified Management Accountants Society of British Columbia, Canada and the president of its Hong Kong branch, a member of the Advisory Board of the Department of Accounting of Hong Kong Shue Yan University. He is a member of the Advisory Committee of the College of Professional and Continuing Education, The Hong Kong Polytechnic University. Mr. Wong has over 44 years of experience in corporate finance, management and international working experience.

Mr. John Ho Hon-ming

F.C.A., F.C.P.A., F.H.K.I.o.D., B.A.(Hons.),

Executive Director, Chief Financial Officer and Company Secretary

Aged 64. Mr. Ho joined the Company in 2002. Mr. Ho was appointed to the Board of Directors of the Company in October 2020. Mr. Ho is currently the Executive Director, Chief Financial Officer and Company Secretary of the Company, and also holds directorships in various subsidiaries of the Group. He is also an Executive Director and the Company Secretary of Towngas China Company Limited and a director of Changchun Gas Co., Ltd., Shenzhen Gas Corporation Ltd. and Foran Energy Group Co., Ltd., all of which are listed public companies. Mr. Ho is the Vice Chairman of the General Committee of the Chamber of Hong Kong Listed Companies and the Vice Chairman of the Taxation Committee of the Hong Kong General Chamber of Commerce. He is a Fellow of the Institute of Chartered Accountants in England and Wales, a Fellow of the Hong Kong Institute of Certified Public Accountants and a Fellow of the Hong Kong Institute of Directors.

Mr. Ho graduated from the University of Manchester in the United Kingdom with an honorable Bachelor of Arts degree in Economics and Social Studies (Accounting and Finance). He completed the Advanced Management Program from Harvard Business School in the United States, the Senior Executive Program offered by Harvard Business School, Tsinghua University School of Economics and Management and China Europe International Business School, and the Chief Executive Program from Singapore Institute of Management. Mr. Ho has over 42 years of experience in accounting, corporate finance

and investments.

The Hong Kong and China Gas Company Limited9

Annual Report 2020

EXECUTIVE

COMMITTEE

from left to right

Martin Kee Wai-ngai	Simon Ngo Siu-hing	Philip Siu Kam-shing
Executive Vice President,	Head of Engineering -	Chief Operating Officer -
Hong Kong and China Gas Investment	Hong Kong Utilities	New Energy Business
Limited and Hua Yan Water
Peter Wong Wai-yee	Alfred Chan Wing-kin	John Ho Hon-ming
Deputy Managing Director	Managing Director	Executive Director,
		Chief Financial Officer and
		Company Secretary
Fan Kit-yee	Daniel Fung Man-kit
Head of Corporate Human Resources	Head of Strategy & Innovation and
	Commercial - Hong Kong Utilities

CLEAN ENERGY FOR ALL

MAINLAND

UTILITY

BUSINESSES

In 2020, Towngas China signed a capital increase agreement with Shanghai Gas Co., Ltd (Shanghai Gas) and Shenergy (Group) Company Limited (Shenergy Group), which is expected to give us access to 6.3 million more customers and increase our customer base to a total of about 40 million households in mainland China.

MAINLAND UTILITY BUSINESSES

For more than 25 years, Towngas has been providing people in mainland China with a clean, reliable and economic supply of fuel as well as other products that contribute to a more comfortable life and promote a sustainable future. Our businesses today cover 282 city-gas projects serving around 31.81 million customers in

23 provinces, autonomous regions and municipalities (2019 year end: 273 projects, inclusive of city-gas projects re-invested by the Group's companies). Through these businesses, we are meeting the growing demand for energy that will power the nation's economy while assuring a cleaner environment for all.

Progress amid Challenges

In 2020, trade disputes between mainland China and the United States continued to have a negative impact on exports as a whole. Our gas sales in mainland market were also affected in the early part of the year by the outbreak of COVID-19. As some cities went into lockdown, most industrial and commercial activities came to a halt in the first quarter of the year and overall gas volume fell. Once the epidemic began to come under control in March, our commercial and industrial (C&I) clients resumed normal operation and production in an orderly manner. The mainland economy has also gradually recovered since then.

This auto parts factory in Xuzhou, Jiangsu province uses natural gas for drying, controlling indoor temperature and treating exhaust fumes.

During the period, local governments issued a series of measures to support small and medium-sized enterprises. As a responsible utility group, Towngas provided special offers on tariffs in some cities for customers in need. We also ensured our gas supply would remain uninterrupted and continued to carry out safety inspections. At the same time, we collaborated closely with our C&I clients to help them resume

production or get back to work as soon as possible after the lockdown was lifted.

For the year as a whole, total sales of our city-gas amounted to approximately 26,900 million cubic metres, which was 5 per cent higher than in 2019. The margin on gas sales was also better than the year before, as the Government had lowered the city gate price, which contributed to increased gas use.

The Hong Kong and China Gas Company Limited0 Annual Report 2020

A LANDMARK

PARTNERSHIP

WITH SHANGHAI GAS

Moreover, Shanghai Gas and Shenergy Group have two liquefied natural gas (LNG) receiving terminals at Wuhaogou and Yangshan Port. Combined with our underground salt cavern gas storage facility in Jintan, Changzhou, Jiangsu province, the receiving terminals will create synergy and assurance for the Group's gas supply, thereby establishing a solid foundation for our entry into the natural gas trading market.

In October 2020, Towngas China signed a capital increase agreement with Shanghai Gas and Shenergy Group to acquire a 25 per cent stake in Shanghai Gas, one of the largest city-gas operators in mainland China, with a customer base of

6.3 million accounts and annual gas sales of over 9,000 million cubic metres.

The partnership will help the Group to expand into Shanghai and recently developed surrounding areas, including Lingang New District, Qingpu New District and the Yangtze River Delta Integrated Development Demonstration Zone. As a result, our market position in the eastern part of mainland China is set to be further strengthened.

Shanghai is a wealthy municipality, with a population of over 24 million. Through our partnership, we have an opportunity to extend our businesses to the strong customer base of Shanghai Gas, including space heating systems, insurance services, gas appliances and kitchen and bathroom products.

Igniting a Low-carbon Economy

Natural gas, the cleanest fossil fuel with much lower carbon emissions than coal or oil, will continue to be our main business focus in the foreseeable future. At the same time, we have also been exploring other opportunities for our continued business growth, such as renewable energy and smart energy.

This strategy aligns with the Chinese government's Fourteenth Five-Year Plan, which calls for the development of intelligent, green production technologies that help to reduce carbon emissions. We are also contributing towards mainland China's goal of peaking carbon emissions before 2030 and achieving carbon neutrality before 2060, as announced in September 2020 at the United Nations General Assembly.

During the year we continued to vigorously promote coal-to-gas conversion in line with the Chinese government's environmental policies and commitment to carbon neutrality. The annual gas consumption among our coal-togas customers increased by

17 per cent from last year to reach 3.4 billion cubic metres.

Mainland Utility Businesses

Customers benefitting from our high-efficiency gas applications can be found in a wide range of trades and industries, including steel manufacturing, ceramics, glass, textiles and food, as well as hotel, restaurant and theme park businesses. During the year, we continued to look for business opportunities by initiating new projects for our gas applications. One example is the laundry business we started in 2019, which is currently in operation in Hangzhou, Chengdu, Shaoguan and Guilin. More new projects in Nanjing, Tangshan and other cities are expected to be commissioned in 2021.

In addition, we have been involved in the Distributed Energy Systems (DES) business since 2017. Widely acclaimed by our C&I customers, DES offers a decentralised energy supply for generating electricity as well as producing hot water, steam and chilled water using waste heat. The economies of scale available

China Joint Ventures

Gas Sales (million m3)

30,000

25,000

20,000

15,000

10,000

5,000

16 17 18 19 20

with DES have enabled us to extend these efficient, cost- saving systems into residential districts for space heating and industrial development zones for steam supply. In 2020, we recorded a total of 260 million cubic metres in DES gas sales, an increase of 76 per cent compared with 2019.

In order to expand our sustainable energy business, we have developed a Smart Energy system that utilises artificial intelligence (AI), big data and the Internet to achieve higher energy efficiency and lower emissions. The system covers a portfolio of electricity, steam, natural gas, renewable energy and energy storage. During the year, we acquired 40 solar photovoltaic power generation projects and five energy storage projects, with a total capacity of 300 megawatts and total storage capacity of over 100 megawatt- hours respectively.

Strengthening Our

Midstream and Upstream

Businesses

Securing a reliable supply of natural gas is critical for the success of our businesses in mainland China. This is achieved through our investments in midstream facilities, including long-haul pipelines, gas storage facilities and joint purchases of gas directly from upstream gas sources, in accordance with our diversified gas sourcing strategy.

In Jintan, Changzhou, Jiangsu province, we operate an underground salt-cavern gas storage facility, which is the first of its kind built by a city-gas enterprise on the mainland. With four wells now in operation, it will eventually comprise

25 wells with a total storage capacity of 1.1 billion cubic metres and a working capacity of 660 million standard cubic metres. This facility will increase our gas storage capacity and help us to regulate gas supply and prices more effectively, while opening up business opportunities for gas trading.

During the year, we acquired two storage tanks at the LNG receiving terminal in Tangshan, Hebei province. With a total capacity of 400,000 cubic metres, they are targeted for use before the end of 2023.

We have also been granted the right to use the jetty at the terminal for importing 1 million tonnes of LNG per year. Under a 50-year contract, this project will both enhance the Group's gas storage capacity and reduce the cost of building separate gas storage facilities by individual companies under the Group.

We also maintained a presence in Sichuan province by establishing a company in Weiyuan to invest in a shale gas liquefaction plant and gas storage tanks. The facilities will serve our many Sichuan city-gas companies and provide another reliable source of supply for our nearby projects.

The Hong Kong and China Gas Company Limitedq Annual Report 2020

In 2019, the Government integrated the national oil and gas pipeline network under China Oil & Gas Pipeline Network Corporation, enabling us to purchase LNG directly from overseas suppliers or trade it on the Shanghai Petroleum and Natural Gas Exchange for our city-gas projects or gas storage facilities. This has further diversified our gas supply channels and provided new opportunities for our businesses.

Water and Environmental Business

Our wholly-owned subsidiary, Hong Kong & China Water Limited (Hua Yan Water), currently operates seven urban water projects in mainland China. These businesses include tap water supply and wastewater treatment, purified water production and sales, water quality and meter testing, as well as smart water services. The performance of the water business in 2020, despite

COVID-19, remained stable with sales of 917 million tonnes of water, a slight decrease of about 1 per cent.

As a public utility company, Hua Yan Water considers the safety of its water supply to be its highest priority. Accordingly, the company started two projects for water quality analysis and intelligent water management during the year. One of these offers comprehensive water testing services at a laboratory that has obtained China Inspection Body and Laboratory Mandatory Approval and China National Accreditation Service for Conformity Assessment. The other new project is involved in developing technologies and software for building smart water systems and upgrading management systems for water supply companies.

Capitalising on our rich experience in sewage treatment, we established Hong Kong and China Environmental Holdings

With the encouraging development of our food waste project in Suzhou Industrial Park, Jiangsu province, plans were made for a new food waste treatment line to serve residential districts.

Company Limited (Hua Yan Environmental) to coordinate the development of our environmental governance businesses.

Our urban organic waste resource utilisation project in Suzhou Industrial Park, Jiangsu province made satisfactory progress during the year.

The project has cumulatively processed more than 170,000 tonnes of organic waste to date and produced nearly 5 million cubic metres of bio-natural gas. Plans were also made for a new food waste treatment line to serve residential districts with a designed daily capacity of

300 tonnes of food waste. It is expected to go into operation in the second quarter of 2021.

We also acquired a food waste resource utilisation project in Tongling, Anhui province in July 2020. With a working capacity of 100 tonnes per day, the plant has already processed 25,000 tonnes of food waste during the year. We are currently expanding the project to increase its annual capacity to a total of 73,000 tonnes by the second half of 2021.

Mainland Utility Businesses

Another new food waste project was secured in Xinbei, Changzhou, Jiangsu province, where we plan to construct a treatment plant with a working capacity of 300 tonnes per day. Commissioning of this plant is expected in 2024.

Moreover, in Changzhou we expanded into an environmental and sanitation business that will convert urban solid waste into valuable products in order to build a total recycling system that includes domestic waste incineration, waste screening, kitchen waste treatment and

a garbage disposal network. Construction of an incineration treatment facility in Jiashan, Changzhou will begin by the end of 2021. Upon its completion, the facility will be capable of producing 320,000 megawatt- hours of electricity each year.

Looking further ahead, we will expand the urban organic waste and sanitation market and develop the appropriate infrastructure for this business, with the aim of constructing a smart sanitation system for more hygienic cities.

Services beyond Gas

At Towngas we are in not just the business of supplying a safe and reliable source of energy, but also a lifestyle business catering to customers' everyday needs. With a strong customer base

of over 30 million accounts, we have expanded into new

Live-streaming on Towngas Lifestyle makes increased interactions possible with customers and helps stimulate sales of products.

markets, including smart appliances, kitchen cabinets, insurance, home care and other services, for a better, more comprehensive customer experience.

Products under our Bauhinia brand, mainly gas appliances, continued to be popular among customers in 2020, due mostly to the brand's growing reputation for high quality and safety features. During the year, approximately 800,000 appliances were sold, with sales of combi boilers achieving an increase of nearly 50 per cent to about 45,000 units.

In 2020, we launched additional smart Bauhinia kitchen products in the market. Smart appliances in this line include stoves, water heaters, range hoods and space heaters. All are equipped with Internet of Things functions that customers can control with an app. Another smart appliance launched during the year was

a cooking appliance with an intelligent temperature control function for enhanced safety, which will automatically shut off when the temperature exceeds a pre-set level.

Mia Cucina, our Total Kitchen Solution of premium kitchen

equipment and cabinets, achieved sales of over 9,400 sets in 2020 at a value of more than RMB90 million. Our marketing focus continued to be on residential projects during the year, and we negotiated with major property developers

to install kitchen cabinets in residential complexes in provinces such as Jiangsu, Shandong and Guangdong.

We also enhanced our online services for the greater convenience of our customers. On our online platforms, customers can now manage their gas accounts, make maintenance appointments, pay gas bills and enjoy other services, or even go e-shopping. In addition, we have adopted new technologies to provide smart kitchen solutions, such as an Intelligent Kitchen Helper service that we pilot tested in 2020. With this new service, customers can "talk" to our smart speaker and gain access to our online services, monitor their appliances or shut off gas valves.

The Hong Kong and China Gas Company Limitedw Annual Report 2020

During the COVID-19 epidemic, we saw a surge in demand for online shopping. This benefitted our e-commerce platform, Towngas Lifestyle, which achieved total sales of RMB18.78 million in 2020, a nearly fourfold increase over the previous year.

With Towngas Lifestyle, we offer a total home solution ranging from cooking and health tips to high quality home accessories, kitchenware, seasonal and festive food, insurance and a new housework service that includes cooking and cleaning.

Providing high quality service has always been our competitive advantage as we take care of our customers along the journey from purchase to delivery and offline interactions. During the year, we set up a Home Lifestyle Centre in Suzhou for offline engagement with our customers and as a business sharing platform for training the staff of our service providers and

partners. In future, we plan to launch more outlets to reach a total of 50 outlets in 2021.

Ensuring Gas Safety

Safety, as always, is our greatest priority. This was particularly challenging in 2020 with the outbreak of COVID-19 and its associated risks to our stakeholders. In accordance with our enhanced health and safety guidelines, we not only offered adequate protective equipment for our employees but also implemented a variety of measures on our premises. These included stepping up our cleaning procedures and limiting access to our offices and plants by visitors in order to minimise the risk of infection.

To ensure the safety of our customers, we continued to carry out proactive gas inspections in their homes and businesses, although the number of these inspections was lower

than in previous years due to the epidemic. We also utilised online channels, including popular social media platforms such as WeChat and Tiktok, to promote gas safety to the public.

With "Preventing Risks and Ensuring Safety" as our theme for 2020, we made every effort to strengthen our safety management and maintain the highest standards of safety.

In 2020, the number of general managers' safety inspections increased from once a month to twice a month. In total,

45 safety audits were conducted to identify potential risks for rectification, with public health information added as one of the inspection and audit items. To demonstrate our commitment to safe production, we also promoted responsibility for production safety, which all project companies were required to implement.

During the year, no serious gas incidents were reported. The number of cases per 100 km of third-party damage and gas pipe network leakages declined by 14 per cent and 11 per cent respectively.

Even during the COVID-19 epidemic, our technicians continued to carry out regular inspections of our gas infrastructure to ensure public safety.

SPREADING GOOD VIBES

HONG KONG

GAS

BUSINESS

Following the outbreak of COVID-19, more and more of our customers went online for shopping and cooking tips. Our new e-commerce platform, Towngas Fun, and the top-of-the-town Towngas Cooking YouTube channel featuring celebrity chefs were especially popular.

HONG KONG GAS BUSINESS

The outbreak of COVID-19 in early 2020 deeply affected our commercial customers, particularly those in the catering, hospitality and tourism sectors. Despite this challenging environment, we continued to supply our customers with reliable, clean energy for their needs. As a socially responsible company, we also helped businesses experiencing financial difficulties because of the pandemic and extended our care to those in need through our community initiatives.

A Year of Continuing Challenges

Year 2020 was again remarkably difficult. The Hong Kong tourism and hospitality sectors were severely affected by the COVID-19 pandemic, as tourist arrivals dropped substantially. Social distancing and venue closures also dealt a heavy blow to companies in the restaurant trade as well as the clubhouse and party room business, many of which are consumers of town gas. At the same time, we saw a significant increase in residential gas demand with large numbers of people working from home, many of whom used gas for cooking and heating water.

During the year, the volume of commercial and industrial (C&I) gas sales decreased notably, but this was partially offset by an increase in residential sales. Total volume of gas sales was approximately 27,947 million MJ, a slight decrease of 2.7 per cent from the previous year. The number of new customers in 2020 rose only by 10,050 accounts to over 1.94 million, as a result of delays in new housing move-ins.

Exploring Opportunities in a Demanding Market

In the tourism sector, travel restrictions led to a drastic decline of 93.6 per cent in the number of visitors, while hotel occupancy rates experienced a precipitous drop from 79 per cent in 2019 to 46 per cent. Both trends had a serious impact on our gas sales, particularly to our C&I customers who prepare in-flight meals or provide laundry services.

Our integrated Primary Air-handling Unit was installed at H Zentre to help reduce energy consumption and improve indoor air quality.

The Hong Kong and China Gas Company Limitede

Annual Report 2020

SUPPORT

FOR THE CATERING INDUSTRY

DURING COVID-19

Among the most affected by COVID-19 were our C&I clients, especially those in the catering and restaurant industry. To assist these mostly small and medium-sized businesses, we

distributed about 40,000 bottles of nano photocatalytic spray so that they could disinfect their premises and help restore customer confidence about dining-in.

In May 2020, we launched the Supporting F&B and the Economy campaign. We distributed complimentary dining coupons under our newly launched loyalty programme, Towngas Fun, to increase patronage. Also, we provided aid to qualifying restaurants in the form of an interest-free kitchen equipment rental and purchase scheme.

Despite the negative business environment for hotel operators, new hotels continued to open in 2020, such as The Hari Hong Kong and Sheraton Hong Kong Tung Chung Hotel, along

with several other new hotel development projects that secured the installation of gas applications for hot water, cooking as well as dehumidification.

In a similar vein, the social gathering ban during the pandemic led to school suspensions and the closure of venues such as two theme parks, public swimming pools and sport stadiums. The expansion of the two theme parks was also delayed, while a project was temporarily put on hold. Nevertheless, we continued to identify emerging opportunities in our C&I business with the

conversion of ageing diesel boilers to use town gas.

An exceptionally promising market is for a gas-fired desiccant dehumidification system we developed, which enhances humidity control and provides significant improvements to indoor air quality. This compact integrated Desiccant+Primary Air-handling Unit (D-PAU) has already been installed at H Zentre

Hong Kong Gas Business

Towngas Fun, our new membership programme combined with online redemption platform, allows members to earn points and redeem special offers.

Our top-of-the-town professional flame cooking platform, the Towngas Cooking YouTube channel, was launched to help audiences become culinary experts.

on Middle Road and in the patient ward area of Hong Kong Baptist Hospital. The system can meet higher hygiene standards by integrating other air quality control devices for filtering fine particles and eliminating microbes.

Potential users for our D-PAU system include hospitals with hydrotherapy pools and operating theatres, hotels, office buildings, pharmacies, laundries, rehabilitation centres and homes for the elderly. As Hong Kong has a massive plan for hospital development, the potential for gas dehumidification application will be substantial.

Building a Contemporary Home

Our branded gas appliances are favoured for their quality and smart features as well as the backing of our service professionals.

Our kitchen appliances are especially well received among customers for their convenience and safety. In keeping with our Smart Kitchen concept, we have developed a cooking appliance with anti-scorch function as well as another series of models that can be remotely controlled through a mobile app. As the demand for Internet of Things- enabled smart home grows, we will continue to launch more innovative products with smart features.

In 2020, we achieved satisfactory sales for our Mia Cucina line of kitchen cabinets, which are popular among residential customers as well as property developers for their high quality. To promote sales, we showcased different Mia Cucina kitchen projects and shared design tips on digital platforms in addition to conventional channels, with the aim of providing design inspiration and increasing brand awareness among customers planning to renovate their kitchens.

Our desiccant dehumidifier entered the residential market for the first time during the year. We see the market potential for this new gas consumption application in the luxury

The Hong Kong and China Gas Company Limitedr Annual Report 2020

residential sector. In addition to protecting cloakrooms, wine cellars, furniture and valuable works of art, our desiccant dehumidification system improves indoor air quality and comfort levels, while reducing electrical load and overall energy costs.

Marketing under the New Normal

During a challenging year when people's lifestyles changed as a result of the COVID-19 pandemic, our sales and marketing teams came up with a variety of innovative promotions to keep Towngas top of mind among consumers.

To build customer loyalty and generate additional online revenue, we launched an exciting new membership programme titled Towngas Fun with redemption offers. The programme is designed to provide not only value-added services to our customers but also publicity exposure for participating merchants.

2o2o RESULTS oF ToWNGAS SERVICE PLEdGE

Speed and	Handling
Convenience	Suggestions
Customer	Reply within
Service Hotline	3 working days
(calls answered	100%
within 4 rings)

Reliability

Uninterrupted gas supply (over 99.99%)

99.99%

3 days' prior

	Appointments	Service
Safety	Availability of	Quality
maintenance	Efficiency*
Emergency Team
and installation
9.00
average arrival	services within

time (within	2 working days
Courteous and
25 minutes)	Average

96.10%

Connect or disconnect gas supply within

1 working day (upon customer's request)

Resolution,

or a statement of how and when the matter will be resolved, within 2 weeks

100%

notification in case of supply interruption on account of maintenance or engineering work

100%

Restoration of gas supply within 12 hours

99.99%

Average	1.21 days	friendly attitude*
21.57	8.98

minutes

The result was based on surveys conducted by an independent research company. Our target is to exceed a score of 8.5 out of 10.

100%

Deposit refunded at Customer Centres 2 hours after disconnection

of gas supply (upon customer's request)

100%

Hong Kong Gas Business

Number of Customers

Company (Thousand)

2,000

1,900

1,800

1,700

1,600

1,500

1,400

1,300

1,200

1,100

1,000

16 17 18 19 20

In 2020, we unveiled the top-of-the-town Towngas Cooking YouTube channel as a platform for flame cooking with celebrity chefs and experts. Topics included green and healthy diets, training for domestic helpers, and cooking tips for parents. Additionally, under the "new normal" of social distancing, the Towngas Cooking Centre offered a series of live cooking classes online, with ingredients for the courses delivered to participants' homes in advance.

Achieving

Service Excellence

Innovation continued to play a key role in improving our productivity and service quality. One of our innovations is our artificial intelligence (AI) Chatbot that can handle customer enquiries and requests for gas services regardless of location and time. For the convenience of

our customers, we introduced a new Wi-Fi/BLE (Bluetooth low energy) series during the year as an upgrade of our Smart Metering System. With this new device, meter readings can be done automatically and sent to

our system via home Wi-Fi or Bluetooth.

During the year, we received over 5,800 compliment letters. In recognition of our service excellence, we received the Sing Tao Service Awards - After Sales Services award for the 12th year, and East Week's Hong Kong Service Awards - Public Utilities for the 10th year.

Expanding Gas

Supply Network

Our comprehensive network infrastructure is well regarded for its safe and reliable supply. To maintain a high level of supply reliability, we have been forming

ring-feedtransmission network in the New Territories. The last 9 km of transmission pipelines linking Tuen Mun and Tsuen Wan were mostly completed in 2020, with commissioning expected in 2021.

The announcement of two new railway developments, the Tung Chung West Extension and Tuen Mun South Extension, in 2020 will ultimately bring us about 20,000 potential customers. Work on these two projects is scheduled to commence in 2023.

We are also undertaking the construction of a ring-feed supply network to the Airport Island and Ocean Park in order to increase supply security. Despite COVID-19, works progressed smoothly during the year. Additionally, in 2021 we will start a network upgrading project for all of Wong Chuk Hang District.

Innovation and Safety

During the year, we continued to conduct regular gas leakage surveys, monitor third-party construction activities and replace ageing pipes in our network. The number of leaks reported by the public in 2020 again reached a record low for a third consecutive year. Third-party damage dropped to the single- digit level again, as compared with approximately 100 cases per year two decades ago.

Number of Customers per km of Mains

Company

570

560

550

540

530

520

510

500

16 17 18 19 20

The Hong Kong and China Gas Company Limitedt Annual Report 2020

To maintain a high level of safety, we use the sophisticated Supervisory Control and Data Acquisition system for monitoring and controlling our pressure-regulating stations and network. Other advanced gas detection technologies

include the use of drones to scan and take videos to identify potential risks of pipe corrosion.

When analysing X-ray films of weld joints on steel pipes, we have been exploring the use of machine learning and AI to help

identify any welding defects and improve the efficiency of quality checks. AI is also being used to monitor third-party construction works carried out in the vicinity of strategic gas pipelines.

Towngas Network in Hong Kong

Guangdong

LNG Terminal

SHENZHEN

			Sheung
			Shui
				Fanling
Yuen Long	NEW TERRITORIES	TAI PO PLANT

Tin Shui Wai
	Au Tau
Tuen Mun			Chuen Lung	Ma On Shan	Sai Kung


Tai Lam Kok			Tsuen Wan	Sha Tin

		Tsing Yi
Ta Pang Po					MTK PLANT
				Kwun
Chek Lap Kok	Hong Kong	KOWLOON
			Tong	Tseung
	International
Tai Ho				Kwan O
Theme Park


Tung Chung			HONG KONG ISLAND
LANTAU ISLAND				Wong Nai Chung Chai Wan

Stanley

Existing	Planned	Planned high	High pressure or	Existing	Existing	Existing submarine
areas of	new areas	pressure or	intermediate pressure	high pressure	intermediate	pipeline from
supply	of supply	intermediate	pipelines under	pipelines	pressure pipelines	Guangdong LNG
		pressure pipelines	construction			Terminal to Tai Po plant

FROM WASTE INTO TREASURE

NEW ENERGY

AND DIVERSIFIED

BUSINESSES

ECO is refining its technology to produce cellulosic ethanol, an advanced biofuel, from agricultural waste. When this process is proven successful at a pilot plant now under construction, ECO will become a world leading producer of advanced biofuels, including hydro-treated vegetable oil and cellulosic ethanol.

NEW ENERGY AND DIVERSIFIED BUSINESSES

The demand for sustainable energy as a means of combatting climate change is growing across the world. ECO's business is helping to meet this demand by turning low-valuewaste-based feedstock from renewable sources into high-value products. Through our proprietary technologies, we are providing sustainable solutions that will help to decarbonise our world and make it a better place for future generations.

ECO: A Leader in

Green Energy

ECO Environmental Investments Limited (ECO) was established in Hong Kong in 2000 under the concept of "turning waste into treasure". Starting with early initiatives to produce clean energy from waste sources, ECO has extended its range of clean products to cover fuels, chemicals and other renewable materials.

Guided by the vision of a carbon neutral world, our business development is powered by the innovative endeavours at our research and development bases in Shanghai and Suzhou. As several of our key research projects come into fruition, ECO is emerging as a global forerunner in the green industry,

ECO established research and development bases in Shanghai and Suzhou to develop products related to advanced biofuels and eco-friendly materials.

with solutions that address the environmental challenges associated with climate change.

ECO is focusing on businesses related to the development of clean, renewable energy from biomass, including inedible bio-grease and agricultural waste. At present, these businesses comprise a bio-grease utilisation project in Jiangsu province and two biomass utilisation projects in Hebei province.

In the third quarter of 2020, our hydro-treated vegetable oil (HVO) project went into full

production. This project has been performing well despite the challenges of COVID-19.

Using patented technologies developed in-house, ECO produces HVO accredited under the International Sustainability and Carbon Certification Scheme that is capable of reducing carbon emissions by 90 per cent. The product is exported to EU markets, where it helps to meet the EU's latest targets under Renewable Energy Directive (RED) II and its commitment

to reduce emissions under the Paris Agreement.

The Hong Kong and China Gas Company Limitedy Annual Report 2020

The second phase of the HVO project in Zhangjiagang, Jiangsu province was fully commissioned, expanding its annual production capacity to 250,000 tonnes of HVO.

After only a few months in operation, the HVO facility produced around 88,000 tonnes of HVO, of which 90 per cent was sold to customers in Europe in 2020. With the proven success of our processes and technologies, we are now planning to further increase our HVO production capacity.

Additionally, we plan to upgrade the processes at our HVO facility to enable the production of sustainable aviation fuel (SAF). We believe that SAF will become one of the key pillars for achieving carbon neutrality in

a global context and thus has huge market potential.

Also during the year, two new plants were under construction in Hebei province. Both facilities will make use of our patented hydrolysis and saccharisation technologies to convert locally collected agricultural waste, such as corn cobs and straw, into a wide variety of useful bio-chemical products.

The first plant will commence trial production in the second quarter of 2021, when it will begin producing furfural and paper pulp. This will create a solid foundation for a whole new range of bio-products.

The second plant, also in Hebei, is expected to commence trial production of furfural and cellulosic ethanol in the fourth quarter of 2021. Cellulosic ethanol is yet another advanced biofuel, as defined under the EU RED II framework, which can be added to gasoline to reduce its carbon emissions. With the successful completion of this facility, ECO will emerge as a forerunner in the economical production of cellulosic ethanol on a commercial scale and will likely be the only company worldwide capable of producing both HVO and cellulosic ethanol.

Recognising that the world is looking for a viable supply of green hydrogen, we are now exploring the possibility of adapting our patented biomass gasification technology to

produce hydrogen-rich gas from agricultural waste. The success of this technology will have profound implications for a hydrogen-based economy, as green hydrogen will then become readily available wherever agricultural waste can be conveniently collected in fields surrounding urban areas.

Going forward, ECO will continue to pursue the expansion of its low-carbon business, powered by its ground-breaking technological innovations.

Telecommunications

We operate telecommunications businesses in both Hong Kong and mainland China through Towngas Telecommunications Company Limited, a wholly- owned subsidiary of the Group, and its subsidiaries (collectively known as "TGT"). With solid infrastructure and resources, TGT provides services for Hong Kong, mainland China and international telecommunications service providers, operators, and corporations.

Today, TGT has grown into a company with seven world-class data centres across Hong Kong and mainland China, offering

New Energy and Diversified Businesses

Together with Henderson Land Development, TGT launched the Smart Mall service to provide customers with a stable, high speed 5G mobile communication experience at a shopping mall in Ma On Shan.

strong connectivity and advanced data services such as fog and cloud computing.

One of TGT's strongest competitive advantages is its Glass-In-Gas technology, which allows optical fibres to be installed within our extensive gas pipe network for a more cost-effective,interference-free alternative to traditional road opening methods. This technology is now also being applied in mainland China, where we obtained approval from the China Gas Association for our Technical Standards for Laying Fibre Casing Pipe in Gas Pipeline.

In April 2020, TGT cooperated with Henderson Land Development Company Limited (Henderson Land Development) to introduce the 5G Sharing System at nine shopping malls of Henderson Land Development. The system offers high speed, low latency and stable 5G mobile services as well as related applications for the convenience of customers. The project earned the Best 5G Connected Arena - Gold Award in the 2020 CAHK STAR Awards. TGT is currently preparing to develop 5G services for use in the public areas of residential premises.

Information Technology

Our wholly-owned subsidiary, S-Tech Technology Holdings Limited (S-Tech), was established to provide our city-gas companies with information technology that supports customer service management. Today, this business is engaged in cloud software development, solutions implementation and systems integration services, which enable our city-gas businesses to manage their advanced customer service and gas piping network systems more efficiently.

The Towngas Customer Information System (TCIS) developed by S-Tech covers 87 per cent of the Group's city-gas companies on the mainland. Of these, 89 per cent are using the latest cloud version of the system, which helps them reduce operational costs, shorten development cycles and provide quality services to more than 17 million customers. The TCIS has now been updated

to accommodate data uploads and downloads from millions of smart meters. In 2020, the cloud and non-cloud based versions of TCIS3.0 were implemented in

city-gascompanies, achieving

per cent availability (service- level agreement: 99 per cent).

During the year, S-Tech launched the TCIS3.0 and mobile application project with Changchun Gas Co., Ltd. (Changchun Gas), a major city-gas project of the Group in Jilin province serving more than

1.6 million customers. Changchun Gas plans to adopt S-Tech's mobility application, paperless customer service office and Artificial Intelligence Call Centre system with the TCIS3.0 for their Smart Gas projects and Towngas Total Solution+.

Civil and Building Services Engineering

U-Tech Engineering Company Limited (U-Tech) is a wholly- owned subsidiary of the Group providing consultancy and engineering contractor services

The Hong Kong and China Gas Company Limitedu Annual Report 2020

in Hong Kong and Macao. These services include utilities installation, infrastructure construction and civil and building services engineering for public and private projects.

During the year, U-Tech acquired a landfill gas pipe construction contract from Chun Wo Construction and Engineering Company Limited for South East New Territories Landfill Extension in Tseung Kwan O. Other contracts were secured in 2020, including a fire services installation works project for a residential development at Un Chau Street by Henderson Land Development under the Urban Renewal Authority, as well as the supply and installation of electrical works for Henderson Land Development's residential development on Seymour Road.

In addition, U-Tech continued to construct district cooling mains for the Electrical and Mechanical Services Department at Kai Tak Development Area.

Manufacturing

M-Tech Metering Solutions Company Limited (M-Tech) is a wholly-owned subsidiary of the Group that develops and markets smart gas meters. It takes advantage of rapid developments in advanced technology, including Micro-Electro Mechanical Systems (MEMS) and Narrowband Internet of Things (NB-IoT), to provide products with wider measuring ranges and smart features.

In 2020, M-Tech incorporated NB-IoT into its residential and commercial MEMS meters.

Connected seamlessly with the TCIS3.0 platform, the NB-IoT meters allow mobile payments, automatic meter readings, remote valve shut-off and other safety monitoring functions. These smart meters have become widely accepted by household users and restaurant clients. During the COVID-19 epidemic, they enabled gas companies to obtain meter

U-Tech's advanced trenchless approach to tunnel boring is being used to install cooling pipes for the District Cooling System at Kai Tak Development Area.

readings without accessing customers' premises.

M-Tech is also developing other advanced meters and meter accessories such as filters and connecting pipes, to offer customers a complete solution package.

Another wholly-owned subsidiary of the Group, G-Tech Piping System (Zhongshan) Company Limited (G-Tech), supplies high-quality polyethylene (PE) piping and related ancillary products with the support of GH-Fusion Corporation Limited, a joint venture between Towngas and Fusion Group (United Kingdom) specialising in PE fittings.

G-Tech has a wide range of quality products to meet the different needs of national and international markets. The PE ball valve fittings we launched in 2019 achieved satisfactory sales among our city-gas projects. Although the COVID-19 pandemic in Europe slowed down export sales of PE fittings in 2020, market growth in mainland China made up the shortfall.

G-Tech's production sites are located in Zhongshan, Guangdong province and Maanshan, Anhui province, which had a total production capacity of up to 20,000 tonnes of pipes at the end of 2020. Together with its two logistics centres, G-Tech offers quality products, high distribution efficiency and excellent customer service.

SHARING THE WARMTH

SUSTAINABILITY

As financial pressures mounted during the COVID-19 pandemic, we launched the Towngas Love on Delivery programme and distributed 30,000 fresh food packs to 1,000 families who required immediate relief with food expenses.

SUSTAINABILITY

As a leading utility company in Hong Kong and mainland China, we take our responsibilities to stakeholders very seriously. Guided by our Environmental, Social and Governance (ESG) framework, Towngas has a commitment to sustainability that extends to how we conduct our business, ensure health and safety, protect the environment, serve the community and strengthen corporate governance. Our aspiration is to become one of the greenest and most esteemed companies in Hong Kong and mainland China.

A Leader in Sustainability

In recognition of our sustainability efforts, Towngas has received an average of over 50 awards each year since 2015. In 2020, we were ranked first on both the Greater Bay Area Business Sustainability

Index (GBABSI) and the Hong Kong Business Sustainability Index organised by The Chinese University of Hong Kong Business School's Centre for Business Sustainability. We were also the only company on the

GBABSI to be ranked at the highest Exemplar tier. These rankings acknowledge our commitment to ESG.

Our corporate governance and business practices are guided by sound business ethics. During

GREEN PROMOTION

DURING COVID-19

During the year, working from home as well as online shopping and learning became the "new normal". To engage our customers and the public on the subject of environmental protection, we made greater use of digital platforms such as Facebook, Instagram and other social media. One example is our Towngas Low Carbon Action! page on Facebook for sharing green information, tips and recipes, as well as promoting green events by our company and environmental groups. Workshops, quizzes and thematic webinar were also held online

to promote environmental awareness.

The Hong Kong and China Gas Company Limitedi Annual Report 2020

			Greenhouse
			Gas
			Emissions
Air Quality		Greenhouse
Total NOx output		gas emissions
	from major gas
was 4 kg/TJ
	production
of town gas		equipment were
		344,549
Total SOx output
	metric tonnes
was 0.01 kg/TJ		in terms of CO2
of town gas		equivalent

Total CO2 output		Carbon
was 11.9 metric		Intensity
tonnes/TJ of		of Gas
town gas		Production

			0.592 kg CO2e/
		unit of town gas;
			reduced by 23%
			compared with
		2005

Ozone

Layer

Protection

All of our vehicle air conditioning systems now operate with refrigerant R134A

All BCF portable fire extinguishers have been replaced with dry powder extinguishers

The central chiller plant system in our North Point headquarters and Ma Tau Kok building are operated

with HCFC-free refrigerants

KEY

ENVIRoNMENTAL

PERFoRMANCE

IN 2o2o (HoNG KoNG)

All major legal requirements relating to environmental protection were fully complied with.

Chemical		Noise
Waste	Water	All installations
Total chemical	and operations
Quality
waste output	complied with

was 2 kg/TJ	Total waste	the statutory
requirements
of town gas	water output
was 3.5 m3/TJ
	No noise
	of town gas
		abatement
		notice has ever
		been received

the year, we complied with laws and regulations that have a significant impact on the Group.

Protecting

the Environment

With the growing concerns about climate change across the world, many global leaders have set out strategies for reducing carbon emissions in accordance with the Paris Agreement signed in 2016. At the United Nations

General Assembly in September 2020, mainland China declared it would aim to peak its carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060.

At Towngas, we are committed to this vision through our core businesses of providing cleaner forms of energy, in many cases by assisting our customers

to switch from fuels such as coal to natural gas, which

lowers carbon emissions by about 40 per cent. With our focus on innovation, we have also pioneered a number of alternative energy projects, such as advanced biofuels, that help to conserve resources and reduce pollution.

Our Journey to

a Low-carbon Future

Our environmental policy guides us in how we conduct our business. Since the 1970s,

Sustainability

we have been utilising naphtha, a clean oil product, to replace coal and heavy oil as our production fuel in Hong Kong. We have also introduced natural gas and landfill gas in our fuel mix, which has further reduced our carbon footprint. Greenhouse gas emissions from the production and consumption of town gas represent only about 1 per cent and 3.8 per cent of Hong Kong's total emissions respectively.

In mainland China, our city-gas projects help the country to build a cleaner environment by providing low-carbon, highly efficient and economical energy solutions. One such initiative is our business in Distributed Energy Systems, which offer an energy efficiency rate of up to

80 per cent and can supply power and heat for both industrial parks and residential districts. We are also developing a smart energy business, which combines photovoltaic power generation with power storage functions and harnesses the Internet and big data in analytics and management systems in order to achieve higher energy efficiency and reduce emissions.

Our agricultural waste utilisation pilot project in Tangshan, Hebei province, produces high-value chemical products with patented biomass gasification technology.

As the first energy utility in Hong Kong to issue a green bond, we have dedicated considerable resources towards the development of green technologies. These include converting waste into energy or other valuable materials, such as biomass-based vehicular fuels and chemical products. Our plant in Jiangsu province is currently in full operation with an annual production capacity of 250,000 tonnes of hydro-treated vegetable oil. Given the success of this project, we plan to upgrade our facilities with the capability to produce sustainable aviation fuel. We are also exploring the possibility of using our patented biomass gasification technology to produce hydrogen-rich gas from agricultural waste.

During the year, the Group incurred over HK$180 million in total research and development related expenditures in

Hong Kong and mainland China.

In the future, we will bring more green projects that contribute to a carbon neutral world on stream.

Additionally, we have implemented the recommendations of the Task Force on Climate-related Financial Disclosures and conducted a gap analysis to examine our current practices against these recommendations. Various risk assessments and management exercises were also conducted to ensure we remain resilient to climate change.

Promoting Green Awareness

On an ongoing basis, we support education initiatives and events by environmental groups, although many were either postponed or cancelled due to social distancing during the pandemic. We also continued our Plantation Enrichment Project with The Green Earth to maintain biodiversity in country parks at a new planting site at Shing Mun Country Park. Other green programmes in which we

The Hong Kong and China Gas Company Limitedo Annual Report 2020

We distributed fresh food packs to families in need during the Towngas Love on Delivery programme.

The Towngas Volunteer Service Team joined over 100 welfare organisations to deliver mooncakes to the elderly and disadvantaged.

CARING INITIATIVES IN 2o2o

Towngas Concession Schemes

benefit the elderly, people with disabilities, and single-parent and low-income families

Total gas concessions:

HK$26 million

Total beneficiaries:

Over 45,000 households

Festive Foods for the Community

Rice dumplings distributed:

154,300

Mooncakes delivered:

130,500

Donations to Support Community Activities

HK$7.9 million

Number of volunteer hours

Hong Kong: 16,633

Mainland China: 714,300

participated included WWF's Earth Hour, which calls on the public to switch their lights off for one hour to combat climate change, and the Used Clothes Recycling Bin Design Competition for primary and secondary students with Friends of the Earth (Hong Kong).

Serving the Community

We make every effort to care for the community and provide services that improve public

health, social integration and personal wellbeing. During the COVID-19 pandemic, we maintained our caring intiatives through a wide range of volunteer and philanthropic activities to serve the elderly and help the disadvantaged.

Love on Delivery

Together with the Christian Family Service Centre, Towngas launched the Love on Delivery programme for underprivileged families suffering financial

hardship as a result of job loss or underemployment due to COVID-19. From May to December 2020, 30,000 fresh food packs were distributed to 1,000 families. As volunteer visits were not possible during the pandemic, we offered our voluntary services online.

We also organised small-scale interactive contests and published information on Towngas job openings, health, gas safety, and home repairs.

Sustainability

Unemployed

Support Scheme

To help people in the community who had lost their jobs as a result of the economic downturn, we set up the Unemployed Support Scheme. Short-term employment opportunities were offered under the scheme to about 60 job seekers. Selected candidates who demonstrated outstanding performance were offered a one-year contract after completing their short-term jobs with us.

Mad Dog Café

Charity Programme

In the past, our employees prepared foods to raise funds for the annual Mad Dog Café charity programme. Although the event had to be cancelled in 2020 due to the pandemic, the Company contributed funds towards the

purchase of air purifiers, which were much in need for sanitising care homes for the elderly and disabled.

Mainland Caring Initiatives

To deal with the challenges of COVID-19, we donated health supplies and medicine to mainland hospitals as well as medical staff and their families. These included supplies such as face masks, medical gloves, protective clothing, goggles and disinfectant as well as financial assistance. Health education programmes were also organised in local districts across the country.

Our project companies also rolled out various initiatives in their cities. In Anhui, Guangdong, Liaoning and Shandong provinces, for instance, they waived gas bills or donated

appliances for medical staff who had been dispatched to Hubei province, while in Suzhou our volunteer team distributed food to the families of medical workers. When discovering that blood banks were understocked during the epidemic, our companies in cities such as Guangzhou, Tongling and Fuxin, initiated a blood donation drive and called on all healthy and eligible employees to participate. Another programme, the Bauhinia Action initiative, was launched to meet the basic needs of underprivileged families in 26 cities, including donations of gas appliances and daily necessities.

In 2020, we once again organised activities for the Gentle Breeze Movement programme. These included donations of school

We donated stationery and teaching supplies to schools in Qijiang, Chongqing under the Gentle Breeze Movement programme.

Volunteers from our project companies participated in anti-epidemic work in communities during the early phase of the COVID-19 outbreak.

The Hong Kong and China Gas Company Limitedp Annual Report 2020

Revenue per Employee

Company (HK$ thousand)

5,000

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

16 17 18 19 20

supplies and stationery

in Qijiang, Chongqing, where we also distributed 2 tonnes of rice from our Towngas Bauhinia Farm to 22 primary schools. During

a visit to a primary school in Qingyuan, Guangdong province, we delivered school supplies such as computers, desks, chairs and physical education necessities. Our volunteers also helped set up a Towngas China Charity Library and repaired the school's facilities.

Building a Sustainable Workforce

We strive to retain and nurture our people by providing a desirable work environment that enables them to develop a fulfilling career with us. To help our employees achieve better work-life balance, we implemented flexible working hours at the beginning of 2020. In addition, we enhanced our medical benefits in Hong Kong

and provided additional insurance coverage in mainland China related to the coronavirus.

Protecting Our Staff against COVID-19

With the outbreak of COVID-19, our primary concern was to minimise the risk of infection among our staff and to keep them healthy.

For our employees and contractors, particularly frontline technicians who had to visit customers' homes, we provided appropriate protective gear and disinfectant supplies. To reduce employees' potential exposure at work and during their daily commutes, we introduced work-from-home arrangements and offered flexible working hours. Some non-emergencyon-site services, such as regular safety inspections and meter readings, were suspended.

We also required employees to quarantine themselves under specified circumstances and offered free tests if it was thought that they had come into contact with suspected COVID-19 cases.

During a year of global economic downturn and the worldwide COVID-19 pandemic, we organised training programmes under the theme of "Overcoming Challenges" to equip our staff with a positive mindset, skills and knowledge. In keeping with our work-from-home arrangements

and social distancing practices, we replaced many of our face-to- face activities with online platforms and webinars or adopted blended training methods that combined online learning with smaller face-to- face classroom sessions. We also produced new in-housee-learning videos and online training programmes, which were shared on our Smart Learning System. Topics included work practices during COVID-19, coaching and communication skills, as well as sales skills, among others. In 2020, we provided an average of 17.5 hours of training per employee in Hong Kong.

Developing

the Talent Pipeline

To meet the demands of our business development, we are directing our recruitment efforts to candidates of different age groups in various job categories, including both technical and non-technical personnel. Through our apprenticeship training schemes, we continued to recruit and develop young talent to ensure a competent workforce. During the year,

we expanded the scope of our sponsorships so that our apprentices could pursue further studies or academic qualifications.

In support of the Post-50 Internship Programme organised by the Employees Retraining Board, we offered a four-week internship for candidates aged 50

Sustainability

Town Gas Sales per

Employee

Company (million MJ)

16 17 18 19 20

or above to help them develop new skills. For students, we provided the opportunity to gain real-life work experience as summer interns and co-operative trainees and, in 2020, recruited 95 of them for the programme. Moreover, we launched a graduate trainee programme for mainland China in which young candidates were selected to train as future managers in our mainland utility businesses.

The Towngas Engineering Academy provides professional training to our technical staff, gas technicians, contractors and new joiners. This training underlies our excellent reputation for gas safety and customer service and helps attract young people to the gas industry. During the year, the apprentices in our gas utilisation, network and mechanical engineering training schemes won the Outstanding Apprentice Award organised by the Vocational Training Council

(VTC), which reaffirmed the high calibre of our apprentices and effectiveness of our training approach.

In addition, we sponsored apprentice graduates and frontline staff for the Diploma of Vocational Education in Gas Services Engineering. This diploma, which has been accredited by the Institution of Gas Engineers and Managers (IGEM), enables apprentices and our staff to acquire the professional EngTech MIGEM qualification. For our Professional Diploma in Gas Engineering programme, a second intake of 30 students started their studies in August 2020 at VTC.

Occupational

Safety and Health

Our usual work of promoting health and safety did not come to a stop during the pandemic. In 2020, we strengthened our operational safety measures and improved our standards of health, safety and environmental management. We also continued our audits to identify hidden hazards for rectification in a timely and effective manner.

Our online fitness programmes featured yoga and Pilates exercises, encouraging our staff to maintain a healthy lifestyle while working from home.

During the year, we held a seasonal Occupational Safety and Health (OSH) Promotion series, with training sessions organised every quarter in topics such as infectious disease control, prevention of heat stroke, and work stress management. We also continued our subsidised flu prevention programmes in Hong Kong, with 326 employees and their family members participating in the vaccination programme.

For contractors, we organised OSH programmes, which included training courses and the Safe Foreman Award, to promote accident prevention and OSH focused supervision.

Engaging Stakeholders

We regularly engage in ongoing dialogues with our stakeholders as we understand that as a sustainable organisation we must have their support.

The Hong Kong and China Gas Company Limiteda

Annual Report 2020

KEY ENGAGEMENT

INITIATIVES IN 2o2o

	•	Innovation Funding to encourage employees to propose innovative ideas
EMPLoYEES	• Annual Quality Festival including an online seminar and a visit to a pulp mill
	that recycles beverage cartons

	•	Internal newsletters

CoNTRACToRS ANd SUPPLIERS

e-TenderingSystem that managed 5,000 global suppliers
Supply Management and Research Topics Programme in mainland China, with awards to encourage suppliers to submit proposals that improve product competitiveness
Seminars and workshops

	•	Online channels such as our website, social media platforms and Towngas App
CUSToMERS	•	Customer Focus Team with online safety talks
	•	Monthly surveys on our performance of services and products

LoCAL	•	Green partnership and sponsorship programmes
• Charity and community programmes
CoMMUNITIES
•	Towngas Volunteer Service Team


	•	Annual General Meeting
	• Investor and securities analyst briefings for annual and interim results
INVESToRS	•	Conferences and meetings with investors, securities analysts and
		credit rating agencies
	•	Local and overseas roadshow meetings

From what we learn in our discussions with stakeholders, we are able to formulate strategies that address their concerns, minimise our risks and align with their values. At the same time, our diverse communication channels enable our stakeholders to have a better understanding of us, and for our employees, contractors and suppliers in particular to share our values and follow the same principles and standards in how we deliver products and services.

Creating Long-term Value for Stakeholders

At Towngas, we are committed to delivering enhanced value for our stakeholders over the long term by addressing their needs and concerns.

We believe that our long-term focus on creating value will lead to more robust growth and better investment outcomes. This commitment is also reflected in our corporate culture and high standards of corporate

governance, as well as the way we develop our human capital and promote innovation.

With our strong commitment to sustainability, we are confident that we can fulfil our vision of being "Asia's leading clean energy supplier and quality service provider, with a focus on innovation and environmental friendliness."

BUSINESS PROJECTS IN 2O2O

UTILITY BUSINESSES IN MAINLAND CHINA

(City-gas projects re-invested by the Group's Companies are excluded)

Towngas (Stock Code: 3)

Piped City-Gas Projects

Guangdong Province

Panyu

Zhongshan

Dongyong

Shenzhen

Chaoan

Chaozhou Raoping

Central China

Wuhan

Xinmi

Eastern China

Yixing

Taizhou

Zhangjiagang

Wujiang

Xuzhou

Suining

Fengxian

Peixian

Danyang

Jintan

Tongling

Suzhou Industrial Park

Changzhou

Nanjing

Fengcheng

Pingxiang

Jiangxi

Zhangshu

Yonganzhou

Hangzhou

Shandong Province

Jinan East

Northern China

Jilin

Beijing Economic-Technological

Development Area

Hebei Jingxian

Northwestern China

Xi'an

Hainan Province

Qionghai

Midstream Projects

Guangdong LNG

Anhui NG

Hebei NG

Jilin NG

Henan NG

Jintan NG (Phase 1)

Jintan NG (Phase 2)

Huanghua Port LNG

Taizhou (District High Pressure

Network)

Tangshan Caofeidian LNG

Terminal (Storage Tanks)

LNG Refilling Station

Nanjing (Marine)

Smart Energy

Photovoltaic

Suqian

Changzhou

Qingdao

Weifang

Foshan

Zhaoqing

Nanyang

Xiamen

Quanzhou

Energy Storage

Dunhuang

Danyang

Energy Savings

Management

Changsha

Water/Waste Treatment

Wujiang

Suzhou Industrial Park

Wuhu

Suzhou Industrial Park

(Industrial Wastewater

Treatment)

Maanshan

Jiangbei

Suzhou Industrial Park (Food &

Green Waste Processing and

Utilisation)

Foshan Water Environmental

Protection

Tongling Food Waste

Treatment

Changzhou Jiashan Waste

Incineration and Power

Generation

Changzhou Wujin Kitchen

Waste Treatment

The Hong Kong and China Gas Company Limiteds Annual Report 2020

Towngas China (Stock Code: 1083)

Piped City-Gas Projects

Guangdong Province

Foshan

Shaoguan

Qingyuan

Yangdong

Fengxi

Eastern China

Nanjing Gaochun

Dafeng

Tongshan

Hubei Zhongxiang

Maanshan

Bowang

Zhengpugang Xin Qu Modern

Industrial Zone

Wuhu Fanchang

Wuhu Jiangbei

Anqing

Chizhou

Tunxi

Huangshan

Huizhou

Tongxiang

Huzhou

Yuhang

Songyang

Changjiu

Fuzhou

Jiujiang

Wuning

Xiushui

Yifeng

Changting

Shandong Province

Jimo

Laoshan

Laoshan Bay

Zibo

Zibo Lvbo

Longkou

Jinan West

Weifang

Weihai

Taian

Chiping

Linqu

Laiyang

Zhaoyuan

Pingyin

Feicheng

Boxing Economic

Development Zone

Yangxin

Wulian

Hunan Province

Miluo

Northeastern China

Benxi

Chaoyang

Tieling

Fuxin

Shenyang Coastal Economic

Zone

Yingkou

Dalian Changxingdao

Dalian Economic and Technical

Development Zone

Anshan

Lvshun

Kazuo

Beipiao

Wafangdian

Xinqiu

Jianping

Changchun

Gongzhuling

Siping

Qiqihar

Hebei Province

Qinhuangdao

Yanshan

Cangxian

Mengcun

Shijiazhuang

Inner Mongolia

Baotou

Southwestern China

Ziyang

Weiyuan

Pengxi

Lezhi

Pingchang

Dayi

Yuechi

Cangxi

Chengdu

Zhongjiang

Jianyang

Pengshan

Mianyang

Xinjin

Xindu

Mianzhu

Jiajiang

Qijiang

Guilin

Zhongwei (Fusui)

Xingyi

Luliang

Liujiang District, Liuzhou

BUSINESS PROJECTS IN 2020

UTILITY BUSINESSES IN MAINLAND CHINA (continued)

(City-gas projects re-invested by the Group's Companies are excluded)

Towngas China (Stock Code: 1083)

Midstream Projects

Xuancheng Huangshan

Taian Taigang

Inner Mongolia Transmission

Pipeline

Jinan-Liaocheng Pipeline &

Chiping South Citygate

Upstream Project

Sichuan Liquefaction of

Shale Gas

CNG Refilling Stations

Qiqihar (Lianfu)

Qiqihar (Xingqixiang)

Distributed

Energy Systems

Sichuan

Shenyang Economic and

Technical Development Zone

Jiawang District, Xuzhou

Qingdao Jimo Chuangzhi

New District

Yangxin Economic &

Technological Development

Zone, Binzhou

Changchun

Guilin

Tangshan Chengnan Economic

Development Zone

Boxing Economic Development

Zone, Binzhou

Xuzhou Biomedical

Industrial Park

Maanshan Economic and

Technological Development

Zone South District

Zhengzhou Xinmi Yinji

International Tourism Resort

Shenzhen Gas Building

Dangtu Economic Development

Zone Northern District

Lishui Songyang Wangcun

Industrial Park

Tangshan Fengnan Lingang

Economic Development Zone

Anhui Electricity Company

Changzhou Photovoltaic

Industrial Park

Eastern Park of Tongling

Economic and Technological

Development Zone

Fuxin Industrial Park

Haicheng Xiliu Textile

Industrial Park

Others

Zhuojia Public Engineering

Towngas Natural Gas Sales

U-Tech (Guang Dong)

Engineering

Liaoning Clean Energy Group

Towngas Cosy Home (Chengdu)

Technological Services

The Hong Kong and China Gas Company Limitedd

Annual Report 2020

NEW ENERGY AND OTHER PROJECTS

New Energy

Coal Mining

Inner Mongolia Ordos Kejian

Coal-Based Chemicals

Jiangxi Fengcheng

Inner Mongolia Ordos

CNG/LNG Refilling Stations

Shaanxi Xianyang

Shaanxi Huitai

Shaanxi Lueyang

Shaanxi Fengxiang

Shaanxi Shenmu

Shaanxi Baoji

Shaanxi Hancheng

Shanxi Yuanping

Shanxi Lingshi

Shanxi Xinfu

Shandong Chiping

Shandong Dongping

Shandong Jiaxiang

Shandong Weishan

Shandong Shanxian

Shandong Linqing

Shandong Heze

Hebei Shijiazhuang

Xingtai (Gangxing)

Xingtai (Xinghua)

Henan Kaifeng

Henan Linzhou

Henan Nanyang

Henan Wuyang

Inner Mongolia Huhhot

Inner Mongolia Wulatezhong Qi

Inner Mongolia

Xiwuzhumuqin Qi

Inner Mongolia Chifeng

Inner Mongolia

Chaha'eryouyiqian Qi

Inner Mongolia Xilingol League

Inner Mongolia Ulanqab Huade

Inner Mongolia Ulanqab Chahar

Inner Mongolia Bayannur

Uradqian Qi

Inner Mongolia Bayannur Linhe

Inner Mongolia Bayannur

Hanggin

Ningxia Jinyintan

Ningxia Zhongwei

Ningxia Zhongwei Haixing

Development Zone

Jiangsu Xuzhou

Anhui Maanshan

Jiangxi Pengze

Guangdong Guangzhou

Upstream Projects

Shanxi LCBM

Jilin Tianyuan

Xuzhou COG

Coal Logistics

Shandong Jining Jiaxianggang

Logistics Port

Biomass

Zhangjiagang

Hubei Jingzhou

Luanzhou

Cangzhou (Biofuel)

Oilfield

Phetchabun Province in Thailand

Telecommunications

Shandong Jinan

Shandong Jinan Chibo

Shandong Laiyang

Xuzhou Fengxian

Xuzhou Peixian

Liaoning Dalian DETA

Dalian Yida

Harbin

Beijing Zhongjing

Beijing Chibo

Dongguan

Shenzhen (Qianhai)

Shenzhen (Interlink Connectivity)

Yingtong TGT Network

Services (Shenzhen)

Others

Shenyang Sanquan

Construction Supervisory

ECO Engineering

Management (Xi'an)

Suzhou Industrial Park

Broad Energy Services

GH Yixing Ecology

Dalian

(New Energy Technology)

M-Tech

GH-Fusion

G-Tech

S-Tech (Wuhan)

S-Tech (Zhuhai)

ECO Engineering

Management (Shenzhen)

Towngas Lifestyle

Towngas Payment Technology

(Shenzhen)

Hong Kong & China Gas

International Energy Trading

Mia Cucina Kitchen Cabinets

(Shenzhen)

Inner Mongolia Ordos

Carbon Material

Towngas Agriculture

Investment (Nanjing)

Tangshan Laundry Factory

Danyang Laundry Factory

Suzhou Industrial Park Suxiang

Cooperation Zone Urban

Utilities Development

RISK FACTORS

In the risks discussed below, we highlight the factors that could have an adverse material effect on the Group's revenues, cash flows, market competitiveness and operations in Hong Kong and mainland China.

For further details on how the Group manages its risks, please refer to the "Risk Management and Internal Control" section of our Corporate Governance Report on pages 80

to 82.

Business Environment

In order to contain the rapid spread of COVID-19 in 2020, widespread global lockdowns were imposed. In many countries, businesses ranging from factories to restaurants closed, which dealt a heavy blow to the economy. Nearly all types of businesses were seriously affected, but the retail, travel and catering sectors were particularly hard hit.

COVID-19 triggered the deepest global economic recession in decades. While the ultimate outcome of the recession is still uncertain, the pandemic will result in contractions across the vast majority of emerging markets and developing economies. It will also affect labour productivity and industrial output.

Hong Kong is still suffering after two years of unprecedented economic weakness triggered by social unrest and the global pandemic. Annual GDP showed a record 6.1 per cent contraction in 2020, following the decline of 1.2 per cent in 2019. This was the first time Hong Kong had posted back-to-back annual contractions since 1962.

In 2020, tourism was almost non-existent. The number of visitors dropped by 93.6 per cent from the decrease of 14.2 per cent in 2019 due to social unrest. Arrival figures dropped to 3.6 million from 55.9 million a year before. The average hotel occupancy rate fell to 46 per

cent in 2020, down from 79 per cent in 2019 (in December 2020, the rate was 58 per cent, mainly due to local staycations and visitors under quarantine). The consumer price index averaged just 0.3 per cent, the lowest in the past 15 years (2.9 per cent in 2019). The unemployment rate surged to

a 16-year high of 6.6 per cent.

Mainland China experienced a very difficult beginning in 2020 but delivered satisfactory results by the end of 2020, after bringing COVID-19 under control.

The country was the only major economy in the world to register growth for the year, with a GDP growth of 2.3 per cent. Despite continuing Sino-US trade tensions, mainland China's total export value increased 3.6 per cent, beating the

0.5 per cent increase in 2019. The Brent crude oil price dropped 35 per cent from an average of US$64 per barrel in 2019 to US$42 per barrel in 2020.

Business challenges faced by the Group included a slowdown in gas demand as a result of the global economic downturn, competition from providers of electricity in Hong Kong and direct sales by upstream gas companies, as well as suppliers of liquefied natural gas (LNG) and alternative energy sources in mainland China. Other threats to our business included drops in oil prices and changes in government policy (political, legal, regulatory, environmental or competition related), all of which could also affect our operations.

Our strategy for dealing with business risks continues to be critical for the sustainable growth and success of the Group. In line with this strategy, we remain prudent in our capital investments and seek ways to improve the productivity and cost effectiveness of all our operations. Credit monitoring is also reinforced to minimise the risk of a customer default.

Furthermore, we are constantly exploring new gas applications and new business opportunities to achieve business diversification in both Hong Kong and mainland China, while maintaining

close communication with our operational partners and governments whose support is essential for our business growth.

In response to the potential impact of COVID-19, a variety of counter measures has been put in place to alleviate the impact on our operations and relieve the operating pressure on our customers, including the granting of a credit period extension. In addition, special measures have been taken to minimise the impact of the pandemic on our workforce, as mentioned later in this section.

Despite the reduction in social unrest in 2020, we continued to put mitigating measures in place to enhance safety and security controls on our premises and gas facilities, while continuing to review and assess our contingency preparedness.

Reliability of Gas Supply

We secure multiple sources of feedstock for the production of town gas in our Hong Kong operations. These include natural gas transmitted from our LNG receiving terminal at Shenzhen to our gas production plant at Tai Po, naphtha imported from places such as Southeast Asia and Australia, and treated landfill gas obtained from our landfill project sites in Hong Kong.

A major risk of interruption to our feedstock supply for natural gas includes the possibility of inclement weather delaying LNG tankers.

We have addressed this risk under our diversified production strategy, in which we have given our Tai Po plant the capability of switching between natural gas and naphtha for feedstock.

The Hong Kong and China Gas Company Limited Annual Report 2020

In mainland China, to facilitate more efficient gas inventory management and reduce supply bottlenecks during high demand periods, we have built LNG storage facilities as well as a natural gas storage facility at our underground salt caverns in Jiangsu province. A variety of energy sources have also been obtained, including natural gas supplied to northern and northeastern China from Russia as well as through the reinforcement of pipeline network interconnections.

To ensure reliable gas transmission, we have a sophisticated Supervisory Control and Data Acquisition (SCADA) system to monitor and control our pressure-regulating stations and network. We also have a comprehensive staff training programme, asset management systems, and contingency plans with regular practice drills, in preparation for unforeseen events that might affect our customers and the public. Moreover, the development of regulatory requirements for gas reserves applicable to our gas operations in mainland China are being closely monitored.

Production and

Network Safety

Preventing gas leakages or explosions in our production and storage facilities, pipelines and networks is a top priority for Towngas. Risks include the possibility of damage to critical facilities or related infrastructure from a third party, a security threat or extreme weather events such as typhoons, flooding or landslides. These and other factors affecting the safety of our infrastructure or causing an interruption to service would have a significant legal, financial and/or reputational impact on the Group.

Towngas conducts regular reviews of all operating procedures to mitigate these risks and implements

targeted strategies for addressing them. Our Total Quality Management system,

for example, covers all critical production, storage, transmission and distribution facilities. We also manage our assets according to international standards and external certifications, and maintain insurance coverage against any property damage or financial loss.

Information Security

Our business operations are dependent on information technology systems that are vulnerable to a critical system failure, leakage or loss of sensitive information, all of which would adversely affect the Group's business. Accordingly, we have put in place protective measures to manage data loss and monitor suspicious cyber activities. We also commission third parties to assess our security standards and identify areas for enhancement. Other security measures include contingency plans with regular drills to counter system failures as well as staff awareness programmes on cybersecurity and sensitive information handling to fully safeguard our operations against growing information security threats. Furthermore, the development of new regulatory requirements in mainland China relating to information security

is also under close scrutiny for proper compliance.

Ethics and Integrity

Maintaining strong corporate governance standards and operating ethically are among management's top concerns. Poor ethical behaviour by employees could damage our corporate reputation as well as adversely affect our long- established business relationships with stakeholders, including our customers and suppliers, which may have potential financial implications.

In order to provide an ethical workplace with integrity, we have policies on the standards of behaviour we expect of our employees and provide them with regular training in these policies. We have also established formal channels for reporting suspected cases of fraud and encourage our business partners to follow the same ethical principles that we promote in our Anti-Fraud Policy.

Health and Safety

We recognise the importance of maintaining high levels of occupational health and safety in all our operations. Serious accidents or the outbreak of a communicable disease, among other risks, could cause injury, loss of life and operational disruption that would result in huge recovery costs, litigation or reputational damage.

To mitigate and contain the risks directly or indirectly under our control, we encourage staff at all levels to monitor and report any hazards or potential threats. We also have comprehensive safety guidelines and measures that ensure our safety performance conforms to the highest industry standards. Our safety management system, certified for compliance with international standards, is reviewed and updated regularly. We also emphasise the importance of maintaining a comprehensive and effective safety culture by providing staff and contractors with systematic professional, technical and safety-related training.

In 2020, we put additional measures in place to protect our workforce during the outbreak of COVID-19. These included, but were not limited to, the adoption of a variety of special work arrangements

to maintain social distancing and the provision of necessary personal protective equipment to our employees.

FINANCIAL RESOURCES REVIEW

Liquidity and Capital Resources

As at 31st December 2020, the Group had a net current borrowings position of HK$3,224 million (31st December 2019: HK$1,233 million) and long-term borrowings of HK$31,286 million (31st December 2019: HK$28,696 million). In addition, banking facilities available for use amounted to HK$21,200 million (31st December 2019: HK$15,700 million).

The operating and capital expenditures of the Group are funded by cash flow from operations, internal liquidity, banking facilities, debt and equity financing. The Group has adequate and stable sources of funds and unutilised banking facilities to meet its future capital expenditures and working capital requirements.

Financing Structure

In May 2009, the Group established a US$1 billion Medium Term Note Programme (the "Programme") which gives the Group the flexibility to issue notes at favourable terms and timing. In July 2019, the Programme was updated with the size increased to US$3 billion. Up to 31st December 2020, the Group issued notes in the total nominal

amount of HK$20,742 million (31st December 2019: HK$14,756 million) with maturity terms of 3 years, 10 years, 12 years, 15 years, 30 years and 40 years in Renminbi, Australian dollar, Japanese yen and Hong Kong dollar under the Programme (the "MTNs"). The carrying value of the issued MTNs as at 31st December 2020 was HK$20,165 million (31st December 2019: HK$14,049 million). Medium term notes of RMB535 million, equivalent to HK$621 million (net proceeds: RMB535 million, equivalent to HK$621 million) and HK$5,365 million (net proceeds: HK$5,328 million) were issued in 2020.

As at 31st December 2020, the Group's borrowings amounted to HK$42,139 million (31st December 2019: HK$37,936 million). While the notes mentioned above together with the bank and other loans of HK$8,139 million (31st December 2019: HK$6,862 million) had fixed interest rate and were unsecured, the remaining bank and other loans were unsecured and had a floating interest rate, of which HK$6,935 million (31st December 2019: HK$9,759 million) were long-term bank loans and HK$6,900 million (31st December 2019: HK$7,266 million) had maturities within one year on revolving credit or term loan

facilities. As at 31st December 2020, the maturity profile of the Group's borrowings was 26 per cent within 1 year, 20 per cent within 1 to 2 years, 22 per cent within 2 to 5 years and 32 per cent over 5 years

(31st December 2019: 24 per cent within 1 year, 15 per cent within 1 to 2 years, 36 per cent within 2 to 5 years and 25 per cent over 5 years).

The RMB, AUD and JPY notes issued are hedged to Hong Kong dollars by currency swaps. Except for some borrowings of certain subsidiaries are arranged in or hedged to their functional currency in Renminbi, the Group's borrowings are primarily denominated in Hong Kong dollars and local currency of subsidiaries in mainland China. The Group therefore has no significant exposure to foreign exchange risk.

In February 2019, the Group re-issued Perpetual Subordinated Guaranteed Capital Securities (the "Perpetual Capital Securities") of US$300 million and the proceeds were mainly used to refinance the 2014 first-issued perpetual capital securities redeemed in January 2019. The Perpetual Capital Securities are able to keep a distribution rate of

4.75 per cent per annum for the first five years and thereafter at fixed distribution rate. With no fixed

The Hong Kong and China Gas Company Limited Annual Report 2020

maturity and the distribution payment can be deferred at the discretion of the Group, and the Perpetual Capital Securities are redeemable at the Group's option on or after 12th February 2024, they are accounted for as equity in the financial statements. The Perpetual Capital Securities are guaranteed by the Company. The issuance helps strengthen the Group's financial position, improve its financing maturity profile and diversify its funding sources.

The gearing ratio [net borrowing / (total equity + net borrowing)] for the Group as at 31st December 2020 remained healthy at 30 per cent (31st December 2019: 28 per cent).

Contingent Liabilities

As at 31st December 2020 and 2019, the Group did not provide any guarantee in respect of bank borrowing facilities made available to any associates, joint ventures or third parties.

Currency Profile

The Group's operations and activities are predominantly based in Hong Kong and mainland China. As such, its cash, cash equivalents or borrowings are mainly denominated in Hong Kong dollars, Renminbi or

United States dollars, whereas borrowings for the Group's subsidiaries, associates and joint ventures in mainland China are predominantly denominated in the local currency, Renminbi, in order to provide natural hedging for the investment there.

Group's Financial Investments in Securities

Under the guidance of the Group's Treasury Committee, financial investments have been made in equity and debt securities. As at 31st December 2020, the relevant investments in securities amounted to HK$685 million (31st December 2019: HK$705 million). The performance of the Group's financial investments in securities was satisfactory.

FIVE-YEAR FINANCIAL STATISTICS

Earnings and Dividends		Revenue and Gas Sales
per Share (HK$)				(HK$ million)

0.6						45,000

						40,000
0.5
							35,000

0.4						30,000

						25,000
0.3
							20,000

0.2						15,000

						10,000
0.1
							5,000

0						0
16	17	18	19	20	16	17	18	19	20
Earnings per Share					Revenue
Dividends per Share					Gas Sales

Property, Plant, Equipment,	Capital Expenditures
Right-of-use Assets and		(HK$ million)
Leasehold Land (HK$ million)

110,000						8,000

100,000
						7,000

	90,000

								6,000
80,000


70,000
							5,000

60,000
									4,000
	50,000

							3,000
40,000

30,000
							2,000


20,000
									1,000
10,000


0						0
16	17	18	19	20	16	17	18	19	20
		Property, Plant, Equipment, Right-of-use Assets		Capital Expenditures
		and Leasehold Land					Depreciation and Amortisation
		Accumulated Depreciation and Amortisation

2O2O FINANCIAL ANALYSIS

The Hong Kong and China Gas Company Limited Annual Report 2020

Analysis of Revenue

37%

Equipment Sales and

Maintenance Services

Gas Sales

(Industrial)

Gas Connection Income

13%

Water, Oil, Coal, Hydro-treated

Vegetable Oil related

Sales and Others

21%

14%

Gas Sales

(Residential)

(Commercial)

Analysis of Expenditures

58%

Fuel Cost

Customer Service

Distribution

Other Expenses

Marketing &

Equipment Costs

17%

10%

Corporate

Other

Administration

Production Costs

COMPARISON OF TEN-YEAR RESULTS

2020	2019	2018

Highlights (Company)

Number of Customers as at 31st December Town Gas Sales, million MJ

Installed Capacity, thousand m3 per day Maximum Daily Demand, thousand m3

Revenue and Profit

Revenue

Profit before Taxation Taxation

Profit for the year

Holders of Perpetual Capital Securities Non-controlling Interests

Profit Attributable to Shareholders Dividends

1,943,777	1,933,727	1,908,511
27,947	28,712	29,550
12,596	12,596	12,596
5,859	6,058	7,255
HK$'M	HK$'M	HK$'M
40,927.0	40,628.1	39,073.0

8,925.6	10,403.9	12,339.5
(1,713.2)	(2,289.6)	(1,907.6)
7,212.4	8,114.3	10,431.9
(110.3)	(98.6)	(107.4)
(1,094.8)	(1,050.0)	(1,011.7)

6,007.3	6,965.7	9,312.8
6,220.0	5,923.8	5,385.3

Assets and Liabilities

Property, Plant, Equipment, Right-of-use assets and Leasehold Land	70,936.1	63,807.9	60,193.3
Investment Property	827.0	830.0	778.0
Intangible Assets	5,462.9	5,291.1	5,682.1
Associates	28,670.3	27,475.5	26,314.1
Joint Ventures	11,981.2	10,613.5	10,950.3
Non-current Financial Assets *	7,180.1	8,172.5	4,633.7
Other Non-current Assets	5,066.0	4,150.2	3,529.4
Current Assets	20,156.6	20,129.4	20,612.2
Current Liabilities	(29,806.3)	(26,167.5)	(26,150.9)
Non-current Liabilities	(41,320.6)	(38,905.9)	(36,348.9)
Net Assets	79,153.3	75,396.7	70,193.3

Capital and Reserves

Share Capital	5,474.7	5,474.7	5,474.7
Share Premium	-	-	-
Reserves	57,196.4	54,841.9	53,387.1
Proposed Dividend	4,087.4	3,892.8	3,538.9
Shareholders' Funds
66,758.5	64,209.4	62,400.7
Perpetual Capital Securities	2,384.0	2,384.2	-
Non-controlling Interests	10,010.8	8,803.1	7,792.6
Total Equity
79,153.3	75,396.7	70,193.3
Earnings per Share, HK Dollar #	0.34	0.39	0.52
Dividends per Share, HK Dollar #	0.35	0.33	0.30
Dividend Cover	0.97	1.18	1.73

Non-currentfinancial assets include available-for-sale financial assets, financial assets at fair value through other comprehensive income and financial assets at fair value through profit or loss

Adjusted for the bonus share issue in 2020

The Hong Kong and China Gas Company Limited

Annual Report 2020

2017201620152014201320122011

1,883,407	1,859,414	1,839,261	1,819,935	1,798,731	1,776,360	1,750,553
29,049	28,814	28,404	28,835	28,556	28,360	28,147
12,596	12,596	12,596	12,260	12,260	12,260	12,260
6,191	6,964	6,172	6,571	6,283	6,403	6,742
HK$'M	HK$'M	HK$'M	HK$'M	HK$'M	HK$'M	HK$'M
32,476.5	28,557.1	29,591.3	31,614.7	28,245.9	24,922.5	22,426.8

11,096.7	9,845.7	9,906.0	9,874.6	9,410.8	9,885.6	8,068.7
(1,749.8)	(1,575.9)	(1,726.7)	(1,771.4)	(1,655.2)	(1,484.6)	(1,344.0)

9,346.9	8,269.8	8,179.3	8,103.2	7,755.6	8,401.0	6,724.7
(111.2)	(110.5)	(110.5)	(102.2)	-	-	-
(1,010.4)	(818.6)	(766.8)	(891.8)	(901.8)	(688.9)	(575.1)

8,225.3	7,340.7	7,302.0	7,109.2	6,853.8	7,712.1	6,149.6

4,895.7	4,450.9	4,046.6	3,679.7	3,345.9	3,041.7	4,147.8

58,056.7	51,226.2	49,417.5	51,353.6	47,002.3	41,914.1	33,606.3
764.0	729.0	713.0	683.0	646.0	540.0	518.0
5,883.6	5,572.4	5,819.5	5,858.5	5,253.3	3,845.4	3,434.8
23,393.4	20,485.0	19,591.9	17,572.5	17,015.1	16,307.1	12,706.8
10,889.2	9,226.5	9,288.2	9,033.8	8,939.0	9,103.6	8,964.7
4,289.9	4,967.1	4,567.0	2,599.7	2,937.3	3,078.6	3,110.6
3,419.3	3,366.3	2,533.3	2,668.3	2,913.5	2,710.6	2,734.5
24,365.8	21,170.9	23,632.9	24,641.5	21,688.7	21,437.8	19,955.1
(31,948.1)	(19,547.5)	(23,180.6)	(20,689.6)	(19,261.8)	(17,252.9)	(13,403.4)
(28,867.9)	(34,297.9)	(30,269.8)	(31,497.6)	(30,762.9)	(31,334.1)	(25,353.3)

70,245.9	62,898.0	62,112.9	62,223.7	56,370.5	50,350.2	46,274.1

5,474.7	5,474.7	5,474.7	5,474.7	2,389.9	2,172.6	1,975.1
-	-	-	-	2,861.0	3,078.3	3,275.8
51,746.9	45,532.6	44,707.7	44,735.7	42,418.0	37,952.1	33,075.4
3,217.2	2,924.9	2,659.0	2,417.8	2,198.7	1,998.8	3,199.7

60,438.8	53,932.2	52,841.4	52,628.2	49,867.6	45,201.8	41,526.0
2,354.1	2,353.8	2,353.8	2,353.8	-	-	-
7,453.0	6,612.0	6,917.7	7,241.7	6,502.9	5,148.4	4,748.1

70,245.9	62,898.0	62,112.9	62,223.7	56,370.5	50,350.2	46,274.1

0.46	0.41	0.41	0.40	0.39	0.43	0.35
0.28	0.25	0.23	0.21	0.19	0.17	0.23
1.68	1.65	1.80	1.93	2.05	2.54	1.48

REPORT OF THE DIRECTORS

The Directors have pleasure in submitting to shareholders their Report and the audited financial statements for the year ended 31st December 2020 which are to be presented at the Annual General Meeting to be held at Meeting Room N101 (Expo Drive Entrance), Hong Kong Convention and Exhibition Centre, 1 Expo Drive, Wanchai, Hong Kong on Wednesday, 2nd June 2021.

Principal Activities

The principal activities of the Company and its subsidiaries (collectively, the "Group") are the production, distribution and marketing of gas, water supply and emerging environmentally-friendly energy businesses in Hong Kong and mainland China. Particulars of the principal subsidiaries of the Company are shown from pages 176 to 187 of this Annual Report. Revenue and contribution to operating profit are mainly derived from activities carried out in Hong Kong and mainland China.

Results and Appropriations

The results of the Group for the year ended 31st December 2020 are set out in the consolidated income statement and the consolidated statement of comprehensive income on pages 92 and 93 of this Annual Report respectively.

An interim dividend of HK12 cents per share was paid to shareholders on 14th September 2020 and the Directors recommend a final dividend of HK23 cents per share payable on 21st June 2021 to shareholders whose names are on the register of members of the Company on 10th June 2021.

Bonus Issue of Shares

The Directors recommend a bonus issue of shares on the basis of one bonus share for every twenty existing shares held by shareholders whose names are on the register of members of the Company on 10th June 2021.

The bonus issue is subject to the conditions and trading arrangements set out in the circular despatched together with this Annual Report.

Business Review

A review of the business of the Group during the year, particulars of important events affecting the Group that have occurred since the end of the year ended 31st December 2020 (if any), an analysis of the Group's performance using financial key performance indicators and a discussion on the Group's future business development are provided from pages 2 to 63 of this Annual Report. Description of the possible risks and uncertainties that the Group may be facing are set out from pages 56 to 57. The financial risk management of the Group can be found in Note 3 to the consolidated financial statements. In addition, discussions on the Group's relationships with its key stakeholders, environmental policies and performance, and compliance with relevant laws and regulations which have a significant impact on the Group can be found from pages 20 to 55 and pages 72 to 84.

The Group complies with all major local laws and regulations, including business ethics, health and safety, employees, customers, and the environment, as the basic requirement of how we operate.

Preventing gas leakages or explosions in our production and storage facilities, pipelines and networks is a top priority for the Group. In Hong Kong gas business, the gas safety requirements are covered by the Gas Safety Ordinance (Cap. 51 of the Laws of Hong Kong), which the Group complies fully with at all times. The Group conducts regular reviews of all operating procedures to mitigate these risks and implements targeted strategies for addressing them. The Group also manages our assets according to international standards and external certifications, and maintains insurance coverage against any property damage or financial loss.

The Group collects and keeps customers' personal data necessary for the provision of the Group's services. Customers are required to supply the Group with personal data in connection with the opening or operation of gas accounts, and when the Group provides other related facilities and services. The Group takes every step necessary to protect its customers' data and established a Privacy Policy Statement that sets out our standards for handling customer information. The Group complies with the Personal Data (Privacy) Ordinance (Cap. 486 of the Laws of Hong Kong).

The Hong Kong and China Gas Company Limited

Annual Report 2020

Business Review (Continued)

The Group is governed by the Prevention of Bribery Ordinance (Cap. 201 of the Laws of Hong Kong) and any anti-bribery laws, which include zero tolerance towards corruption and related malpractice. The Group complies with the Prevention of Bribery Ordinance and the Code of Conduct and an Anti-fraud Policy of the Group are in place to promote integrity as a core company value. The Group insists our staff and business partners adhere to both the letter and the spirit of the law during the course of business. All employees are strictly forbidden from giving or accepting bribes and must never offer an advantage to, or ask for an advantage from, customers, suppliers, contractors, regulators and legislators, authorities or other business partners.

The Group sets out its commitment to comply with the laws and regulations pertaining to anti-competitive practices, in line with the Group's nine core values. Guidance is provided for staff on understanding the requirements and importance of compliance, as well as the disciplinary actions and possible liabilities they will be subject to in cases of non-compliance. Additionally, the Group closely monitors the Competition Ordinance (Cap. 619 of the Laws of Hong Kong) and reports to the management on any developments that could have a significant impact.

The Company has complied with the requirements under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules"), the Companies Ordinance (Cap. 622 of the Laws of Hong Kong) (the "Companies Ordinance") and the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong)

(the "SFO") including but not limited to the disclosure of information and corporate governance practices.

Financial Summary

A summary of the results and of the assets and liabilities of the Group for the last nine financial years is set out on pages 62 and 63 of this Annual Report.

Distributable Reserves

The distributable reserves of the Company as at 31st December 2020 amounted to HK$13,773,000,000 (2019: HK$14,442,000,000) before the proposed final dividend for the year ended 31st December 2020.

Shares Issued

During the year, the Company issued 846,252,612 bonus shares without consideration on the basis of one bonus share for every twenty shares held. The reason for the issue of bonus share was to enable the shareholders to enjoy a pro-rata increase in the number of shares being held in the Company without incurring any costs.

Details of the shares issued by the Company during the year are set out in Note 35 to the consolidated financial statements.

Bank Loans, Guaranteed Notes and Medium Term Note Programme

Particulars of bank loans, guaranteed notes and Medium Term Note Programme of the Company and the Group as at 31st December 2020 are set out in note 32 to the consolidated financial statements on pages 161 and 162 and Financial Resources Review on pages 58 and 59, respectively.

Charitable Donations

During the year, the Group made charitable donations amounting to approximately HK$7,900,000 (2019: HK$7,200,000).

Report of the Directors

Directors

The Directors of the Company during the year and up to the date of this report were:

Non-executive Directors

Dr. Lee Ka-kit (Chairman)

Mr. Lee Ka-shing (Chairman)

Dr. Colin Lam Ko-yin

Independent Non-executive Directors

Dr. the Hon. Sir David Li Kwok-po

Prof. Poon Chung-kwong

Dr. Moses Cheng Mo-chi

Executive Directors

Mr. Alfred Chan Wing-kin

Mr. Peter Wong Wai-yee

Mr. John Ho Hon-ming*

Mr. John Ho Hon-ming was appointed as Executive Director with effect from 1st October 2020.

At the Annual General Meeting held on 5th June 2020, Dr. Lee Ka-kit, Dr. the Hon. Sir David Li Kwok-po and Mr. Alfred Chan Wing-kin were re-elected as Directors of the Company. Mr. Lee Ka-shing, Dr. Colin Lam Ko-yin, Prof. Poon Chung-kwong, Dr. Moses Cheng Mo-chi and Mr. Peter Wong Wai-yee held office throughout the year. Mr. John Ho Hon-ming was appointed as Executive Director with effect from 1st October 2020.

According to the Articles of Association of the Company (the "Articles of Association"), one-third of all the directors are subject to retirement by rotation at every annual general meeting. Pursuant to Article 97 of the Articles of Association, Mr. Lee Ka-shing, Prof. Poon Chung-kwong and Mr. Peter Wong Wai-yee are due to retire by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-appointment. Pursuant to Article 91 of the Articles of Association, Mr. John Ho Hon-ming, Executive Director, is also due to retire at the forthcoming Annual General Meeting and, being eligible, offer himself for re-appointment. Details of these directors proposed for re-election are set out in the circular sent together with this Annual Report.

A list of directors who have served on the boards of the subsidiaries of the Company during the year and up to the date of this report is kept at the Company's registered office and available for inspection by shareholders during office hours.

Biographical Details of Directors

The biographical details of Directors and senior management who are also executive directors are set out from pages 14 to 18 of this Annual Report.

The Hong Kong and China Gas Company Limited

Annual Report 2020

Disclosure of Interests

A. Directors

As at 31st December 2020, the interests and short positions of each Director of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of the SFO) as recorded in the register required to be kept under section 352 of the SFO or as otherwise notified to

the Company and The Stock Exchange of Hong Kong Limited (the "Exchange") pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers were as follows:

Shares and Underlying Shares (Long Positions)

			Interest in Shares

Name of		Personal	Corporate	Other	Aggregate	%*
Company	Name of Director	Interests	Interests	Interests	Interests

The Hong Kong	Dr. Lee Ka-kit			7,379,707,351	7,379,707,351	41.53
and China Gas				(Note 2)
Company	Mr. Lee Ka-shing			7,379,707,351	7,379,707,351	41.53
Limited				(Note 2)
	Dr. the Hon. Sir David Li Kwok-po	54,569,414				54,569,414	0.31
	Mr. Alfred Chan Wing-kin	338,831				338,831	0.00
		(Note 5)
	Prof. Poon Chung-kwong	231,510				231,510	0.00
		(Note 4)
	Mr. John Ho Hon-ming	53,058				53,058	0.00

Lane Success	Dr. Lee Ka-kit			9,500	9,500	95
Development				(Note 6)
Limited	Mr. Lee Ka-shing			9,500	9,500	95
				(Note 6)

Yieldway	Dr. Lee Ka-kit			2	2	100
International				(Note 7)
Limited	Mr. Lee Ka-shing			2	2	100
				(Note 7)

Towngas China	Dr. Lee Ka-kit			2,025,099,415	2,025,099,415	68.21
Company				(Note 8)
Limited	Mr. Lee Ka-shing			2,025,099,415	2,025,099,415	68.21
("Towngas				(Note 8)
China")	Mr. Alfred Chan Wing-kin	4,041,693				4,041,693	0.14

	Mr. Peter Wong Wai-yee	3,201,000				3,201,000	0.11
	Mr. John Ho Hon-ming	1,133,862				1,133,862	0.04

Percentage which the aggregate long position in the shares or underlying shares represents to the number of issued shares of the Company or any of its associated corporations.

Save as mentioned above, as at 31st December 2020, there were no other interests or short positions of the Directors of the Company in any shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) recorded in the register maintained by the Company pursuant to section 352 of the SFO or as otherwise notified to the Company and the Exchange pursuant to

the Model Code for Securities Transactions by Directors of Listed Issuers.

Report of the Directors

Disclosure of Interests (Continued)

B. Substantial Shareholders and Others (Long Positions)

As at 31st December 2020, the interests and short positions of every person, other than the Directors of the Company, in the shares and underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO were as follows:

		No. of Shares in	%*
	Name of Individual / Company	which Interested

Substantial Shareholders	Dr. the Hon. Lee Shau-kee(Note 3)	7,379,707,351	41.53
(a person who is entitled	Disralei Investment Limited (Note 1)	4,108,302,676	23.12
to exercise, or control the
exercise of, 10% or more	Timpani Investments Limited (Note 1)	5,703,993,415	32.10
of the voting power at	Faxson Investment Limited (Note 1)	7,379,707,351	41.53
any general meeting)
Henderson Land Development Company Limited (Note 1)	7,379,707,351	41.53

	Henderson Development Limited (Note 1)	7,379,707,351	41.53
	Hopkins (Cayman) Limited (Note 2)	7,379,707,351	41.53
	Riddick (Cayman) Limited (Note 2)	7,379,707,351	41.53
	Rimmer (Cayman) Limited (Note 2)	7,379,707,351	41.53

Persons other than	Macrostar Investment Limited (Note 1)	1,675,713,936	9.43
Substantial	Chelco Investment Limited (Note 1)	1,675,713,936	9.43
Shareholders
Medley Investment Limited (Note 1)	1,595,690,739	8.98

Percentage which the aggregate long position in the shares represents to the number of issued shares of the Company.

Save as mentioned above, as at 31st December 2020, the register maintained by the Company pursuant to section 336 of the SFO recorded no other interests or short positions in shares and underlying shares of the Company.

Notes:

These 7,379,707,351 shares were beneficially owned by Macrostar Investment Limited ("Macrostar"), Medley Investment Limited ("Medley") and Disralei Investment Limited ("Disralei"). Macrostar was a wholly-owned subsidiary of Chelco Investment Limited, which was in turn, a wholly-owned subsidiary of Faxson Investment Limited ("FIL"). Medley and Disralei were wholly-owned subsidiaries of Timpani Investments Limited, which was in turn, a wholly-owned subsidiary of FIL. FIL was a wholly-owned subsidiary of Henderson Land Development Company Limited ("HLD"). Henderson Development Limited ("HD") was entitled to exercise or control the exercise of more than one-third of the voting power at general meetings of HLD.
These 7,379,707,351 shares are duplicated in the interests described in Note 1. Hopkins (Cayman) Limited ("Hopkins") owned all the issued ordinary shares which carry the voting rights in the share capital of HD as trustee of a unit trust ("Unit Trust"). Rimmer (Cayman) Limited ("Rimmer") and Riddick (Cayman) Limited ("Riddick"), as trustees of the respective discretionary trusts, held units in the Unit Trust. Dr. Lee Ka-kit and Mr. Lee Ka-shing, as discretionary beneficiaries of the discretionary trusts, were taken to have duties of disclosure in relation to these shares by virtue of Part XV of the SFO.
These 7,379,707,351 shares are duplicated in the interests described in Notes 1 and 2. Dr. the Hon. Lee Shau-kee beneficially owned all the issued shares in Rimmer, Riddick and Hopkins and was taken to be interested in these shares by virtue of Part XV of the SFO.
These 231,510 shares were jointly held by Prof. Poon Chung-kwong and his spouse.
These 338,831 shares were jointly held by Mr. Alfred Chan Wing-kin and his spouse.
These 9,500 shares in Lane Success Development Limited were beneficially owned by a wholly-owned subsidiary of the Company (as to 4,500 shares) and a wholly-owned subsidiary of HLD (as to 5,000 shares). Dr. Lee Ka-kit and Mr. Lee Ka-shing were taken to be interested in HLD and the Company as set out in Notes 1 and 2 by virtue of Part XV of the SFO.
These 2 shares in Yieldway International Limited were beneficially owned by a wholly-owned subsidiary of the Company (as to 1 share) and a wholly-owned subsidiary of HLD (as to 1 share). Dr. Lee Ka-kit and Mr. Lee Ka-shing were taken to be interested in HLD and the Company as set out in Notes 1 and 2 by virtue of Part XV of the SFO.
These 2,025,099,415 shares in Towngas China representing approximately 68.21% of the total number of issued shares in Towngas China were beneficially owned by Hong Kong & China Gas (China) Limited (as to 1,850,656,677 shares), Planwise Properties Limited (as to 171,524,099 shares) and Superfun Enterprises Limited (as to 2,918,639 shares), wholly-owned subsidiaries of the Company. Dr. Lee Ka-kit and Mr. Lee Ka-shing were taken to be interested in the Company as set out in Notes 1 and 2 by virtue of Part XV of the SFO.

The Hong Kong and China Gas Company Limited

Annual Report 2020

Equity-Linked Agreements

No equity-linked agreements were entered into by the Company during the year or subsisted at the end of the year.

Arrangements to Purchase Shares or Debentures

At no time during the year was the Company or any of its subsidiaries a party to any arrangement to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Directors' Interests in Competing Businesses

Pursuant to Rule 8.10 of the Listing Rules, the interests of Directors of the Company in businesses which might compete with the Group during the year ended 31st December 2020 and as at 31st December 2020 were as follows:

Mr. Alfred Chan Wing-kin, Mr. Peter Wong Wai-yee and Mr. John Ho Hon-ming (appointed with effect from

1st October 2020), Directors of the Company, have held directorships in companies engaged in the same businesses of production, distribution and marketing of gas in mainland China as the Group. Although some of the businesses carried out by those companies are similar to the businesses carried out by the Group, they are of different scale and/ or at different locations, and the Group, has been operating independently of, and at arm's length from, the businesses of those companies. Therefore, the Board is of the view that the businesses of those companies did not compete with the businesses of the Group.

Service Contracts

None of the Directors who are proposed for re-election at the forthcoming Annual General Meeting has a service contract with the Company which is not determinable within one year without payment of compensation, other than statutory compensation.

Connected Transactions

During the year, the Company had the following connected transactions, each of which, as disclosed by way of announcement, was subject to the reporting and announcement requirements but exempt from independent shareholders' approval requirements under Chapter 14A of the Listing Rules since each of the applicable percentage ratios was less than 5%:

1. As disclosed in an announcement dated 27th March 2020, Alpha Idea International Limited ("Alpha Idea"), a wholly-owned subsidiary of the Company, had by signing and returning to Hongkong Island Construction Properties Co., Limited ("Hongkong Island Construction"), a wholly-owned subsidiary of Henderson Land Development Company Limited ("HLD") on 27th March 2020: (a) a letter of award successfully tendered for

a sub-contract for the carrying out of the design, supply and installation works of kitchen cabinets at the sum of HK$28,959,000; and (b) a letter of acceptance in respect of the engagement for the carrying out of the town gas installation works at the sum of HK$27,471,000, both at the residential development situated at New Kowloon Inland Lot No. 6565 at Kai Tak, Kowloon, Hong Kong for Hongkong Island Construction. As Hongkong Island Construction is a wholly-owned subsidiary of HLD, which in turn is a controlling shareholder of the Company, Hongkong Island Construction is a connected person of the Company under the Listing Rules and the aforesaid transactions therefore constituted connected transactions for the Company under Chapter 14A of the Listing Rules.

Report of the Directors

Connected Transactions (Continued)

As disclosed in an announcement dated 28th August 2020, Alpha Idea had by signing and returning to Denco Properties Limited ("Denco"), a wholly-owned subsidiary of HLD on 28th August 2020: (a) a letter of acceptance in respect of the engagement for the carrying out of the town gas installation works at the sum of HK$17,243,400; and (b) a letter of award successfully tendered for a sub-contract for the carrying out of the design, supply and installation works of kitchen cabinets at the maximum aggregate amount of not exceeding HK$23,718,011, both at the residential development situated at New Kowloon Inland Lot No. 6562 at Kai Tak, Kowloon, Hong Kong for Denco. As Denco is a wholly-owned subsidiary of HLD, which in turn is a controlling shareholder of the Company, Denco is a connected person of the Company under the Listing Rules and the aforesaid transactions therefore constituted connected transactions for the Company under Chapter 14A of the Listing Rules.
As disclosed in the announcements dated 28th August 2020 and 25th September 2020, U-Tech Engineering Company Limited, a wholly-owned subsidiary of the Company, had by signing and returning to Sky Rainbow Development Limited ("Sky Rainbow"), wholly owned by a joint venture company which is indirectly owned as to 65% by HLD and as to 35% by New World Development Limited, a letter of nomination on 28th August 2020 successfully tendered for a sub-contract for the carrying out of the supply and installation of electrical equipment and the testing and commissioning of electrical systems at the redevelopment project situated at 4A-4P Seymour Road, Hong Kong at the maximum aggregate amount of not exceeding HK$91,035,000 for Sky Rainbow. As Sky Rainbow is an associate of HLD (a controlling shareholder of the Company), Sky Rainbow is a connected person of the Company under the Listing Rules and the aforesaid transaction therefore constituted a connected transaction for the Company under Chapter 14A of the Listing Rules.

The related party transactions set out in Note 40 to the consolidated financial statements include transactions that constitute connected transactions or continuing connected transactions under the Listing Rules for which the disclosure requirements in accordance with Chapter 14A of the Listing Rules had been met.

Directors' Material Interests in Transactions, Arrangements or Contracts

Except for the "Connected Transactions" as disclosed in this report, no other transactions, arrangements or contracts of significance in relation to the Group's business to which the Company or any of its subsidiaries was a party, and in which a Director of the Company and the Director's connected entity had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

Management Contracts

No contracts (as defined in section 543 of the Companies Ordinance) concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or existed

during the year.

Controlling Shareholders' Interests in Significant Contracts

Save as disclosed in this report, no contract of significance has been entered into between the Company or any of its subsidiaries and the controlling shareholder or its subsidiaries during the year.

The Hong Kong and China Gas Company Limited

Annual Report 2020

Purchase, Sale or Redemption of the Company's Listed Securities

Neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company's listed securities during the year.

Permitted Indemnity

Pursuant to the Articles of Association, subject to the provisions of the Companies Ordinance, every Director or other officer of the Company shall be indemnified out of the assets of the Company against any liability incurred by him as a director or other officer of the Company in defending any proceedings (whether civil or criminal) in which judgement is given in his favour or he is acquitted or in connection with any application under the Companies Ordinance in which relief is granted to him by the court.

In addition, the indemnity agreements made by the Company, which are currently in force and were in force throughout the financial year, contained permitted indemnity provisions (as permitted under the Companies Ordinance), for the benefit of the Directors of the Company. The Company has maintained appropriate directors' and officers' liability insurance coverage for the Directors and officers of the Group.

Major Customers and Suppliers

During the year, both the percentages of the purchases attributable to the Group's five largest suppliers combined and the percentage of the turnover attributable to the Group's five largest customers combined were less than 30 per cent of the total purchases and turnover of the Group respectively.

Corporate Governance

The Company's corporate governance principles and practices are set out in the Corporate Governance Report from pages 72 to 84 of this Annual Report.

Public Float

As at the date of this report, the Company has maintained the prescribed public float under the Listing Rules, based on the information that is publicly available to the Company and within the knowledge of the Directors.

Auditor

The financial statements have been audited by PricewaterhouseCoopers who will retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-appointment at a fee to be agreed by the Board.

On behalf of the Board

Lee Ka-kit	Lee Ka-shing
Chairman	Chairman

Hong Kong, 19th March 2021

CORPORATE GOVERNANCE REPORT

The Board of Directors of the Company (the "Board") is committed to maintaining good corporate governance. The Board believes that good corporate governance principles and practices should emphasise accountability and an increase in transparency which will enable the Group's stakeholders, including shareholders, investors, customers, suppliers, employees and the community to have trust and faith in the Group to take care of their needs and to fulfill its social responsibility.

Corporate Governance Practices

During the year ended 31st December 2020, the Company complied with all the code provisions as set out in the Corporate Governance Code contained in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules").

The below sets out the corporate governance principles and practices adopted by the Group which indicate how the Group has applied relevant principles in the Corporate Governance Code.

Board of Directors

Responsibilities of Directors

The Board is ultimately accountable for the Group's activities, strategies and financial performance, which include formulating business development strategies, directing and supervising the Group's affairs, reviewing the financial statements and budget proposal of the Group, approving interim reports, annual reports and announcements of interim results and annual results, considering dividend policy, reviewing the effectiveness of the risk management and internal control systems and so on.

The day-to-day management, administration and operation of the Group are delegated to the management team. The Board gives clear directions to the management team as to their powers of management, and circumstances in which the management team should report back.

Newly appointed Directors will be arranged a comprehensive, formal and tailored induction which includes provision of key guidelines, documents and publications relevant to their roles, responsibilities and ongoing obligations;

a briefing on the Group's structure, businesses, risk management and other governance practices and meeting with other fellow Directors so as to help the newly appointed Directors familiarise with the management, business and governance policies and practices of the Company, and ensure that they have a proper understanding of

the operations and businesses of the Group.

To ensure that Directors' contribution to the Board/committees remains informed, continuous professional development are provided for Directors to develop and refresh their knowledge, skills and understanding of

the business and markets in which the Group operates. Directors are also provided with monthly updates of the Group's development, and information such as performance and key operational highlights to enable the Board as a whole and each Director to discharge their duties.

All Directors participated in appropriate continuous professional development and provided the Company with their records of training they received for the year ended 31st December 2020.

The Hong Kong and China Gas Company Limited

Annual Report 2020

Board of Directors (Continued)

Responsibilities of Directors (Continued)

During the year ended 31st December 2020, all the current Directors participated in the training which included reading regulatory updates or information relevant to the Group or its businesses and attending or giving talks at seminars and/or conferences.

Directors	Training

Non-executive Directors
Dr. Lee Ka-kit (Chairman)	✓
Mr. Lee Ka-shing (Chairman)	✓
Dr. Colin Lam Ko-yin	✓

Independent Non-executive Directors
Dr. the Hon. Sir David Li Kwok-po	✓
Prof. Poon Chung-kwong	✓
Dr. Moses Cheng Mo-chi	✓

Executive Directors
Mr. Alfred Chan Wing-kin	✓
Mr. Peter Wong Wai-yee	✓
Mr. John Ho Hon-ming*	✓

Mr. John Ho Hon-ming was appointed as Executive Director with effect from 1st October 2020.

Every Director ensures that he gives sufficient time and attention to the affairs of the Company. Each Director shall disclose to the Company at the time of his appointment the directorships held in other listed companies or nature of offices held in public organisations and other significant commitment. The Company has also requested the Directors to provide in a timely manner any change on such information. Each Director is also required to disclose to the Company their time commitment.

Appropriate insurance cover on Directors' liabilities has been in force to protect the Directors of the Group from risks arising from the businesses of the Group.

Corporate Governance Functions

The Board has undertaken the following corporate governance functions:

to develop and review the Company's policies and practices on corporate governance and make recommendations to the Company;
to review and monitor the training and continuous professional development of Directors and senior management;
to review and monitor the Company's policies and practices on compliance with legal and regulatory requirements;
to develop, review and monitor the code of conduct and compliance manual (if any) applicable to employees and Directors; and
to review the Company's compliance with the code provision of Appendix 14 to the Listing Rules and disclosure in the Corporate Governance Report.

During the year ended 31st December 2020, the Board reviewed the Company's policies and practices on corporate governance and the disclosure in the Corporate Governance Report.

Corporate Governance Report

Board of Directors (Continued)

Board Diversity Policy

The Board adopted the Board Diversity Policy setting out the approach to achieve diversity on the Board.

The Company recognises and embraces the benefits of having a diverse Board to enhance the quality of its performance. In designing the Board's composition, Board diversity has been considered from a number of aspects, including but not limited to professional experience, skills, knowledge, cultural and educational background, ethnicity, age and gender. All Board appointments will be based on meritocracy, and candidates will be considered against selection criteria, having regard for the benefits of diversity on the Board.

Nomination Policy

The Board adopted a Nomination Policy which aims to ensure that the Board has a balance of skills, experience and diversity of perspectives appropriate to the requirement of the Company's businesses.

Pursuant to the Nomination Policy, the Nomination Committee shall consider the following criteria in evaluating and selecting candidates for directorships:

Reputation for integrity
Business experience relevant and beneficial to the Company
Willingness to devote adequate time to discharge duties as a member of the Board
Board Diversity Policy for achieving diversity on the Board

These factors are for reference only, and not meant to be exhaustive and decisive. The Nomination Committee has the discretion to nominate any person, as it considers appropriate. The ultimate decision will be based on merit and contribution that the selected candidates will bring to the Board.

The Nomination Committee identifies individual(s) suitably qualified to become board members, having due regard to the Nomination Policy and the Board Diversity Policy, and assesses the independence of the proposed independent non-executive Director(s) as appropriate. The Nomination Committee makes recommendation(s) to the Board.

The Board considers the individual(s) recommended by the Nomination Committee, having due regard to the Nomination Policy and the Board Diversity Policy and confirms the appointment of the individual(s) as Director(s) or recommends the individual(s) to stand for election at a general meeting. Individual(s) appointed by the Board will be subject to election by the shareholders of the Company ("Shareholders") at the next following annual general meeting of

the Company (the "AGM") or the next following general meeting in the case of filling a casual vacancy in accordance with the Company's Articles of Association (the "Articles of Association"). Shareholders approve the election of individual(s), who stand(s) for election at general meeting, as Director(s).

The Nomination Committee also considers each retiring Director, having due regard to the Nomination Policy and the Board Diversity Policy, and assesses the independence of each retiring independent non-executive Director. The Nomination Committee makes recommendation(s) to the Board. The Board considers each retiring Director recommended by the Nomination Committee, having due regard to the Nomination Policy and the Board Diversity Policy and recommends the retiring Directors to stand for re-appointment at the AGM in accordance with the Articles of Association. Shareholders approve the re-appointment of Directors at the AGM.

The Board shall have the ultimate responsibility for all matters relating to selection and appointment of Directors. The Nomination Committee will monitor the implementation of the Nomination Policy and from time to time review it, as appropriate, to ensure that it remains relevant to the Company's needs and reflects both current regulatory requirements and good corporate governance practice.

The Hong Kong and China Gas Company Limited

Annual Report 2020

Board of Directors (Continued)

Dividend Policy

The Board adopted a Dividend Policy which sets out the guidelines for the Board to determine whether to pay

a dividend and the level of such dividend to be paid. In general, it is the policy of the Company to allow its shareholders to participate in the Company's profits whilst retaining adequate reserves for future growth. Normally, the Company pays dividends twice a year, which are the interim dividend and final dividend. The Board may also declare special dividends in addition to such dividends as it considers appropriate. The policy also contains a number of factors for which the Board has to consider in determining the frequency, amount and form of any dividend in any financial year/period. The Board may also consider the issuance of bonus shares on a basis as permitted by the applicable laws and regulations.

Board Composition

The Board currently has three Executive Directors and six Non-executive Directors. Three of the six Non-executive Directors are independent to ensure that proposed strategies protect all shareholders' interests.

During the year ended 31st December 2020 and up to the date of publication of this Annual Report, the Directors of the Company are set out below:

Non-executive Directors

Dr. Lee Ka-kit (Chairman)

Mr. Lee Ka-shing (Chairman)

Dr. Colin Lam Ko-yin

Independent Non-executive Directors

Dr. the Hon. Sir David Li Kwok-po

Prof. Poon Chung-kwong

Dr. Moses Cheng Mo-chi

Executive Directors

Mr. Alfred Chan Wing-kin

Mr. Peter Wong Wai-yee

Mr. John Ho Hon-ming*

Mr. John Ho Hon-ming was appointed as Executive Director with effect from 1st October 2020.

The Company received from each of the Independent Non-executive Directors confirmation in writing of their independence pursuant to Rule 3.13 of the Listing Rules and considered them as independent.

Biographical details of the Directors and relevant relationships among them are set out from pages 14 to 18 of this Annual Report. Save as disclosed therein, there is no financial, business, family or other material/relevant relationship among the Directors. A List of Directors and their Role and Function is available on both the websites of The Stock Exchange of Hong Kong Limited (the "Exchange") and the Company.

According to the Articles of Association, one-third of all the directors are subject to retirement by rotation at

every AGM. Subject to the provisions contained in the Articles of Association, the term of office of all Non-executive Directors (including Independent Non-executive Directors) shall expire on 31st December 2023.

Corporate Governance Report

Board of Directors (Continued)

Joint Chairmen of the Board and Managing Director

The Joint Chairmen of the Board are Dr. Lee Ka-kit and Mr. Lee Ka-shing and the Managing Director is Mr. Alfred Chan Wing-kin. The roles of the Joint Chairmen of the Board and the Managing Director are separate and are not performed by the same individual. The Joint Chairmen are responsible for providing leadership to, and overseeing, the functioning of the Board and, with the support of Executive Directors and the Company Secretary, seeking to ensure that all Directors are properly briefed on issues arising at Board meetings and that they receive, in a timely manner, adequate and reliable information. The Managing Director is responsible for managing the business of the Group and leading the management team to implement strategies and objectives adopted by the Board. Their respective responsibilities are clearly established and set out in writing.

Board Meetings

The Board meets regularly at least four times a year at approximately quarterly intervals. The Directors can attend meetings in person or through electronic means of communication in accordance with the Articles of Association.

During the year ended 31st December 2020, the Board met four times. The attendance record of each Director at the Board meetings during the year ended 31st December 2020 is set out below:

	No. of Meetings
Directors	Attended / Held

Non-executive Directors
Dr. Lee Ka-kit (Chairman)	4/4
Mr. Lee Ka-shing (Chairman)	4/4
Dr. Colin Lam Ko-yin	4/4

Independent Non-executive Directors
Dr. the Hon. Sir David Li Kwok-po	4/4
Prof. Poon Chung-kwong	4/4
Dr. Moses Cheng Mo-chi	4/4

Executive Directors
Mr. Alfred Chan Wing-kin	4/4
Mr. Peter Wong Wai-yee	4/4
Mr. John Ho Hon-ming*	1/1

Mr. John Ho Hon-ming was appointed as Executive Director with effect from 1st October 2020.

Regular Board meetings of the year are scheduled in advance and at least 14 days' notice is given to all Directors so as to give them an opportunity to attend. Meeting agenda and accompanying meeting papers are sent to all relevant Directors at least 3 days before the date of a Board or committee meeting to enable the Directors to make informed decisions on matters to be raised at the meetings. All Directors are given an opportunity to include matters in

the agenda for Board meetings.

In addition, Directors at all times have full and timely access to all information on the Group and may seek independent professional advice at the Company's expense in carrying out their functions, after making a request to the Board.

The Hong Kong and China Gas Company Limited

Annual Report 2020

Board of Directors (Continued)

Directors' Securities Transactions

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules as the code for dealing in securities of the Company by the Directors

(the "Model Code"). Having made specific enquiry by the Company, all Directors confirmed that they had fully complied with the required standard set out in the Model Code throughout the year ended 31st December 2020.

The Board has also established written guidelines for relevant employees, including certain employees of

the Company, certain directors or employees of its subsidiaries who are considered to be likely to possess inside information in relation to the Company or its securities (the "Relevant Employees"), in respect of their dealings in the Company's securities.

Directors' Responsibility for the Financial Statements

The Directors acknowledge their responsibility for preparing the financial statements for the year ended

31st December 2020, which give a true and fair view of the state of affairs of the Company and of the Group at that date and of the Group's results and cash flows for the year then ended and are properly prepared on a going concern basis in accordance with statutory requirements and applicable accounting standards. The Directors shall ensure the publication of the Group's financial statements in a timely manner.

The statement of the Auditor of the Company about their reporting responsibilities on the financial statements of the Group is set out in the Independent Auditor's Report from pages 85 to 91 of this Annual Report.

Board Committees

The Board has established the following Board committees to oversee particular aspects of the Company's affairs:

Board Audit and Risk Committee

The Board Audit and Risk Committee (formerly known as Audit Committee) was formed in May 1996. The members of the Board Audit and Risk Committee are Dr. the Hon. Sir David Li Kwok-po (Chairman of the Board Audit and Risk Committee), Prof. Poon Chung-kwong and Dr. Moses Cheng Mo-chi. All members are Independent Non-executive Directors. The Chairman of the Board Audit and Risk Committee has the appropriate professional qualification as required by the Listing Rules.

The principal duty of the Board Audit and Risk Committee is to assist the Board in fulfilling its audit and control- related duties through the review of the Company's financial reporting, risk management and internal control systems. The review covers all material controls, including financial, operational and compliance controls and risk management functions. The Company has adopted written terms of reference for the Board Audit and Risk Committee that clearly define the role, authority and function of the Board Audit and Risk Committee.

The terms of reference of the Board Audit and Risk Committee are available on both the websites of the Exchange and the Company.

The Board Audit and Risk Committee held two meetings during the year ended 31st December 2020 and the following sets out a summary of the work of the Board Audit and Risk Committee during the year under review:

review of the financial reports for 2019 annual results and 2020 interim results;
recommendation to the Board, for the approval by shareholders, of the re-appointment of PricewaterhouseCoopers as the external Auditor and approval of their remuneration;
determination of the nature and scope of the audit;
review of the financial and accounting policies and practices of the Company; and
review of the effectiveness of the Company's financial control and risk management and internal control systems, including the review of the adequacy of resources, staff qualifications and experience, training programmes and budget of the Company's accounting and financial reporting function.

Corporate Governance Report

Board Committees (Continued)

Board Audit and Risk Committee (Continued)

The attendance record of each member at the Board Audit and Risk Committee meetings during the year ended 31st December 2020 is set out below:

	No. of Meetings
Board Audit and Risk Committee Members	Attended / Held

Dr. the Hon. Sir David Li Kwok-po (Chairman)	2/2
Prof. Poon Chung-kwong	2/2
Dr. Moses Cheng Mo-chi	2/2

Remuneration Committee

The Company established a Remuneration Committee on 7th September 2005. The Remuneration Committee is chaired by Dr. the Hon. Sir David Li Kwok-po (Independent Non-executive Director) with Dr. Lee Ka-kit and

Mr. Lee Ka-shing (both are Non-executive Directors), Prof. Poon Chung-kwong and Dr. Moses Cheng Mo-chi (both are Independent Non-executive Directors) as members.

The principal duties of the Remuneration Committee include, but are not limited to, making recommendations to the Board on the Company's policy and structure for all remuneration of Directors and senior management (who are also executive directors of the Company), reviewing and approving the special remuneration packages of all executive directors with reference to corporate goals and objectives resolved by the Board from time to time and determining, with delegated responsibility, the remuneration packages of individual executive directors. The Company has adopted written terms of reference for the Remuneration Committee that clearly define the role, authority and function of the Remuneration Committee. The terms of reference of the Remuneration Committee are available on both the websites of the Exchange and the Company.

The Company has not adopted any share option scheme. The emoluments of Directors are determined based on the duties and responsibilities of each Director. The Directors' fees were reviewed by the Remuneration Committee. During the year ended 31st December 2020, every Director received a Director's fee at the rate of HK$250,000 per annum while the Joint Chairmen of the Board each received an additional fee at the rate of HK$250,000 per annum and each member of the Board Audit and Risk Committee, the Remuneration Committee and the Nomination Committee received additional fees at the rate of HK$250,000, HK$100,000 and HK$100,000 per annum respectively. The Remuneration Committee considered the fees reasonable in view of the Directors' responsibilities.

The Remuneration Committee held one meeting during the year ended 31st December 2020. During the year under review, the Remuneration Committee reviewed the Directors' fees and the remuneration of the Executive Directors including the newly appointed Director. The attendance record of each member at the Remuneration Committee meeting during the year ended 31st December 2020 is set out below:

	No. of Meeting
Remuneration Committee Members	Attended / Held

Dr. the Hon. Sir David Li Kwok-po (Chairman)	1/1
Dr. Lee Ka-kit	1/1
Mr. Lee Ka-shing	1/1
Prof. Poon Chung-kwong	1/1
Dr. Moses Cheng Mo-chi	1/1

The Hong Kong and China Gas Company Limited

Annual Report 2020

Board Committees (Continued)

Nomination Committee

The Company established a Nomination Committee on 19th March 2012. The Nomination Committee is jointly chaired by Dr. Lee Ka-kit and Mr. Lee Ka-shing (both are Non-executive Directors) with members who are all Independent Non-executive Directors, including Dr. the Hon. Sir David Li Kwok-po, Prof. Poon Chung-kwong and Dr. Moses Cheng Mo-chi.

The principal duties of the Nomination Committee include, but are not limited to, reviewing the structure, size and composition (including the skills, knowledge and experience) of the Board and making recommendations on any proposed changes to the Board to complement the Group's corporate strategy. It is also responsible for making recommendations to the Board on nominations and appointment of directors as well as assessing the independence of independent non-executive directors. The Committee shall consider the candidate from a range of backgrounds on his/her merits and against objective criteria set out by the Board. The Company has adopted written terms of reference for the Nomination Committee that clearly define the role, authority and function of the Nomination Committee. The terms of reference of the Nomination Committee are available on both the websites of the Exchange and the Company.

The Nomination Committee held one meeting during the year ended 31st December 2020. During the year under review, the Nomination Committee reviewed the structure, size and composition (including the skills, knowledge and experience) of the Board, the Board Diversity Policy and the Nomination Policy, and considered that the said policies were appropriate and effective. Further, the Nomination Committee also assessed the independence of all independent non-executive directors of the Company and recommended to the Board the extension of the terms of office of all non-executive directors (including independent non-executive directors) and for approval of the re-election of

the retiring Directors at the 2020 AGM and the appointment of Mr. John Ho Hon-ming as Executive Director.

The attendance record of each member at the Nomination Committee meeting during the year ended 31st December

2020 is set out below:

	No. of Meeting
Nomination Committee Members	Attended / Held

Dr. Lee Ka-kit (Chairman)	1/1
Mr. Lee Ka-shing (Chairman)	1/1
Dr. the Hon. Sir David Li Kwok-po	1/1
Prof. Poon Chung-kwong	1/1
Dr. Moses Cheng Mo-chi	1/1

Auditor's Remuneration

For the year ended 31st December 2020, the total remuneration in respect of statutory audit services provided by the Company's external auditor, PricewaterhouseCoopers, amounted to approximately HK$12.9 million. During the year, payment to PricewaterhouseCoopers in respect of non-audit services, mainly including taxation services and interim results review service provided to the Group amounted to approximately HK$7.7 million.

Corporate Governance Report

Risk Management and Internal Control

Internal Control

The Board is responsible for maintaining sound and effective risk management and internal control systems for the Group in order to safeguard the Group's assets and shareholders' interests, as well as for reviewing the effectiveness of such systems.

Risk management and internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. Policies and procedures are established to ensure that all payments and investments are properly authorised, critical assets and data are safeguarded as well as all company records are accurate and complete. In addition, the Group has a strict internal code of conduct and an Anti-Fraud Policy which provide guidance on the ethical behaviour when handling issues such as bribery and corruption, conflicts of interest, insider dealing, acceptance of gift and entertainment and fair dealing. The Board adopted a Whistleblowing Policy which provides reporting channels and guidance for employees and other parties who deal with the Group (e.g. contractors and suppliers, etc.) to report possible improprieties in matters of financial reporting or other matters. The Whistleblowing Policy and the Anti-Fraud Policy are available on the Company's website.

The Group's internal audit function, which is independent of the Group's management team, assesses and monitors the effectiveness of the Group's risk management and internal control systems and reports to the Board Audit and Risk Committee on a half-yearly basis. The function has unrestricted access to the company records that allows it to review all aspects of the Group's control and governance process. Yearly audit plan is prepared for review and approval by the Board Audit and Risk Committee. The scope of work includes financial and operational review, recurring and unscheduled audit, fraud investigation and compliance review. The opinion, as formulated by the function on the effectiveness of the risk management and internal control systems, together with the major findings and implementation progress of the audit recommendations, would be reported to the Board Audit and Risk Committee.

During the year ended 31st December 2020, the Board, through the Board Audit and Risk Committee, has conducted a bi-annual review of the overall effectiveness of the Group's internal control systems over financial, operational and compliance controls, risk management process, information systems security, scope and quality of the management's monitoring of risks and internal control systems, the effectiveness of financial reporting and compliance with the Listing Rules.

The Board ensured that the resources, staff qualifications and experience, training programmes and budget of the Company's accounting, internal audit and financial reporting functions were adequate. The Board concluded that in general, the Group had set up a sound control environment and installed necessary control mechanisms to monitor and correct non-compliance or material internal control defects, if any. The Board also considered that the Group's risk management and internal control systems are effective and adequate.

The Hong Kong and China Gas Company Limited

Annual Report 2020

Risk Management and Internal Control (Continued)

Risk Management

Risk Management Framework

Rooted in corporate's vision and mission, the Group strives the best to provide its customers with a safe, reliable supply of energy as well as the caring, competent and efficient service they expect. Meanwhile, the Group is also working to pursue sustainable development and caring for the environment, people and community.

To ensure growth and long-term value for the key stakeholders, the Group considers risk governance as its top priority and is committed to establishing a robust system of risk identification and management which is central to its ongoing success.

The Group has in place an Enterprise Risk Management Framework (the "Framework") that depicts the system to effectively identify, assess, mitigate, report and monitor key business risks across all business units of the organisation. The system enables the management team to gain a clear view of the significant risks for better strategy setting and project execution which ultimately contribute to enhanced business performance.

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Executive Risk Management

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Group Risk Management

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Business Units

Risk Appetite

To pursue the Group's mission and keep in line with the expectations of its stakeholders, the Group is willing to take reasonable and manageable risks that are consistent with its strategic business drivers and necessary to promote innovation and continued growth but would not expose the Group to the following:

Major incidents affecting safety and health of its staff, contractors and the general public;
Loss or failure of infrastructures and operations materially affecting production and supply;
Material financial loss impacting ability of the Group to carry out its business drivers;
Incidents leading to profound negative impact on corporate image or reputation;
Legal actions that are liable for major loss or suspension of operations; and
Incidents leading to severe impacts on the environment.

Corporate Governance Report

Risk Management and Internal Control (Continued)

Risk Management (Continued)

Risk Management Structure

The risk management structure sets out the mechanism by which authority is exercised, decisions are taken and organisation is effectively supervised. The Board Audit and Risk Committee supports the Board in overseeing the overall risk management system and provides assurance to the Board at least annually that the system is operating effectively. The Executive Risk Management Committee ("ERMC"), which is composed of all Executive Committee Members of the Company, is responsible for the system formulation and its effective implementation to maintain risk exposures within the risk appetite. It is assisted by the Group Risk Management Committee ("GRMC"), which comprises risk owners who are also the key business management team. GRMC reviews the major risk exposure, monitors the implementation of risk-mitigating controls and reports to ERMC regularly on the results of risk management review.

Risk Management Process

The risk management process is embedded into the day-to-day operation and is an ongoing process carried out by everyone in the organisation across all business units.

Each company of the Group has its own risk management process and system. Regular communication is made among companies, regional offices and headquarters of the Group on the latest risk exposures and mitigation measures to ensure risks are effectively managed and issues are timely reported. Regular independent review would be performed to ensure the risk management system is operating effectively.

The GRMC would communicate and summarise the key risks (also taking emerging risks into account) across all businesses through senior executives, who continuously monitor all material risks faced by the companies of the Group in their corresponding regions and business streams.

The summarised key risks would be reviewed continuously and reassessed within the Group by adopting the risk assessment criteria as set out in the Framework. Priorities would be given to high and medium risks on implementation of risk mitigating measures. A risk management update that highlights the summarised key risks and action plans would be submitted to and discussed by ERMC at least annually for monitoring purpose while top risks and measures would finally be selected for review by the Board Audit and Risk Committee on behalf of the Board. The Board Audit and Risk Committee, based on the review of top risks and adopted measures, ensures at least an annual review of the effectiveness of the risk management system has been conducted.

A description of the Group's risk factors is shown on pages 56 to 57 of the Annual Report. The Group seeks continuous improvement to the Framework in response to the changing business environment.

Policy and Procedures on Disclosure of Inside Information

The Board has adopted the Policy and Procedures on Disclosure of Inside Information which contains the guidelines to the officers (referring to Directors, managers or Company Secretary of the Company) and all the Relevant Employees of the Company to ensure that the inside information of the Company is to be disseminated to the public in an equal and timely manner in accordance with the applicable laws and regulations. The Policy and Procedures on Disclosure of Inside Information is available on the Company's website.

Company Secretary

The Company Secretary is responsible for assisting the Board by ensuring good information flow within the Board members as well as the Board policy and procedures being followed properly. The Company Secretary also provides professional advice to the Board on corporate governance and other matters. He is also responsible for organising general meetings of the Company and facilitating the induction and professional development of the Directors.

During the year ended 31st December 2020, the Company Secretary undertook no less than 15 hours of relevant professional training.

The Hong Kong and China Gas Company Limited

Annual Report 2020

Communication with Shareholders

The Board is committed to maintaining an ongoing communication with shareholders and providing timely disclosure of information concerning the Group's material developments to shareholders and investors.

The AGM provides a good forum for communication between the Board and shareholders. The notice of the AGM is despatched to all shareholders at least 20 clear business days prior to such AGM. The chairmen of all Board Committees are invited to attend the AGM. The Joint Chairmen of the Board and the chairmen of all the Board Committees are available to answer questions at the AGM. Auditor is also invited to attend the AGM to answer questions about the conduct of the audit, the preparation and content of the auditor's report, the accounting policies and auditor's independence.

Pursuant to the Listing Rules, any vote of shareholders at a general meeting will be taken by poll. Detailed procedures for conducting a poll will be explained to the shareholders in the general meeting so that shareholders are familiar with such voting procedures. The poll results will be posted on the websites of the Exchange and the Company on the day of the general meeting. Moreover, a separate resolution will be proposed by the chairman of a general meeting in respect of each substantially separate issue.

The 2020 AGM was held on 5th June 2020. The attendance record of each Director at the 2020 AGM is set out below:

	No. of Meeting
Directors	Attended / Held

Non-executive Directors
Dr. Lee Ka-kit (Chairman)	1/1
Mr. Lee Ka-shing (Chairman)	1/1
Dr. Colin Lam Ko-yin	1/1

Independent Non-executive Directors
Dr. the Hon. Sir David Li Kwok-po	1/1
Prof. Poon Chung-kwong	1/1
Dr. Moses Cheng Mo-chi	1/1

Executive Directors
Mr. Alfred Chan Wing-kin	1/1
Mr. Peter Wong Wai-yee	1/1
Mr. John Ho Hon-ming*	N/A

Mr. John Ho Hon-ming was appointed as Executive Director with effect from 1st October 2020.

Shareholders' Rights

Set out below is a summary of certain rights of the shareholders of the Company which are governed by the provisions of the Articles of Association and applicable laws, rules and regulations.

Convening a General Meeting

Pursuant to the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) (the "Companies Ordinance"), shareholders representing at least 5% of the total voting rights of all the shareholders are entitled to send a request to the Company to convene a general meeting. Such request must state the general nature of the business to be dealt with at the meeting and may include the text of a resolution that may properly be moved and is intended to be moved at the meeting. The request may be sent to the Company in hard copy form or in electronic form and must also be authenticated by the person or persons making it.

CoRPORATE GoVERNANCE Report

Shareholders' Rights (Continued)

Putting Forward Proposals at a Shareholders' Meeting

Pursuant to the Companies Ordinance, shareholders representing at least 2.5% of the total voting rights of all the shareholders or at least 50 shareholders can request the Company in writing to circulate to the shareholders a statement of not more than 1,000 words with respect to a matter mentioned in a proposed resolution to be dealt with at that meeting or other business to be dealt with at that meeting. The request may be sent to the Company in hard copy form or in electronic form and must identify the statement to be circulated. It must be authenticated by the person or persons making it and be received by the Company at least 7 days before such meeting.

Putting Forward Enquiries to the Board

The Company has maintained a policy on shareholders' communication to handle enquiries put to the Board. In order to enable such enquiries be properly directed, designated contacts, email addresses and enquiry lines of the Company were provided on page 188 of this Annual Report and the Company's website.

Proposing a Person for Election as a Director

If a shareholder wishes to propose a person other than a retiring director of the Company for election as a director of the Company at a general meeting, that shareholder should deposit a written notice stating the full name of the person proposed for election as a director of the Company, together with (a) the proposed person's biographical details as required by Rule 13.51(2) of the Listing Rules, and be signed by the shareholder concerned and that proposed person indicating his/her willingness to be elected; and (b) the proposed person's written consent to the publication of his/her personal data not earlier than the day after the despatch of the notice of the meeting and not later than 7 days prior to the day appointed for the meeting. Detailed procedures can be found in the "Procedures for shareholders to propose a person for election as a director of the Company at a general meeting" which is available on the Company's website.

Investor Relations

The Company continues to enhance communications and relationships with its investors. Designated senior management maintains regular communication and dialogue with shareholders, investors and analysts. A meeting with analysts will be held after the announcement of interim or annual results which strengthens the communication with investors. Questions from investors are dealt with in an informative and timely manner.

As a channel to further promote effective communication, the Group maintains a website at www.towngas.com where the Company's announcements and press releases, business developments and operations, financial information, corporate governance practices and other information are posted.

Constitutional Documents

The latest version of the Articles of Association is available on both the websites of the Company and the Exchange. During the year ended 31st December 2020, there was no change in the Articles of Association.

INDEPENDENT AUDITOR'S REPORT

The Hong Kong and China Gas Company Limited Annual Report 2020

TO THE MEMBERS OF THE HONG KONG AND CHINA GAS COMPANY LIMITED (incorporated in Hong Kong with limited liability)

Opinion

What we have audited

The consolidated financial statements of The Hong Kong and China Gas Company Limited (the "Company") and its subsidiaries (the "Group") set out on pages 92 to 187 which comprise:

the consolidated income statement for the year ended 31st December 2020;
the consolidated statement of comprehensive income for the year then ended;
the consolidated statement of financial position as at 31st December 2020;
the consolidated cash flow statement for the year then ended;
the consolidated statement of changes in equity for the year then ended; and
the notes to the consolidated financial statements, which include a summary of significant accounting policies.

Our opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31st December 2020, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards ("HKFRSs") issued by the Hong Kong Institute of Certified Public Accountants ("HKICPA") and have been properly prepared in compliance with the Hong Kong Companies Ordinance.

Basis for opinion

We conducted our audit in accordance with Hong Kong Standards on Auditing ("HKSAs") issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the HKICPA's Code of Ethics for Professional Accountants ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

INDEPENDENT AUDITOR'S REPORT

Key audit matters (Continued)

Key audit matters identified in our audit are summarised as follows:

Valuation of investment in certain equity interest of an unlisted company
Impairment assessment of (i) coal mine and oil properties and (ii) property, plant and equipment and goodwill of individual city-gas projects
Recognition of gas connection income

Key audit matter	How our audit addressed the key audit matter

Valuation of investment in certain equity interest of an unlisted company

Refer to notes 3, 4(g) and 24 to the consolidated financial statements

The investment in certain equity interest of an unlisted company (the "Investment") which owned a coking coal mine and related coke production and coke-gas conversion facility in Inner-Mongolia, was accounted for as a financial asset at fair value through profit or loss and it was subject to fair value revaluation at each reporting date. The Investment

at 31st December 2020 was valued by an independent professional valuer. With reference to the valuation, management had estimated the fair value of the Investment at HK$3.1 billion at year end.

In consideration of the Investment is operating in an emerging industry and its fair value is highly dependent on its expansion plan, the valuation involved significant management judgements. Accordingly, the valuation of the Investment was considered as one of the key audit matters.

The fair value was determined based on the discounted cash flow model. The valuation involved significant judgements and estimates from management, including coking coal reserves, future business growth driven by future expansion plan, future products selling prices and production costs of the investee, discount rate, marketability discount and minority discount etc.

Our procedures in relation to management's valuation of the Investment include:

Obtaining an understanding of the management's control procedures of valuation of the Investment and assessing the inherent risk of material misstatement by considering the degree of estimation uncertainty and level of other inherent risk factors;
Evaluating the independent professional valuer's competence, capabilities and objectivity;
Assessing the valuation methodology used by the independent professional valuer to estimate the fair value of the Investment;
Checking, on a sample basis, the accuracy and reasonableness of the input data provided by management to the independent professional valuer, to supporting evidence, such as approved budgets and considering the reasonableness of these budgets by comparing the budgets to the historical results and market data;
Assessing the reasonableness of cash flows projection, challenging and performing audit procedures on management's assumptions such as coking coal reserves, the future business growth driven by future expansion plan, future products selling prices and production costs, discount rate by comparing the assumptions to historical results and published market and industry data and comparing the current year's results with the prior year forecast and other relevant information. Internal valuation expert had been engaged to assist the review on valuation methodology, discount rate, marketability discount and minority discount. In addition, we had communicated with the management of the Investment to understand the business and assessed if there was any inconsistency in the assumptions used in the cash flows projection; and
Testing the mathematical accuracy of the cash flows projection.

Based on the audit procedures performed, we found the assumptions made by management in relation to the valuation were supported by available evidence.

The Hong Kong and China Gas Company Limited

Annual Report 2020

Key audit matters (Continued)

Key audit matter	How our audit addressed the key audit matter

Impairment assessment of (i) coal mine and oil properties and (ii) property, plant and equipment and goodwill of individual city-gas projects

Refer to notes 4(a), 7 and 16 to the consolidated financial statements

In relation to the New Energy business segment, the Group owned a coal mine in mainland China and oil properties in Thailand which were engaged in the exploration, drilling and sale of crude oil. The carrying values of the coal mine and oil properties are mainly included under "mining and oil properties" of HK$2.3 billion

of property, plant and equipment as at

31st December 2020. In consideration of the prices of the primary outputs of these projects, namely coal and oil were in relatively low level and volatile in recent years, management considered there were impairment indicators and performed impairment assessments on these assets. A provision for impairment of HK$385.0 million was recognised in the consolidated income statement for the year ended 31st December 2020 for the oil properties in Thailand.

Our procedures in relation to management's impairment assessment include:

Obtaining an understanding of the management's control procedures of impairment assessment and assessing the inherent risk of material misstatement by considering the degree of estimation uncertainty and level of other inherent risk factors;
Understanding, evaluating and testing management's control procedures in relation to impairment assessment, where applicable;
Evaluating the independent professional valuer's and consultant's competence, capabilities and objectivity, where applicable;
Assessing the methodology used by management to estimate the recoverable amounts;
Checking, on a sample basis, the accuracy and relevance of the input data to supporting evidence, such as approved budgets and considering the reasonableness of these budgets by comparing the budgets to the historical results and the market data;

INDEPENDENT AUDITOR'S REPORT

Key audit matters (Continued)

Key audit matter	How our audit addressed the key audit matter

In relation to city-gas business in mainland China operated by the Group's subsidiaries, the attributable carrying values of property, plant and equipment and goodwill related to these individual city-gas projects as at 31st December 2020 amounting to approximately HK$34.6 billion. The Group's share of property, plant and equipment, together with goodwill related to individual city-gas projects accounted for associates and joint ventures of the Group

as at 31st December 2020 were carried at approximately HK$12.0 billion and HK$17.0 billion respectively. In consideration of regulatory development and market-oriented reforms for the natural gas industry in the mainland China, management considered there were uncertainties to future profitability from these projects and performed impairment assessments on these assets. Based on the results of these impairment assessments on these assets. The Group considered the carrying values of property, plant and equipment and goodwill related to these individual city-gas projects as at 31st December 2020 were recoverable.

Under the impairment assessments, management calculated the recoverable amounts under value-in-use or fair value less cost of disposal method. As the calculations require the use of significant management judgement and estimates, including the coal and oil reserves, future business growth, future products selling price and production costs, production volume, expected impact of the regulatory changes, discount rate, terminal value etc., we considerd it was one of the key audit matters.

Assessing the appropriateness of cash flows projections in calculation of the recoverable amount of the coal mine and oil properties and city-gas business, challenging the reasonableness of management's assumptions such as the coal and oil reserves, future business growth, future products selling prices and production costs, production volume, expected impact of regulatory changes, discount rate, terminal value, etc. based on our knowledge of the business and industry by comparing the assumptions to historical results and published market and industry data and comparing the current year's actual results with the prior year forecast, where applicable. Internal valuation expert had been engaged to assist the review on the methodology of the recoverable amount calculations and discount rates; and
Performing sensitivity analysis in consideration of potential impact of reasonably possible downside changes in the key assumptions.

Based on the audit procedures performed, we found that the assumptions made by management were supported by available evidence.

The Hong Kong and China Gas Company Limited

Annual Report 2020

Key audit matters (Continued)

Key audit matter	How our audit addressed the key audit matter

Recognition of gas connection income

Refer to notes 4(e) and 5 to the consolidated financial statements

Gas connection income is recognised when or as the control of the underlying performance obligations is transferred to the customer.

The Group had recognised gas connection income of HK$3.2 billion for the year ended 31st December 2020.

Management identified performance obligations from the contract and determined corresponding transaction price. For performance obligation being satisfied at a point in time, revenue is recognised when the customer obtains control of the service. For performance obligation being satisfied overtime, the progress towards complete satisfaction of the performance obligation is measured using input method. Management are required to exercise significant judgement in their review and revision of the estimates of the total contract costs and actual costs incurred up to the end of the reporting period for each contract as the contract progresses, based on past experience and specific circumstances.

The eventual realisation of these estimates are subject to the finalisation of the costs. Any change in the estimate of the total contract costs, which determined the progress towards complete satisfaction of performance obligation, would affect the gas connection income recognition.

Due to its quantitative significance to the consolidated income statement and judgements involved in the determination of the progress, we considered recognition of gas connection income as one of the key audit matters.

Our audit procedures in relation to recognition of gas connection income and margins included the following:

Obtaining an understanding of the management's control procedures of recognition of gas connection income and assessing the inherent risk of material misstatement by considering the degree of estimation uncertainty and level of other inherent risk factors;
Understanding, evaluating and testing the key controls surrounding the gas connection income cycle, including the assessment of project status, estimation of the total contract costs and actual costs incurred;
Evaluating the appropriateness of profit margin adopted by management by comparing to profit margin of similar services and external market data, if available;
Checking, on a sample basis, to contracts, invoices, project status reports and other relevant correspondences to evaluate the project status, reasonableness of management's assessment of budgeted total contract costs and actual costs incurred, and to validate the amounts of income recognised; and
Selecting contracts, on a sample basis, to perform interview with the project managers and assessed whether or not these estimates showed any evidence of management bias.

We found the management's estimations and judgements in the recognition of gas connection income to be reasonable based on the available evidence.

INDEPENDENT AUDITOR'S REPORT

Other information

The directors of the Company are responsible for the other information. The other information comprises all of the information included in the annual report other than the consolidated financial statements and our auditor's report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of directors and those charged with governance for the consolidated financial statements

The directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. We report our opinion solely to you, as a body, in accordance with Section 405 of the Hong Kong Companies Ordinance and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

The Hong Kong and China Gas Company Limited

Annual Report 2020

Auditor's responsibilities for the audit of the consolidated financial statements (Continued)

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Chu Ho Kwan Raphael.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 19th March 2021

CONSOLIDATED INCOME STATEMENT

for the year ended 31st December 2020

		2020	2019
	Note	HK$'M	HK$'M
Revenue	5	40,927.0	40,628.1
Total operating expenses	6	(32,527.1)	(32,604.4)

		8,399.9	8,023.7
Other (losses)/gains, net	7	(481.9)	1,048.7
Interest expense	9	(1,268.6)	(1,230.4)
Share of results of associates	21	1,187.0	1,820.4
Share of results of joint ventures	22	1,089.2	741.5

Profit before taxation	10	8,925.6	10,403.9
Taxation	13	(1,713.2)	(2,289.6)

Profit for the year		7,212.4	8,114.3
Attributable to:

Shareholders of the Company		6,007.3	6,965.7
Holders of perpetual capital securities		110.3	98.6
Non-controlling interests		1,094.8	1,050.0

		7,212.4	8,114.3

Earnings per share - basic and diluted, HK cents	15	33.8	39.2*

Adjusted for the bonus share issue in 2020

The notes on pages 100 to 187 form part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The Hong Kong and China Gas Company Limited Annual Report 2020

for the year ended 31st December 2020

	2020	2019
	HK$'M	HK$'M
Profit for the year	7,212.4	8,114.3
Other comprehensive income:
Items that will not be reclassified subsequently to profit or loss:
Movement in reserve of equity investments at fair value through	(597.6)	1,490.7
other comprehensive income
Remeasurements of retirement benefit	55.2	102.1
Share of other comprehensive (loss)/income of an associate	(19.7)	71.0
Exchange differences	891.6	(74.8)
Items that may be reclassified subsequently to profit or loss:
Movement in reserve of debt investments at fair value through	4.5	14.7
other comprehensive income
Change in fair value of cash flow hedges	(87.1)	(15.2)
Share of other comprehensive income of an associate	4.1	10.8
Exchange differences	2,975.9	(777.0)

Other comprehensive income for the year, net of tax	3,226.9	822.3

Total comprehensive income for the year	10,439.3	8,936.6
Total comprehensive income attributable to:

Shareholders of the Company	8,534.0	7,388.1
Holders of perpetual capital securities	110.3	98.6
Non-controlling interests	1,795.0	1,449.9

	10,439.3	8,936.6

The notes on pages 100 to 187 form part of these consolidated financial statements.

CONSOLIDATED STATEMENT

OF FINANCIAL POSITION

as at 31st December 2020

		2020	2019
	Note	HK$'M	HK$'M
Assets
Non-current assets
Property, plant and equipment	16	68,133.7	61,082.7
Investment property	17	827.0	830.0
Right-of-use assets	18	2,802.4	2,725.2
Intangible assets	19	5,462.9	5,291.1
Associates	21	28,670.3	27,475.5
Joint ventures	22	11,981.2	10,613.5
Financial assets at fair value through other comprehensive income	23	2,492.8	3,141.9
Financial assets at fair value through profit or loss	24	4,687.3	5,030.6
Derivative financial instruments	25	305.0	354.1
Retirement benefit assets	26	111.9	66.3
Other non-current assets	27	4,649.1	3,729.8
		130,123.6	120,340.7
Current assets
Inventories	28	2,671.0	2,363.7
Trade and other receivables	29	8,572.5	8,001.2
Loan and other receivables from associates	21	401.7	526.7
Loan and other receivables from joint ventures	22	442.9	800.4
Loan and other receivables from non-controlling shareholders		206.3	240.0
Financial assets at fair value through profit or loss	24	205.4	188.5
Derivative financial instruments	25	28.5	1.4
Time deposits over three months	30	173.3	158.6
Time deposits up to three months, cash and bank balances	30	7,455.0	7,848.9
		20,156.6	20,129.4
Current liabilities
Trade payables and other liabilities	31	(17,031.1)	(14,718.0)
Amounts due to joint ventures	22	(486.3)	(943.2)
Loan and other payables due to non-controlling shareholders		(108.3)	(100.4)
Provision for taxation		(1,188.1)	(1,165.3)
Borrowings	32	(10,852.3)	(9,240.6)
Derivative financial instruments	25	(140.2)	-
		(29,806.3)	(26,167.5)
Total assets less current liabilities		120,473.9	114,302.6

The notes on pages 100 to 187 form part of these consolidated financial statements.

CONSOLIDATED STATEMENT	Annual Report 2020
	The Hong Kong and China Gas Company Limited
OF FINANCIAL POSITION (Continued)

as at 31st December 2020

		2020	2019
	Note	HK$'M	HK$'M
Non-current liabilities
Deferred taxation	33	(7,059.1)	(7,180.5)
Borrowings	32	(31,286.3)	(28,695.6)
Derivative financial instruments	25	(478.6)	(571.0)
Other non-current liabilities	34	(2,496.6)	(2,458.8)
		(41,320.6)	(38,905.9)
Net assets		79,153.3	75,396.7
Capital and reserves
Share capital	35	5,474.7	5,474.7
Reserves	36	61,283.8	58,734.7
Shareholders' funds		66,758.5	64,209.4
Perpetual capital securities	37	2,384.0	2,384.2
Non-controlling interests		10,010.8	8,803.1
Total equity		79,153.3	75,396.7

Approved by the Board of Directors on 19th March 2021

Lee Ka-kit	David Li Kwok-po
Director	Director

The notes on pages 100 to 187 form part of these consolidated financial statements.

CONSOLIDATED

CASH FLOW STATEMENT

for the year ended 31st December 2020

		2020	2019
	Note	HK$'M	HK$'M
Net cash from operating activities	41	9,910.2	9,912.4
Investing activities
Receipt from sale of property, plant and equipment		32.6	76.3
Receipt from sale of right-of-use assets		5.2	7.1
Purchase of property, plant and equipment		(7,217.6)	(6,751.3)
Deposit paid for acquisition of an associate		(394.1)	-
Payment for right-of-use assets		(77.3)	(301.6)
Increase in investments in associates		(268.5)	(412.3)
Increase in loans to associates		(75.5)	(214.2)
Repayment of loans by associates		172.9	7.8
Increase in investments in joint ventures		(307.8)	(79.0)
Increase in loans to joint ventures		(48.7)	(43.4)
Decrease in amounts due to joint ventures		(303.5)	(51.5)
Repayment of loans by joint ventures		317.1	74.9
Acquisition of businesses	42 (a)	18.2	(42.5)
Sale of financial assets at fair value through profit or loss		149.3	50.6
Sale of financial assets at fair value through other		79.5	21.2
comprehensive income
Purchase of financial assets at fair value through profit or loss		(120.1)	(10.0)
Purchase of financial assets at fair value through other		(99.0)	(98.9)
comprehensive income
(Increase)/decrease in time deposits over three months		(8.8)	175.1
Interest received		183.4	233.7
Dividends received from investments in securities		143.9	105.4
Dividends received from associates		1,001.7	1,064.3
Dividends received from joint ventures		827.5	887.5
Net cash used in investing activities		(5,989.6)	(5,300.8)

The notes on pages 100 to 187 form part of these consolidated financial statements.

CONSOLIDATED	Annual Report 2020
	The Hong Kong and China Gas Company Limited
CASH FLOW STATEMENT (Continued)

for the year ended 31st December 2020

		2020	2019
	Note	HK$'M	HK$'M
Financing activities
Redemption of perpetual capital securities		-	(2,405.4)
Issue of perpetual capital securities		-	2,341.3
Change in loans with non-controlling shareholders		47.1	(132.8)
Capital injection by non-controlling shareholders		38.1	100.1
Further acquisition of subsidiaries	42 (b)	(63.1)	(37.5)
Increase in borrowings		20,221.8	22,012.0
Repayment of borrowings		(16,566.4)	(19,441.2)
Principal elements of lease payments		(134.8)	(128.6)
Interest paid for the lease liability		(13.2)	(16.3)
Interest paid to holders of perpetual capital securities		(110.5)	(55.7)
Interest paid		(1,373.6)	(1,405.1)
Dividends paid to shareholders of the Company	43 (a)	(6,025.4)	(5,569.9)
Dividends paid to non-controlling shareholders		(540.5)	(474.8)
Net cash used in financing activities		(4,520.5)	(5,213.9)
Decrease in cash and cash equivalents		(599.9)	(602.3)
Cash and cash equivalents at 1st January		7,848.9	8,500.8
Effect of foreign exchange rate changes		206.0	(49.6)

Cash and cash equivalents at 31st December		7,455.0	7,848.9
Analysis of the balances of cash and cash equivalents
Cash and bank balances		5,775.4	5,385.3
Time deposits up to three months		1,679.6	2,463.6

		7,455.0	7,848.9

The notes on pages 100 to 187 form part of these consolidated financial statements.

CONSOLIDATED STATEMENT

OF CHANGES IN EQUITY

for the year ended 31st December 2020

	Attributable to
	shareholders of	Holders of
	the Company
	perpetual	Non-
	Share		capital	controlling
	capital	Reserves	securities	interests	Total
	HK$'M	HK$'M	HK$'M	HK$'M	HK$'M
As at 1st January 2020	5,474.7	58,734.7	2,384.2	8,803.1	75,396.7
Profit for the year	-	6,007.3	110.3	1,094.8	7,212.4
Other comprehensive income:
Movement in reserve of financial
assets at fair value through other	-	(405.2)	-	(187.9)	(593.1)
comprehensive income
Remeasurements of retirement benefit	-	55.2	-	-	55.2
Change in fair value of cash flow hedges	-	(83.6)	-	(3.5)	(87.1)
Share of other comprehensive loss	-	(15.6)	-	-	(15.6)
of associates
Exchange differences	-	2,975.9	-	891.6	3,867.5
Total comprehensive income for	-	8,534.0	110.3	1,795.0	10,439.3
the year
Capital injection	-	-	-	38.1	38.1
Further acquisition of subsidiaries	-	40.5	-	(103.6)	(63.1)
(note 42(b))
Acquisition of business (note 42(a))	-	-	-	18.7	18.7
Interest paid on perpetual capital	-	-	(110.5)	-	(110.5)
securities
Dividends paid to shareholders of	-	(6,025.4)	-	-	(6,025.4)
the Company
Dividends paid to non-controlling	-	-	-	(540.5)	(540.5)
shareholders
As at 31st December 2020	5,474.7	61,283.8	2,384.0	10,010.8	79,153.3

The notes on pages 100 to 187 form part of these consolidated financial statements.

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Delayed Hong Kong S.E. Other stock markets 02:55:06 2024-04-26 am EDT			5-day change	1st Jan Change
5.99 ^HKD	-0.50%		+5.83%	+0.17%

Apr. 24	Hong Kong & China Gas Logs Higher 2023 Profit Despite Lower Revenue	MT
Mar. 20	The Hong Kong and China Gas Company Limited Proposes Final Dividend for the Year Ended 31 December 2023, Payable on 24 June 2024	CI

Hong Kong & China Gas Logs Higher 2023 Profit Despite Lower Revenue	Apr. 24	MT
The Hong Kong and China Gas Company Limited Proposes Final Dividend for the Year Ended 31 December 2023, Payable on 24 June 2024	Mar. 20	CI
The Hong Kong and China Gas Company Limited Reports Earnings Results for the Full Year Ended December 31, 2023	Mar. 20	CI
Hong Kong and China Gas Redeems $300 Million Worth of Securities	Feb. 15	MT
Weak demand, tighter lenders: Hong Kong property developers face tough 2024	Jan. 12	RE
Hong Kong and China Gas CFO Steps Down	Dec. 27	MT
The Hong Kong and China Gas Company Limited Announces Executive Changes, Effective January 1, 2024	Dec. 26	CI
The Hong Kong and China Gas Company Limited Announces Executive and Board Changes	Dec. 26	CI
Towngas Smart to Buy HKCG's Stakes in Three Renewable Energy Ventures	Dec. 11	MT
Towngas Smart Energy to Form Chaozhou Joint Venture with Parent	Nov. 22	MT
Hong Kong and China Gas' Profit Climbs 9% in H1; Shares Down 3%	23-08-16	MT
The Hong Kong and China Gas Company Limited Declares Interim Dividend for the Six Months Ended 30 June 2023, Payable on 08 September 2023	23-08-15	CI
The Hong Kong and China Gas Company Limited Reports Earnings Results for the Half Year Ended June 30, 2023	23-08-15	CI
Hong Kong & China Gas Arm Exits Shanghai Gas	23-08-03	MT
Towngas, Citybus Operator to Co-Develop Hydrogen Refueling Facility	23-07-10	MT
Towngas Smart to Buy Parent's 50% Stake in Renewable Energy Joint Venture	23-06-21	MT
Towngas Smart Energy Company Limited entered into the Transfer Agreement to acquire Towngas Renewable Energy (HK) Company Limited from The Hong Kong and China Gas Company Limited (SEHK:3)	23-06-20	CI
Towngas Smart Energy Exits 25% of Shanghai Gas for 4.66 Billion Yuan	23-05-23	MT
China Trade Report Churns Asian Stock Markets	23-05-09	MT
Towngas Posts 5% Rise in 2022 Profit	23-03-17	MT
The Hong Kong and China Gas Company Limited Reports Earnings Results for the Full Year Ended December 31, 2022	23-03-17	CI
The Hong Kong and China Gas Company Limited Proposes Final Dividend for the Year Ended 31 December 2022, Payable on 26 June 2023	23-03-17	CI
Bain Capital Invests $400.0 Million in Towngas-Backed Biorefinery EcoCeres	23-01-12	DJ
Bain Capital buys stake in biofuel firm for $400 mln	23-01-11	RE
Most Kwai Chung Names COO	22-09-19	MT

	1st Jan change	Capi.
THE HONG KONG AND CHINA GAS CO LTD	+0.17%	14.35B
ENN ENERGY HOLDINGS LIMITED	+16.52%	9.45B
KUNLUN ENERGY COMPANY LIMITED	+8.10%	8.3B
ENN NATURAL GAS CO.,LTD.	+8.50%	7.76B
CHINA RESOURCES GAS GROUP LIMITED	-2.73%	7.36B
SOUTHWEST GAS HOLDINGS, INC.	+19.89%	5.44B
NEW FORTRESS ENERGY INC.	-27.80%	5.59B
GRUPO ENERGÍA BOGOTÁ S.A. E.S.P.	+29.47%	5.59B
UGI CORPORATION	+4.59%	5.39B
BROOKFIELD INFRASTRUCTURE CORPORATION	-10.35%	4.52B

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