BEH’s Focus on Natural Gas Operation To Benefit From China’s Decarbonization Policy

Founded in 1997, Beijing Enterprises Holdings is the listed flagship of the Beijing municipal government, with a strategic focus on public utilities. It has a monopoly position in Beijing’s natural gas distribution, owns unparalleled gas transmission and distribution networks in Beijing, and controls 40% of the Shaanxi-Beijing pipelines, the major source of natural gas supply for Beijing and northern China. It has a unique customer mix, with gas-fired power and heating plants the most prominent demand segments, allowing the company to benefit from a favorable policy environment. The government’s push to fight air pollution sees gas-fired power and heating plants replacing coal-fired power and heating systems in the city, which should drive sustainable and robust gas demand. We think BEH's key strength is its high-quality, well-located gas network with monopoly operation, providing the company with sustainable and robust cash inflows. This underpins our narrow economic moat rating.