HONG Kong & China Gas Co, the city's only piped-gas supplier, has agreed to acquire a 45 percent stake in Panva Gas Holdings Ltd for HK$3.2 billion (US$411 million) to tap rising demand for the fuel on the Chinese mainland, Bloomberg News reported.

Towngas, as Hong Kong & China Gas is known, will purchase 722.9 million shares at HK$4.18 apiece, Hong Kong-based Panva Gas said in a statement to the Hong Kong Stock Exchange yesterday. In exchange, Panva Gas, partly owned by billionaire Li Ka-shing, will acquire 10 mainland gas projects from Towngas, it said.

City gas companies are competing for a share of the growing market for natural gas in the mainland, which relies on coal and oil for 90 percent of its fuel needs. Panva Gas will benefit from gaining additional supply businesses in a transaction that involves no cash payment, Moody's Investors Service said.

Piped gas sales volume is expected to more than double as the acquired projects have a high concentration of industrial and commercial users, Jennifer Wong and Gary Lau, Hong Kong-based analysts at Moody's, said in a statement. Panva Gas's debt ratings have been placed under review for possible upgrade, the ratings company said.

Panva will have 35 piped gas projects in 32 cities in the mainland serving more than 1.7 million users after the acquisition, the company said in the statement.