AAG Energy Holdings, which produces energy from natural gas found in coal, is seeking to rekindle its initial public offering ambitions and raise up to $363 million.
AAG Energy's first bid to tap public markets in December 2012 was unsuccessful.
This time around the privately held coalbed methane company has already locked in five cornerstone investors who have pledged $229 million in total, or 63% of the total dealsize.
Cornerstones include Shenzhen Tongyu Gas, private equity firm Addor Capital and Sichuan Datong Gas.
AAG Energy will offer 761.4 million shares at an indicative price range of HK$3 to HK$3.70 per unit, according to a term sheet seen by FinanceAsia. Of the 761.4 million shares, 87.3% will be primary. The selling shareholder, Citic, will offload 95.2 million shares. If the greenshoe option is exercised, private equity firms Warburg Pincus, Baring Private Equity Asia, and the company's chairman Steve Zou, will also sell some of their stake.
A greenshoe option will tack on an additional 114.2 million shares and depending on where the shares price, could bring the total deal-size to $418 million.
Ninety percent of the deal is available for the international tranche and the remainder for the retail tranche. Depending on demand, the retail portion will increase accordingly. For example, if the international tranche is 15 times oversubscribed, the retail tranche will receive 10% of the offering, according to a term sheet seen by FinanceAsia.
There is a six-month lockup for the selling shareholders.
Some 60% of IPO proceeds will go towards exploration, development and production of coalbed methane projects in the southern Qinshui Basin in China's Shanxi province, a coal-producing region.
CICC and HSBC are the joint sponsors.
While AAG Energy does not have any direct comps, prospective investors will likely look at London-listed Green Dragon Gas, Sino Oil and Gas, and Far East Energy.
The company attempted to come to market in 2012 but wound up postponing the flotation, citing a difficult pricing environment in Hong Kong.
In the company's prospectus, it notes that China's natural gas industry is set to grow an an exponential rate. It only accounted for 4.2% of China's total energy mix in 2012, substantially lower compared to the global average of 21.3%, according to SIA Energy, a mainland oil and gas consulting firm. The Chinese government plans to boost the usage of natural gas to 10% by 2020, and has incentivised policies to encourage natural gas consumption, according to AAG Energy's A-1 filing.
The roadshows will carry on from June 8 to June 16 in Hong Kong, San Francisco, New York, Boston, Singapore, London and Edinburgh. Pricing is set for June 16 and listing on June 23.
This article was updated to clairify that private equity firms Warburg Pincus and Baring Private Equity Asia, as well as the company's chairman Steve Zou, will only sell shares if the greenshoe option is exercised.
