Re: LNG hedging for China

Hi Mark -

You're right. Only 3 types of institutions have the capacity and authority
to enter into derivatives transactions in the PRC. They are:
a. banks;
b. non-bank financial institutions ("NBFI"); and
c. foreign invested enterprises ("FIE").

Banks and NBFIs require banking licences and may only enter into derivative
transactions for hedging purposes. FIEs comprise (i) wholly foreign owned
enterprises ("WFOE"); and (ii) sino-foreign owned joint ventures ("SFJV") and
include foreign banks, foreign finance companies and bank branches . There
are no specific restrictions for WFOEs but SFJVs may only enter into
derivative transactions for hedging purposes as well. State-owned
enterprises and collectively-owned enterprises can therefore only transact
through a duly authorised bank or NBFI. So it looks as if China National Oil
Company (Corp.?) and China State Power Corp. do not have the capacity nor the
authority to enter into derivative transactions themselves in the PRC.

I believe that Nony has our Legal Survey on PRC on file so you might wish to
pass to Cynthia a copy of the PRC Derivatives Transctions Guide for her to
look at. It's a good snapshot of the issues which are encountered in the PRC.

Regards,
Anita