Zhongyu Gas Holdings Limited's Participation of Leading Institutional Investors Paves the Way for Successful Development Of Coalbed Methane ("CBM") Resources

Zhongyu Gas Holdings Limited's Participation of Leading Institutional Investors Paves the Way for Successful Development Of Coalbed Methane ("CBM") Resources

June 07, 2007

    HONG KONG, June 7 /Xinhua-PRNewswire/ -- Zhongyu Gas
Holdings Limited ("Zhongyu Gas" or the
"Group") (Stock Code: 8070), an early mover in
developing a vertically integrated gas operation from
upstream resources development to downstream distribution
in China, is pleased to announce the successful conclusion
of its latest round of financing to develop coalbed methane
("CBM") resources in China.

    Coalbed methane is a form of natural gas found on top
of coal deposits. It is completely interchangeable with
conventional natural gas and can be readily mixed with the
latter.  The Chinese government has recently promulgated
favorable policies promoting the development of CBM to
address the growing natural gas shortage in the country. 
At the same time, the extraction of CBM removes a highly
flammable gas from coal mines, thus improving miner safety
levels.  CBM has a long history of development and has been
part of natural gas supply in the United States for decades,
currently accounting for approximately 8% of the total
natural gas production in the United States.

    In order to develop its approximately 1 trillion cubic
meters (34 trillion cubic feet) of CBM reserves in Henan,
the Group announced on 29 May 2007 the placing of
279,000,000 shares at a price of HK$1.165 per share and the
proposed issue of US$40 million 1% Convertible Bonds due
2012.  The net proceeds will total approximately
HK$609,520,000 (equivalent to approximately US$78 million).
 Part of the proceeds will also be used to acquire three
downstream gas distribution assets.

    In particular, the Group would like to highlight the
participation of a number of large institutional investors
with extensive investment experience in the global energy
space. Perry Capital is one such institutional investor who
has invested in more than 5% of Zhongyu Gas.  Perry Capital
has made investments globally in the energy sector,
including companies with CBM operations.

    Richard Hao, CEO of Zhongyu Gas said, "CBM is
still at an infant stage in China, and we are very happy to
have the support of leading institutional investors.  China
is one of the largest energy consuming countries in the
world, and there is a growing demand for cleaner forms of
energy such as natural gas. Coalbed methane can be used
interchangeably with natural gas, of which is there is a
significant shortage in the region where Zhongyu Gas
operates."

    Mr. Wang Wenliang, Chairman of Zhongyu Gas, concluded,
"We are very fortunate to have Perry Capital as one of
our largest institutional shareholders.  The support of our
new institutional investors in this round of financing will
enable us to take full advantage of our exclusive right to
develop CBM resources in Henan, a province with proven CBM
reserves of 1 trillion cubic meters (34 trillion cubic
feet).  We will continue to leverage our various resources
and remain dedicated to maximizing shareholder
return."

    About Zhongyu Gas Holdings Limited

    Zhongyu Gas Holdings Limited ("Zhongyu Gas")
(Stock Code: 8070), is an early mover in developing a
vertically integrated gas operation from upstream resource
development to downstream distribution in China. This is a
unique model in the China gas sector. Zhongyu Gas enjoys
the exclusive right to develop CBM resources in Henan, a
province with proven CBM reserves of approximately 1
trillion cubic meters (34 trillion cubic feet).  It has
also formed strategic alliances with strong technical
partners who have successful track records in extracting
CBM resources in a commercially viable and economically
attractive manner.  Currently Zhongyu Gas has six
downstream projects under operation (Sanmenxia, Yongcheng,
Linyi Zhongyu, Linyi China Gas, Xinmi, Yanshi).  Another
three projects (Jiaozuo, Luohe, Jiyuan) will be injected
into Zhongyu Gas under a previously announced very
substantial acquisition. Zhongyu Gas was listed on the GEM
board of the Stock Exchange of Hong Kong in 2001.

    About Perry Capital

    Founded in 1988, Perry Capital LLC is an investment
firm with approximately $14 billion under management with
affiliated offices in New York, Hong Kong and London. The
Perry Capital approach is that of a fundamental
research-driven bottom-up value investor, and the portfolio
consists primarily of equities, fixed income securities and
private investments. The firm's portfolio managers consider
their investments to be a partnership with management,
striving to develop close working relationships with the
critical members of a company's operating team.


    For further information, please contact:

     Zhongyu Gas Holdings Limited. 
     Mr. Daniel Lui/ Ms. Lucy Sun
     Tel:   [phone]
     Fax:   [phone]	
     Email: [e-mail]/
[e-mail] 

     CCG Elite Investor Relations Limited
     Ms. Michelle Fang
     Tel:   [phone]
     Fax:   [phone]	
     Email: [e-mail]