China Natural Gas Announces $40 Million Financing

- $20 Million Guaranteed Senior Notes Closed + Incremental $20 Million
Arranged -

NEW YORK, Jan. 30 /PRNewswire-FirstCall/ -- China Natural Gas, Inc.
(OTC Bulletin Board: CHNG), one of the leading providers of pipeline natural
gas for industrial, commercial and residential use and compressed natural gas
(CNG) for vehicular fuel in Xi'an, China, today announced the closing of the
first round of a $40 million debt financing with Abax Lotus, an affiliated
entity of Abax Global Capital ("AGC").
Qinan Ji, Chief Executive Officer and Chairman of the Board of the
Company, stated "We are very pleased to have entered into the financing
agreement with Abax Lotus. This capital will allow us to strengthen our
leadership position in China in-line with our strategic growth initiatives,
especially our LNG plans. We are also pleased to have Abax Global Capital's
support and look forward to the contribution the firm will make as an
experienced investor."
The net proceeds from the offering will be used for the construction of
the Company's previously announced LNG processing facility in the Shaanxi
Province and for the construction and acquisition of additional CNG filling
stations throughout Xi'an and other regions of China.
Donald Yang, President of AGC, stated, "We are confident our investment in
China Natural Gas will allow the Company to implement its business initiatives
and maintain its robust growth trajectory. We look forward to continuing our
working relationship with the Company."
Pursuant to the terms of purchase agreement, the Company issued to AGC 5%
Guaranteed Senior Notes due 2014 in the principal amount of RMB 145 million
(approximately $20 million) and seven-year warrants exercisable for up to 2.9
million shares of the Company's common stock at an initial exercise price of
US$ 7.3652 per share, which represents a 20% premium to the volume weighted
average price for the 15 consecutive trading days ending January 28, 2008. In
addition, the Company will issue to AGC an additional 5% Guaranteed Senior
Notes due 2014 in the principal amount of RMB 145 million (approximately $20
million) on or before March 3, 2008 subject to the Company meeting certain
closing conditions. The Company has also granted AGC an option to purchase up
to RMB 73 million (approximately $10 million) in principal amount of its 5%
Guaranteed Senior Notes due 2014.
In connection with the sale of the Senior Notes, the Company will enter
into an indenture agreement, which requires the Company to pay additional
interest at the rate of 3.0% per annum if the Company has not obtained a
listing of its common stock on the Nasdaq Global Market, the Nasdaq Capital
Market or the New York Stock Exchange one year from the date of issuance and
maintained such listing continuously thereafter as long as the Senior Notes
are outstanding.
The Company will also enter into an investor rights agreement, a
registration rights agreement covering the shares of common stock issuable
upon exercise of the warrants and a share pledge agreement. More information
can be obtained from the Company's recently filed Form 8-K.
About China Natural Gas, Inc.
China Natural Gas, Inc., ("CHNG"), is the first China-based natural gas
company publicly traded in the US. It currently owns and operates a 120
kilometer long compressed natural gas pipeline in Xi'an, China, a fast growing
Chinese city supported by a population of approximately eight million and is
the "gateway" to the broad Western regions of China. CHNG has three profitable
business segments: end user delivery of natural gas services to residential,
commercial and industrial customers; wholesale natural gas to retail natural
gas filling stations; and retail natural gas at company-owned natural gas
filling stations. The city of Xi'an has approximately 20,000 Taxis, 3,000
buses and 2,000 special purpose vehicles that are powered by compressed
natural gas.
This press release may contain forward-looking statements. These
statements are based on the current expectations or beliefs of China Natural
Gas, Inc. management and are subject to a number of factors and uncertainties
that could cause actual results to differ materially from those described in
the forward-looking statements, including the fluctuation of natural gas
prices, the availability of natural gas supplies, changes in governmental
regulations and/or economic policies.
About Abax Global Capital:
Abax Global Capital is a leading Hong Kong based investment firm focused
on Pan-Asian public and private investments with a particular emphasis on
Greater China and South East Asia. AGC's objective is to invest in and create
value for small to mid-sized Asian enterprises, thereby generating returns for
all stakeholders. Morgan Stanley Investment Management is a minority
shareholder of AGC, an independently managed investment company.
Certain of the statements made herein constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements typically involve risks and uncertainties and may
include financial projections or information regarding our future plans,
objectives or performance. Actual results could differ materially from the
expectations reflected in such forward-looking statements as a result of a
variety of factors, including the risks associated with the effect of changing
economic conditions in The People's Republic of China, variations in cash
flow, reliance on collaborative retail partners and on new product
development, variations in new product development, risks associated with
rapid technological change, and the potential of introduced or undetected
flaws and defects in products, and other risk factors detailed in reports
filed with the Securities and Exchange Commission from time to time.
CONTACT
Ashley Ammon MacFarlane & Dan Joseph
Integrated Corporate Relations, Inc.
203-682-8200 (Investor Relations)

SOURCE China Natural Gas, Inc.

Investor Relations, Ashley Ammon MacFarlane & Dan Joseph, +1-203-682-8200, of
Integrated Corporate Relations, Inc., for China Natural Gas