Hong Kong-listed MIE Holdings is set to acquire a 51 per cent interest in a unit of Sino Gas & Energy Holdings, a move that secures funding for the development of two coal-seam gas tenements in central China.

The deal involves MIE Holdings paying $US10 million ($9.9m) upfront to buy an initial interest in Sino Gas & Energy, wholly owned by Sino Gas & Energy Holdings, and a commitment to invest a further $US90m at a later date to advance the development of the Sanjiaobei and Linxing assets.

Sino Gas & Energy Holdings announced early this month that it had signed a letter of intent to fund its interests in China, but didn't identify the counterparty.

MIE Holdings and Sino Gas & Energy Holdings entered a trading halt yesterday pending a proposed transaction.

Argonaut advised Sino Gas & Energy Holdings. Argonaut's original mandate was to raise a minimum of $US25m up to a maximum of $US40m to fund 2012-13 work program.

MIE didn't use an adviser.

China is seeking to reduce its reliance on coal in its energy mix, which has made cities such as Shanghai among the smoggiest in the world. This has driven an investment boom in alternative energy sources, including wind farms and solar projects.

Coal-seam gas is a natural gas trapped in coal seams below the Earth's surface that produces no sulphur dioxide or particulates when burned, and only 50 per cent of the carbon dioxide emitted when coal is burned.

It is usually either vented into the open air, or remains trapped underground, contributing to hundreds of coal mine deaths in China every year. Analysts estimate China's coal-seam gas reserves total more than 34 trillion cubic metres.

But China's coal-seam gas output has been held back by technical issues, regulatory hurdles, and high costs. Private investors often struggle to access major gas pipelines that are mostly controlled by state-owned PetroChina or China Petroleum and Chemical Corporation (Sinopec).

Sino Gas & Energy's existing shareholders include Australian-listed mining services provider Imdex. Its project partners include subsidiaries of China National Petroleum, the state-owned parent of PetroChina.