Cheung Kong backs Hopewell
Newly listed Cheung Kong Infrastructure (CKI) has come to the rescue of Hopewell Holdings' proposed ring road in Guangzhou with a plan to invest about 950 million yuan (about HK$883.5 million) to help reactivate the suspended project.
The infrastructure arm of Cheung Kong (Holdings) said yesterday it had joined Gordon Wu's group to construct the southern Chinese city's 39.4-kilometre East-South-West Ring Road.
Work on the project was shelved a year ago because Hopewell and the Guangzhou municipal government failed to agree on the project cost, including property investments along the road, which shot up to 10 billion yuan from six billion yuan as a result of cost overruns.
CKI was then invited into the project and the co-operation agreement was revised.
The deal with CKI is the second time Mr Wu has introduced a significant outside investment into one of his mainland road projects.
Early last year he sold a 2.5 per cent stake in his Guangzhou-Shenzhen super-highway to Japan's Kanematsu for HK$964 million.
Hopewell shares rose 10 cents yesterday to $4.30.
CKI managing director Kam Hing-lam said CKI and Hopewell had signed a supplementary agreement with the Guangzhou government's Guangzhou Freeway Co on the construction, management and operation of the East-South section.
He said the project would be built in separate phases, beginning with the East-South section.
'The total project cost is estimated to be two billion yuan,' Mr Kam said.
He said CKI and Hopewell would jointly invest the US dollar equivalent of 1.9 billion yuan.
Guangzhou Freeway would be responsible for the remaining 100 million yuan.
CKI chairman Victor Li Tzar-kuoi said the three parties had agreed in principle to build the remaining part of the toll road project, which the consortium estimated to be worth about two billion yuan.
'Discussions are currently under way for the next phase of construction, the 20-km West-South section of the ring road,' Mr Li said.
The supplementary agreement comes further to an original contract signed between Hopewell and Guangzhou Freeway on November 23, 1992, on the entire East-South-West Ring Road.
Over the past few years, Hopewell has invested about 900 million yuan on resettlement and foundation work of the ring road.
Under the agreement, the ring road project involving three parties will exclude property developments.
Guangzhou Freeway, the turnkey contractor for the project, will undertake the design and construction of the East-South section of the Ring Road at a fixed price.
Guangzhou senior vice-mayor Chen Kaizhi said that if the project cost went over two billion yuan, the Guangzhou party would undertake to pay the excess.
Guangzhou Freeway is offering the foreign parties an assured minimum return on investment of 20 per cent.
Guangzhou Freeway general manager He Yichuan said the Guangzhou party would share 60 per cent of the remaining profits after paying the assured return to Hong Kong partners.
Mr He said the 900 million yuan already injected by Hopewell would become part of the company's investment in the two-phase road project.
Hopewell is still pursuing negotiations with the Guangzhou government on the investment potential of property developments along the road.
The joint venture will last for 30 years from when construction is completed on the East-South section in 1998.
