Investor in roads to press ahead

PUBLISHED : Tuesday, 04 May, 1999, 12:00am
UPDATED : Tuesday, 04 May, 1999, 12:00am

Road King Infrastructure will make further investments in mainland toll roads this year despite problems in recouping guaranteed returns on existing projects.

The company has joined a growing list of foreign infrastructure investors facing problems in the mainland.

It booked an exceptional loss of $38.33 million last year, representing receivables in relation to minimum-income undertakings from joint-venture partners in two road projects in Yulin, Guangxi.

The problem was disclosed as the company on Friday announced a 37 per cent year on year jump in attributable profit to $480.35 million for last year.

Managing director Ko Yuk-bing said it was the first time Road King had encountered problems in getting minimum returns from mainland partners.

Describing it as an isolated incident, Mr Ko said the problem was the result of a combination of factors such as a slowing domestic economy, lower than expected revenue and a cash shortage at its mainland partners.

He expected the issue would be settled in two to three months after the Guangxi provincial government reaffirmed the legality of the contract and pledged to solve the problem.

While noting the company would not sell the Yulin projects, Mr Ko said he did not expect other mainland projects carrying similar guarantees to encounter the same problem.

Chairman William Zen Wei-pao said the company had made no new investments last year due to the tough financial market and changes in the infrastructure-investment environment.

The company was in advanced talks on three to four road projects, he said.

It would also explore opportunities to expand into non-road infrastructure projects.

Road King was among seven companies which had tendered for the management contract for Hong Kong's Cross-Harbour Tunnel, the result of which was expected to be announced next month.

It was also studying the possibility of investing in water supply and treatment plants.

Mr Zen said the company would seek the same 19 per cent minimum return it sought in road projects from other infrastructure projects.

Mr Zen said the company would be able to expand beyond road projects when a three-year restriction expired in July.

He said the company had sufficient internal resources to finance new purchases.

It had financial resources of $800 million, which would be boosted to about $1.4 billion following completion of the sale of its entire 45 per cent stake in Meiguan Expressway in Guangdong to Shenzhen Expressway.

The company this year aims to reduce US-denominated debts and raise yuan financing.

It has applied for an average toll increase of 20 per cent to 30 per cent for six toll roads.