Citic hopes to recoup investments
Citic Pacific has high hopes of recouping its US$800 million mainland investment following China's move to end guaranteed returns on infrastructure projects.
However, no agreement between the red-chip conglomerate and the Shanghai municipal government has been reached.
Managing director Henry Fan Hung-ling said his deputy Peter Lee Chung-hing had met a Shanghai government official on Monday to discuss the future of Citic's six infrastructure projects - mainly bridges and toll roads in Shanghai. The next meeting is scheduled for Wednesday.
'Shanghai municipal government cares about its co-operation with overseas investors and they have acknowledged our contributions,' Mr Fan said. 'We have reached a consensus to handle this matter in a fair manner.'
Among the options on the table is selling back these projects to Shanghai for capital or debts. Also considered was changing the terms of the contractual agreement, which guaranteed a return of 15 per cent with principal repayment for 20 years.
Mr Fan said closing down the joint ventures was ruled out.
Citic now has a US$800 million exposure in Shanghai projects, which would have generated HK$820 million profit for next year.
Mr Fan stressed that Citic would not make any provisions on its infrastructure investment, hinting that the bottom line of the discussion was the return of the principle amount to Citic.
Analysts have downgraded Citic's returns from these mainland projects.
'Even if it got back an interest payment of 5 per cent, that is still 10 per cent less than what it was promised,' ING analyst Cusson Leung said.
Citic made its first investment in Shanghai in 1991, when China's interest rates were as high as 20 per cent.