China Communications plans 11b yuan spending
China Communications Construction, the mainland's biggest port builder, has budgeted more than 11 billion yuan as capital spending this year for investment projects that can generate higher returns.
The company plans to invest in projects under the build-transfer (BT) model, which it sells back to the government after completing construction, and build-operate-transfer (BOT) model, in which it will run the projects for awhile before the sale.
Such models require the company to fund the construction first and retrieve the capital and profit when the projects are sold. That is different from other projects in which the company is paid as a builder under contracts.
'Capital spending this year will be at least three billion yuan more than last year as investment projects are more capital-intensive than construction business,' chairman Zhou Jichang said. 'Investment projects could provide more stable income and have a higher return.'
The firm, which spent 8.5 billion yuan on capital expenditure last year, said it recently set up a department for investment projects after carrying out some BT and BOT projects on trial basis in the past.
China Communications was also looking for infrastructure projects that could generate an investment return of not less than 15 per cent and a pay-back period of not more than five years, Mr Zhou said.
The company, which raised HK$18.5 billion in a Hong Kong initial public offering in December, was aiming to boost profit contribution from the investment segment to 25 per cent of the company's profit in five years, from almost zero last year, Mr Zhou said.
Last month, the company signed a framework agreement to build a road in Jiangyin city, Jiangsu province with the municipal government, with a total investment of 2.7 billion yuan. Construction work is expected to be completed in two years.