Hebei to lure foreign infrastructure firms

PUBLISHED : Friday, 23 September, 1994, 12:00am
UPDATED : Friday, 23 September, 1994, 12:00am

CHINA'S Hebei province will provide foreign investors with about 15 per cent rate of return for infrastructure projects such as power plants and superhighways to ease concern over the profitability of running mainland projects.

The province will start a seven-day promotional tour of Hong Kong today to lure foreign investment for more than 300 projects, which are expected to amount to several billion dollars.

But Hebei's first vice-governor Chen Liyou said 15 per cent was only an estimated rate of return, not a guaranteed one.

'It's not a guarantee, therefore there are some inherent risks and the rate of return is likely to be subject to some changes,' he said.

With China's high inflation, foreign investors have sought a guaranteed rate of return to hedge against risks.

For instance, in a bid to make shares in the country's power plants more appealing, the Ministry of Electric Power announced a new tariff policy in June for four power operators designated to issue shares overseas.

The measure guaranteed a 15 per cent rate of return on their net fixed assets after satisfying operating costs and taxation.

However, power plants not listed elsewhere were not entitled to such tariffs.

China had earlier signed letters of intent with Siemens of Germany, which would take a 40 per cent stake in a new coal-fired power plant in the province, comprising two 660 megawatt generators.

Although Hebei could not provide a guaranteed return, Mr Chen said the plant was able to adjust its electricity fee according to the estimated internal rate of return.

The Sino-German joint venture was expected to cost more than 10 billion yuan (about HK$9.04 billion).

In Hebei, power plants are listed as one of the most attractive investments because of the province's chronic shortage of electricity.

The province planned to almost double its capacity by the end of the century by adding 7,000 MW to the existing 9,000 MW capacity.

Karlvin Wan, managing director of Anbao Vehicle Service Co, who has more than 10 years of business experience in Hebei, said the province's rich resources of coal and sea-water, coupled with its excessive power demand, made the province an ideal place for power-plant investment.

Sea-water is used to cool power plants.

Although the province's economic development had only recently picked up, Mr Wan said it could catch up with the right blend of technology and policies.