China Development Bank is teaming up with one of the world's largest natural resources asset managers for a joint venture, as the capital-rich state-owned bank embarks on more offshore investments over the next few years.
Gateway Energy & Resource, the Asian unit of Washington-based EIG Global Energy Partners, has signed a deal with CDB to form the venture that would seek a back-door listing in Hong Kong, said Barry Cheung, a non-executive director of Gateway.
EIG manages more than US$10 billion worth of assets, making it one of the largest institutional investors in natural resources.
Speaking in an exclusive interview with the South China Morning Post, Cheung said the deal, if successful, would not only provide CDB a new investment platform but also offer many retail investors a rare opportunity to participate in such investments.
"Hong Kong investors have a strong interest in resources-related companies, which is not surprising, given China's strong appetite. They believe resources-related companies should do well in the long run," he said.
The move came after Gateway failed to launch an initial public offering early last year after it received regulatory approval for listing amid the weak market environment. The offering had sought to raise about US$200 million.
The company now plans to list on the exchange through a merger with China Development Bank International Investment.
CDBII shareholders will have to approve the merger, and a decision is expected in March.
CDB and EIG intend to remain as major shareholders in the joint-venture company.
"I hope the combination will attract a lot of investor interest. If the company performs well, you will see it grow very quickly," said Cheung, who is also the chairman of the Hong Kong Mercantile Exchange.
"We are excited by the opportunity and the importance of the deal. This (CDB's investment) is a vote of confidence for us."
Stephen Suo, an executive director of EIG, which opened an office in Hong Kong late last year, said: "After the deal, Hong Kong investors will have access to large resources deals that only big institutional investors have access to."
It is no secret that CDB, a bank fully owned by the central government, has had ambitions to expand into global natural resources.
Beijing is keen to find new sources of energy and mining to support its economic growth, leading to some Western politicians raising concerns about Beijing's ambition for natural resources.
Asked if the partnership between EIG and CDB may cause more political concerns in the West, Cheung said: "This is not a vehicle to invest just CDB's money.
"Going forward, you can imagine that the capital [in the new listed firm] will come primarily from other investors, including institutional and ordinary investors.
"I don't think there should be any political sensitivity."
CBII last traded 2.35 per cent lower at 83 HK cents.