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Peggy Sito

Citic Pacific is to enlarge its infrastructure portfolio with the purchase of 13 water plants in eastern China for about US$162 million.

Speaking after the company's annual general meeting yesterday, chairman Larry Yung Chi-kin said the company had agreed to buy substantial shareholdings in a number of water plants in Nanjing and Wuxi, Jiangsu province.

They include a 49 per cent stake from the Nanjing municipal government in eight water plants for $100 million.

Citic Pacific also agreed to pay the Wuxi government $62 million for a 49 per cent equity interest in five water plants.

It is the first time Citic Pacific has diversified its infrastructure investments into water plants from roads, tunnels and power stations.

Managing director Henry Fan Hung-ling said the company decided to enter the industry because of the strong demand.

'Expected internal rate of return of the deals will be not less than 15 per cent,' Mr Fan said.

According to Mr Fan, the plants in Nanjing would have a production capacity of 1.72 million tonnes a day, while those in Wuxi would produce one million tonnes.

'Infrastructure investments will account for 15 per cent of the company's net asset value after the acquisitions,' Mr Fan said.

The company will finance the purchase, to be settled by October, through internal resources.

Mr Fan said the company did not need to raise fresh capital because its financial position was comfortable.

'The company's debt now is $9 billion after it acquired an additional 15 per cent interest in Cathay Pacific Airways,' he said.

'This represents 15 per cent of the company's net asset value.'  In April, Citic Pacific agreed to increase its stake in Cathay from 10 to 25 per cent, paying $6.3 billion for the additional share.

At the same time, it sold a 17.6 per cent interest in Hong Kong Dragon Airlines (Dragonair) to the China National Aviation Corp (CNAC), reducing its stake to 28.5 per cent.

Mr Yung said the deals were a strategic move consistent with the long-term aims of the company.

'We have enlarged our shares in the aviation industry after the deals,' he said, adding that it was in line with the company's strategy in the sector.

He described the Cathay and Dragonair stakes as good investments.

Both Cathay and Dragonair would expand, which would benefit Citic Pacific because of its substantial interests in the companies. Mr Yung also said two senior Citic Pacific executives, including Mr Fan, would join Cathay's board.

WATER WORKS Citic to purchase 13 water plants worth US$162 million Deal includes 49 per cent equity in eight Nanjing plants and five Wuxi plants Expected internal rate of return not less than 15 per cent 



Citic Pacific plans to expand east China infrastructure portfolio