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Andrew Chetham

Hopewell Holdings yesterday underlined the depth of problems with its troubled transport project in Bangkok by setting aside $5 billion in provisions to cover a potential write-off.

 The provision, revealed with its annual results, drove the company to a $1.69 billion loss last year, compared with the $769 million profit posted a year earlier.

 The Thai Government last month cancelled Hopewell's 30-year concession to build and operate the Bangkok elevated road and train system (Berts).

 Hopewell chairman Sir Gordon Wu Ying-sheung yesterday said the company had not received an official letter of termination, which was the necessary first move to terminate the contract.

 'We've deemed it prudent to make a provision of $5 billion, 95 per cent of what we have invested. In the event this thing does go on we'll write off this $5 billion,' Sir Gordon said.

 'In the event that we go on with good results then we can always write it back.'  Hopewell's results - for the year to June 30 - would have been worse if it had not booked a $2.8 billion exceptional gain from the sale of a 40 per cent stake in Consolidated Electric Power Asia.

 Stripping out all these exceptional items, operating profit showed a 22.6 per cent gain to $882.8 million.

 Sales grew to $2.84 billion against $2.36 billion a year earlier.

 The loss per share was 39 cents.

 Sir Gordon said Hopewell had so far spent $4.3 billion on Berts and another $800 million had been allocated to cover on-going costs while the project was on hold.

 Construction on the $25 billion, 60-kilometre venture has been on hold for several weeks, with only 20 per cent of the work completed.

 Sir Gordon said until Hopewell received a letter confirming termination of contract, it would not start compensation proceedings against Thailand for cancelling the contract.

 The company remained committed to the project, he said.

 'It is not over until it's over.'  However, Hopewell would not proceed in Thailand until it had the necessary agreements concerning the changed economics of the project - meaning fare rises, he said.

 The sale of its Cepa assets had put Hopewell into a much improved debt position. As of August 31, the group's gearing was 24.6 per cent, down from 35 per cent at the end of June last year.

 While the group has $918 million in net cash at the corporate level, it still has $9.47 billion in project debt outstanding. None of this is attached to Berts.

 Hopewell's net asset value per share at the end of its financial year was $5.50.

 Last night Hopewell shares closed at $1.93.

 Previously, Sir Gordon indicated he would consider privatising the company at $3 per share. With the stock trading at a deep discount to NAV, he was asked if he had considered this path.

 'I said that when the Hang Seng Index was at an entirely different level,' he said. 'I am not saying yes, I am not saying no, as I want to leave my options open.'  Despite the loss, Hopewell announced an increased full year dividend. With a final dividend of 3 cents, the dividend for the full year was 9 cents, up from 6 cents.



Developer in $5b write-off provision as transport project goes off the rails