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Peggy Sito

Hutchison Whampoa will take a reduced stake in a Yantian container terminal development in exchange for continued exposure to the expanding Shenzhen port.

The Yantian International Container Terminal Phase 3 development is more evidence of how the Li Ka-shing flagship is being restricted in its mainland port-expansion plans.

Last month, Hutchison Port Holdings (HPH), a wholly owned subsidiary of Hutchison Whampoa, secured a 49 per cent stake in Ningbo Beilun Port Phase 2 but only after two years of talks.

In the case of Yantian, Shenzhen's largest port and a rival to Hong Kong in handling container cargo traffic, HPH also became involved in lengthy negotiations with the local government.

'The outlook of Yantian is so good it is not surprising that the Chinese party would take a larger stake,' said Emilie Chau, an analyst at Deutsche Bank.

'The deal enabled Hutchison to secure continued exposure in one of the mainland's fastest-growing ports.'

An HPH spokesman said yesterday the Phase 3 development had been approved by the central government. She said HPH's direct stake would be less than 45 per cent, down from 50.5 per cent in the previous two phases.

A Hutchison-led consortium, including Cosco Pacific, and other key shipping companies took a 73 per cent stake in Yantian Phases 1 and 2.

Shenzhen-listed Yantian Harbour, owned by the Shenzhen municipal government, holds the remaining stake.

But foreign ownership of the Phase 3 development is set to be cut.

The Shenzhen-based Securities Times  said the State Council had decided that a Hong Kong consortium would be allowed to own 65 per cent of Yantian Phase 3 for 50-year operating rights.

The consortium is likely to include red chip Cosco Pacific, a listed flagship of the mainland's largest shipping company, China Ocean Shipping Group.

An executive at Cosco Pacific said the company intended to take part in the project.

'We are in talks with Hutchison Whampoa aimed at taking a minority stake in the Phase 3 development,' he said.

'How many shares Cosco can get will be subject to Hutchison's equity stake in the project.' But Cosco had asked for a stake of not less than the 5.6 per cent they had in the first phase, he said.

The executive said the amount of foreign ownership in the third phase development required final approval from the State Planning and Development Commission and other authorities such as the Ministry of Communications.

'It will take one to two months to receive the approval,' he said.

In a move aimed at protecting domestic port operators before World Trade Organisation entry, the Ministry of Communications made a rule change in March that banned foreign firms from taking majority stakes in future mainland port developments.

HPH, the largest foreign port operator in China, has majority control of nine ports.

Yantian Phase 3 will be ready by the end of next year.



Stake in Yantian terminal reduced as restrictions trim subsidiary's mainland ambitions