bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

helpersCheckIsPostiesArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

moreOnThisArticles

urlAlias

commentCount

sponsorType

authorLocations

authors

paywallTypes

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

socialHeadline

headline

flag

firstTopic

glossary

flattenTypeIds

publishedDate

additionalInfoBoxes

images

image

relatedLinks

relatedNewsletters

__typename

createdDate

sponsor

factSheets

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

copyrighted

customTimezone

liveContents

Russell Barling

The minority shareholder wants out as the reasons for the terminal's continued failure are viewed with suspicion

The River Trade Terminal's (RTT) biggest shareholders are in negotiations with Cosco Pacific to buy its minority stake in the loss-making HK$6.5 billion facility at Tuen Mun.

Hutchison Whampoa and Sun Hung Kai Properties, which each owns 38 per cent of the RTT, are making the move as RTT management prepares for its day in court with the government next week.

Shareholder sources confirmed talks were ongoing yesterday, but declined to say whether the deal would be done before the court case, which could significantly alter the value of Cosco Pacific's 10 per cent stake.

'If it's not already a done deal, I would think it was very close,' a senior source at one of the shareholding companies said.

RTT management is being challenged over its right to berth ocean-going vessels at its berths, an act the government says contravenes the facility's land lease.

The RTT, the government insists, is licensed only to serve the trade flowing to and from the Pearl River Delta.

Weighed down by the interest payments on a HK$1.14 billion land premium paid at the height of the market and feuding shareholders, the RTT continued to haemorrhage money last year, despite a comparative 42 per cent jump in throughput, to 1.8 million 20-foot equivalent units (teu).

Based on Cosco Pacific's US$3.3 million year-end provision for the facility, it lost at least HK$250 million, a familiar result since its launch in 1998.

The loss was the last straw for minority shareholder Bank of China Group Investment (10 per cent), which sold its share in March to Hutchison and Sun Hung Kai for an undisclosed sum.

Cosco Pacific is now set to follow, leaving Jardine Matheson Holdings, with 14 per cent, as the remaining minority shareholder.

According to sources within the RTT, shareholders have in the past few years viewed with suspicion some of Hutchison's RTT-related actions, which they said appeared to be working counter to the facility's best interests.

In October 2001, the Hong Kong Terminal Operators Association (HKTOA), under the stewardship of Hutchison's Eric Ip, brought the RTT's berthing of ocean-going vessels to the attention of the government.

In a letter to the Director of Lands and the secretary of the Port Development Board dated October 10, 2001, HKTOA executive director Henry Lee, at the time also on the Hutchison payroll, urged the government 'to take prompt action to ensure that the RTT operates in accordance with the lease conditions'.

The RTT handled about 200,000 of the disputed ocean-going boxes last year, generating additional revenue management has said it badly needs.

When the HKTOA urged the government to stem that stream of revenue, elements within the RTT were angered that a partner would act against RTT interests.

The partnership was further strained earlier this year when Hutchison tried to persuade the board to abandon next week's court case, according to a source close to the RTT.

'The appearance is that Hutchison would like see the RTT continue to fail from an economic standpoint so that they can continue to acquire shares at a distressed rate,' the source said.

If the RTT wins the right to service other than river trade vessels, shares in the facility would gain in value, he said.

Officially, Sun Hung Kai and Hutchison would not comment on the acquisition, nor would the Li Ka-shing-owned firm explain the strategy behind trying to block the case.

'We have no comment on the shareholding issues at the RTT and as a shareholder we do not comment on management issues,' a spokesman said.

Privately, however, a senior source at Hutchison admitted last month the company intended to acquire a controlling stake in the RTT.

The river trade is the last sector of Hong Kong's maritime trade in which Hutchison does not control a majority.

Its wholly owned subsidiary Midstream Holdings handles up to 60 per cent of the port's midstream traffic, according to a competitor.

Hongkong International Terminals, another subsidiary, handles most of the traffic at the main terminals, where volumes are up almost 11 per cent year on year in the first four months.

If the RTT loses the case, which begins Thursday, shareholders will have to continue to pour millions of dollars into the loss-making facility.

John Wan Hak-chung, RTT general manager, has said it needs to handle three million boxes a year to break even.

Strip away the business the terminal controversially derived from ocean-going trade last year, and the RTT is about half way to turning a profit after almost six years of business.



Cosco Pacific selling stake in RTT