Rail operator signs agreement to take 49pc stake in 15.3b yuan metro project, part of infrastructure for the Olympics The MTR Corp is preparing to ride into Beijing by 2008 after signing an agreement to invest in a 15.3 billion yuan metro project in the capital. The semi-privatised corporation signed a legally binding agreement yesterday, which will see it take up a 49 per cent interest in the project for 735 million yuan. The MTR and its state-owned partners - Beijing Capital Group and Beijing Infrastructure Investment - will invest, build and operate the Beijing Metro Line 4, a core part of the transport infrastructure for the 2008 Olympic Games. The project will be MTR's second direct investment outside Hong Kong after a six billion yuan rail project in Shenzhen. 'MTR's investment in Line 4 will form part of our growth strategy beyond Hong Kong,' MTR chief executive Chow Chung-kwong said. 'The signing of the agreement in principle for Beijing Metro Line 4 marks an important milestone for the participation of MTR in metro development on the mainland.' With a total of 24 stations, the 29km Beijing Metro Line 4 will serve as the main north-south traffic artery in the capital running from Ma Jia Lu on Fourth Ring Road South to the northwest Haidian District and terminating at Long Bei Cun. The agreement sets out the framework of a planned joint venture, in which the MTR and Beijing Capital each will hold a 49 per cent stake and Beijing Infrastructure the remaining 2 per cent, with the right to run the project for 30 years. A key term of the agreement is that the Beijing municipal government will pay for 70 per cent, or about 10.7 billion yuan, of the project cost. The remainder, about 4.6 billion yuan, will be borne by the joint venture, of which 66 per cent will come from bank loans and the rest from joint-venture shareholders. Beijing Capital, the city's biggest landlord, will be responsible for land acquisition and civil works construction of the rail line, while the MTR will contribute operation and management expertise. Some analysts have cast doubts on the profitability of the rail line, which they say would rely on revenue from train fares and commercial activities at the stations. 'On the surface, the deal sounds neutral given the government will bear 70 per cent of the total investment,' one analyst at a European brokerage said. 'But if the rail line charges the same level of fares as existing subway lines - and we're talking about a couple of yuan - I will worry about the prospective profitability.' An MTR spokeswoman said the project was still in its infancy and it was too early to talk about fares, which like toll-road fees and electricity tariffs were determined by the government. Another analyst said the Beijing project would have been more appealing if there was a property development element. In Hong Kong, the MTR uses profits from property development to fund heavy investment in rail lines. Last year, the MTR's net profit stood at $4.45 billion, which included a $5.36 billion property development profit and a pretax loss of $980 million on its core rail operations. The loss was heavier largely because of the Sars outbreak. The MTR's property-and-rail model will be applied on the Shenzhen project, where the corporation will build and operate a 16.5km railway running from Shaoniangong to Longhua Town as well as develop and manage 26,000 flats, for 30 years.