Three largest companies seek to list their construction and engineering units
China's three largest oil companies, China National Petroleum Corp, China Petrochemical Corp and China National Offshore Oil Corp, are planning to spin off their construction and engineering units in deals that could raise as much as US$3 billion each, sources said.
The first deal could come as early as this year. The construction and engineering subsidiaries design and build terminals, wharves, pipelines, drilling platforms, storage facilities and refineries.
Sources expect the deals to raise between US$2 billion to US$3 billion, while others see US$1 billion-size transactions. 'The margins are tight in these units,' said one source expecting a US$1 billion transaction.
'It's hard to say how much profit they make because these are very small units compared to the whole group size and you'll have to do a lot of restructuring work before any listing because there's a lot of connected party transactions surrounding them,' said DBS Vickers analyst Gideon Lo. 'I don't see any strong commercial or business reason why they would want to spin off these units.'
Mainland oil firms are among several different industries seeking to list companies developing infrastructure in the mainland. Such companies are growing rapidly as China replaces existing antiquated infrastructure and expands existing networks to include more of the nation.
China Railway Engineering Group, which helped build the nation's only high-speed rail line, plans to raise about US$1.5 billion from an initial public offering as early as this year. China Railways Construction Corp, which builds train lines, highways and airports, seeks up to US$2 billion in an offering early next year.