Railway hopes to expand after auction
By Li Wenfang (China Daily)
Updated: 2006-07-24 08:41
Investors are moving in on the debt-laden Guangdong Luoding Railway Corp,
which is being publicly auctioned to raise funds to extend its
tracks.
The management of the State-owned railway intends to sell its
entire holdings in a bid to raise funds to keep the railway's expansion plans
alive.
Conglomerate Shenzhen Zhongji Industrial Group, in which the State
has only a minor share, is one of possible bidders.
"We would see it as a
long-term investment and as positive for future earnings," said General Manager
Li Xiaoming.
The group, which has been studying a possible deal to
acquire shares in the railway, has yet to submit a bid, said Li.
He added
that a policy issued by the Ministry of Railways last year, which encourages
non-State firms to build and operate railways, had encouraged them to look at
the railway.
The Luoding government sees the auction as an important
reform and way of generating investment and funds for the railway.
Formed
in 1992, Guangdong Luoding Railway Corp holds 86 per cent of Zhongtie (Luoding)
Railway Corp, which owns and operates the railway between Chunwan and Luoding in
Guangdong Province.
Guangdong Luoding Railway Corp also owns a major
stake in Zhongtie (Luocen) Railway Corp, which is meant to build a railway
between Luoding and Cenxi in the Guangxi Zhuang Autonomous Region. A key railway
project in Guangdong, originally slated for completion in 2008, the
Luoding-Cenxi track is designed to link southwestern provinces with the more
developed southeast.
However, with services along the Chunwan-Luoding
railway still far from fulfilling their capacity, Guangdong Luoding Railway Corp
has run into serious debt and has found itself unable to invest in the new
track.
The 62-kilometre 846 million yuan (US$104.32 million)
Chunwan-Luoding railway, which went into full operation in 2003, has a designed
annual capacity of 5.5 million tons but is moving only 300,000 tons a year at
present.
At the end of last year, Guangdong Luoding Railway Corp's total
assets were 978 million yuan (US$120.71 million), while its debts amounted to
793.66 million yuan (US$97.87 million). Net losses were 134.56 million yuan
(US$16.59 million) last year.
The 75-kilometre Luoding-Cenxi Railway
demands an investment of 1.47 billion yuan (US$181.14 million).
Guangdong
Luoding Railway Corp shareholder Luoding Yongsheng Asset Management Co is
looking for a stake buyer with its own total assets of not less than 7 billion
yuan (US$863.13 million) and annual revenue not less than 2 billion yuan
(US$246.61 million), as well as the financial capability to build the new
track.
Cargo flow along the new track is expected to be robust, since it
will connect with other railways in the region, said Xu Dakun, secretary-general
of the China Local Railway Association.
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