APAC: China State Construction eyes Portugal, Canada, UK PPPs 

16 March 2018 - 12:00 am UTC

China State Construction International (CSCI) is looking at overseas markets where Portuguese or English is spoken for PPP projects, CEO Zhou Yong told Inframation.

The Hong Kong unit of state-owned builder China State Construction (CSCI)  is examining water and road PPP opportunities in Portugal, Canada, the UK and Australia in particular he said.

Meanwhile, it plans to securitize operating BOT projects in mainland China to fund future PPP projects at home.

“We do not have plans for rights issues this year, and will tap other instruments such as ABS to finance our projects,” Zhou said, referring to asset-backed securities.

Although project IRRs in developed countries tend to be lower than in China, payments might be “better guaranteed” given that the PPP markets there are more mature, Zhou noted.

In mainland China, CSCI would only invest in BOT projects if they generate a minimum IRR of 12%.

It has a slightly lower IRR requirement when bidding for such projects overseas. “It will be fine if the IRR is 0.5-1 percentage point lower,” said Zhou.

CSCI will consider other countries in the future, particularly those located along the Belt and Road. It will avoid Africa, however, as its parent has already established local branches there.

“Overseas markets present more opportunities right now,” he said. He noted that institutions such as the Asian Infrastructure Investment Bank and Silk Road Fund are expected to make it easier for Chinese companies to invest in infrastructure projects abroad.  

Zhou explained that CSCI could capitalise on its experience in Macau and Hong Kong, where Portuguese and English are official languages and share similar legal frameworks to Portugese and English language markets overseas.

In Canada, the group’s Hong Kong-listed specialty engineering unit Far East Global will be tasked with tapping the PPP market, Zhou added.  

CSCI registered revenues of HKD 54.8bn (USD 6.99bn) last year, up 11.7% YoY. Its net profit rose 7% YoY to HKD 5.5bn.

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