APAC: China State Construction to secure Portuguese PPPs

22 August 2018 - 12:00 am UTC

One of China’s biggest builders expects to secure new Portuguese PPP projects in the coming months,Inframation has learnt.

China State Construction Engineering Corporation (CSCEC) is on track to sign “several PPPs” involving civil engineering projects, Zhou Yong, chairman of China State Construction International (CSCI) told this news service.  

Earlier this year, the Beijing-based engineering group launched subsidiary CSCEC-China Construction Portugal to bid for Portuguese infrastructure projects, including railways, roads, airports, land transport terminals as well as water and sewage plants.

The newly established venture in Lisbon is mainly overseen by CSCEC’s Hong Kong-listed subsidiary CSCI. It is headed up by CSCI managers previously based in Hong Kong and Macau — a former Portuguese colony where the Chinese builder has overseen projects such as transport interchanges and casinos.

In June, China-Portugal Global Investment Company, a CSCEC investment vehicle, signed an agreement with engineering firm Teixeira Duarte to purchase its 7.5% stake in the Lusoponte consortium for EUR 23.3m (USD 26.9m). Lusoponte is the concessionaire of the Vasco da Gama and April 25 bridges that cross Lisbon’s Tagus River. The deal is pending local regulatory approvals, and could still be blocked if the other shareholders – Mota-Engil (38%), Vinci (37%) and Italy’s Atlantia (17.5%) – opt to exercise their preemptive rights.

The state-owned Chinese builder’s entrance into Portugal comes as the southern European launches a wave of major transport projects, some of which will be carried out as PPPs. These include the New Lisbon (Montijo) Airport; the “Ferrovia 2020 plan” to modernise the railway connecting Évora to Elvas – cities situated between the capital and the Spanish border; and the construction and operation of the new Lisbon Barreiro Terminal 

In March, Zhou told this news service that CSCI was exploring overseas markets where Portuguese or English is spoken. The Hong Kong unit of CSCEC is examining water and road PPP opportunities in Portugal, Canada, the UK and Australia in particular.

Zhou explained at the time that CSCI could capitalise on its experience in Macau and Hong Kong, which feature Portuguese and English as official languages as well as similar legal frameworks to relevant markets overseas.

In mainland China, CSCI will 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, he said in March.

China PPP project sales
In mainland China, CSCI plans to shift its focus to PPPs with shorter concession periods in order to optimise its cash flow, Zhou told reporters on Tuesday (21 August) at a post-earnings press briefing.  

Meanwhile, the Hong Kong-based company is finalising a Belt and Road Investment Fund to help finance projects, which Zhou expects will improve its leverage profile. In mainland China, it is also “in early stage works” to securtise some of its operating PPP projects, and is also in talks to sell some PPP assets. 

CSCI saw a 1.2% rise in its 1H18 net profit to HKD 2.52bn, boosted by a 18% surge in its operating revenues to HKD 27.1bn for the period.