APAC: HNA’s infrastructure arm withdraws to home market

22 October 2018 - 12:00 am UTC

HNA Infrastructure, a key unit of acquisitive Chinese conglomerate HNA, has pulled its focus back to aviation-related projects in Hainan province.

The company on Friday (October 19) agreed to sell a Shenzhen-based construction firm to Tianji Wealth Management for RMB 1.385bn (USD 199m). This follows a move by its unit HNA Airport Group earlier this month to pull out of a deal to operate Bulgaria’s Plovdiv Airport in the Central Eastern European country’s second largest city.

The latest asset sale was intended to “optimise the company’s asset structures and push forward the strategic transition of the company,” according to a stock exchange disclosure.

“The top priority for HNA now is to improve leverage and go back to its origin of aviation-related business in Hainan,” an investment banker familiar with the situation said, adding “so we are unlikely to see it take on any new multimillion-dollar projects overseas for the time being.”

HNA Infrastructure is one of the largest private-sector builders in China spanning real estate and aviation. Its unit HNA Airport Group operates Sanya Phoenix International Airport in the touristic island of Hainan – where HNA is headquartered – as well as over a dozen of airports across China. Last August, it closed a transaction to acquire an 82.5% stake in Frankfurt-Hahn Airport for EUR 15m (USD 17m).

While parent HNA used to be one of the most acquisitive Chinese conglomerates overseas, it has since last year been troubled with a hefty debt pile and forced to offload property assets globally.

That has also led to a change in HNA Infrastructure’s strategy as it shifted focus back to Hainan’s aviation industry while divesting “non-core” assets elsewhere.  

“We are now particularly interested in infrastructure development of Hainan as the island is becoming China’s pilot Free Trade Zone (FTZ),” an article published by the company website said, citing Chairman Lu Xiaoming.

In April, Chinese President Xi Jinping announced that the island will become a pilot FTZ and invited investors worldwide to invest in it, as a focus towards international cooperation among countries along the Belt and Road.

Lu also highlighted in the article the need for expansion of Hainan’s four operating airports – all run by HNA – in the wake of the surging passenger traffic between the mainland China to the touristic island, often dubbed China’a equivalent to Hawaii. 

“HNA still has a dominant position in Hainan’s aviation infrastructure,” said a source from China Development Bank, HNA’s biggest creditor. “It makes full sense for them to go back to their old business and seize new opportunities there.”

Founded in 1993, tourism-to-property conglomerate HNA traced its roots back to the Hainan Airlines, which then was restructured and ventured into airport, real estate, tourism and logistics across China and overseas.

On 7 October, a consortium formed between HNA Airport Group and Dutch-registered Plovdiv Airport Invest decided to pull out of the 35-year concession it won in March to operate, repair and maintain the airport in Plovdiv – Bulgaria’s second largest city for BGN 600,000 (USD 352,734).

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