Deal inked for PPP rail project

2017-09-12
China Daily

The investment agreement for the Hangzhou-Shaoxing-Taizhou railway public-private partnership project was signed in Hangzhou of Zhejiang province on Sept 11, marking China’s first high-speed train line with private investors taking the controlling stake.

PPP refers to a partnership between government and privately owned enterprises in developing infrastructure and public services projects, mainly covering municipal engineering and transportation.

Stretching some 269 kilometers, the railway line will include nine stops. The train’s maximum speed will be 350 kilometers per hour. It is one of the eight railway projects involving private investment approved by the National Development and Reform Commission, China’s top economic regulator.

A consortium of eight privately owned enterprises led by Shanghai-based investment conglomerate Fosun International will take a controlling 51 percent stake in the 12.36 billion yuan ($1.9 billion) registered capital of the railway project. The investment agreement, which was signed on Sept 11, was worth 40.9 billion yuan.

The construction companies for the railway project will be decided in a separate bid at a later date. The consortium of privately owned enterprises and the Zhejiang government will jointly set up a project company that will be responsible for the construction.

The project company will set the ticket price, while China Railway Corp and its Shanghai Railway Bureau will be in charge of the daily operation of the railway line.

Construction of the line will take four years and the joint operation period will be 30 years. As the project will adopt a build-own-operate-transfer cooperation mode, the railway will be transferred to the government for free after the 30-year period ends.

Construction of the high-speed railway line will start by the end of this year.

Shanghai Sunvision Capital, the PPP investment platform under Fosun, will participate in the railway project. According to Wen Xiaodong, president of Sunvision, the income from the railway project will be made up of operating income and a government subsidy.

“Although the return from this investment will not be extremely high, it will be quite stable,” he said. “It will also be helpful in terms of the overall mixed-ownership reform of China’s railway industry.”

Guo Guangchang, chairman of Fosun International, said during the signing ceremony that China still lags behind Japan and Germany in terms of building high-speed train projects overseas.

“With the experience from the Hangzhou-Shaoxing-Taizhou project, we wish to introduce China’s high-speed train technology and projects in more overseas markets,” he said.

According to Shenzhen-based ASKCI Consulting, 495 national-level demonstrative PPP projects were agreed by the end of June with total investment reaching 1.24 trillion yuan.

A total of 291 privately owned enterprises have taken part in these projects, accounting for 37.1 percent of the enterprises participating in PPP projects, up 5.1 percent year-on-year. These companies are involved in projects covering areas such as municipal facilities, ecological improvement and environmental protection.

The National Development and Reform Commission said at a meeting in mid-August that it would invite more private investors to take part in PPP projects and draw up policies to ensure that this investment is more effective.