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Shanghai in new spending spree
Jul 06, 2012
Shanghai plans to spend more than 100 billion yuan (HK$122.9 billion) in the next few years on infrastructure projects ranging from roads and bridges to affordable housing.
And the municipal government's main infrastructure firm, Shanghai Chengtou Corporation, says it will partly fund the projects by issuing 2.5 billion yuan of one-year bonds.
"As the development of the Yangtze River Delta takes shape while Shanghai builds itself as an international financial and shipping hub, and [Shanghai's] 12th five-year plan pushes the integration of urban and rural areas, the prospects for developing Shanghai's infrastructure will be even broader," the company said in its prospectus for the bond issue.
Chengtou has some 77 infrastructure projects lined up over the next few years, with a total investment budget of 105.2 billion yuan, according to the prospectus. Those projects include roads, bridges, water works and affordable housing.
"As the main infrastructure construction firm of the Shanghai government and Shanghai's largest infrastructure conglomerate, our funding needs are large," it said.
"In recent years, the scale of Shanghai's infrastructure construction has continued to increase, and that may bring financial pressure on the company in future."
Though huge, the planned expenditure stills falls short of Chengtou's 227.7 billion yuan infrastructure binge from 2009 to 2011. A large portion of that went towards building work in the lead-up to the Shanghai World Expo in 2010.
This year, Chengtou will invest 17 billion yuan in infrastructure projects, of which 3.2 billion yuan has already been spent from January to April.
Chengtou had net operating cash outflow of 608 million yuan in the first quarter, in contrast to net cash inflow from 2009 to 2011, as a result of the spending spree.
Its debt stood at 100.9 billion yuan at the end of March, with a gearing ratio of 56.9 per cent.
Meanwhile, port operator Shanghai International Port Group (SIPG) expects the city's container throughput of 31.5 million 20-foot equivalent units (teu) this year. It expected that to rise 4.8 per cent to 33 million teu next year and 6 per cent to 35 million teu in 2014.
The Shanghai-listed firm plans to issue 1 billion yuan of bonds with a period of 270 days. Some 40 per cent of the money raised will be used to repay debt and 60 per cent will finance the company's container, logistics and services operations. SIPG expects Shanghai port's bulk cargo throughput to reach 149 million tonnes this year, rising 4.7 per cent next year and 2.6 per cent in 2014.
One of its objectives for the five-year plan period to 2015 is to maintain Shanghai's position as the world's busiest port. Shanghai overtook Singapore as the world's top port in 2010. SIPG is also trying to find more investment opportunities overseas so that it can become an international port operator. It will rely mainly on its own funds to invest in projects, according to its prospectus. At the end of last year, SIPG had 9.9 billion yuan in firstname.lastname@example.org
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