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Potential of China Merchant Pacific to own Australia Toll Roads

From the Australia times comes an interesting article about China Merchant Group, China Merchant Pacific’s parent making a foray into  Australia infrastructure. The last news on CMG is that they are in Sri Lanka dealing with toll roads and that perhaps CMG wants to make CMHP their default vehicle to consolidate the roads.

China Merchants Group, one of China’s biggest state-owned enterprises, is eyeing investment opportunities in Australia as state governments look to privatise assets such as toll roads and other infrastructure to reduce debt.

Asked specifically if Australian infrastructure was on CMG’s agenda, he replied: "I don’t think we are currently in a position to reveal any detailed discussions with potential business parties. Many China Merchant Group companies are listed on stock exchanges, so we have to closely comply with the rules about revealing sensitive information."

His comments will prompt speculation that CMG may be part of a consortium bidding for the $6bn Queensland Motorways (QML) business or may be interested in other assets being earmarked for sale by state governments.

Key players said to be lining up in the QML bidding process include infrastructure managers Hastings Funds Management and CP2 as well as Transurban Group and IFM Investors.

Four consortiums have reportedly been seeking the backing of equity partners for their bids.

China’s $US600bn sovereign wealth fund China Investment Corporation helped bankroll CP2’s $2.2bn bid for Melbourne toll road owner ConnectEast in 2011 alongside the National Pension Service of Korea and US-based Teachers Insurance. Bidders have until February 7 to present indicative offers for QML.

This is interesting. They are basically venturing into a territory where the banks have so much experiencing making the whole world eat infrastructure as trusts. And what an acquaintance told me is that Australian’s turn out to be bigger liars in business than the Chinese!

A CMG subsidiary, the Singapore-listed China Merchants Holdings (Pacific), is a leading toll road company focused on investing in and managing toll roads in Southeast Asia.

The company is one of the leading toll road operators in China and is the single largest toll road company listed on the Singapore Stock Exchange.

Dr Fu said CMG was potentially eyeing toll road acquisitions on the Chinese mainland. "Some governments might consider to sell off their toll road, for instance to reduce their gearing. We have a China Merchant Highways. It would be in a position to do something provided the term is right."

Dr Fu said moves by the Chinese government to reform state-owned enterprises would do nothing to curtail their ambitions to invest abroad.

The government wants to reform the governance practices of SOEs as part of a wide-ranging package of reforms to crack down on corruption and encourage China’s transition to a more market-focused and service-driven economy.

"I think they encourage SOEs to expand their businesses to overseas provided the investment was made sensibly. I think they would encourage it," Dr Fu said.

Nothing much will come out of this for CMHP, unless they get more investors interested in subscribing to the shares they placed out. A wealth of end-game that can happen here.


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