China's railway companies rush forward with IPOs
News releases from the 2nd Annual China RailWorld Summit 2007
Aug 15th, 2007
It's obvious that the Chinese government is reforming its railway system partly by encouraging rail companies to go public, in order to boost their capital and strengthen their management. Luo Renjian, a researcher with the Institute of Comprehensive Transportation under the National Development and Reform Commission (NDRC), said that the listing of Daqin marks a new leap in the reform of the railway investment system in China, he also believes more railway companies will follow the Daqin model by listing on the stock market to raise capital for railway construction.
Zhang Jianping, deputy director of the Development Planning Department under the Ministry of Railways, recently confirmed that the ministry will speed up the listings of some large and profitable railway companies.
China needs 1.5 trillion Yuan in spending on trains and rail lines from 2006 to 2010. The country faces shortages of at least 40 billion yuan a year in the five years through 2010 as spending surges to five times the historical average.
"China's railways are badly in need of innovative financing modes," Cao Yuanzheng, chief economist at BOC (International) Holdings, said in Shanghai. "Compared to the steadily increasing transport demands, the investment is insufficient." BOC International is the investment-banking unit of China's second-biggest lender.
"Railway companies getting listed is a symbol of China's rail reform, indicating that more and more railways will go public to enlarge investment sources," Cao added.
Possible new financing sources include bonds, public share sales, private equity and institutional investment, Cao said. The capital markets currently supply less than 10 percent of total funding for China's rail system, compared with 62 percent from government sources and 28 percent from bank loans, Cao said.
Lenders including Macquarie Bank, CLSA, BOC International, CITICS will gather together at the 2nd Annual China RailWorld Summit 2007, the leading railway conference with a special focus on rail financing issues, to seek investing opportunities in this flourishing sector.
BTW, possible IPOs of China's railways at 2007 and 2008 includes:
China Railway Engineering Group, hired BOC International and other advisers to raise $1.5 billion in an initial public offering of stock;
China Railway Construction is preparing for a $2 billion initial offering;
China Railway Container Transport Co., also plans to list by purchasing a listed railway-related company, Dalian Tielong Industry Company Co., Ltd;
China Southern Locomotive & Rolling Stock Industry (Group) plans to raise at least $2.5 billion in an initial public offering next year;
CHINA Railway Express Co., Ltd is planning an initial public offering (IPO) of shares in Shanghai late this year;
Daqing Railway Co., plans to debut on the Shanghai Stock Exchange early next month after a huge initial public offering (IPO) of over 14 billion Yuan
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