HONG KONG: NWS Holding sees its $1.76 billion mainland railway container venture as a "cash cow" benefiting from Beijing's massive spending on the jammed mainland rail system, a senior executive said yesterday.

NWS also plans to invest 1 billion yuan each year in other mainland infrastructure projects, with a focus on the water industry, Tsang Yam Pui, executive director of NWS, said at the Reuters China Investment Summit.

NWS, an infrastructure and service arm of property firm New World Development, holds a 22 percent stake in China United International Rail Containers Co, making it the second-largest investor after the Ministry of Railway (MOR).

Following the model of US freight railroad company BNSF Railway, the venture aims to become the leading rail container logistics supplier in the country, providing door-to-door shipments.

"For the MOR, this project is a national mission and for us it is a future cash cow," Tsang said. He expects the project's internal rate of return will be 15-20 percent.

With the support of MOR and a total investment of 12 billion yuan ($1.76 billion), NWS expects the venture to break even in 2013, a year after all of its 18 terminals are completed.

"For infrastructure projects, once they break even their profit will rise substantially," said Steve To, general manager of NWS.

The annual volume of rail cargo shipped in containers is only 3 million TEUs on the mainland, or 3 percent of the total rail freight. In the US and Europe, that figure is 20-30 percent. "There is plenty of room for growth" on the mainland, said To.

The central government will invest more than 700 billion yuan ($102 billion) a year in rail construction on average over the next three years, up from 600 billion yuan this year, vice railway minister Wang Zhiguo said last month.

The government has been accelerating its rail investments to help stimulate the economy.

MOR'S China Railway Container Transport Corp Ltd has a 34 percent stake in the venture.

China International Marine Container (Group) Co Ltd, container ship operators CMA CGM and Zim Integrated Shipping Services Ltd, German's national rail company Deutsche Bahn AG and Hong Kong's Promisky Investment Ltd have a stake of between 8 percent and 10 percent each in the venture.

Some local governments have also invested in the rail container terminals in their areas, Tsang said.

The Dalian city government has a 40 percent stake in the Dalian terminal. Similarly, the Shanghai municipal government, which owns 50 percent of the city's rail container terminal, will retain its stake after the venture takes over the existing terminal.

Shares of NWS bucked a negative market trend to edge up 0.91 percent yesterday to HK$15.46. Its shares have risen about 34 percent this year, in line with a 36 percent gain on the benchmark Hang Seng Index.

The company is looking to Beijing's 4 trillion yuan stimulus package announced in late 2008 to boost the country's domestic demand and create other infrastructure opportunities.

"Water is a main focus of the stimulus plan; therefore we are placing a lot of emphasis on developing this segment, both water supply and waste water treatment," Tsang said.

NWS Holdings and Suez of France, the world's No 1 water firm, have jointly invested in more than 20 water projects on the mainland.

China Daily - Reuters

(HK Edition 09/03/2009 page4)