| HONG KONG
HONG KONG NWS Holding (0659.HK) sees its $1.76 billion China rail container venture as a "cash cow" benefiting from China's massive spending on its jammed rail system, a senior executive said on Wednesday.
NWS also plans to invest 1 billion yuan each year in other China 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 001.7.HK, holds a 22 percent stake in China United International Rail Containers Co, making it the second-largest investor after China's Ministry of Railway (MOR).
Taking the model of U.S. freight railroad company BNSF Railway BNI.N, the venture aims to become the leading rail container logistics supplier in China, 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 in China, or 3 percent of the total rail freight. In the U.S. and Europe, that figure is 20-30 percent. "There is plenty of room for growth in China," said To.
China 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 200039.SZ, 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 each has a stake of between 8 percent and 10 percent in the venture.
Some local governments have also invested in the rail container terminals in their areas, Tsang said. The Dalian government has a 40 percent stake in the Dalian terminal. Similarly, the Shanghai 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 on Wednesday 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 .HSI.
NWS, which invests in diverse businesses from transportation projects to financial services and manages Hong Kong Convention and Exhibition Center, posted a 64 percent fall in its six month profit ended December as a slowing global economy hurt its infrastructure and services business.
But the company is looking to China'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 GSZ.PA of France, the world's No. 1 water firm, have jointly invested in more than 20 water projects in China.
(Reporting by Alison Leung and Joy Leung; Editing by Don Durfee and Ken Wills)