(Corrects to remove references to loss-making in 9th paragraph
* Veolia to buy 50 pct of HK tram operator
* No financial details given
* To operate tram on daily basis
* Has option to buy remainder of company
(Adds details, background)
By Stephen Aldred and Sui-Lee Wee
HONG KONG, April 7 French water, waste and
transportation giant Veolia Environnement (VIE.PA) will buy 50
percent of Hong Kong's iconic tram system and take over
operation of the 105-year-old network under a deal unveiled on
Veolia said it has the option to buy the remaining stake in
the tram operator from conglomerate Wharf Holdings (0004.HK),
confirming a Reuters report, but has no immediate plans to do
Bruno Charrade, head of operations for Veolia Transport
China, said running the Hong Kong tram would help provide
know-how as it builds an urban rail business in China.
"Operating the light rail system in Hong Kong will give us
the knowledge and expertise in mainland China. That's
strategically why we chose to start in Hong Kong," he told a
Hong Kong's slow-moving and frequently stopping trams have
been eclipsed by the city's modern subway system, but still
attract an average of 230,000 passengers a day, who pay just
HK$2 (about 26 cents) per ride.
Fares have not been raised for 11 years, while passenger
numbers are up 4.7 percent in the six months from October.
Like the Star Ferry, which is also run by Wharf, Hong Kong's
tram system is a popular tourist attraction.
No financial details were available for the deal, but it was
expected to be relatively small for both Wharf and Veolia. Wharf
reported an overall turnover of $2 billion last year. Veolia was
advised by Societe Generale (SOGN.PA), a source with direct
knowledge of the deal said.
The tram generated just HK$150 million ($19 million) in
passenger fares last year and an additional HK$50 million in
Its 161 passenger trams, which stop an average of every 250
metres, make up the largest fleet of double-decker tram cars in
the world, according to the firm's website, www.hktramways.com.
The clattering tram is technologically primitive compared
with the high-speed passenger rail venture Veolia is
contemplating with partner Air France-KLM.
Shares in Wharf ended about 4.8 percent lower on Tuesday,
underperforming the 0.46 percent fall in the Hang Seng Index
.HSI, although one analyst said the tram deal is too small to
have had an impact on Wharf's price.
Besides the Star Ferry, Wharf controls Hong Kong cable TV
firm I-Cable Communications and owns office buildings, shopping
malls and container terminals.
(Additional reporting by Alison Leung; Writing by Tony Munroe;
Editing by Ken Wills, Anshuman Daga and Erica Billingham)