Keppel makes third China port deal in Guangdong

The Singapore-listed property conglomerate has bought a 60% stake in a Chinese port.

A China-focused subsidiary of Keppel Telecommunications & Transportation, a Singapore-listed conglomerate, has just bought a 60 percent stake in a logistics river port in Guangdong for RMB 166 million (€21 million; $27 million) – the company’s third port project in China, according to a Keppel statement.

Keppel is specifically investing in Foshan Sanshui Port Development, which owns Foshan Sanshui Port, in the city of Foshan, which is next to Guangzhou in the southern Chinese province of Guangdong. The city government will retain the remaining 40 percent stake in the port, and, while it will have board seats, Keppel will have full management control of the port, according to Vincent Ko Woon Chun, chief executive of Keppel’s China business unit.

When the deal is closed, Sanshui will be Keppel’s second port project in Foshan and third in China. The firm’s China subsidiary, Keppel Logistics (Foshan), has been operating nearby Lanshi Port for 19 years already, and this new deal should “complement” that investment, according to the statement.

Sanshui is strategically located on the Pearl River Delta in Guangdong, meaning it can service both the interior Guangdong province – which is now enjoying “robust growth”, Chun said – as well as the nearby trading hubs of Hong Kong, Shenzhen and Nansha.

“Sanshui has been on our radar for quite some time, and when the government opened it to investment we jumped on the opportunity,” Chun told Infrastructure Investor. The local government only just gave clearance for private investors to seek a stake in the port a few months ago, he added.

For now, Keppel’s focus will be on improving the financial performance of the 23-hectare port, primarily through minor modifications and improvements, according to Hee Hon Pang, chief executive of Keppel Telecommunications & Transportation. The port currently has a 160-metre long multi-purpose berth and over 5,000 square metres of warehousing space. At this point, Keppel does not have any major development plans, Pang explained.

“We mostly want to maximise the potential of the current assets [in the port], such as integrating warehouse capacity with river port operations,” Pang said. Although Keppel would not disclose return expectations, Chun revealed that the lease period is 50 years, and Keppel expects to operate the port for at least that amount of time. The capital for this deal was primarily paid in cash from Keppel’s China subsidiary, he added.

In its most recent Five-Year Plan, China put particular emphasis on developing waterways in the country, which give rise to a large portion of domestic economic growth as means of transport, Pang said. Many local governments, however, are debating whether they want to foot the entire bill on their own, and have begun inviting private sector partners to co-invest.