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UBS: Railway annual investment gap 200b yuan in 3 years

By Tu Lei (chinadaily.com.cn)
Updated: 2008-05-06 13:45

The railway sector will see an annual investment gap of 200 billion yuan ($28.60 billion) in three years, said UBS Securities yesterday in Shanghai, according to yesterday’s China Securities Journal.  

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Wei Qiang, vice-director of UBS Securities, said the railways need 1.25 trillion yuan in capital over the five years between 2006 and 2010, but capital expenditures will exceed 300 billion yuan annually over the next three years, resulting in an investment gap of 200 billion yuan for the period. 

Compared with other industries including power, telecommunications and banks, the railway sector is still in its initial phase with more reconstruction pressure, said UBS’s research report. 

Wei said the Ministry of Railways will inject more capital in three listed companies – Daqin Railways, Guangshen Railways and Tielong Container Logistics, and attract more commercial capital, including private capital.  

“It is impossible to issue bonds or loans to fill the gap,” said Wei, explaining that in 2006, the Ministry of Railways’ capital and interest repayments totalled 56 billion yuan, far higher than the profit of 3.2 billion yuan.  

Figures show that in 2006, transportation profits totalled about three billion yuan, with total assets of 1,520 billion yuan and an assets to debt ratio of 80 percent.