Text: | Print | Share

Privately-owned railway sputters to life(2)

2011-09-08 10:19    Ecns.cn     Web Editor: Wang Fan
The Luoding Railway is the first and only privately-owned passenger railway in China.

The Luoding Railway is the first and only privately-owned passenger railway in China.

Where will the money come from?

Every year, the Ministry of Railways prepares construction of many railway projects, so it had never planned to add more capital to the Luoding Railway. However, the annual financial revenue of Luoding was only about 200 million yuan ($30.92 million), and Cenxi's financial resources were also limited.

According to Liang Renqiu, director of the Luoding Publicity Department at that time, after considering many methods to ensure the smooth progress of the project, they finally decided to sell their entire stake of the Luoding Railway. This idea was first hatched in January of 2005.

An official from the Luoding government said that there would be political concerns at first, but it was definitely a blind alley for the two railways if the Luoding Railway was not sold off.

The State Council then released an announcement called "Non-public New 36" on February 25, 2005, introducing the market to Luoding Railway.

Very soon after on August 22, 2006, CNTIC Kong (Holdings) Ltd., a private company in Shenzhen, bought 100% of the equity rights of the Luoding Railway Company from the Guangdong Luoding Yongsheng Assets Operation Co. Ltd.

The price for ownership rights was 41.86 million yuan ($6.47 million). However, 59% of the stake was sold to Tianjin Hongfeng in November 2006 at the price of 411 million yuan ($63.5 million). Later, Tianjin Hongfeng bought another 24.43% for 163 million yuan ($25.2 million), adding up to a total of 83.43%. The rest was then in the hands of the China Railway Construction Investment Company. But by 2009, Tianjin Hongfeng held 99.85% of the entire stake in Luoding Railway.

A promising transition

In April 2008, Tianjin Hongfeng was renamed Constant State Railway, followed by an unexpected transition. Constant State Railway began raising capital in October 2009, coming up with a sum of 2.113 billion yuan ($326.7 million) through the A-share stock market.

With such a sufficient amount of money, why was the railway not opened after a decade? According to the Luoding government, the project had been halted for some time and had only resumed last year. The government claimed that there had been a shortage of personnel and that the project had still not been fully funded.

But now that the Constant State Railway has gained a financial foothold, the situation is picking up. It is hoped that the privately-owned company will make good use of its advanced management system, and finally get the project into high gear.