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Home >> Business
UPDATED: 08:01, July 11, 2006
Railway company wins approval for public offering
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Daqin Railway Co Ltd is set to become the first rail company to be listed on the mainland bourse after gaining approval for a domestic initial public offering in Shanghai yesterday.

China Securities Regulatory Commission announced the decision on its website yesterday evening. It means the railway company could raise at least 14 billion yuan (US$1.75 billion).

"Becoming listed makes Daqin Railway a pioneer," said Ou Guoli, a professor at Beijing Jiaotong University.

Stretching from Datong in Shanxi Province to Qinghuangdao in Hebei Province, the company's railway line mainly transports coal in North China.

The company's listing approval has opened up new possibilities for the Ministry of Railways, which is turning to different sources for funds to cover the huge expansion of the rail network, Ou said.

It is estimated China will spend at least 2 trillion yuan (US$250 billion) by 2020 in reaching its goal of 100,000 kilometres of rail track, as set out in the Medium and Long Term Railway Network Development Programme.

Throughout the 11th Five-Year Plan period (2006-10) alone, 1,250 billion yuan (US$156 billion) will be needed to pay for new tracks.

The ministry currently spends more than 100 billion yuan (US$12.5 billion) every year. Half of this amount comes from the government's railway construction fund, and the rest comes from bonds and bank loans.

Getting profitable rail lines listed is one of the ministry's means to gather enough money for expansion.

Ou said a few other railways had tried to get listed before, but all failed.

Only the Guangzhou-Shenzhen Railway has been listed, in Hong Kong in the 1990s.

"Daqin Railway is relatively independent, focusing mainly on the coal transporting business, which makes it possible for Daqin to lead the way in getting listed," Ou said.

Daqin is reported to be the biggest railway transportation enterprise involved in the transfer of coal from west to east.

It provides a coal-transporting service for at least 380 power plants and five power corporations. It transported 153 million tons of coal in 2004 and 203 million tons in 2005.

The company achieved a 3.56 billion yuan (US$445 million) net profit last year, with revenues of 13.1 billion yuan (US$1.64 billion). It will use the proceeds mostly to fund an expansion project, Shanghai Securities News reported.

Insiders predict that the railway company is embracing a golden opportunity, since coal-transporting patterns are not likely to change over the next few years.

Source: China Daily

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