Batista ventures may reap gains from Hu's visit

08:56, April 13, 2010      

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Eike Batista's shareholders may benefit most from Chinese President Hu Jintao's visit to Brazil this week as the Brazilian billionaire seeks investments for his LLX Logistica SA Porto Acu project.

The Manhattan-sized complex, planned for Rio de Janeiro's coast, will be "a highway to China" and require as much as $50 billion, Batista told reporters on March 31, ahead of Hu's arrival this week for a summit of the largest emerging economies.

Wuhan Iron & Steel Group, China's third-largest steelmaker, paid $400 million in November for almost 22 percent of Batista's MMX Mineracao e Metalicos SA iron-ore company. The companies also said they may jointly build a steel mill at the port costing as much as $5 billion.

LLX shares surged about 400 percent over the past year as investors such as the Ontario Teachers' Pension Plan bet on the proposed port with an industrial complex that will include a thermoelectric power plant, cement facility and auto producers.

"Some of those may be Chinese companies or companies that have a strong presence in China as well," Wayne Kozun, senior vice-president for public equities at Ontario Teachers' Pension Plan, which owns stakes in both LLX and Batista's oil producer OGX Petroleo & Gas Participacoes SA, said.

Ontario Teachers held 124.1 million LLX shares, valued at C$747.3 million ($745.6 million) and 283.4 million OGX shares, valued at C$2.91 billion, as of Dec 31, according to their year-end report, released on April 6.

That makes it the second- largest holder of both companies.

Lower-risk investment

The port may also allow smaller iron producers to better compete with Rio de Janeiro-based Vale SA, the world's largest iron-ore producer, in giving them better access to overseas markets, according to Pedro Montenegro, a steel and mining analyst at Brascan Corretora in Rio.

Chinese steelmakers are also seeking alternatives to iron ore supplies from Vale, Rio Tinto Group and BHP Billiton Ltd after prices surged.

The Chinese "without a doubt" will invest more in businesses that can diversify the Brazilian production of iron ore and therefore reduce the bargaining power of Vale, BHP and Rio Tinto, the three biggest world producers, Montenegro said.

The visit of Chinese business and government leaders "can bring news related to new Chinese investment in overseas assets in Brazil", he said.

Hu will be in Brazil from April 14 to 17 as part of a Latin American tour that includes a summit of the BRIC nations of Brazil, Russia, India and China in Brasilia.

He also will visit Chile and Venezuela.

Chinese financial institutions and energy companies will sign agreements with their counterparts from Brazil and Venezuela during Hu's visit, Vice Minister for Foreign Affairs Li Jinzhang said at an April 8 briefing.

Wuhan Steel hasn't decided whether to send an executive with Hu, spokesman Bai Fang said April 8. The Hubei province-based company has no immediate plans to boost investment in Brazil or Batista companies, and doesn't expect agreements to be signed during Hu's visit, according to Bai.

An LLX spokeswoman wouldn't confirm any planned visit from Chinese officials.

"The Chinese are starting to get out of China with their industrial complexes," Batista told reporters.

"If it is God's wish, Hu Jintao will visit Acu. I understand he is an engineer and it has been explained to him that this port is the beginning of a highway to China, to supply raw materials, but also to make the Chinese build and produce things in Brazil, because we are not only raw material suppliers," he said.

Tripled wealth

Porto Acu is located in northern Rio de Janeiro state, at the closest point to Asia from the Americas coast of the Atlantic, according to Batista.

The port will be able to receive the largest ocean vessels, serving Brazil's most industrialized areas of Sao Paulo and Rio de Janeiro states, he said.

Batista, 53, more than tripled his wealth in the past year and rose to the top 10 of Forbes magazine's billionaires list for the first time last month.

He raised 6.7 billion reais ($3.8 billion) in the 2008 initial public offering of OGX, a record at the time in Brazil, and the company hasn't yet begun commercial production of oil.

MPX Energia SA, which raised about 2 billion reais in its 2007 IPO, hasn't completed construction of any of the power plants.

His shipbuilding company OSX Brasil SA raised $3.9 billion less than he originally sought last month and then plunged 13 percent in its first day of trading, a decline Batista attributed to "difficult" markets.

Batista said in a March interview that Brazil is counting on Chinese investment as the South American country "helps China with its food and natural resources security in a big way".

Source: China Daily

(Editor:黄硕)

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