The trustee-manager of Hutchinson Port Holdings Trust (HPH Trust) has entered into a joint venture agreement (JVA) with Shenzhen Yantian Port Group Company on June 1.
The agreement was signed by HPH Trust’s 79.45%-owned indirect subsidiary, Hutchinson Ports Yantian Limited.
Under the JVA, HPH Trust will establish a 50-50 joint venture (JV) with Shenzhen Yantian.
The new JV is tentatively named as Yantian East International Container Terminals Limited.
The purpose of the new JV is to construct, develop, operate and manage phase 1 of a container terminal measuring some 120 hectares located in the eastern side of the Yantian International Container Terminals in Shenzhen.
The container terminal has a quay length of around 1,470 metres.
The new JV will have a registered capital of RMB2.73 billion ($567.4 million) which will comprise the total equity contribution from Hutchinson Ports Yantian and Shenzhen Yantian, each being a 50% shareholder in the JV.
Hutchinson Ports Yantian and Shenzhen Yantian will have to pay each of its share of the total capital contribution within five years from the date of the business licence to be issued by the Market Supervision Administration of Shenzhen Municipality.
Hutchinson Ports Yantian’s total share in the JV amounts to RMB1.37 billion.
HPH Trust’s trustee-manager intends to fund Hutchinson Ports Yantian’s share from time to time using internal resources.
The total amount of investment in the development is estimated to be around RMB10.94 billion. This includes the estimated cost of acquisition of the land on which Yantian East Port will be located on.
The JV intends to finance part of the total investment from the total capital contribution and the remainder by external loans.
SEE: Smooth sailing ahead for HPH Trust, with an attractive DPU outlook: DBS
The establishment of the JV is subject to the completion of the relevant regulatory procedures in China.
Under the trust deed constituting HPH Trust on Feb 25, 2011, where the total project costs incurred in a development is US$500 million ($661.0 million) or more, the trustee-manager is entitled to receive development fees equivalent to a fee of US$12.5 million plus 1.5% of the total project costs incurred, pro-rated to HPH Trust’s 39.73% effective interest in the development.
As such, the development fee is currently estimated to be around US$15.2 million.
Through three JVs with Shenzhen Yantian, HPH Trust currently holds its interests in the Yantian International Container Terminals, Yantian International Container Terminals (Phase III) and Shenzhen Yantian West Port Terminals (which will be collectively referred to as the existing Yantian JVs).
Yantian International Container Terminals have been jointly managed by the same management team under a joint operation agreement entered into among the existing Yantian JVs in 2001, and supplemented in 2004, 2005 and 2007.
Under the fourth supplementary agreement dated June 1, one management team will be responsible for the operation and management of Yantian International Container Terminals as well as Yantian East Port.
The revenue and expenses from the management and operation of the facilities of the expanded Yantian Terminals will be shared among the existing Yantian JVs and the new JV at a pre-agreed ratio.
Units in HPH Trust closed 0.5 cent higher or 1.6% up at 32 cents on June 1.
