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Chinese Group Wins Major Rail Contract in Laos

The logo of China Railway Group Ltd. is displayed at a news conference in Hong Kong, China, on Monday, April 16, 2012. China Railway Group sees "very few" new rail projects in the first half of the first half of the year. Photographer: Jerome Favre/Bloomberg *** Local Caption *** Li Changjin

China Railway Group has won a $1.2bn contract to build a large section of railway through neighbouring Laos, a crucial step in China’s plan for a continuous rail link all the way south to Singapore.

The group’s announcement to the Hong Kong Stock Exchange on 8 September drew a thumbs up from ratings agency, Moody’s, which said the win would help it gain more business traction in Laos.

Three subsidiaries of the group will build sections I, II, and III of the Boten-Vientiane Railway Project, which will eventually run 414km from Boten on the Laos-China border in the north to Laos’ capital, Vientiane, on the border with Thailand in the south.
China Railway Group said the bid’s value was RMB8.1 billion ($1.2bn).

The award of this package follows another of the group’s subsidiaries winning section V1 of the railway, worth around $344m (RMB2.3 billion) in December last year.

The construction period for the latest suite of jobs was given as 60 months.

China Railway Group said the whole railway would cost approximately $5.6bn.

Moody’s today said the win is “credit positive” and supports the group in its A3 issuer rating.

“The award demonstrates the group’s strong capabilities with cutting-edge technologies in railway, bridge and tunnel construction to win large-scale and complex projects overseas,” said Chenyi Lu, a Moody’s vice president and senior analyst.

Moody’s believes the project will help the company gain more business traction in Laos. This is the first railway construction project that the company has won in the country.

Moody’s expects the company’s revenue from its overseas operations to grow to about 7% to 8% of total revenue over the next three years from about 5.1% in the first half of 2016, a reward for its efforts to penetrate overseas markets.

CRG’s revenue should grow by 3%-4% annually in 2016 and 2017, supported by its strong order backlog, continued overseas expansion, and an expectation that solid spending on infrastructure, including railways, urban rails and roads, in China will continue over the next two years, Moody’s said.

Source: Global Construction Review