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MarketScreener Homepage  >  Equities  >  SHANGHAI STOCK EXCHANGE  >  Power Construction Corporation of China - Powerchina    601669   CNE1000017G1

POWER CONSTRUCTION CORPORATION OF CHINA

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Power Construction of China Powerchina : IMF waves red flag on Sinohydro deal

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05/03/2019 | 04:51am EDT

The International Monetary Fund (IMF) has raised burning questions about some of the terms and conditions in government’s US$2billion infrastructure for bauxite agreement with China’s Sinohydro.

Under the agreement, the Ghana Integrated Aluminum Development Corporation (GIADC) is required to set up an offshore escrow account for revenue generated from selling bauxite – to secure GIADC’s repayments to Sinohydro with the provision that the funds will be for the exclusive benefit of Sinohydro. At any time during the term, the escrow account is required to have amounts sufficient to cover the upcoming two instalments – from the start of construction onward.

This, the IMF 7th and 8th review report of the Extended Credit Facility (ECF) for Ghana says, will put a limitation on how government can exercise discretion over using its own resources.

“Nonetheless, committing future bauxite receivables to debt service and locking bauxite sales receipts in the escrow account limits the GoG’s ability to exercise discretion of how the proceeds are allocated.

“Government estimates that Ghana’s bauxite resources can potentially deliver over US$500billion in revenue. It will however take considerable effort and time to put into place GIADC’s capabilities to produce enough refined bauxite to cover debt service under the agreement,” the IMF said.

Even though the agreement said all financial obligations to Sinohydro will be transferred from the Ministry of Finance to GIADC – at which point government will have no financial liability to Sinohydro, nor will it provide any guarantees – the IMF says the possibility of government carrying the burden of GIADC exists if it is unable to fulfil its financial obligations to Sinohydro.

“In the event of a breach of the agreement by GIADC, Sinohydro may demand repayment. In the event that the transfer of obligations from MoF to GIADC is not completed as envisaged, this arrangement will be considered as a government obligation. At this stage, the conditions precedents (CPs) specified in the agreement have not been met and could take a few months to be satisfied,” the report said.

Meanwhile, President Nana Addo Dankwa Akufo-Addo last month cut the sod for construction of the Tamale Interchange, to mark the start of work under the agreement that was approved by parliament in July 2018.

The one-kilometre Tamale Interchange will link the Kumasi road through the Point 7 road, the Central Taxi Rank, Central Market intersection with the Melcom Road and Bolgatanga Road. A total of 442 kilometres of roads will be constructed under the first phase of the agreement at a cost of US$646million.

This will include the construction of an 84km Accra inner-city road network; 100km Kumasi inner-city road network; 39km of Sunyani and Berekum inner-city roads; 32 km of Cape Coast and Prestea inner-city roads; 66km of Hohoe and Jasikan roads; rehabilitating 38km of the Akyem-Oda Asafo-Ofoase road; as well as upgrading selected feeder-roads in Kumasi and the Western Region.

An additional 1,300 kilometres of roads, three interchanges and 69 steel bridges will be constructed at an estimated US$850million under phase-two of the agreement.

(c) 2019 Business and Financial Times - All Rights Reserved Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

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Financials (CNY)
Sales 2019 319 B
EBIT 2019 21 734 M
Net income 2019 8 825 M
Debt 2019 214 B
Yield 2019 2,13%
P/E ratio 2019 8,79
P/E ratio 2020 8,09
EV / Sales 2019 0,91x
EV / Sales 2020 0,87x
Capitalization 75 424 M
Chart POWER CONSTRUCTION CORPORATION OF CHINA - POWERCHINA
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Mean consensus HOLD
Number of Analysts 3
Average target price 5,27  CNY
Spread / Average Target 6,8%
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Managers
NameTitle
Hong Shui Sun Vice Chairman & General Manager
Zhi Yong Yan Chairman
Li Ma Chairman-Supervisory Board
Cheng Liang Shi Independent Director
Fang Ming Han Independent Director