China Railway Group bags major rail contract in Laos

China Railway Group bags major rail contract in Laos

On 8 September, CRG announced that it had won a railway construction bid for section I, II, and III of the Boten-Vientiane Railway Project (also known as the China-Laos Railway), together with Laos-China Railway Company Limited in Laos.

The total bid size is about RMB8.1 billion, accounting for approximately 0.4% of CRG’s total order backlog of RMB1.89 trillion at end-June 2016 and 1.3% of the company’s RMB619 billion revenue for the 12 months ended 30 June 2016. The construction period is five years.

The winning bid follows CRG’s successful bid in December 2015 for section VI of the project for a bid size of about RMB2.3 billion. The company will perform civil works for the four sections with a total length of 245 kilometers.

The Boten-Vientiane Railway Project will comprise a total of six sections covering a total length of 414 kilometers, and require an investment of about RMB37.4 billion. The railway will link the Yuxi-Mohan Railway in China (Aa3 negative) with the Nongkhai-Bangkok Railway in Thailand (Baa1 stable).

“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,” says 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 1H 2016, reflecting 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.

Listed on the Hong Kong Stock Exchange and Shanghai Stock Exchange in December 2007, China Railway Group Limited (CRG) mainly focuses on railway, highway, urban rail transit and housing construction in China. Moody’s estimates that CRG had a 45%-50% market share of China’s railway construction industry

CRG is about 54.4% owned by China Railway Engineering Corporation (unrated), which in turn is a state-owned enterprise wholly owned by the State Council of China upervised by the State-owned Assets Supervision and Administration Commission (SASAC).

 

China Railway Group bags major rail contract in Laos

 

 

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