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YANGZE PORTS INVESTMENT OPPORTUNITIESIN ONE OF CHINA’S BIGGESTS GROWTH ENGINES Port Investor - February 2012 By InduStreams
The Yangtze River – An overview The Yangtze river stretches about 6,300km from Tibet to Shanghai of which 2,600km is navigable The Yangtze runs through 10 provinces covering a region with a population of 430 million that contributes about 25% of China’s GDP In 2010 more than 1.3 billion tonnes of cargo and 7.3 million TEU (containers) were transported on the Yangtze The combination of continuous improvement in capacity (depth and navigability), focus on developing the Western regions and improving the environment create strong fundamentals for continued growth in Yangtze area
The Lower Reach The lower reach covers the section between Nanjing and Shanghai, it is the main river Yangzhou transportation channel of the Yangtze River Delta (YRD), which is one of the most Nanjing Taizhou Nantong developed regions in China. Zhenjiang YRD include the provinces of Jiangsu, Zhejiang and Shanghai. With 130 million Zhangjiagang Changzhou Jiangyin people it contributes 22% of GDP and 28% of Changshu Taicang export/import of China and is expected to remain the key manufacturing and export/import center of the country. Lower reach ports: Throughput in this section is about 70% of Shanghai - Nanjing total Yangtze throughput in terms of cargo weight. Throughput (million tonnes in 2009) Ocean going vessels ships can reach Nanjing 200 150 but cannot go beyond due to bridges after 100 Nanjing. 50 New developments continue to take place 0 throughout the YRD and in particular on the north bank.
The Middle Reach Middle reach ports: Maanshan Wuhan - Nanjing The middle reach covers the section Wuhu between Nanjing and Yichang city, and the economies and provinces of Tongling Wuhan Anhui, Jiangxi, Hunan and Hubei. The hinterland provinces have a population Anqing of total 223 million, contributing about 13% Jiujiang of national GDP. Throughput in this section is about 25% of total Yangtze throughput In terms of cargo Middle reach ports: weight. Yichang - Wuhan The middle provinces are gaining weight in Wuhan Yichang national industry output and consumption. Transportation via Yangtze has been Jingzhou considered as key factor of development by all provinces in this section. Throughput (million tonnes) Depth varies from 3m to 9m in this section 100 allowing for vessel size of 3,000 to 5,000 50 tonnes or 100-300 TEU for container 0 Maans… Jingzhou Jiujiang Yichang Anqing Wuhu Yueyang Wuhan Tongling shipping. Yueyang New developments are seen in many of ports in this section and particularly in Wuhan.
The Upper Reach The upper reach covers the section between Wanzhou Yichang and Yibin. Chongqing is the main port in the area but the hinterland economy stretches far into among Chongqing Fuling others the Sichuan province. A population of 110 million live in the area with an associated economy of (GDP) $328 billion or about 6% of national GDP. Luzhou Upper reach ports: Throughput in this section is about 5% of total Yibin Yichang - Yibin Yangtze throughput In terms of cargo weight. Rapid volume growth has been seen in this area particularly in Chongqing. Throughput (million tonnes) The “Go West” policy and the improvement 100 of navigation condition caused by the Three 80 Gorges Dam have are playing a big role in 60 that. 40 Vessels from Chongqing port can be as big as 20 350 TEU or 5,000 tonnes. All vessels have to 0 pass the Dam to reach lower section of Chongqing Luzhou Yibin Yangtze. Note: Chongqing data include Fuling and Wanzhou New development are seen in many of ports in this section and particularly in Chongqing.
Who might this be relevant for? Infrastructure investment funds looking for investments with growth potential or acquisitions Pension and insurance funds with allocation for infrastructure in Asia or China that have potential to provide stable cash flows Private equity funds looking for small to medium sized investments with high potential upsides Seed investors looking to place early capital for potential sell off at later stage (e.g. to a consortium) Container, bulk, oil and other operators with interest to develop and cooperate with local port groups and governments Developers and contractors with ability to take on large marine infrastructure investments
EXAMPLE 1 – PORT WIDE PARTNERSHIP Investment model This purely an illustrative slide for a JV formed with a local Port Group or Government. Most agreements are made on a negotiated basis in (an example) China and therefore most models are possible. Many port areas have substantial options for further logistics developments on the landside. Port X% X% Investor Group Land Resources Joint Venture + Equity + Equity New Logistic Port Area
China Consortium and how to participate We have cooperation with global as well as local Chinese operators, funds, developers, port groups and many others. As development and collaboration opportunities emerge we involve clients that we have formalized cooperation with and (if relevant) parties that may benefit our existing client network for specific developments or acquisitions. China Consortium is already in motion in several locations. If you would like to be part of it please contact us at email@example.com and we would be glad to discuss your needs and relevant scope for the Chinese infrastructure market. For more information about developing markets with Port Investor please go to: www.port-investor.com/marketdevelopment
Opportunities in the Chinese Port Sector Massive container, dry bulk, oil and CHINA IN THE WORLD TODAY liquids markets - representing an (a few key numbers on the Chinese economy and its Port Sector) immense share of world throughput 1.3 >400 New segments such as bio fuel and Billion people >25% Mill. tons others in rapid development Of world container of crude oil demand + throughput target to further increase oil supply Limited competition - many ports with reserves one controlling port group 10% Consistent growth Strong interest with local governments last 30 years – may overtake the US by 11 to attract “multinationals” 2030 Of the worlds 20 biggest ports Negotiated deals are the norm (vs open and 50+ large tender) 10 >60% “secondary” ports Less competition for developments Trillion USD Of world iron PPP adjusted GDP ore demand More deal flexibilityBut tapping into this potential requires a significantly different approach than most take - it requires a newmodel that engages local stakeholders in a positive way. For investors just bringing money the window ofopportunity may well have passed in China.
Typical challenges in securing investments The deal pyramid illustrates a few key rules of the marketplace: Deal a) The quality of the output is determined by the 1-5 input – poor market scanning and market Lead intelligence leads to poor leads development b) The most valuable deal leads are created pro- 10 - 50 actively through focused market engagement Focused c) Each deal lead requires a strong contact and market engagement engagement base to develop into an actual 100 - 500 investment Market scanning and d) Only a few of the potential market targets will intelligence end up as deals - without a substantial 1,000 – 5,000 pipeline no investments or dealsMany believe they can avoid building the pyramid – it’s anillusion, the deals you get access to are only as good as yourpipeline.
Challenges in the Chinese Port Sector Many Chinese constituents like building on partnerships – one deal can lead to a larger number of leads and deals Deal With the blessing of local partners and government, deals can be cut quickly Once into a stage of exploration of Lead cooperation there is often presumed exclusivity for a period development Actual leads eventuate from close dialogue and relation development – Any real engagement requires local often very unstructured Focusedrelations and a real proposition to both government and port market engagement Multitude of local stakeholders including local government and port Local presence required for any entities – wide engagement often req. real insight – several sources Market scanning and often required for verification intelligence No or little market intelligence available through desk research
The purpose of China Consortium WHAT A group of operators, investors, and developers many of which have world leading technology, experience and Shipping lines Asia funding capability Port industries Latin America Not a consortium in the traditional sense Energy and resources Middle East – there is no forced collaboration just collaboration opportunities in the many CARGO OWNERS PORT PARTNERS markets and sectors WHY Combined leverage makes it possible to CONSORTIUM create much more clout in the local markets Complementary skill-sets from major port DEVELOPERS INVESTORS OPERATORS infrastructure fields that will allow synergies as each seek to develop in the Free Zone Pension Fund Container market Marine Infra. Private Equity Oil & Liquid We have been active in the Chinese port Dry Bulk Construction Sovereign Fund market for nearly a decade – the market and its constituents are well suited to engage with this form of “consortium”
How can we help you… All constituents have different needs as concerns the target locations and the type of investments. These are just a small handful of examples.…relevant scope (1) Bulk Financial investor Singapore Dampier Corpus Christi London Southampton Shanghai Hamburg Gladstone Bergen Wilhelmshaven Container Rotterdam New York Primorsk Taichung Calais$10+ million Operator Tianjin Ningbo Nantong Vancouver Bremen Long Beach Bombay Barcelona Baltimore Forth Ports Guangzhou Yantai Corpus Christ Sao Sebastiao Bilbao Qingdao Nanjing Algeciras Lake Charles Pittsburgh Greenfield Brownfield Hong Kong Kitakyushu Pohang Trieste Yanbu Qinhuangdao Tangshan New Orleans Texas City Karachi Dalian Itaqui Grimsby Baton Rouge New MangaloreDeveloper Majority Busan Nagoya lianyungang Tubarao Beaumont Huntington Saldanha Bay Paradip Tampa Milford Haven Shenzhen Marseilles Constantza Jeddah Odessa South Louisiana Newcastle Mobile Tees Leghorn Acquisition Oil & Liquid Houston Kobe Hampton Roads Manila Paranagua Antwerp Amsterdam Ports St. Petersburg Alexandria Paulsboro Ulsan Osaka Valencia Taranto Tarragona Chiba Tanjung Pelepas Plaquemines Gothenburg Valdez Logistic Zone $100+ million Port Hedland Sepetiba Dunkirk Tampa Texas City Port Kelang Richards Bay Madras Jubail Liverpool Rizhao Hay Point Jawaharlal Nehru Tanjung Priok Savannah Yingkou Novorossisk Los Angeles Zeebrugge Brisbane Seed investor Free Zone Kaohsiung Inchon Tokyo Santos Genoa Calcutta Mormugao Durban Lubeck Pascagoula Yokohama Le Havre Izmit Duluth-Superior Angra dos Reis Minority $1+ billion
How can we help you… Each constituent have different needs as concerns the deal pyramid. Some look for solutions all the way from market intelligence to…relevant scope (2) closing actual deals, others only up to and including engagement of the relevant authorities and potential partners. Step 4 Deal Closing the deal 1-5 Lead Step 3 development Deal development 10-20Step 2 FocusedEngage the most relevant market engagement 50-100Step 1 Market intelligenceFocus among the many and scanning 1,000-5,000
InduStreams was founded in 2011 with a mission to create a more transparent, connected and informed infrastructure market place. We launched Port-Investor.com in July 2011, a specific sector pilot with focus on port investing and the global port industry. Current state of affairs 200+ port groups and 1,000+ executives and decision makers in the network and increasing China Port Investor and other regions are being launched Specific concepts in development with select investors and port groups The Vision Connecting all substantial port markets (5,000+ globally) with investors (1,000+ globally) Creating a transparent and informed market place driven by industry leaders and experts Unleashing the potential inherent in this sector by creating thousands of new investment opportunities (we expect investment potential to exceed $1 trillion) Want to know more or simply engage… …contact us on: firstname.lastname@example.org