Shenzhen Opens to Foreign Investment In Utilities for Market Edge

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). Shenzhen, one of the economic 'boom' metro city regions of Southern China, has decided to improve profitability and adapt to the tough dynamics of the market economy by selling stakes in five key state-owned companies by international auction.

Minority shares in Shenzhen Energy Group, Shenzhen Water, Shenzhen Gas Group and Shenzhen Public Transport will be offered to foreigners and stakes of 30% to 40% in Shenzhen Food General's two foreign companies are on offer.

At the same time the Shenzhen has agreed to sell its stake of around 15% in the Shenzhen Development Bank (SDB) for $180 million. When approved by the People's Bank of China the deal would make the SDB the first mainland bank to sell all its state holdings to foreign buyers. The sale is aimed at attracting international capital, helping the bank to enter the global market and strengthening its competitiveness.

The foreign buyer of the stake has been identified as New Bridge Capital (NBC), a joint venture between the World Bank, GE (NYSE:GE) (Fairfield, Connecticut), a Californian pension fund and an investment arm of the Singapore government. NBC made what would appear to be a pre-emptive bid which will double the SDB's net assets per share. It will also make NBC the bank's largest single shareholder and will entitle it to appoint the chairman of the board. Some NBC appointed staff have already started working at the Shenzhen bank.

Investors in the public companies will be required to make a long-term commitment and add value to the various companies. If the auctions are successful they will be expanded in scope by the Shenzhen government.

Bidding is open. Some interest from the connections of NBC could be expected but has not yet surfaced. Hong Kong and China Gas is reported to be interested in bidding for a 24% stake in the Shenzhen Gas Group which is a piped gas monopoly in economic zone.