Belt and Road: Top 10 projects started in 2017 (1)

FinanceAsia examines what China’s Belt and Road initiative has actually brought to the world last year.

China’s trillion-dollar Belt and Road Initiative is hailed as the “project of the century” as the world’s second-largest economy looks to take the lead role in globalisation historically held by the West.

Much has been discussed about the political, economic and cultural impact that the initiative could have globally since it was introduced in 2013. However, there has been little attention paid to those projects the scheme has already kick-started.

In a three-part series, FinanceAsia takes a look at what Belt and Road actually brought to the world at the project level last year, and examines which companies are spearheading and likely benefitting from these projects.

These projects are ranked according to their estimated project value.

All of them started construction in 2017, indicating they have gone beyond mere discussions on the paper.

1.   Hinkley Point C Nuclear Power Plant, United Kingdom

Companies involved: China General Nuclear Power Group (CGN), China National Nuclear Corporation (CNNC), Électricité de France

Estimated project value: $27.3 billion

The controversial proposal to build a nuclear facility off the southwest coast of England finally got under way in March last year, six months after China and the UK inked the deal during a national-level meeting in September 2016.

British Prime Minister Theresa May struck the final call by approving the Hinkley Point C Nuclear Power project during Chinese President Xi Jinping’s state visit to the UK, putting an end to the drawn-out discussions over the project that started as early as 2007.

By giving the green light to the multibillion-dollar project, Britain is affirming its support of nuclear energy development despite security concerns.

The new facility will be built next to the existing Hinkley Point A and B nuclear power stations. The Hinkley Point A nuclear reactor was decommissioned in 2000 and Hinkley Point B is due to be taken offline in 2023.

At the same time, the project also underscores Britain’s commitment to use nuclear energy despite its higher cost compared to other forms of renewable energy, which have been dropping in prices over the past few years.

With an estimated initial cost of £19.6 billion ($27.3 billion), Hinkley Point C will be the world’s most expensive power project ever – equivalent to twice the cost of the 2012 London Olympics.

Still, another way of looking at the deal is as a sign of the UK maintaining ties with two major economic powers as it prepares to exit the European Union.

The project will be developed jointly by China and France on a 33.5%/67.5% split. China General Nuclear Power Group (CGN) and China National Nuclear Corporation (CNNC) will co-develop the project with state-owned Électricité de France.

Upon completion in 2032, the Hinkley Point C plant will create an estimated 25,000 jobs and contribute to 7% of Britain's total power supply during its 60-year lifespan. Meanwhile, the plant could help Britain cut 9 million tonnes of carbon emission per year, an important step towards the country’s target of reducing carbon emissions by 80% on 1990 levels by 2050.

2.   Amur Gas Processing Complex, Russia

Companies involved: China Gezhouba Group, China Petroleum Engineering & Construction Corp, Gazprom

Estimated project value: $22 billion

The ambitious project to connect the natural gas network between eastern Russia and northeastern China could be the first infrastructure project borne out of the Belt and Road initiative.

Russian President Vladimir Putin was one of the attendees of the groundbreaking ceremony for the Amur Gas Processing Plant in August; it will be Russia’s biggest gas processing facility when completed.

The beginning of construction in the city of Svobodny came a little more than three years after Putin oversaw the signing of a historic $400 billion contract to supply natural gas to China in May 2014.

The mega gas supply contract was inked less than a year after Chinese President Xi Jinping proposed the Belt and Road Initiative in late 2013. As part of the agreement, Chinese companies were ti be rewarded with construction contracts for the processing units and off-site facilities, including roads, railway and communication lines.

The Amur Gas Processing project is a big part of the China-Russia gas deal, and will involve Chinese contractors like state-owned China Gezhouba Group and China Petroleum Engineering & Construction, a subsidiary of oil and gas giant China National Petroleum Corporation (CNPC).

However, the contracts for Chinese companies are estimated to account for only one-fifth of the project’s $22 billion overall value. Russia’s Gazprom, operator of the Amur Gas plant, will be the biggest beneficiary.

Upon completion in 2024, the facility will have a natural gas processing capacity of 42 billion cubic metres per year. An estimated 38 billion cubic metres of natural gas will be supplied to China’s northeastern province of Heilongjiang through Gazprom’s Power of Siberia gas pipeline.

3.   East Coast Rail Link, Malaysia

Companies involved: China Communications Construction Company (CCCC), The Export-Import Bank of China (financing)

Estimated project value: $13 billion

When Malaysian Prime Minister Najib Razak officiated the groundbreaking ceremony for the East Coast Rail Link in August, he described the project as a “game changer and a mindset changer”.

The 668-kilometer passenger and cargo rail link, which costs a hefty M$55 billion ($13 billion), will run from Port Klang in western Malaysia to Tumpat in the northeast. It will connect four of the country’s 13 states including Selangor, Pahang, Terengganu and Kelantan, home to about 4.4 million Malaysians.

It is no exaggeration to say the project was impossible without China’s involvement. Chinese companies will provide the technical know-how, build for the railway line, as well as finance the bulk of the cost.

State-owned China Communications Construction Company (CCCC) is the main contractor of the project, which will be 85% funded by The Export-Import Bank of China. Malaysia’s government will bear the remainder of the cost through sovereign sukuk issues.

For Beijing, Malaysia’s East Coast Rail Link encompasses an important part of its strategic plan to connect Southeast Asia via road links, thereby reducing the reliance of using sea route for trades with India and Africa.

Currently, most of China’s exports to Africa and Europe pass through the Strait of Malacca and Singapore.

It is estimated that the East Coast Rail Link could make up 10% of the current traffic at the Port of Singapore.

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