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 over the leading role in globalisation historically held by the West.
In a three-part series, FinanceAsia is looking at what the Belt and Road initiative has actually brought to the world at the project level last year, and examines which companies are spearheading and likely benefitting from these projects. Previous entries are here and here.
These projects are ranked according to their estimated project value.
All of them have started construction in 2017, underlining the fact they are more than just discussions on paper.
7. Hub Coal-fired Power Plant, Pakistan
Companies involved: State Power Investment Corporation, Hub Power Company (Pakistan), China Development Bank (financing), The Export-Import Bank of China (financing)
Estimated project value: $2 billion
In what was described by Beijing as the “priority project along the China-Pakistan Economic Corridor”, China started construction of the 1,320-megawatt power project in Pakistan in March last year.
The project, which includes the construction of two 660MW coal-fired power plants and a coal port, was spearheaded by China because it accounts for the bulk of the construction value as well as financing.
State Power Investment Corporation, one of China's "Big Five" power producers, is the major contractor and will account for a 74% interest in the project, while Pakistani independent power producer Hub Power Company will assume 26%.
The project is funded by a consortium of banks led by China Development Bank and The Export-Import Bank of China.
The facility is at the city of Hub, located in the Lasbela district of Balochistan, 45 kilometres northwest of Karachi.
According to estimates, the project will create over 10,000 jobs and will supply electricity to 4 million homes upon completion, which is slated for August 2019.
Pakistan is one of the biggest supporters of China’s Belt and Road scheme, and the diplomatic relationship is reflected in this project.
China and Pakistan signed the agreement for the power project in May 2016. Only ten months later, construction of the project was under way, highlighting the smooth cooperation between the two countries.
China's investment in Pakistan also includes one of the most challenging hydroelectric power projects ever undertaken, located on the River Indus. A $350 million term loan to Pakistan Water and Power Development Authority was chosen as FinanceAsia's first Belt and Road Deal of the Year, an award based on broader criteria than this list.
8. Astana LRT project, Kazakhstan
Companies involved: China Railway Group, Asian Development Bank (financing)
Estimated project value: $1.8 billion
China’s commitment to build a light rail transit network in Kazakhstan’s capital is yet another difficult task because of the city’s extreme weather conditions.
Construction for the 22-kilometre rail line, which started in May last year, is expected to be suspended in winter when the temperature could fall to as much as -50 degree Celsius.
Technically, Chinese contractors will also have to ensure railway equipment and signaling systems can function under such extreme conditions, which rarely occur in their home country.
To make matter worse, the project must be completed within 2.5 years. China Railway Group, the main contractor of the project, said projects of similar scale normally take about three years to complete under normal conditions.
Still, the Astana LRT will be an important step for China to export its railway know-how because it will be the first railway line in Central Asia to fully adopt Chinese technologies.
The 18-station light rail, which will connect Astana’s international airport, the inter-city railway station and the Akorda Presidential Palace, will be fully automated. The entire project will cost an estimated $1.8 billion.
It is worth noting that, in one of the few cases of private capital involving in large Belt and Road projects, Chinese private construction manufacturing firm Zoomlion will participate in construction projects alongside the LRT line.
Companies involved: Cosco
Estimated project value: $700 million
In one of the landmark Belt and Road deals in the Middle East, Chinese shipping giant Cosco signed an agreement with the United Arab Emirates’ port operator to build a new container terminal at the Khalifa Port at Abu Dhabi in November.
With an initial cost of $700 million, the new terminal will nearly double the port’s existing capacity of 2.5 million twenty-foot equivalent units per year when it is completed in the first quarter of 2019.
China’s investment in Khalifa Port forms part of its maritime Silk Road strategy to connect itself with Africa and Europe via the South China Sea and Indian Ocean.
Sitting between the Arabian Sea and the Mediterranean Sea, the UAE is naturally an important strategic location for China. The federal state is responsible for one-fifth of Sino-Arab trade.
10. Pokhara International Airport, Nepal
Companies involved: China CAMC Engineering, The Export-Import Bank of China (financing)
Estimated project value: $217 million
China’s involvement in building Nepal’s second international airport shows Beijing is more concerned with expanding its influence in its neighbour than pure economic gains.
Construction of the Pokhara International Airport, which started in July, is by far China’s biggest infrastructure project in the Himalayan state. The project is the first major deal since Nepal elected a new communist government that is expected to foster closer ties with China and step away from Indian influence.
This was highlighted by the fact the new airport is fully funded by China at extremely low rates.
According to the financing terms, The Export-Import Bank of China will finance the $217 million investment through a 20-year loan to Kathmandu, 25% of which is interest-free and the rest at an interest rate of 2% per year.
Nepal has invited bids for the construction of the Pokhara International Airport since 2012, two years before it eventually awarded the contract to China CAMC Engineering. The contract was put on hold because Kathmandu had expected to pay $166 million for the contract, but all of the bids came in at over $300 million.
Pokhara’s new airport will be the second international airport besides Kathmandu’s Tribhuvan International Airport when it is completed in July 2021.
