China’s ICBC Earmarks USD 700 Mn for New Brazilian Port

China Communications Construction Company (CCCC) has signed an investment and financing framework deal with Industrial and Commercial Bank of China (ICBC) on the development of Port San Luis in Brazil.

With a total investment of USD 700 million, Port San Luis will be financed by ICBC, and jointly constructed by CCCC South America Regional Company and Brazil’s Thorell.

CCCC will hold a 51% stake in the port and undertake the engineering, procurement, and construction of the project. The port will be operated by CCCC.

As informed, the company’s subsidiary Concretmat Engineering undertook the preliminary design consultation for the project.

“The signing of the agreement marks a major breakthrough of CCCC in its localized operation in South America,” CCCC said commenting on the agreement.

Located in the marine outfall of southeastern Brazil, close to Brazil’s main grain-producing area, Port San Luis boasts good natural water depth conditions. After being built, the port will mainly transport grain, chemical fertilizer, oil products and bulk cargo, CCCC said.

The project has been supported by the governments of both countries.

Chinese port operators have been very busy over the recent period with regard to investing in overseas port assets.

Moreover, port assets in Africa and Latin America are expected to see more interest from Chinese investors as they work to satisfy their appetite for major acquisitions.

The strategic advantage supporting the recent acquisitions by Chinese investors is that they are willing and able to pay a premium for port assets, as indicated by Drewry.

One of such examples is the recent purchase of a 51 percent stake in the Spanish container terminal operator Noatum Port Holdings by COSCO Shipping Ports Limited for which COSCO paid a premium (14.9x EV/EBITDA).

This is further facilitated by low interest rates from Chinese banks, as bank loans supporting the Belt and Road Initiative have interest rates of only 2-3.5 percent, providing a scope for more aggressive bids.

Furthermore, as explained by Drewry, overseas acquisitions by Chinese port operators are earnings-accretive investments and diversify geographical risk simultaneously.