BOT HIGHWAY CONCRETE SYMBOL OF GORDON WU'S WORK IN CHINA

BOT HIGHWAY CONCRETE SYMBOL OF GORDON WU'S WORK IN CHINA

Hong Kong developer Gordon Wu, a k a "the No. 1 infrastructure player in Asia," is an enigma.

His official biography states that he is the son of a taxi driver. Actually, senior Mr. Wu was a taxi driver who also owned a 370-cab company.After studying at Princeton University, Gordon Wu returned to Hong Kong and started Hopewell Holdings, a medium-sized property development firm that hails itself as the inventor of the small apartment in China. Hopewell was the first to build two-bedroom apartments with a net floor area of 400 to 500 square feet.

In the last 10 years, Mr. Wu moved into the even more challenging area of infrastructure deals in China. His most successful project was the Shajiao B power plant, a 700-megawatt, coal-fired project in Guangdong province. The project set a completion record of 22 months - 11 months ahead of schedule - and won a prestigious British engineering record.

But it is the 1-year-old, $1.2 million Guangzhou-Shenzhen-Zuhai superhighway that has become the symbol of Mr. Wu's China program. Completed in 21 months in July 1994, the 75-mile Hopewell Highway, which Mr. Wu built with his Chinese partners, reduces the usual four to five hour traveling time to 75 minutes.

The original feasibility study for the superhighway project assumes daily travel of 15,000 vehicles. That figure has since increased to 35,000 vehicles per day despite complaints about the toll cost of 590 Hong Kong dollars (US$76) per vehicle one-way, compared with HK$200 on the old routes.

Under the terms of the agreement - one of the first applicable build- operate-transfer (BOT) deals in China's joint ventures - Hopewell is guaranteed a 17.5 percent rate of return for a period of 30 years. In equity distribution, the company's share is 40 percent, while the Chinese partner, Guangdong Provincial Highway Construction Co., is entitled to the remainder.

Since the superhighway project was completed, Chinese authorities have been reluctant to grant another BOT agreement with a guaranteed rate of return of more than 12 percent.

But there have been exceptions, as in the offering of the Huaneng Power shares on the New York Stock Exchange.

Although Mr. Wu's highway deal was not a record high, his recent public statements have been puzzling, if not ungenerous.

"Among all my investments," he said in Hong Kong last month, "China provides the lowest rate of return. It does not matter if I make less profits, but one simply should not hurt one's friends, especially your banker friends." He also said that at age 59, he could not wait for another project with such a lengthy recovery period.

Despite his age, Mr. Wu seems to be giving more attention to numerous power plant projects in the Philippines, India and Pakistan. He complained that in China there are too many regulatory obstacles in getting project approvals. In other Asian countries, "There is not as much bureaucracy," he said.

While Mr. Wu has stressed his East Asian interests in recent public statements, his bearish sentiments could be a negotiation ploy. Since the completion of the expressway, Hopewell has been working on two related BOT projects in Guangdong province, including a $1.5 million, 475-mile highway linking Guangzhou and Yueyang in northern Hunan province.

However, Mr. Wu also scaled down the second phase of the superhighway project last month by scrapping a planned eight-lane expressway between Zuhai and Guangzhou for a less expensive design.

Mr. Wu's statements about Chinese joint ventures, including criticism of China's policy of granting a 12 percent rate of return for infrastructure projects, have clearly irritated the central authorities who have held up Hopewell's plans to build a 2,640-megawatt-power station in Shenzhen.

At the same time, Mr. Wu may have won admiration from foreign investors, who are hesitant to invest large amounts of capital in a risky venture at that level of return and perhaps are afraid to voice their concerns in public or to Beijing officials.

Perhaps by coincidence, Mr. Wu's rebuke was followed by Guangdong province's announcement for the bidding of 10 high-speed highways across the province at a budget in excess of 40 billion yuan ($4.7 billion).