Wenzhou invites private capital into railway project

A recently released financing plan for a railway line in Wenzhou, in coastal Zhejiang Province, provides the first opportunity for private capital to invest in the railway sector.

This marks China's first private involvement in railway project construction. It is also part of the ongoing pilot program of financial reforms in Wenzhou.

On December 12, the Wenzhou branch of the Industrial and Commercial Bank of China revealed a share purchase plan that will raise 1.5 billion yuan to build the city's S1 railway line. Subscription for the shares will open to all public investors until the end of April 2013.

This represents the first of several planned rounds of fund-raising for the project.

The bank branch said that on December 12 alone, 255 investors bought 58.34 million shares of the project.

The first phase construction of the line has a length of 51.9 kilometers and starts from the city's south station. It will require total investment of 15 billion yuan. The work will take four years.

According to the financing plan for the S1 project issued earlier by the Wenzhou Railway and Transportation Investment Group, the contractor of the line, 3.5 billion yuan of the total investment will be raised from enterprise and individual investors through the public offering.

ICBC's offering plan shows that the threshold for company investors is 20 million yuan while that for individuals is 10,000 yuan. The lockup period for individual investors is one year.

The city government has set aside 1 billion yuan for the buyback of the shares from individual investors in order to ensure their investment return, the financing plan shows.

In November, a government guideline said the city would encourage private capital to participate in basic industry, infrastructure construction and welfare housing sectors through equity and debt investment.