The Stock Exchange of Hong Kong Limited (the HKSE) recently granted the first waiver under the guidelines issued in January 1996 for infrastructure companies which do not meet the general three-year profit requirements. The waiver was granted to Road King Infrastructure Limited whose shares were listed on July 4 1996.
The waiver was made pursuant to sub-rule 8.05(2) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The HKSE has indicated that it will consider granting the waiver if the following requirements are met:
The applicant company:
- must undertake, not simply finance, the development of infrastructure project(s);
- must at the time of listing not be engaged in any businesses other than those stipulated in the infrastructure project mandate(s) or contract(s); and
- must undertake not to acquire any other type of assets which will result in a change of business in the first three years following listing.
- The projects are infrastructure projects which create the basic physical structures or foundations for the delivery of essential public goods and services necessary for the economic development of a territory.
- The infrastructure projects must be carried out under a long-term concession or mandate awarded by government and be of a substantial size and normally have 15 years remaining in each concession.
- The applicant company's share of the total capital cost of the infrastructure projects should normally be at least HK$1 billion (approximately US$128 million) including both the amount of funds already invested and the estimated amount of funds required to complete the infrastructure projects.
- The applicant company may be involved in a single infrastructure project or multiple infrastructure projects. Although some of its infrastructure projects may be in operation, the majority should be in the pre-construction or construction stage.
Use of proceeds of offering
The bulk of the proceeds of the offering should be used to finance the construction of infrastructure project(s) and not principally to repay indebtedness.
Strength of management and substantial shareholders
The substantial shareholder(s) of the applicant company must demonstrate that it and the management team have the necessary experience, technical expertise, track record and financial strength to carry the infrastructure project(s) to completion and to operate infrastructure project(s) thereafter.
Additional documentary requirements
The HKSE will require additional documents, including business valuations, feasibility studies and sensitivity analyses, a summary of all joint venture arrangements, details of the concession and cash flow projections.
Anne W Y Chen and Steve S F Woo