China Construction Bank, the world's second biggest on assets, is ready and willing to add scale and experience to financing New Zealand's major infrastructure project, and help grow the economy.
"The bank has a long history of infrastructure development and financing, and we have placed a strong strategic focus on primary industries, infrastructure and energy in New Zealand — these sectors make up 75 per cent of our client base," said Grant McKeown, head of corporate and institutional banking with China Construction Bank (New Zealand).
"New Zealand has long stated it has an infrastructure deficit and we have demonstrated our capability by supporting leading corporate entities and project sponsors. The bank is here to help fill the infrastructure investment gap."
China Construction Bank, listed on the Hong Kong and Shanghai stock exchanges, has total assets of more than $NZ5.6 trillion and its 2019 net profit was $5.96b. Based in Beijing, it has nearly 15,000 banking outlets employing some 350,000 staff in 30 countries and regions.
Having been heavily involved in China's modern-day economic growth, the bank is well positioned to structure, arrange and execute large scale project financing transactions in New Zealand on both bilateral and syndicated terms.
"Since the signing of the free trade agreement in 2008 there has been an increasing flow of trade and capital between China and New Zealand. That flow will increase. We can be a conduit and see our role as adding value or enhancing those flows," said McKeown.
New Zealand has a penchant for funding and completing major projects in stages. But McKeown argues that the financing and construction of the projects can be done in one big burst — at lower cost and earlier completion.
"Making the investment up front can deliver project value outcomes earlier. If it is staged, the value reality is further out in the future — that has a cost," he said.
He likens it to building a house: Do you build the kitchen and living room one year and then add rooms over each of the next four years. No, you get the most value out of building the whole house at once.
"Most Kiwis have no problem going to the bank to get all the financing or mortgage up front to build their home. We don't do the same for infrastructure projects. If we bring a housing mentality to infrastructure, then we will be away laughing."
McKeown said China has shown the value of scaling up construction. China, for instance, has built some 35,000km of high-speed rail in the past decade.
"It has a huge wealth of engineering capacity to bring to New Zealand if there is a major transportation project to be done. Why shouldn't New Zealand benefit from this?
"The bank would relish the opportunity of bringing scale and pace to the infrastructure market with its associated cost savings and seeing value created in New Zealand."
China Tiesiju Engineering Group, one of the world's largest construction companies, made an unsolicited bid in 2018 to build and operate a four-lane Penlink route near Silverdale and pay for it through tolls. Nothing materialised. Construction of the 7km Penlink between the Northern Motorway and Whangaparaoa Peninsula — now two lanes only — will be starting later next year and take four years to build — and it will be tolled.
McKeown fully supports the Government's moves on infrastructure and funding legislation passed in August, and he is waiting to see the finer details of the $12 billion New Zealand Upgrade Programme.
"Is it $12 billion cash and 100 per cent equity for the projects, or is it $12b leverage to turn it into $60-70 billion funding?
"Utilising the funding legislation and bringing in financing partners would supercharge the delivery of the projects. Why not move forward quickly with strong partners?"
McKeown would like to see a 10-year infrastructure pipeline clearly laid out with real timing and associated funding and financing requirements. "I'm a big supporter of the Infrastructure Commission being an independent tool for the prioritisation of infrastructure — at least there's a plan as it's hard to resource an aspiration list.
"The commission may say the next national priority is to spend $1b this year on light rail in Auckland but the Minister may authorise the third best project with reasons. At least we are going off a framework rather than an aspiration list.
"Clarity is what is required for international funding partners."
China Construction Bank (NZ), which was registered as a subsidiary in 2014, then a branch in 2017 and operating with more than 65 staff, has been involved in a variety of infrastructure and corporate activity over the past 15 years.
The bank was the mandated lead arranger for the NX2 Group public-private partnership responsible for financing, designing, building, maintaining and operating the Puhoi to Warkworth Highway for up to 25 years — underlying ownership is retained by the Crown.
The $800m project, which began in November 2016 and because of Covid-19 delays will be completed by May 2022, is 90 per cent debt funded. The Government will pay back the loan over 25 years based on available and performance-based annual payments.
The 27km four-lane Transmission Gully motorway from Mackays Crossing to Linden in Wellington is the only other transport public-private partnership operating in New Zealand at present.
China Construction Bank (NZ) was a lender to the $422m Central Plains Water Enhancement Scheme in Canterbury, which irrigated 63,000ha of farmland between the Rakaia and Waimakariri Rivers.
The scheme was completed in 2018.
It included building a 17km-headrace canal delivering water from the Rakaia River into a 130km-long piped distribution network.
"We were the first international bank to join ANZ and Westpac in the project which in turn supported high-value exports from the agricultural industry," said McKeown.
The bank was the sole funder of the six-level KiwiBuild Sunset West apartment building in the Cuba quarter, Wellington, and it financed New Ground Capital's build-to-rent housing in Hobsonville Point and Whenuapai in Auckland.
It also helped finance Top Energy's Ngawha Springs 31.5MWE geothermal power station near Kerikeri, designed and built by Israeli experts Ormat. China Construction Bank (NZ) provides general funding for the Auckland, Wellington and Christchurch airports, and the Wellington and Lyttleton ports, which all have expansion plans.
The bank also provides revolving credit facilities to corporates such as Investore Property, Vodafone, Fletcher Building, Mercury, Fonterra, Firstgas, Kiwi Property and Contact as it helps enhance the national economy.