MTR, Hangzhou Metro Group in JV deal

Jan. 19, 2009 (China Knowledge) - MTR Corp Ltd<66>, the operator of Hong Kong's subway system, inked an agreement with the municipal government of Hangzhou, a northeastern Chinese city, to operate and invest in a RMB 22 billion (US$3.2 billion) mass transit rail line, as per industry sources.

MTR Corp, Hong Kong's subway operator, said it signed an agreement with Hangzhou Metro Group to jointly invest in the rail line.

MTR said in a statement filed with the Hong Kong Stock Exchange (HKEx) that it will own a 49% stake in a joint venture (JV), which is responsible for the electrical and mechanical system of the Hangzhou Metro Line 1. The remaining stake will be held by Hangzhou Metro Group Co.

The JV, which will operate the line for 25 years, is set to invest RMB 8.1 billion or 37% of the project cost in total.

The construction of the 48-kilometer Hangzhou Line 1 started in March 2007. The construction work will account for 63% of the total project cost.

The 30-station line, with underground and elevated sections, is expected to be operational as early as 2012.

The two sides also clinched a deal last Friday on exploring property development possibilities along the line, sources said.