A Ray Of Hope For Hopewell

Gordon Wu may land much needed cash from a U.S. utility

Gordon Wu, an outspoken Hong Kong entrepreneur who was one of the first to take on big infrastructure projects in China, has been unusually quiet lately. And little wonder. His Hopewell Holdings Ltd., once a darling of investors, and its 1993 power project spin-off, Consolidated Electric Power Asia Ltd. (CEPA), have been beset with cost overruns and delays. In August, plans for a new real estate spin-off had to be aborted because of a lack of investor interest.

Now, Hopewell's situation has become critical. The company is mired in $3 billion of debt. Its major anticipated revenue source, the Guangzhou-Shenzhen-Zhuhai expressway, has turned out to be a money-loser, at least for now. Moreover, the company is under the gun to come up with an additional $1 billion to keep things moving on the $3.5 billion Bangkok Elevated Road & Train Systems (BERTS) as well as a $224 million highway in Guangzhou.

But Wu, a Princeton civil engineering graduate, may have found a way out: the sale of at least part of Hopewell's 60% stake in CEPA. According to analysts and reports in the Hong Kong media, as many as six foreign companies have expressed an interest in buying a piece of CEPA, a builder of power plants with a market capitalization of $2.7 billion. One is GPU Inc., formerly known as General Public Utilities Corp., a utility holding company based in Parsippany, N.J. That would get Hopewell out of the woods and open up other avenues of fund-raising. A GPU spokesman confirms that the company is "interested" in buying a piece of CEPA but says the company is exploring other deals, too, as it gears up a global strategy.

If Wu can find a big U.S. investor, Hopewell will have killed two birds with one stone. "They'll be injecting more expertise and adding a very powerful strategic partner to CEPA," says Salomon Brothers analyst Michael Green. "At the same time, Hopewell adds some badly needed capital. It's a turnaround and a growth strategy at once."

TOUGH MANAGER. The addition of a major utility as an active partner would help balance some of Wu's liabilities. Critics have long accused him of diving into projects before nailing down all the details. Others fault his entrepreneurial management style--subordinates say he has the final say on even small decisions. Hopewell would not respond to requests for comment.

Wu's mounting problems came to a head when investor disinterest forced him to cancel plans for his proposed $1.4 billion spin-off of all of Hopewell's troubled transportation projects, to be dubbed Consolidated Real Estate & Transport Asia (CREATA). At the same time, a planned $320 million flotation of the Bangkok elevated transit project on the Thai exchange was ruled out because stocks in Thailand were in a slump.

Even if Hopewell does a deal with GPU or some other big industry player, Wu can't afford any more road jams on major projects such as the Bangkok venture and on the Guangzhou ring road. Nor will taking on a strategic partner resolve CEPA's woes in many countries where the company has had spats with political leaders. "Difficult governments are difficult governments," says W.I. Carr analyst Wendy Ko. "Whether or not you have a big U.S. partner doesn't matter."

Two of the biggest problems are in Southeast Asia. In the Philippines, the company is in a dispute over the size of a power plant. In Indonesia, a $1.8 billion coal-fired power plant that CEPA is supposed to build in Central Java now appears to be dead in the water. "Hopewell is not important," says Zuhal, the director-general of electricity and energy development at Indonesia's Mines & Energy Ministry.

Cutting its stake in CEPA will reduce Hopewell to primarily a transportation construction company. That's a far cry from the ambitious plans Wu had for his empire a few years ago. But if the fog of debt lifts, the road ahead should be a lot clearer than it has been of late.

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