How Severe Are The Woes Of Gordon Wu?

The developer is scrambling to shore up his shaky empire

Sir Gordon Wu was at his combative best. At a July 21 American Chamber of Commerce luncheon of prawn curry and saffron almond rice, the billionaire first blasted labor laws passed by Hong Kong's legislature before the July 1 handover to China. He then turned his fire on Thailand, where he had just met with Transport Minister Suwat Liptapanlop to renegotiate a $3.7 billion highway and commuter-rail project owned by his Hopewell Holdings Ltd. "I told the minister you have to sort this out," said Sir Gordon, recently knighted by Prince Charles. "You deliver all the land, you agree on the fare structure, and we'll sign the deal. And not a damn day before."

SELLING THE JEWELS. Such bravado has long been Wu's trademark. But never has his anxiety been more warranted. Despite more than six years of work, $500 million in investment, and endless wrangling with the government, the Bangkok Elevated Rail Transport project remains little more than rows of concrete pilings amid the city's traffic jams. Now, the project's costs have just soared 15% because of the crash of the baht, Thailand's currency. As a result, Wu is trying to line up more financial backing and secure new terms, including higher tolls.

Success in Thailand is becoming a matter of urgency for Hopewell. Four years ago, it was one of Asia's most celebrated developers, boasting huge property, transportation, and power projects from Pakistan to the Philippines. Nowadays, Wu is scrambling to keep his empire afloat. His $1.5 billion superhighway from Guangzhou to Shenzhen in South China is a financial disappointment, and a $1.8 billion power plant in Indonesia looks dicey.

Wu also is running out of assets to sell off. In July, Hopewell had to unload one of its last jewels--a 20% stake in Consolidated Electric Power Asia (CEPA), which owns profitable power plants across Asia--to America's Southern Co. The $150 million that Hopewell raised doesn't nearly cover its capital needs. The Thai and Indonesian projects each will require at least another $1 billion to complete. So Wu hopes to float $600 million in bonds. And, despite his denials, he may have to sell equity stakes in his highway in South China.

Wu's mistake, analysts say, was to dive into too many ambitious projects and overestimate his ability to deal with Asian politicians. Other Hong Kong developers have done better than Wu because "they started very slowly and progressed on an incremental basis," says Michael Green, Hong Kong director of Salomon Brothers Inc. Hopewell responds that it "has a very strong track record in developing power plants in Asia."

Competition also has undercut Wu's strategy of scoring huge returns by pioneering new markets early, which paid off at first in China and the Philippines. Now, Asian governments expect better terms. Indonesia wants to pay Hopewell far less than the originally agreed 7.75 cents per kilowatt hour for power from the company's plant. That's one reason that Southern Co. had CEPA divest the plant before buying the remaining 20%. "You're putting more money in and not knowing where you're going to end up," says CEPA Executive Director F.D. Kuester.

In Thailand, Wu has had to cope with seven changes in government since the mass transit deal was signed in 1990. But while the country's economic crisis creates more problems, Wu still has leverage. The project is needed for the December, 1988, Asian Games. Thai officials would like to see Wu bring local partners into the deal. However, with many Thai projects in trouble, raising money may not be easy.

Wu may have to sell more assets, such as Hong Kong real estate and stakes in the Guangzhou-Shenzhen highway, valued by some analysts at $1 billion.

In public, Wu still sounds like anyone but a mogul in distress. His latest proposal: a massive land reclamation in Hong Kong to make 10,000 hectares available for affordable housing, a top priority of the new administration of C.H. Tung. But Wu may need more than another big plan to restore his reputation as a master builder.

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