Investors are moving in on the debt-laden Guangdong Luoding Railway Corp, which is being publicly auctioned to raise funds to extend its tracks.

The management of the State-owned railway intends to sell its entire holdings in a bid to raise funds to keep the railway's expansion plans alive.

Conglomerate Shenzhen Zhongji Industrial Group, in which the State has only a minor share, is one of possible bidders.

"We would see it as a long-term investment and as positive for future earnings," said General Manager Li Xiaoming.

The group, which has been studying a possible deal to acquire shares in the railway, has yet to submit a bid, said Li.

He added that a policy issued by the Ministry of Railways last year, which encourages non-State firms to build and operate railways, had encouraged them to look at the railway.

The Luoding government sees the auction as an important reform and way of generating investment and funds for the railway.

Formed in 1992, Guangdong Luoding Railway Corp holds 86 per cent of Zhongtie (Luoding) Railway Corp, which owns and operates the railway between Chunwan and Luoding in Guangdong Province.

Guangdong Luoding Railway Corp also owns a major stake in Zhongtie (Luocen) Railway Corp, which is meant to build a railway between Luoding and Cenxi in the Guangxi Zhuang Autonomous Region. A key railway project in Guangdong, originally slated for completion in 2008, the Luoding-Cenxi track is designed to link southwestern provinces with the more developed southeast.

However, with services along the Chunwan-Luoding railway still far from fulfilling their capacity, Guangdong Luoding Railway Corp has run into serious debt and has found itself unable to invest in the new track.

The 62-kilometre 846 million yuan (US$104.32 million) Chunwan-Luoding railway, which went into full operation in 2003, has a designed annual capacity of 5.5 million tons but is moving only 300,000 tons a year at present.

At the end of last year, Guangdong Luoding Railway Corp's total assets were 978 million yuan (US$120.71 million), while its debts amounted to 793.66 million yuan (US$97.87 million). Net losses were 134.56 million yuan (US$16.59 million) last year.

The 75-kilometre Luoding-Cenxi Railway demands an investment of 1.47 billion yuan (US$181.14 million).

Guangdong Luoding Railway Corp shareholder Luoding Yongsheng Asset Management Co is looking for a stake buyer with its own total assets of not less than 7 billion yuan (US$863.13 million) and annual revenue not less than 2 billion yuan (US$246.61 million), as well as the financial capability to build the new track.

Cargo flow along the new track is expected to be robust, since it will connect with other railways in the region, said Xu Dakun, secretary-general of the China Local Railway Association.

(For more biz stories, please visit Industry Updates)