On October 17, 2022, the company issued a voluntary announcement. On the same day, Guangzhou Northern Second Ring Expressway Co., Ltd. and Baiyun Land Expropriation Office formally concluded an Agreement on Land Expropriation for the Baiyun Section (Preliminary Works) of Guangzhou North Second Ring Expressway Project (“this Agreement”). As the preliminary step of the reconstruction and expansion project of the Guangzhou North Second Ring Expressway (GNSR Expressway), the signing of the agreement marks a big step forward to the substantial commencement of the reconstruction and expansion project.
1. Brief introduction to Guangzhou North Second Ring Expressway: advantageous geographical location and congested and saturated traffic
GNSR Expressway is a core part of the national expressway network and an artery in the north of Guangzhou. As a part of the highway network connecting the two core first-tier cities Guangzhou and Shenzhen as well as Foshan and Dongguan and other major cities in the Greater Bay Area, it is an important part of the giant traffic network in the Greater Bay Area.
At present, it is almost saturated with traffic where traffic congestion is common. With the continuous growth of traffic in Guangzhou, the actual traffic exceeds the current traffic capacity. The reconstruction and expansion project will significantly improve the current traffic conditions of the Expressway as well as its service level and traffic capacity and reduce traffic accidents and ensure traffic safety. In addition, the project can extend the toll operation period of the Expressway and enable the company to continue to enjoy dividends from the development of the Greater Bay Area. It will contribute to improving the room for future development of the company’s main business of highway toll operation and its ability in investment, construction and operation, which will help the company to enhance its main business continuously.
II. The great significance of the reconstruction and expansion project of
the Guangzhou North Second Ring Expressway
(I) It is a national planned key reconstruction and expansion project
The reconstruction and expansion project of GNSR Expressway is one of the key projects under the “14th Five-Year Plan” concerning integrated transport system at the three levels of the State Council, Guangdong Province and Guangzhou City and has been listed as a key project of “Urban Construction” of Guangzhou for four consecutive years from 2019 to 2022. Its industrial importance is obvious.
This project can strengthen the company's construction and management ability, greatly enhance the company's influence in the industry, improve the brand value and help the company continue its operation. In addition, in response to the national, provincial and municipal planning requirements and the needs of the Greater Bay Area to solve expressway-related bottlenecks, it is necessary to reconstruct and expand GNSR Expressway.
(II) It is conducive to consolidating the core advantages of the most important income-generating asset
In addition to its advantageous industry position, GNSR Expressway is the company's most important income-generating asset. In 2021, its toll revenue reached 1.121 billion yuan, accounting for 30.7% of the company's total toll revenue. Moreover, it has high revenue certainty. After reconstruction and expansion, it can bring the company stable cash flow without the cultivation period, which is expected to further improve the company's earning potential. During the reconstruction and expansion period, Guangzhou Northern Second Ring Expressway Co., Ltd. will also take feasible measures to ensure normal traffic and toll operation of the existing sections of the Guangzhou North Second Ring Expressway and minimize the impact on toll revenue. Therefore, reconstruction and expansion will not cause a significant adverse impact on the traffic and toll revenue of the Expressway.
(III) It is conducive to seizing development opportunities and enhancing high-quality assets in the Greater Bay Area
With the continuous improvement of the economic radiation capacity of the Guangdong-Hong Kong-Macao Greater Bay Area, promoting the reconstruction and expansion of the GNSR Expressway is the most direct and convenient way for the company to seize development opportunities and win investment projects in the Greater Bay Area. It is expected that the reconstruction and expansion of the Expressway can extend its toll operation period to 2053, up to 25 years at most, which can help the sustainable development of the company and enhance the company’s high-quality assets in the Greater Bay Area so that the company can continue to benefit from the huge economic size of the Greater Bay Area and push forward its “3331” development strategy effectively.
The reconstruction and expansion project of GNSR Expressway is of great strategic significance to the sustainable development of the company and is in line with the company's development plan. Starting from the signing of the agreement on land expropriation for the preliminary works, the company will work actively on communication and coordination and earnestly advance the project.