pre-feasibility study in guiyang integrated transport … study in guiyang integrated transport hub...

Pre-Feasibility Study in Guiyang Integrated Transport Hub Project – Dulaying Integrated Logistics Hub

February 2013 Executive Summary

Cities Development Initiative for Asia P a g e | 2

i. EXECUTIVE SUMMARY 1. Geographically Guiyang is a key hub city in the South West of China. It is at the crossing point of the main east-west passage and the coastal passage towards the south of China. The city is also identified as a national logistics node and one of the main logistics centers in South West China. 2. As part of the city development planning, there will be six Grade-1 logistics hubs built in Guiyang which are all located on the edge of the current urban area. The Dulaying Logistics Hub is the first of the six logistics hubs to be implemented. The logistics hub will form a key role of providing interchange for goods to and from Guiyang by both railway and highway modes. A. General condition of Logistics industries in Guiyang: 3. The total goods volume by logistics and value added logistic services is increasing rapidly. In 2010, the aggregate freight volume in Guiyang was more than 100 million tons. The road freight is 82.7%, whilst railway freight is 17.1%, and rail transport is mainly focused on bulky and industrial materials.

Freight Volume in Guiyang (2010) Mode Absolute volume

(10,000 tons) Annual Increase 2009-2010 (%)

Railway 1780 29.2

Road 8596 12.4

Water transport 15.1 -55.2

Civil aviation 6.2 19.6

Total 10,397 14.7

4. The existing logistics services in Guiyang include three main types:

4.1 Regional transport and distribution for public use, which involves trunk transport, multi-modal transport, exclusive lines transport and loading-and-unloading service.

4.2 Warehousing. 4.3 Freight forwarding agent.

5. Generally, there are three types of logistics hubs in Guiyang.

5.1 Depots providing warehousing and supplementary transport. 5.2 Freight hubs providing loading services, which mainly serve vehicle parking

and dispatching, but also operate short storage for a limited volume of goods. 5.3 Highway or railway depots focused on inter-modal interchange services,

which also provide warehousing and transport. B. Existing main problems 6. The logistics industry in Guiyang is still at an initial stage need further developing to match growth demands:

6.1 The general capacity and standard of provision is not competitive. 6.2 The functional capability of existing logistics centers is limited. 6.3 The gap between large industry demand and logistics services increases the

cost of freight distribution. 7. So an integrated logistics centers as intermodal infrastructure is needed to promoting efficient intermodal freight transportation by providing facilities and services, to promote


modal shift from road to rail and improved inter-regional intermodal networks between urban areas, to create a hub-and-spoke network for freight transportation and reduce transport processes. As well optimize logistics operations, mitigate urban traffic, encourage transport modal shift, and multi-company consolidation. Provide a center for urban consolidation and distribution between the trans-shipment of long-distance traffic and local delivery. 8. The Dulaying logistics hub to be designed as integrated facilities to facilitate the smooth transfer of goods between rail and highway modes. The Dulaying Logistics Hub is to be planned as a state-of-the-art facility adopting modern low carbon technologies and automation processes. The core function is to provide integrated services for regional distribution, logistic facilities and other extended services for different types of industries, and to become the regional logistic facility supplier and logistic service platform which is positioned between Third Party Logistics and Fourth Party Logistics. C. Design of Dulaying Integrated Logistics hub layout: 9. Sustainable Logistics model shift from road to rail, mitigate dependence on road freight over long distances, reduce Green House Gas (GHG) missions, particulate emissions. Generally the GHG emission of intermodal transport is 30%-70% lower than road movements. 10. Sustainable buildings particularly warehouses will comprise a large area of the Dulaying Logistics Hub and may account for a significant percentage of energy use of the entire logistics center. D. Project location 11. The Dulaying Logistic Hub location is to the south of the city Outer Ring Road in the Baiyun District of Guiyang, which is about 9km from the central downtown area. It’s to the west of under construction Yansha expressway. YuQian railway freight yard is located 1km away to the north of the Outer Ring Road. There is a high-technology zone and a bonded zone near to the project site.


12. The site is shaped as a rectangle. The total area is 327,000 m2, with a maximum north-south distance of 540m and maximum east-west distance of 780m. The site is with hilly terrain and elevation differences of up to 50m across the site and a maximum slope of about 52%. The majority of the site is covered by farmland, trees and vegetation. 13. The Dulaying logistics hub is target into three main market: the core market is the regional logistic service for the surrounding zones including Baiyun District, Wudang District, High-technology Zone and Bonded Area, and other markets which need railway-highway multi-modal freight shipment; secondly serves for the main urban area of Guiyang, as well for the middle and long distance markets which might need some re-distribution services. 14. In the core catchment area, the key logistic functions of Dulaying logistics center will be urban goods distribution, logistic hub for distribution. The logistic services of Dulaying and Bonded area are complementary. The inside Bonded area logistics focus on the bonded freight of customs, and Dulaying logistic center focuses on the common freight shipment. There are some common freight shipments for Bonded area, which would be carried by Dulaying logistic center. 15. The expected business functions of Dulaying Integrated logistic hub are:

15.1 RDC related to major industrial products of Guiyang 15.2 A key interchange for Railway-Highway transfer shipments 15.3 Extended logistic services such as transportation, delivery, goods

management, facility management, data exchange, information processing, fund management, etc.

15.4 Other facility and services such as offices, restaurants, small hotels and other services.

E. Demand forecast 16. Demand forecasts are needed to establish the operational capacity of Dulaying Logistic Hub. These are based on the historic economic development of Guiyang, Guizhou Province and the neighboring provinces in South West China and also the current operational capacity and trends of freight and logistics. Future trends in operational capacity are estimated for 2015, 2020 and 2025 with the base year as 2010. The forecast demand of typical industries in the forecast years is based on extrapolation of trends and applying elasticity.


Guiyang and Dulaying Hub Freight Volume Forecasts Year 2010

(actual) 2015 2020 2025

GDP(0.1 billion) 1,122 2,200 3,880 62,50

Total Road Freight Volume (10,000 tons) 8,596 14,480 22,280 31,250

% Road Freight by Logistics Vehicles 35 40 47 55

Freight Volumes by Logistics Vehicles (10,000 tons)

3,130 5,790 10,470 17,190

Dulaying Logistic Hub Operational Volume (10,000 tons)

-- 170 325 520

17. It is important to forecast the major industrial and agriculture production in Guiyang as shown in table below. The Dulaying Logistics Regional Distribution Centre (RDC) Storage volume forecast is then made in relationship to the forecast volumes of these major products. Dulaying RDC Operational Volume Forecasts - Conversion tonnage Industry/Product Type Unit 2010 2015 2020 2025 2025

in Dulaying RDC Conversion tonnage (10000 tons)

Light manufacturing/daily use products RDC 10000 tons

3250 138 215 326 326

Vegetables and fresh food/ crop product RDC 10000 tons

735 37 60 90 90

telecommunication/mobile/electronic product RDC

10000 2870 172 277 426 10

Tabaco RDC 0.1 billion 1750 180 200 322 38

Medicine product RDC 10000 tons

8 0.9 1.5 2 2

Total 10000 tons

466

18. The Dulaying Logistic Hub production volume for 2025 is as follows:

18.1 Public storage throughput capacity (in and out)1,420 tons/day 18.2 RDC daily storage throughput capacity (in and out)12,820 tons/day

F. Integrated logistics hub design 19. The Dulaying Logistics Hub has the characteristics of a typical Regional Distribution Centers (RDC) for goods gathering, distribution and delivery. It will be a regional logistic center with the functions of logistic operation, procurement and distribution, supply chain extension operation center, to gather the logistic services for a similar client or industry with goods and operations in one unit. As well it will allow different clients and goods to share the same professional logistic facilities and services to improve the efficiency and to lower the cost. 20. DRC: The main components of the facility layout are the RDCs, Freight Truck connection Areas and Public Transfer Storage Areas. The RDC zone includes two functions: one is specialized storage function and the freight handling function. In particular, the specialized storage section is the core RDC function. In terms of the scale of RDC, the daily storage throughput capacity (in and out) is the target capacity. However, this is not identical to the actual storage capacity. According to logistic industry experience, typically the daily storage throughput capacity is 6-12% of the actual storage capacity. In this case, 10% is chosen as the daily storage throughput proportion.


21. The freight truck connection area provides two interconnection functions: rail and road transport interchange and road cargo connection only. Rail and road connection zone:

This connection zone is set up along the existing railway with connecting platforms and transfer storage area. This enables direct transfer between rail freight and road freight or freight transferring within the warehouse in the logistic center.

The length of rail and road connection platform is 180m long and 6m wide. The truck connection platform is about 80m long and 15m wide, and the connecting warehouse platform is 100m and 50m wide. The connection transfer warehouse is a single floor building with a GFA of 5,000 m2 and a height of about 8m.

The connection platform is equipped with a water-proof shelter. The level of the connection platform is at the same height as the rail connection warehouse platform.

The truck connection platform is 1.5 m below the rail connection warehouse platform. Road Cargo Connection Zones

The connection area for road freight loading and unloading is outdoors. In the current plans, a separate space is not provided for loading and unloading to ensure the green area ratio is satisfied. The green areas can be used for trucks connections.

Considering the similarities between the truck connection zones and the car parking zones, the road freight connection zones can be integrated with the car parking area.

22. Public Transfer Storage Area: The public transfer storage zone contains the public goods transfer, non RDC goods storage and also temporary storage. For the public transfer storage zone, it is proposed to build 2 separate warehouses with a total area of 5,000 m2. 23. For Dulaying Logistic Hub, the constructible area is about 267,000 m2. The total land coverage for the buildings footprint is 128,000 m2 with a total GFA of 269,580m2. The building footprint area is 48% of the site with a FAR of 1.01. The table below summarizes the area needs for different facilities within the logistic center.

G. Development phasing 24. There are two possible options for development phasing:


Option 1: The full site builds out in one phase The total construction period is expected to last 36 months from January 2013 to December 2015. Option 2: the site build out in two distinct phases The overall project is proposed to be developed in two phases. Phase 1 includes the eastern plots (4, 5 and 6) of the logistic hub as shown in the following figure. Phase 1 will be developed from 2013-2015. Phase 2 includes the western plots (1, 2 and 3) of the logistic hub after the completion of the new passenger railway. Phase 2 is proposed to be developed from 2018-2020. 25. Phase 1 includes all RDCs, multi-modal transfer area and warehouses, and parts of the car parking area. Phase 2 includes the remaining the facilities.

ii. Financial and economic appraisal 26. The total investment includes building construction, equipment purchasing and installation, construction of municipal facilities, other engineering-related costs and project contingency. The total capital investment for this project is 568 Million RMB with construction cost of 428 Million RMB and a land acquisition cost of 140 Million RMB. Summary of Capital Costs (Related to Site Construction)

Project GFA (m2)

GFA Cost (10,000 RMB)

Outdoor Area (m2)

Outdoor Cost (10,000 RMB)

Total (10,000 RMB)

land acquisition compensation 14,000

RDC Functional zone

Storage and Handling 135,000 16,200 16,200

Sorting Centre 10,000 1,500 1,500

TOTAL 145,000 17,700 17,700

Public Service Operational Platform

Train-truck Connection Platform

1,080 108 108

Connection Warehouse 5,000 600 600

Transferring Storage 20,000 2,400 2,400

Dedicated Distribution area

16,000 2,400 2,400

Car parking area 6,000 900 20,000 1,000 1,900

Total 48,080 6,408 20,000 1,000 7,408


Other Facilities Operational Building 54,000 10,800 10,800

Staff accommodation and Hotel

15,000 3,000 3,000

Service Centre 7,500 1,500 1,500

Total 76,500 15,300 15,300

Total 269,580 39,408 20,000 1,000 40,408

Site road 72,020 m2 2,160

Green space 66,700 m2 200

TOTAL 56,768

Summary of All Capital Costs No. Item Cost (10,000RMB) % of the total cost

1 Construction fee (including land acquisition)

56,768 72.7

2 Equipment purchasing and installation 8,800 11.3

3 Municipal facilities construction cost 6,415 8.2

4 Other Engineering-related Costs 3,058 3.8

5 Contingency 3,094 4.0

Total 78,135 100

27. Based on the development phasing, the phasing for investment has two options as described to follow: Option 1 – One Development Phase Only

The whole site is developed in one phase only. The preliminary investment phasing plan is:

In 2013, the investment will include the cost for land acquisition, design fees, geological survey costs. This is about 233 million RMB (29.7% of the total cost).

In 2014, the investment will include the cost for foundation and structural engineering, as well as mechanical and installation engineering. This is about 342 Million RMB (43.7% of the total cost).

In 2015, the investment will include the cost for the remaining functional modules, mechanical engineering, interior decoration and fittings, water supply and installation projects etc. which is 207 million RMB (26.6% of the total cost).

Investment Plan for Option 1 (10,000 RMB) Item 2013 2014 2015 Total

Cost % Cost % Cost % Cost %

Construction cost

19,500 83.9 26,700 78.2 10,568 51.0 56,768 72.7

Equipment 500 2.1 2,200 6.4 6,100 29.4 8,800 11.3

Municipal facilities

1,750 7.6 2,900 8.5 1,765 8.5 6,415 8.2

Other costs 1,000 4.3 1,350 4.0 708 3.4 3,058 3.8

Contingency 500 2.1 1,000 2.9 1,594 7.7 3,94 4.0

Total 23,250 100 34,150 100 20,735 100 78,135 100

Two Development Phases Investment Plan for Option 2 (10,000 RMB) Item 2013

2014 2015 2013-

2015 subtotal

2018 2019 2020 2018-2020 subtotal

Total

Construction Cost

18,000 11,000 7,938 36,938 3,830 8,500 7,500 19,830 56,768

Equipment 1,350 2,100 2,250 5,700 400 1,100 1,600 3,100 8,800

Municipal facilities

570 1,800 1,800 4,170 500 1,045 700 2,245 6,415

Other Costs 1,000 500 500 2,000 600 258 200 1,058 3,058


Contingency 500 594 1,000 2,094 200 400 400 1,000 3,094

Total 21,420 15,994 13,488 50,902 5,530 11,303 10,400 27,233 78,135

Revenue streams: Revenues are generated from rent or services related to RDCs, multimodal freight platform, transfer-storage warehouses, special line delivery, vehicle car park and maintenance, logistic management building, and other incomes such as hotel. The estimation of goods operation volumes and revenue is after the completion of the logistic center in 2025. Hence, some revenue adjustment factors are applied for revenues in earlier years. Option 1

2016-2019: 45% of annual revenue

2020-2024: 80% of annual revenue

After 2025: 100% 2016-2035 Revenue Estimation (10,000 RMB) - Option1 Year RDC Multimodal

Transfer Transfer Storage

Special Line Delivery

Car park and Maintenance

Logistic Office Buildings

Other Total

2016 1,756 169 314 221 436 6,161 2,009 11,066

2021 3,122 301 558 392 774 6,161 2,009 13,317

2026 3,902 376 697 490 968 6,161 2,009 14,603

2031 3,902 376 697 490 968 6,161 2,009 14,603

2035 3,902 376 697 490 968 6,161 2,009 14,603

2016-2040 Revenue Estimation (10000 RMB) - Option 2 Year RDC Multimodal

Transfer Transfer Storage

Special Line Delivery

Car park and Maintenance

Logistic Office Buildings

Other Total

2016 3,122 301 558 0 387 0 0 4,368

2021 3,122 301 558 392 774 6,161 2,009 13,317

2026 3,902 376 697 490 968 6,161 2,009 14,603

2031 3,902 376 697 490 968 6,161 2,009 14,603

2036 3,902 376 697 490 968 6,161 2,009 14,603

2040 3,902 376 697 490 968 6,161 2,009 14,603

Possible additional revenue: As a public facility it is possible to raise funding or additional capital in a number of alternative ways which would help to subsidize the facility and increase the potential for investment. At this stage, a Government grant by central or provincial government in recognition of the strategic importance of the logistic center of 30 Million RMB is very likely. An application process needs to be followed and the funds are likely to be released in the second year of construction (2014). Financing options: The primary financing for this project is to apply for an IFI loan which has a relatively low interest rate. Additional private financing is from logistic companies or retail companies who require RDCs in Guiyang. The capital investment for this project is as follows:

IFI loan: 350 million RMB

Private financing by logistics companies: 150 million RMB

Capital investment from the developer/owner: 281 million RMB


The project implementation will be undertaken by Guiyang Water and Transport Development & Investment (Group) Ltd., which is a state owned company formed by the City of Guiyang. H. Debt cost (interest on loan) 28. Debt cost refers to interest costs during the project investment. The proposed debt is from an IFI loan of 350 million RMB and private financing of 150 million RMB by logistics companies. Drawdown of Loans by Phasing Option (Million RMB) Year Option 1 – One Phase Option 2– Two Phases

IFI Loan Private financing IFI Loan Private financing

2013 80 20 80 20

2014 130 70 60 70

2015 140 60 60 60

- - - - -

2018 - - 20 -

2019 - - 65 -

2020 - - 65 -

Total 350 150 350 150

29. The repayment of the loans adopts equal repayments. It estimated by year 2030, all the repayment will be paid off. The interest for the IFI loan is 3% over 15 years. For the private financing by logistics companies, the domestic bank loan is at 8% interest rate for 15 years. For Option 1, the repayment starts in 2016. For Option 2, the repayment of the Phase 1 loan starts in 2016, and the repayment for the Phase 2 starts in 2021. I. Infrastructure and equipment depreciation 30. The depreciation cycle of the building (including water supply and drainage infrastructure) is 40 years. The depreciation duration of devices and equipment is 10 years. The residual value is 5%. Devices and equipment will be renewed at the end of the depreciation cycle. The depreciation cost for the building and infrastructure = 428 million*(1-5%)/40= 10.2 Million RMB per annum The depreciation cost for devices and equipment= 88 million*(1-5%)/10= 8.36 Million RMB per annum J. Operation costs 31. Operating costs include salary, maintenance and energy costs. The operation cost will grow in line with the operational volumes of the logistics hub. The operating costs will be reduced in the early years by the same factors applied to the operating revenue. This also accounts for the development phasing of the logistic center. For Option 1:

2016-2019: 45% of full site annual operation cost

2020-2024: 80% of full site annual operation cost

After 2025: 100%


For Option 2, where the site is developed in 2 phases there are lower revenues in Phase 1 because Phase 2 is not built out. Hence, the following cost factors are adopted:

2016-2024: 80% of annual operation cost

After 2025: 100% K. Taxation 32. According to corresponding regulation and rules from the local Chinese tax department, the turnover tax rate is 5% of the total revenue. The construction tax is 1% of total turnover tax and additional education tax is 3%. Income tax on profit is 25% of the total profit. L. Cash flow analysis 33. The cash flow analysis is shown below for Project IRR and NPV as well as: Investment Return and NPV Financial Indicator Option 1

(One Phase) Option 2 (Two Phases)

Project IRR before tax/ after tax 10.2% / 7.5% 8.6% / 6.5%

Project NPV before tax /after tax (Million RMB) 140 / -29 44 / -89

Return on Investment % 9.81% 7.6%

Return on Investment, NPV, (Million RMB) 55 -15 NPV is calculated using a discount rate of 8%

34. The cash flow analysis shows that the Project IRR before tax is modest but achieves positive NPV. The return on investment is much more attractive when the project is developed in one phase. The reason is that at the start of the project all the land needs to be purchased to avoid substantial land value increases in later years. M. Affordability 35. Dulaying Logistics Hub is one of the most important logistic hubs in Guiyang. The project has strong social benefits as a regional generator of economy and the viability of the project should be based on the economic benefits as well as the financial returns. 36. Debt servicing or the capacity to repay a loan is not regarded as a great risk by the project owner. The Guiyang City Government has past experience with both international and domestic borrowing. Any IFI loan would be under-written by the government and similarly any domestic loan would receive land as a guarantee. N. Commercial viability 37. The project commercial viability bases on the revenues from leasing of RDC center and other warehouses and offices. The Investment criteria analysis (IRRs, NPVs) have been derived considering the prevailing lease rental rates, and other revenues. For the private financing options, RDC designs are suitable for private financing and other large companies which require distribution centers could be the investors of one or more RDC centers for them to use in the future.

Pre-Feasibility Study in Guiyang Integrated Transport Hub Project – Dulaying Integrated Logistics Hub

February 2013 Executive Summary


i. EXECUTIVE SUMMARY A. Background of North Passenger hub project 1. Guiyang’s external transport system has become more developed in recent years. Road transport still takes up to 94% of external passenger transport, and much of the external public passenger transport is via long or short distance coach services.

2. Guiyang is a hub for surrounding suburban areas, county town centers and other provincial capitals/cities. Due to the lack of extensive and efficient provincial railway and comparatively low levels of car ownership in the hinterland, the main form of external passenger transport is the coach service.

3. Currently there are 3main coach stations. The dominant Jingyang coach station is in the North West of Guiyang serves 80% passenger demand. The average boarding passengers per day is about 41,600 which can reach up to 59,800 passengers during the National Spring Festival in February, which equates to around 30.6 million passengers per year.

4. According to the municipal planning, Guiyang North Passenger Hub is one of 4 Passenger Hubs of Grade I planned around the Outer Ring Road which encompasses the Guiyang central area. The North Passenger Hub site is located in Wudang district which is 18 km2 of urban land area in the north east of Guiyang. This district aims to become the provincial base of high technology industries based on the construction of national high-technology development zone. The population is planned at 180,000 in 2020

5. Road network to the project site: The planning Shanghai-Kunming High Speed Rail (HSR) will have two stations in Guiyang. One station is at the North Passenger Hub and another station in the central area of Guiyang. The urban rail transit includes the Ring Railway and the urban light railway according to Guiyang Urban Master plan. The main function of the Ring Railway is to strengthen the connection of the main population areas surrounding Guiyang. It also connects to the light railway and strategic road network.

Project identification of north passenger hub: 6. Guiyang City is experiencing rapid growth in development, economic activity, and in turn population growth through urbanization, which has brought to the fore increasing traffic and transportation issues due to the gap between demand and the motorized transport system supply. Even income increases then car ownership or accessibility tends to increase and the use of the private car increases, the most long distance trips outside the city are provided by public transport. Consequently, Guiyang is planning and developing a Ring Rail express around the city, a Light Rail system across the city, as well as High Speed and Express Rail connections to surrounding cities.

7. However, the growth in external rail links and network coverage will only provide partially distribution of towns and cities in the Guiyang hinterland. The coach travel provides a vital means of transport connection to and from Guiyang. Coach travel attains a higher mobility for external trips compared to rail or private vehicles. This trend provides suitable conditions to develop a series of Integrated Passenger Hubs across Guiyang to combine external coach and rail travel with local buses, taxis, light rail and car trips.

B. Integrated Passenger layout design

8. Hubs represent a rapidly evolving and developing concept. In an Inter modal transport system, the different motilities of transport such as public buses, trains, coaches,


taxis, and private vehicles are integrated to enable travelers’ mobility with available shorter time or economical costs.

9. Guiyang North Integrated hub can be developed as a public or private owned and operated transit passenger transfer facility which contains services rail, coach bus, taxis, cyclists and pedestrians. Complementary land uses such as offices, restaurants, commercial premises, coach terminals as well as taxicab facilities can be provided to make the project more viable. Where a majority of residents use public transport and where an effective passenger transfer centers can improve inter-urban mobility and give low-income residents better access to economic opportunities.

10. With any new build project there is an opportunity to include green design and low carbon solutions. By definition, the passenger hub will promote the use of public transport which is perceived as much greener than the car. Along with the modal encouragement of public transport, policies can be applied which encourage low carbon emitting taxis and coaches at the site (encouraged by lower user charges).

11. Green building design includes an array of possibilities: from materials and processes adopted; construction methods and techniques; low carbon energy and water usage; and operational and management techniques. This has been found to increase building investment costs by up to 5%. However, the payback period is 5-15 years due to 10-20% lower energy costs.

Demand forecast 12. The passenger hub will accommodates demand between the rail services and local bus/taxi. There is also a station square to the railway station can provide the capacity for sharing layout and facilities.

Scenario Daily Outbound Passenger Trips by Coach

Annual passenger throughput (million)

2015 – High Speed Rail 11,400 8.3

2020 – Plus Ring Railway 17,600 12.8

2025 – Plus Light Railway 26,775 19.6

Demand Forecast for North Passenger Hub 13. In the longer term, the land area for the North Passenger Hub and Interchange facilities will reach 9.6 ha which is consistent with the existing passenger hub planning which stipulates a land area of 10ha for the North Coach Passenger Hub

Passenger hub 14. The North Passenger Hub will be constructed as an integrated transport hub including HSR, coach, city ring rail, light rail, local bus, car, taxi and slow modes. Two design options have been developed for the hub:

Option 1: Traffic management optimized

Option 2: Transit Oriented Development (TOD) optimized

The Option 2 TOD mode is preferred design since this maximizes property development and is presented.


Design base on Transit Oriented Development (TOD) TOD promotes additional demand for the hub as well as max-missing the financial viability of the project by re-arranging the facility layout. The coach bus station, LRT and ring roads entrance will be located in the north-west land of the Railway Station. The main exit of HSR is to the west.

The second level of the HSR station is for inbound motorized traffic and passengers.

The first level of HSR concourse is mainly for pedestrian interchanges and outbound traffic.

The main exit of HSR concourse is located at the ground level at the west side.

The local bus interchange and taxi pick-up areas are located to the north-west of the railway station concourse.

The station plaza is located directly north of the concourse, which provides a large open space for passengers.

The car parking is planned in the north of the concourse and the plaza.

The logistic and maintenance area are mainly used for vehicle maintenance, refueling and staff offices and is located to the east of the Railway Station.

The combined TOD (commercial and office developments) is located to the west

C. Financial and economic appraisal

15. The capital costs of this project only consider the facilities to the north of the railway station. Costing of the railway station and south plaza are funded separately by local or national Government and are excluded. Similarly, only revenues from the facilities located the north of the railway station are to be considered in the financial analysis.

16. The project capital costs include:

Coach terminal with coach bays for transit operations and passenger amenities

Taxi/car and local bus pick up/drop off

Repair shops for buses and bus parking bays

Adequate parking for public transport and private vehicles

Connectivity between various modes of transport such as by sky walks or


subways

Service roads and access roads within the passenger hub

Circulation areas and landscaping

Property development related to TOD such as commercial/Institutional/office Development

17. The broad financial viability of the Project is assessed with respect to key parameters such as Project Internal Rate of Return (IRR), Project Net Present Value (NPV) and also Return on Investment (RoI). The discount rate considered for the project is 8% which is the current standard opportunity cost of capital for similar projects in China.

Capital Cost

18. The financial analysis includes the identification of revenue and expenditure streams. Revenues are the user fees from coach operators, parking fees, advertisement charges and rental charges from commercial activities. The expenditure is primarily due to Capital and Operational & Maintenance (O&M) costs. The preliminary cost estimates are based on the unit rates in the local market.

Capital Cost Estimate Summary (Million RMB) Options Investment Cost (Million RMB)

Option 1 485

Option 2 550

19. The basic project cost is calculated considering the cost of construction for each component – coach terminal, parking, auxiliary facilities, land development cost, equipment costs and other costs related to land preparation (resettlement, procurement and site leveling) as well as interest during construction.

Project revenues 20. Operational revenues will be generated from the coach station, parking charges, advertisements and property development. The following revenue estimates are derived with reference to the PMO’s existing experience at East Passenger Hub and also other available revenue data for passenger hubs in other comparable Chinese cities.

Year Coach

Fees

Commercial rent

Car

park

Coach

park

Advertisements

Property

Development

Total

Revenue

2015 4,165 600 29 80 160 3,408 8,442

% 49% 7% 0% 1% 2% 40% 100%

2020 6,757 630 61 126 221 3,578 11,373

% 59% 6% 1% 1% 2% 31% 100%

2025 10,750 660 96 176 330 3,749 15,761

% 68% 4% 1% 1% 2% 24% 100%


Coach services related Revenue (10,000 RMB) Year 2015 2020 2025

Daily Outbound Coach Trips 11400 17600 26700

10,000 RMB Per year 4,165 6,757 10,750

21. Taking into account the different sources of revenue, the estimated revenue is 10 RMB per outbound passenger.

Refer to the existing Jinyang station which serves 80% of the city coach demand. The average fare is 73 RMB per outbound trip. The revenue allocated to the coach station is 10% of the outbound ticket price. Therefore, 7.3 RMB can be estimated to the coach station per outbound passenger trip.

1 RMB Station surcharge per ticket sold, for the basic amenities provided to the passenger.

Income is from vehicle inspection fee. All coaches will be inspected when departing from the coach station. The rate is typically 5 RMB per coach. The vehicle inspection fee can only be collected once per coach on a daily basis.

Charges for luggage shipment fee.

Commercial Space Revenue (10,000 RMB) Year 2015 2020 2025

10,000 RMB Per year 600 630 660

22. Within the passenger hub 2,500 m2 of commercial space will be available for leasing, and refer to the current market rate is 200 RMB per m2 per month.

Advertisement income 23. Potential income from advertising charges as large footfall of travelers in the North Passenger Hub. The owner has right to fix fees for advertising and the revenue is forecast by reference to similar facilities

Private Car and Coach Parking 24. The parking fees to be charged for various categories of vehicles and a periodic increase should be fixed. Fees for parking are modest and the revenue is forecast by reference to similar facilities in China

Property Development Revenue (10,000 RMB) Year 2015 2020 2025

10,000 RMB Per year 3408 3,578 3,749

25. A major source of revenue is for property development. This will be in the form of a mix of hotel, office and commercial premises. The current market rate is 40 RMB per sqm per month. Debt Cost (Interest on Loan)

26. Debt cost refers to interest costs during the project investment. Based on the costs of Option 2 with enhanced property development (TOD) The proposed gearing (debt to equity ratio) is 70:30 with loans provided by 2 alternative sources. According to the financing structure, the total loan is 385 Million RMB. The following drawdown of loans is expected:

25% in 2013, 35% in 2014, 40% in 2015


The 70% debt is raised from two sources:

Domestic bank loan: payable over 8-9 years at 8% per annum

IFI bank loan: payable over 19 years at 3% per annum with a 3 year grace period

27. The IFI loan is typically constrained to 50% of the total investment, hence, two alternative financing structures are considered:

Option 1 - 100% of debt is from domestic loan only (70% of capital cost)

Option 2 – 28.5% of debt is from domestic loan and 71.5% of debt from IFI loan (domestic loan = 20% of capital cost, IFI loan = 50% of capital cost)

28. The repayment of loan adopts equal repayments. It is estimated that by year 2030, all the repayments will be paid for the loan and the interest for the IFI loan. For a domestic loan, the repayment is over 8 years from the first drawdown with completion by 2023.

Infrastructure and equipment depreciation 29. The depreciation cycle of the building (including water supply and drainage infrastructure) is 40 years. The depreciation duration of device and equipment is 10 years. The residual value is 5%. Devices and equipment will be renewed at the end of the depreciation cycle.

The depreciation cost for building and infrastructure is as followed:

41331*104*(1-5%)/40= 9.8 Million RMB per annum

The depreciation cost for device and equipment is as followed:

3369*104*(1-5%)/10= 3.2 Million RMB per annum

Operating costs Year 2015 2020 2025

10,000 RMB Per year 2533 3412 4728

30. Operating costs include salary costs, maintenance and energy costs. Operating costs excluding depreciation are estimated as 30% of operating revenue.

Taxation 31. According to corresponding regulation and rules from the local Chinese tax department, the turnover tax rate is 5% of the total revenue. The construction tax is 1% of total turnover tax and additional education tax is 3%. Income tax on profit is 25% of the total profit.

32. The cash flow analysis is shown below for Project IRR and NPV as well as Investment Return and NPV

Financial Indicator Option 1 (domestic loan)

Option 2 (combined domestic and IFI loan)

Project IRR before tax/ after tax 13.4% / 10% 13.4% / 9.8%

Project NPV before tax /after tax (Million RMB) 233 / 78 233 / 70

Return on Investment % 6.9% 12.2$

Return on Investment, NPV, (Million RMB) -30 77


Project resources of financing 33. The project financing is assumed to come from a typical debt: equity ratio of 70:30. The debt can be obtained from two main sources, either an IFI or a domestic bank. The 30% equity financing will be raised by the Implementing Agency form a number of sources including private investors, government funds/grants and/or bonds. 34. For the domestic loan from the local bank, the project owner will be the entity to borrow the money from banks. However, the government will provide the assurances such as public land as a guarantee. For the IFI loan, the NDRC will guarantee the loan. Possible additional resource of funding:

As a public facility it is possible to raise funding or additional capital in a number of alternative ways which would help to subsidize the facility and increase the potential for investment.

Special capital funds can be set aside by central or provincial government in recognition of the strategic importance of the passenger hub

Development of surrounding benefit in property value increase due to the increased accessibility provided by the passenger hub.

Partially shared construction and facilities by integrated with HSR, Light Rail and Ring Rail.

Government grant for the strategic project of the passenger hub of 50 Million RMB is highly likely.

35. Debt servicing or the capacity to repay a loan is not regarded as a great risk by the PMO (Implementing Agency). The Guiyang City Government has past experience with both international and domestic borrowing. Any IFI loan would be under-written by the government and similarly any domestic load would receive land as a guarantee. Guiyang City started utilizing overseas (IFI) loans since 1980s. They have already been 30 foreign loan projects for health care, urban construction, farming, industry, transport, environmental protection and education. There are several loans which come from the Asian Development Bank, World Bank and European investment Bank which amounts to 680 million dollars. Thus the municipality has experience dealing with international development institutions and is familiar with the funding procedures. Project viability 36. The commercial viability for the project is based on the revenues from subleasing of property development area, user charges from coaches, parking charges for private & public vehicles and advertising charges. The viability of this project also depends on the growth in the surrounding developments and the timely provision of supporting infrastructure. The investment criteria analysis (IRRs and NPVs) have been derived considering the prevailing lease rental rates, parking rates and advertising charges in region. 37. In the next stage, this Feasibility Study will estimate the degree of commercial development needed to ensure commercial viability

pre-feasibility study in guiyang integrated transport … study in guiyang integrated transport hub...

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