Merrill Lynch invests US$40m in Sichuan

Merrill Lynch invests US$40m in Sichuan
Published: 17 October 2008

Merrill Lynch & Co, one of the former Wall Street’s top five investment banks, recently invested about US$40m into Sichuan Zhiquan Special Cement, a cement manufacturer in Sichuan, which was badly damaged by the earthquake on May 12, according to the Sichuan Provincial Department of Commerce.

The move aims to enhance the cement production there. Under the in-between agreement, the investment will be used to upgrade Zhiquan Special Cement’s manufacturing technology, enlarge its production capacity, and enable its unfinished 3,000tpd cement production line in Baihua and Shiyang to be finished. Both of them ceased construction because of the shake.

In addition, Suchuan Zhiquan Group, the parent of Zhiquan Special Cement, is scheduled to go public overseas in 2010. Merrill Lynch’s abundant experience in overseas capital operation is expected to back up the coming overseas listing of Zhiquan Group.

Zhiquan Special Cement is the biggest private cement manufacturer in west Sichuan. The cooperation with such a local industry leader there will let Merrill Lynch effectively avoid the stiff competition against other investors.

Zhiquan Special Cement is projected to produce 2Mt of cement in 2008 and 10Mt in 2010. The newly- added output will be used to construct hydropower stations, reconstruct the badly-damaged area, and meet the increasing demand in Chengdu, capital of Sichuan.

Pursuant to a report by the China Cement Association, Sichuan needs 98.9Mt of cement in 2008, 101.93Mt in 2009, and 90.86Mt in 2010. The demand in those cities that were hit by the quake will amount to 70.75Mt, 73Mt, and 59.58Mt over the next three years, respectively. Sichuan’s current production capacity will not meet the demand in the coming two years, with a lack of more than 40Mt.