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SATS Expands to Qingdao Liuting International Airport

Analysis

SATS and China Aviation Qingdao Liuting Airport (CAQLA) today signed an agreement to form an equity joint venture company in the People's Republic of China (PRC), to be called "Qingdao Airport Cargo Service Co., Ltd." (the JVC), to provide cargo handling services (including express courier, freight and mail handling) to domestic and international airlines at Qingdao Liuting International Airport (QLIA), the main commercial airport of Shandong Province in the PRC.



The initial term of the joint venture (Term) shall be 30 years, commencing on the date of issuance of the Business Licence of the JVC. CAQLA and SATS will initially hold stakes of 51% and 49% respectively in the JVC, to be adjusted should a third shareholder be subsequently admitted to the JVC.

CAQLA's proportionate capital contribution will be via transfer to the JVC of the land use rights in the existing cargo terminal at the airport currently operated by them, together with the land on which it is located and land for the future expansion of cargo terminal facilities, as well as cargo handling equipment and systems and other movable assets that the JVC will utilise for its business. SATS' proportionate capital contribution will be in cash.

The JVC's total initial registered capital will be RMB 78.48M (approximately SGD15.85M), subject to adjustment if necessary after valuation by an independent evaluation firm jointly appointed by the parties and confirmation by the Chinese authorities, of the value of CAQLA's non-cash contribution.

"This joint venture marks another significant move for SATS towards boosting its investments overseas and establishing itself as a leading airport ground handling player in the Asia-Pacific region. We are delighted to work with CAQLA, QLIA and the Qingdao Municipal People's Government in this joint venture, and look forward to playing our part to support the strong cargo business growth at the Airport," said Mr Ng Chin Hwee, President & CEO of SATS.

"Through our partnership with SATS, we aim to provide a world-class facility that will position Qingdao as a premier air cargo hub and encourage further trade in the Shandong region," said Mr Hu Shao Jun, Vice Mayor, Qingdao Municipal People's Government.

The JVC will take over the operations of the existing cargo terminal (with a handling capacity of 94,000 tonnes per annum) as well as construct and operate a new international cargo terminal with an initial annual handling capacity of 60,000 tonnes, resulting in a total handling capacity of 154,000 tonnes per annum.

The parties intend, at a later stage to be agreed between them, to extend the services provided by the JVC to include apron and technical ramp handling services, including aircraft interior cleaning, at the airport. The joint venture has no material financial impact on SATS in terms of earnings per share or net tangible assets per share.

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