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S&P Global: Northern Metropolis May Cost HKD360B Over Next 5-6 Yrs; GREs Expected to Take on More Debt and Leverage
Hong Kong's traditionally conservative government-related entities (GREs) may be stepping into a new era, S&P Global said in its report. The agency expected the scale and n...
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S&P Global: Northern Metropolis May Cost HKD360B Over Next 5-6 Yrs; GREs Expected to Take on More Debt and Leverage
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Hong Kong's traditionally conservative government-related entities (GREs) may be stepping into a new era, S&P Global said in its report. The agency expected the scale and number of GREs to elevate, alongside higher debt and leverage. The catalyst for this shift is the Northern Metropolis technology hub.

The Northern Metropolis will be the largest investment project in Hong Kong's history, with potential costs reaching HKD360 billion or more over the next five to six years, the report said. Of this, S&P Global estimated that about HKD140 billion will be funded by GREs, which may tap the capital markets through debt and equity financing to meet their funding needs.

Ricky Tsang, Credit Analyst at S&P Global Ratings, said the financing approach for the Northern Metropolis is unprecedented for Hong Kong. In the past, major infrastructure projects were primarily funded by the government's ample fiscal reserves. The new approach could also pave the way for private investment, which can become a credit multiplier.

Hong Kong is stepping up efforts to integrate into the technology value chain of the Greater Bay Area. Through this project bordering Shenzhen, Hong Kong aims to unlock new housing supply, employment opportunities and economic drivers.

The agency said GREs will take the lead in many key projects, with their spending and debt levels set to rise. These GREs will also act as credit multipliers by raising project-related debt and equity in the capital markets. They may also introduce private partners.

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