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China's Heathrow stake

LONDON, UK: The China Investment Corporation (CIC), the country's sovereign wealth fund, is to buy a 10 percent stake in London's Heathrow airport for £450 million.

 

The move follows an announcement in August that Qatar Holding is to acquire a 20 percent share for £900 million in FGP Topco, the holding company that owns Heathrow Airport holdings, formerly known as the BAA. European Commission approval is expected by the end of the year.

 

Air ChinaThe CIC purchase from Spanish infrastructure group Ferrovial is via its Stable Investment Corporation subsidiary. Stable will join the board of FGP Topco together with Britannia Airport Partners LP, GIC and Alinda.

 

Once completed, the two deals will reduce Ferrovial's investment in Heathrow Airport Holdings to 33.65 percent.

 

Íñigo Meirás, CEO of Ferrovial said: "This sale is a further part of Ferrovial's investment diversification strategy. Following this deal, we reiterate our role in Heathrow Airport Holdings as the industrial partner. As previously stated, we will continue to work with the new shareholders and with existing shareholders to ensure that Heathrow Airport Holdings retains its position as one of the best infrastructure assets in the world."

 

A consortium including Ferrovial acquired the BAA in June 2006. In addition to Heathrow, other assets include London Stansted, Glasgow, Aberdeen and Southampton airports. In August this year, the BAA announced it would sell Stansted following a lengthy legal battle.

 

China's investment in Heathrow coincides with the release of a critical report on Britain's economic policy by former Conservative party deputy prime minister, Michael Heseltine.

 

Commenting on Heathrow, Heseltine says a solution to its capacity problem should be found and made public by next year.

 

The UK's coalition government earlier agreed to no third runway at Heathrow. A new study is not due to make recommendations until after the next general election in 2015.

 

Heseltine says the private sector should not have to wait three years before a decision is made.

 

Acknowledging that the politics surrounding Heathrow are "uncomfortable", he suggests the government will lose credibility with any delay adding: "It seems to me better to face the dilemma sooner rather than later, with the benefits to business confidence that would follow".

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