Wednesday September 9, 02:10 PM

China's CIC eyes infrastructure, green energy

By George Chen, Asia Private Equity Correspondent

HONG KONG (Reuters) - China Investment Corp (CIC) is seeking minority stakes in infrastructure, green and new energy projects, a senior CIC executive said, as the $200 billion sovereign wealth fund is keen to diversify its investments.

CIC, which made huge paper losses on its ill-timed 2007 equity investments in U.S. financial firms Morgan Stanley and Blackstone, has this year sought to change its strategy and diversify its investments.

"We're interested in high-level of safety and high-yield infrastructure projects," Zhou Yuan, CIC's head of special investments, told Reuters on the sidelines of an industry conference in Hong Kong.

The price gap between buyers and sellers is narrowing for infrastructure assets, but the assets are still not cheaply priced, said Zhou, a former China head of investment bank UBS AG. Zhou joined CIC in early 2009.

Zhou's department oversees direct investments abroad for the fund. He declined to say how much CIC is willing to spend on infrastructure deals.

"Throughout the financial crisis, we have been observing the changes in equity price in terms of infrastructure," Zhou told a group of delegates from Asian governments and financial institutions at the Infrastructure Investment World Asia forum.

INDIA, MONGOLIA AND PAKISTAN

CIC's fund is part of China's roughly $2 trillion of foreign exchange reserves. Beijing is increasingly keen to seek higher investment returns and rely less on purely buying U.S. government bonds.

The fund has started to shift focus to areas including natural resources and real estate business. Recently, it bought a 17.2 percent equity stake in Canada's Teck Resources.

CIC also plans to invest up to $2 billion in U.S. mortgages as it eyes a property market rebound, Reuters reported last month.

Zhou noted infrastructure opportunities in China's neighbouring countries including India, Mongolia and Pakistan "look very interesting" though he declined to elaborate.

CIC is also looking for deals in green energy and new technology to help improve efficiency of transmission of electricity, Zhou said at the forum.

Trillions of dollars are expected to be poured into infrastructure projects globally in the next decade but the world should not have high hopes only on sovereign wealth funds to finance these projects, Zhou said.

"There are some misconceptions that investment institutions such as CIC will be a big part of it but I think CIC will be a very small player for infrastructure," he said.

(Additional reporting by Joseph Chaney)

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