Annual Report 2019

198 CHINA MERCHANTS PORT HOLDINGS COMPANY LIMITED Notes to the Consolidated Financial Statements For the year ended 31 December 2019 23. INTERESTS IN JOINT VENTURES 2019 2018 HK$’million HK$’million Share of net assets of unlisted joint ventures 9,648 11,908 Goodwill — 51 9,648 11,959 Deemed disposal of a joint venture engaged in port operation in Zhanjiang, the PRC and reclassification to interest in an associate in 2019 During the year ended 31 December 2019, 1,853,518,190 shares of Zhanjiang Port (Group) Co., Ltd. (“ZJG”) were issued to a fellow subsidiary and another party independent to the Group. Following the subscription of new shares by the subscribers, the Group’s interest in ZJG has been diluted from 40.29% to 27.58%, resulting in a gain on deemed disposal of HK$440 million. Under the new shareholders’ agreement, decisions of relevant activities of ZJG do not require unanimous consent from all of its shareholders, including the Group. Hence, the Group no longer recognised its investment in ZJG as interest in a joint venture. The investment in ZJG is accounted for as an interest in an associate as the directors consider the Group has significant influence over the investee. Acquisitions of joint ventures engaged in port operation in Australia in 2018 On 6 February 2018, the Company entered into an acquisition agreement with CMU and its wholly-owned subsidiary, Gold Newcastle Property Holding Pty Limited (“Gold Newcastle”), pursuant to which CMU and Gold Newcastle agreed to sell and the Group agreed to purchase 50% of the total equity interests in the Port of Newcastle (as defined below). As part of the transaction, CMU also agreed to sell and the Group also agreed to purchase the entire interest in Gold Newcastle. Upon completion, Gold Newcastle becomes a wholly-owned subsidiary of the Company. The total consideration for these acquisitions, including the interest-bearing shareholder’s loan from CMU to the Port of Newcastle with a principal amount of Australian dollar (“AUD”) 162.5 million, was AUD607.5 million, subject to certain adjustments as set forth in the relevant agreement. The port of Newcastle comprises various entities and trusts that, through lease and sublease, being granted with all the rights and interests, for a term of approximately 98 years from 30 May 2014 in relation to the largest port on the east coast of Australia (the “Port of Newcastle”). Gold Newcastle is an entity established in Australia by CMU for the sole purpose of holding certain assets comprising the Port of Newcastle. The other 50% interest in Port of Newcastle is held by an independent third party. The transaction was completed during the year ended 31 December 2018 for a final consideration of AUD605 million (equivalent to approximately HK$3,488 million) and the Group’s investment in Port of Newcastle is accounted for as interests in joint ventures as the directors of the Company consider the Group has joint control with the relevant joint venture partner over the investees. Particulars of the Group’s principal joint ventures at 31 December 2019 are set out in note 46.