Fiona Chan, Straits Times 29 Mar 08;
SEMBCORP Industries has entered into a joint venture to set up and run an industrial water recycling facility in China's Jiangsu province.
The $22.4 million plant will be located in the free trade zone of Zhangjiagang city, SembCorp said in a statement.
The conglomerate yesterday signed a joint venture agreement with Zhangbao Industries, an investment arm of the Zhangjiagang city government.
SembCorp will own 80 per cent of the joint venture company, Zhangjiagang Free Trade Zone SembCorp Water Recycling Co. Zhangbao Industries will hold the rest.
The joint venture company will construct an industrial water-recycling facility to treat 40,000 cubic m of waste water a day. It will have exclusive rights to supply recycled water and demineralised water to industries in the free trade zone.
As the zone expands, the plant is also expected to grow, SembCorp said.
This facility will be the conglomerate's third water management project in Zhangjiagang.
Its first project was a plant capable of treating 20,000 cubic m of waste water a day. It serves industrial customers in the free trade zone and surrounding industrial parks.
SembCorp is also building its second project, a facility to treat 15,000 cubic m of high concentration industrial waste water.
This project, and the new 40,000 cubic m facility, have been selected by the governments of China and Singapore to showcase Singapore's expertise in water management.
SembCorp, Singapore's largest water company, manages about four million cubic m of water a day worldwide.
Rush to tap China's clean-water market
Straits Times 29 Mar 08;
Foreign investors lead push into potentially lucrative treatment sector
SHANGHAI - WELL aware of its shoddy environmental image, China has opened the door to foreign firms eager for a piece of the fast-growing US$14.2 billion (S$20 billion) water treatment market.
China, which has made cleaner water a major policy goal, is one of Asia's most promising investment destinations for water treatment, drawing in the likes of the French Veolia Environment company and Suez Environment.
Local rivals such as China Water Industry Group and Guangdong Investment have also sprung up.
The government's stance on water has given China an edge over regional rival India in wooing foreign funds.
'India has decided to invest in the water sector mostly through public money, but China has decided to allow private companies, including foreign investors, to participate in water supply and sewage products,' UBS analyst Christopher Wong wrote in a research note.
But problems abound.
Fierce competition for projects means margins may be squeezed.
Opaque rules and a government price freeze on public utilities, including water, are also red flags.
'One challenge is frequent regulatory changes in the acquisition of land, in the usage of land, the end-right use of a particular piece of land,' said Mr Sam Ong, chief financial officer of Singapore-listed water treatment firm Hyflux.
More than half the water in China - the fourth-largest economy in the world - is unfit to drink. Last year, about 48 million Chinese lacked sufficient drinking water.
China, which boasts a fifth of the world's population, has only 7 per cent of global water resources, says Fusion Consulting.
Its per-capita water resources are a mere fifth of the world average. More than 70 per cent of China's rivers and lakes are polluted, says Macquarie Research.
'China is experiencing one of its most severe water shortages. We believe this is one of the key issues that will determine China's future in the next 20 years,' Macquarie analyst Leah Jiang wrote in a recent note.
Since the 1990s, Beijing has been slowly prising open the water industry from the grips of state-owned enterprises. It plans to invest US$130 billion in water and waste water treatment (from 2006 to 2010).
Foreign firms hope this will translate into healthy growth prospects and are keen to get a foothold.
Suez Environment, for example, will invest 100 million euros (S$218 million) annually in sewage treatment and water projects in China over the next five years.
Sino French Water Development, a venture between Hong Kong's NWS Holdings Ltd and Suez, aims to boost daily output from its Changshu plant near Shanghai by more than 40 per cent to 850,000 cu m by 2010. It plans a sludge treatment centre to match that capacity.
'The return of our company is long term. We have a profitable business with revenues that experience double-digit growth every year,' said Mr Steve Clark, executive director of Suez's China subsidiary and Sino French Water Development.
Singapore's Hyflux expects its China revenues to jump 30 per cent this year, said CFO Ong.
Investors are optimistic, boosting shares in China Water Affairs Group Ltd by 61 per cent and China Water Industry Group Ltd by 43 per cent last year.
Rising water prices in China - in many cities they have doubled in the past four years - are a main reason foreign companies are counting on significant future returns.
But Beijing is wary of stoking already-high inflation. In January, the State Council set an immediate price freeze on all public utilities, including water.
'We think this is a key risk to private investment in the water industry as the tariff remains a politically sensitive area for most local governments,' says Macquarie.
REUTERS
