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China Financial and Economic News | BEWG Aims to Keep Water Clean for Next Generation2016/02/04

In a sewage treatment plant in Shandong Province, after sewage treatment process, the reporter witnessed the magic process of sewage changing from muddy and pungent to become clear and tasteless after rotation, bubbling and precipitation in the pool.

This is just one of the many sewage treatment projects carried out by Beijing Enterprises Water Group Limited (“BEWG”) using loan from Asian Development Bank (“ADB”).
It is reported that in 2013 and 2014, BEWG received US$ 120 million Class A loan and US$ 288 million Class B loan from ADB, a total of US$ 408 million, the highest loan limit from ADB. So far, the funds have supported the investment, construction, upgrading and operation of 69 BOT and TOT projects nationwide. The treatment capacity of newly increased sewage, reclaimed water and tap water is about 2.2 million tons/day.

Getting loans from ADB timely for earlier state investment 

Water is known as the source of life, and the source of the city. In the process of rapid urbanization in China, water resource has become one of the challenges we face --- the per capita freshwater resources are insufficient, and the annual per capita water resource is declining at an alarming rate.

Statistics show that more than 400 cities in China are lacking of water with the average daily water shortage of 16 million cubic meters, equivalent to annual average water consumption of nearly 16 million people. At the same time, a large amount of water pollution further reduces the total amount of available fresh water. According to the Ministry of Environmental Protection, fresh water quality of about 28% of China’s top 10 water systems does not meet the drinking water requirements.

Obviously, improving the quality of wastewater treatment is one of the ways to effectively respond to current water challenges. Through the appropriate technical treatment, the sewage can meet specific needs for equipment cooling, cleaning and boiler operation and other industrial areas, and also can be used for urban landscape, flushing toilets, road washing and other municipal sanitation purposes. In this way, higher quality fresh water can be saved for drinking and so on, thereby promoting sustainable water use.

In recent years, Chinese government has attached great importance to sewage treatment, and promoted the development of the water industry chain. At the beginning of 2015, the Ministry of Finance, the National Development and Reform Commission (NDRC), the Ministry of Housing and Urban-Rural Development jointly issued the Administrative Measures for the Collection and Use of Sewage Treatment Fees (hereinafter referred to as the “Measures”), which provides that the sewage treatment fees shall be fully handed over to local treasury as the government non-tax revenue. A fixed sum for a fixed purpose is implemented, namely, sewage treatment fees handed over to treasury and local financial subsidies shall be used to pay service charge to enterprises providing urban drainage and sewage treatment services through the government’s purchasing service.

However, although with the government subsidies, for a sewage treatment plant, the sewage treatment is only low-profit. In general, the direct cost of one-ton sewage treatment includes raw material and electricity costs of about 50-60 cents plus financial and management costs, the cost rise to 80-90 cents, and the ex-factory price one-ton water will not exceed 1.00 yuan.

For the water industry with heavy assets, large pre-investment and little return, the costs must be lowered when the recycled water ex-factory prices are fixed for healthy development of enterprises. It requires water companies to invest capital for technological transformation of energy-saving, energy-saving equipment technological transformation and energy efficiency management of water works.

Therefore, looking for low-cost funds becomes a routine for water companies. Obviously, in the critical period of BEWG’s sustained growth, ADB’s preferential loans contributed to the development of BEWG.

Loans value enterprise more than the project 

ADB has conducted a long period of investigation on BEWG at the beginning of loan approval but not the BEWG’s projects.

According to Yu Liguo, Vice President of BEWG, before ADB granted an initial loan to BEWG, an expert group carried out inspection for a period of 9 months, and completed due diligence on BEWG and financial indicators, production and operations, technical level, environmental achievements and the social security system of its investment projects.

Such a strict pre-loan inspection for the industry leader BEWG has never occurred before. “This long-period inspection is very necessary, which made ADB and BEWG establish a very good trust relationship. ADB not only temporarily raised the credit lines for BEWG, but also gave BEWG great preference in terms of length of maturity and the loan interest rate compared with market policy of the same period, and it is almost impossible for an enterprise to get a loan from other commercial banks with a large amount of limit, long maturity and low cost”, Yu Liguo said.

The data show that of ADB’s US$ 408 million loan for BEWG, the term of Class A US$ 120 million loan is 10 years and term of Class B US$ 288 million loan is 7 years.

According to Wang Yihong, investment official of ADB’s China-based office who is responsible for the project, the US$ 288 million loan provided by ADB to BEWG is the largest amount of such loan granted by ADB. The loan is co-financed by 13 international commercial banks, and ADB is the lender of record.

“The main difference between ADB loans and other commercial bank loans is that commercial banks generally provide loans to projects, and ADB provides loans to enterprises. The companies can decide on which projects they are investing, ADB gives full trust to corporate professional competence and social responsibility”, Yu Liguo said.

In this regard, Wang Yihong said that if ADB provides financing to BEWG sub-projects one by one, ADB and international banks will face problems such as small project size and low financing efficiency. Through careful due diligence, selecting the industry’s high-quality enterprises and prescribing a limit to loan-support projects allow enterprises use funds more flexibly, thereby enhancing the fund efficiency. For example, the projects should be in the second- and third-tier cities and subordinated regions, because the sewage treatment capacity of domestic first-tier cities has been greatly improved, the gaps of sewage treatment are mainly in the second- and third-tier cities, and then the sewage treatment project will be extended to the township and village Level; the treated effluent must meet the Grade A standard, which is the highest requirement for water quality in the sewage treatment; the loan-support enterprises are required to establish the environmental and social responsibility management system, and the ADB’s post-loan management will audit relevant environmental and social responsibility reports submitted by enterprises annually to ensure that they are implemented as required.

In addition, in the process of granting loans to BEWG, ADB also provided value-added services, namely, technical assistance. Wang Yihong introduced that in the sewage treatment, the cost of electricity accounted for more than half of the direct costs of sewage treatment. The introduction of energy conservation measures will make the cost of wastewater reuse more competitive. ADB helps BEWG improve the economic efficiency of wastewater reclamation and reuse through energy audits, energy management systems, and knowledge sharing of energy conservation solutions and policy suggestion.

For example, from 2013 to 1015, BEWG invested 11.50 million yuan to conduct technological transformation on 171 inefficient pumps for energy conservation, saving electric charge of 11.68 million yuan annually. The combined efficiency of water pumps after technical transformation under actual working conditions increased from 50% to 70% or more. The energy-saving effect is significant, and payback period is 12 months in average.

“ADB granting loan to BEWG is actually a recognition of us, which is nothing else but publishing a soft ad for BEWG, accelerating the internationalization of BEWG,” said Yu Liguo.

Reclaimed water creates a beautiful country

With a pool of fallen lotus, a man is fishing in the reclaimed water. The classical beauty of Chinese style appears in Xiajin County, Jinan City, Shandong Province. The clear water is flowing along the terrain like waterfall. In winter, the white mist spreads all over, rectangular stone-paved road winds farther, and yellow dry reed is floating in the air.

In the face of such beautiful scenery, it is difficult to imagine that it was a saline-alkali land, abandoned for many years. We can’t help feeling that people living in the countryside and working here can have such a beautiful view.

“There is a lot of water and fishes here,” said Wang Zilong, a villager of Dongguan Village over fifty years of age. Wang Zilong is a cotton grower, although his home is several kilometers away from this place, he still likes fishing here when he is not busy. Even when it is deep winter, he still drives to this place from time to time. He caught four fishes in the morning.

Jiulongkou constructed wetland has become a place where local people like to take a walk and go fishing since it was built in November 2013. But what they do not know is that the water for the wetland is from 40,000 tons of reclaimed water treated by Xiajin Hongtai Jiacheng Water Co., Ltd. attached to BEWG.

According to Han Qun, the head of the company, it is one of the important projects of “governance, use, protection” water pollution control system in Xiajin County, featured with functions of ecological regulation, improving water quality, water conservation and sightseeing. The sewage after the company’s deep purification treatment can reach the national Grade A standard water quality. Before the construction of wetlands, the water is directly discharged into Liuwu River, and then into the Haihe River Basin, and ultimately into the South-to-North Water Diversion Basin. Now the water quality is further improved through the biological purification of reclaimed water in the wetland to ensure the water quality safety of Haihe River Basin and even the South-to-North Water Diversion Basin.

All-win situation for urban development, enterprises and citizens

In a car wash of Jinan, a wash worker Xue Yingbo is always very busy during the working hours as the foreman, because the car wash price is very low here, only 10 yuan, attracting a lot of customers.

Xue Yingbo said that the secrecy of low price is the use of the reclaimed water. The price of one-ton reclaimed water is only 1.5 yuan, while the price of one-ton tap water is 5.7 yuan. One ton water can wash more than 10 vehicles, calculated based on washing at least 80 cars per day, the car wash can save water rate of 12,000 yuan or more per year.

Cao Xiaofeng is an employee of Jinan Shengxin Garden Engineering Co., Ltd. The original office address was in the suburb of Jinan, and now it moved to the Caihonghu Park honored as a new image of Quancheng. This is because his company signed an agreement with local government. According to the agreement, Shengxin Garden builds this piece of wasteland into a park, which is open to the public free of charge.

According to Cao Xiaofeng, Caihonghu Park is the most important lake landscape and its water source is from the reclaimed water of a sewage treatment plant. The park is very popular, attracting more than 90,000 visitors each year. Because the water quality here is very good, it even attracts some ducks settling down. Inspired by this, the garden management company feeds a lot of geese on the hillside on the opposite bank of the lake for viewing.

You will see workers standing on a sprinkler, holding a water pipe, sprinkling water into the air and cleaning the streets every day on the street corners. The water is also from the reclaimed water of the sewage treatment plant.

Technically speaking, 70% of the sewage can be reused after treatment. Effective use of reclaimed water can achieve a win-win situation for urban development, enterprises and citizens. However, the utilization rate of reclaimed water in China is still very low, probably less than 10%. China’s sewage treatment and water recycling still have huge potential.

Wang Lina, administrative assistant of BEWG Jinan water plant, feels at home every time when she passes by a sprinkler, the Caihonghu Park, or the car wash. Growing from a layman of water industry to a “veteran”, Wang Lina also has her understanding about sewage treatment. She said that the water will also go through life and death, changing from the sewage into clean water is the rebirth of water.

As a well-known poem saying, “From fountainheads water streaks out thin and quiet. Soft and Sunny are trees reflected in the pond. A slim lotus leaf, not yet unfurled, scarcely appears. When on its pointed tip a dragonfly is alighted.” Water is closely related to every one of us. Keep water clean for the next generation is the responsibility of each of us. It is hoped that a hundred years later, when our descendants recite this poem, they may have the same good feelings because of a pure water world.