Caijing Magazine | Beijing Enterprises Water Group Limited Opening up New Perspectives by Virtue of Financing 2014-11-21
Foreword: recently, there is good news in the water affairs market, that is, Beijing Enterprises Water Group Limited (BEWG) obtains RMB 1.7 billion yuan loan from the Asian Development Bank (the ADB) again. In the current PPP boom, BEWG, with over 10 years of mature experience, is igniting the hotspot of PPP pattern in the water environmental protection by virtue of financing.
On October 9, BEWG entered into a class-B loan agreement with the Asian Development Bank (the ADB) in an amount of US 288 million dollar (RMB 1.766 billion yuan) with duration of 7 years. Together with the class-A loan of US 120 million dollar signed by the two parties last year, BEWG obtained US 408 million dollar of class-A/B loan from the ADB within two years, which set the highest record of the loan size from the ADB. And insiders thought this was a milestone in the water affairs field. Besides, it embodies BEWG’s reputation and strength and more importantly, leads a new trend of the PPP pattern.
Creating the most financed amount with its strength
“The projects with financing support we chose have strong demonstration effect and can truly satisfy the demand of people to improve their living standard,” Hisaka Kimura, director of the Infrastructure Financing Eastern Asian Region of ADB Private Sector, placed high hopes on the cooperation, “I’m glad that we are cooperating with BEWG, cause it is a far-sighted enterprise and able to be aimed to the future and provide innovative and urgent solutions to the sewage reuse in Asia.”
At the beginning of 2013, both parties reached a preliminary agreement on the financing cooperation. According to the original plan, the ADB would provide BEWG with a loan of US 240 million dollar. But after strict rating, the ADB increased the amount of the syndicated loan to US 408 million dollar and its interest rate was discounted, compared with the market level of the same period. It is learnt that, the underlying reason for the above amount increasing was that, the ADB highly recognized BEWG’s business patterns and its operation and management abilities after it built a team of experts and spent 9 months to comprehensively investigated BEWG’s financial indicators, production and operation and technical level and its invested projects.
“As the largest developmental financial institution in the Asian-Pacific region, the ADB provided the unprecedented loan size in the water affairs companies to BEWG, which was so well received for BEWG,” said Zhou Min, CEO of BEWG. In insiders’ view, another highlight of this financing cooperation was that it would help to promote huge changes in the PPP pattern. The past pattern of banks directly providing finance to governments and the governments leading construction of public service projects is unable to meet new requirements of development of times and direct investment and financing to enterprises are becoming a innovative way in the PPP pattern in the municipal construction field.
Zhou Min thought, this cooperation, that is, introducing the international supportive fund via an enterprise to support the domestic infrastructure construction and environment improvement, was another classic case of the social capital and government cooperation and also created a prerequisite for further deepening and exploration of the PPP pattern in the water affairs field, therefore, had the benchmarking and demonstrating value.
BEWG’s achievements in PPP
The PPP pattern is a kind of long-term cooperative relation between governments and private sectors in the public goods and service field of the infrastructure and can improve quality and efficiency of the public goods and service via introduction of the market competition and the incentive and restraint mechanism. The water affairs field is one of the fields first applying the PPP pattern among other public service fields and BEWG is a successful practitioner in this field.
For ten years since obtaining the first TOT sewage treatment franchise in 2002, BEWG have invested, constructed and operated over 300 projects in 24 provinces, cities and autonomous regions in China and other countries and regions including Malaysia, Singapore and Portugal and many projects became models of successful operation of the PPP pattern, such as Jinzhou sewage treatment project in Liaoning, Guiyang urban water supply project, Guigang water supply and sewage integration project in Guangxi and the South-to-North Water Diversion Project in Zaozhuang, Shandong. After more than 10 years of mature operation and experience accumulation in the PPP pattern, BEWG has greater superiority in aspects of finance, management, technology and brand.
From Hisaka Kimura, the public at large now can enjoy the more reliable, safer and higher quality infrastructural service, “improving people’s living quality via PPP is what we are expecting from providing of funds to support the PPP development.”
In addition, introduction of the PPP pattern and participation of private sectors can bring about industrial change. Several insiders pointed out, from the deep-seated sense, PPP is not only a financing tool, but also a new management mode. As BEWG’s financing partner, a manager of the PPP project in the ADB once expressed in public, “what we provide for the PPP projects is not just a loan. More importantly, it will bring the international ideas and experience of PPP to China. ”
As for enterprises that link the capital platform and local governments up and undertake and implement the tasks, how to draw on advantages and avoid disadvantages and make the most of the PPP pattern is of great importance. BEWG belongs to a model of this aspect. The PPP pattern involves multiple stakeholders, and therefore, how to coordinate the benefit distribution is the core of such projects and the concern shared by the insiders. But BEWG has explored a successful mode, achieved the gain sharing and established a effective safeguard mechanism after years of practical experience.
On the experience and achievement sides, BEWG takes the opportunity of the PPP pattern to develop itself and meantime allow the public enjoy higher-quality service, solve local governments’ difficulties in investment of the infrastructure and realize a perfect situation of multi-party benefit.
PPP new situation’s driving force
At the moment, the PPP pattern is in is heyday and relevant legislation is quickened. In the recently-concluded APEC Finance Ministers Meeting, the topic of the infrastructure financing almost played a leading role and its core of the topic was to initiate the PPP pattern under the public-private partnership. In the background of promotion by the central government, passion from local governments, attention from the capital market and improvement of policy systems, BEWG will soar and accomplish great things in the water affairs market by virtue of such situations.
Mr. Hisaka Kimura stressed that, in the past 16 years, the ADB has been always supporting the PPP development in the key infrastructure industries in China, “among many fields with potentials to develop the PPP, we choose those projects which are able to challenge the existing ideas, change the current situations of the industries and provide innovative solutions.” BEWG is preferred by the ADB depending on these advantages. It is learnt that BEWG and the ADB both have intentions to future their cooperation in the future environment project and infrastructure construction.
In the macro background of the existing market, the water environmental protection business is valued and highly anticipated. The Chinese PPP market is getting increasingly mature, open and smart. In addition to assistance of the capital market, BEWG will obtain the unique advance change in the future deep cooperation with local governments.
“This offers a wider space and rare opportunities in the PPP project cooperation between local governments and BEWG. We expect that before long, we’ll commence to carry out a batch of better PPP projects and present higher-quality public service products, to benefit the public and contribute more to the Chinese water environmental protection business,” Zhou Min said.
Some expert insiders showed that, large water affairs enterprises like BEWG, strongly rooted in China and steadily expanding the overseas markets, are advantageous and their whole-industry-chain strategies will highlight their competitive advantage in the water affairs market. And now, the financial support from the ADB adds strength to BEWG to help to show its capabilitiest. BEWG will lead the Chinese water environmental protection industry to step into new phase.
