I did not write this myself nor did I attend the conference. The report comes from " Singapore REITs All About Singapore REITs + Other Trusts." I cannot vouch for its contents. However, what they are saying does make sense to me. Might I suggest that one stops by their site and tell them you find their sharing of their experiences interesting. My hope is that by reposting things such as this, I can create a win-win situation for all concerned. If you find this site interesting, please help me by helping the people whose work I share with you in any way you can.
Here's a summary of the key points, all of which I agree with. As stated, it's the details I cannot vouch for.
1. The demand for water, water systems and sensible water policies in China is great and will only continue to grow and is in the midst of flux.
2. Investment policies in China need to be looked at and examined carefully.
3. Although I had not heard that the Chinese were entering the desalination market, it only makes sense that they would do so. A billion people seeking opportunity tends to create a lot of activity in a lot of areas.
http://sreit.blogspot.com/2008/05/hwt-cs.html
HWT - CS
China Water Congress 2008 – key takeaways and implications for Singapore water companies
● We attended the second China Water Congress in Beijing last week (15-16 May). Below are key takeaways and comments from the conference. Overall, we reaffirmed our bullish view of the water demand outlook, driven by government-backed initiatives. We reiterate our OUTPERFORM ratings on HWT, AENV, and EPUR, and our NEUTRAL rating on HYF.
● Presentations by the Chinese ministries reiterated the government's focus on addressing water difficulties. Whilst there are clear opportunities, it appears to us that the existing framework is still at its infancy whilst reforms are underway.
● While the IRR is in the 8-12% range, key investment criteria in determining risk-reward also include location, size, type, etc. Owing to prior success, PPP is a preferred investment option as evident in the active participation amongst the Sing water plays.
● Whilst considerable improvement in desalination technology and on membrane has been made, China has bigger ambitions to be on par with world's standards. Also, it targets raising its capacity to 0.8-1 mn tons/day by 2010 from today's 0.2 mn tons/day.
We re-affirmed our bullish view on China's water demand
We attended the second China Water Congress in Beijing last week (15-16 May). Below are key takeaways and our comments from the conference. Overall, we re-affirmed our bullish view of the water demand outlook, driven by government-backed initiatives. To re-cap, the Chinese government in the 11th Five-Year Plan (2006-10) has allocated a total of RMB1 tn to address water issues, such as supply, waste-water treatment, water reuse, sewage, and environmental protection. Among the Singapore water companies, most have significant exposure to the China water and waste-water market. We continue to believe companies with good track records in China and differentiated capabilities are well-positioned to capitalise on the strong growth potential. We reiterate our OUTPERFORM ratings on Hyflux Water Trust, Asia Environment, and Epure, and our NEUTRAL rating on Hyflux. We remain OVERWEIGHT the sector.
Water reform developments/updates
The first theme of the conference focused on the severity of water difficulties in China and water industry reforms there. The presentation made by the Ministry of Water Resources reaffirmed our positive view of the robust water outlook in China. Whilst there are clear opportunities for investment in China driven by scarcity, climate change, industrialisation, and reforms, the existing industry framework is still in its infancy, with best practices to be explored further and
leveraged across companies and countries. In addition to the mainstream areas/sectors, there were market-driven proposals on opportunities in smaller cities and in various technologies.
Investing in and financing water projects
The second theme was managing investing and financing risks, from the viewpoint of both water companies and financiers. While the internal rate of return with foreign participation is in the 8-12% range, key investment criteria in determining risk-reward also include asset location, portfolio size and type, and governmental involvement, among others. Owing to the success of public-private partnerships in China's energy and transport sectors using the greenfield (BOT)model, this model is generally accepted in the water sector as well. This is evident amongst the Singapore water companies, many of which have moved to participate in BOT (and brownfield - TOT) water and waste-water projects.
Forging ahead with desalination
The third theme was seawater desalination (SWD). With the government's support in developing desalination capacity and technologies, China has made considerable advances, especially in technology, since the late 1950s/early 1960s. Through the years, there seems to be an increasing emphasis on membrane-based SWD (~60% of installed capacity). Whilst playing catch-up, China aims to strengthen its technological competitiveness to be on par with world standards and to raise its installed capacity to 0.8-1 mn tons per day by 2010 from today's established capacity of about 0.2 mn tons per day. At present, there are approximately 19 desalination plants planned or under construction, including Hyflux's 100,000 cu m/day desalination plant in Tianjin Dagang (valued at S$154 mn), which is scheduled for completion in 2009.
Posted by KK at 10:32 AM
Labels: HWT
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