Changle County Water Project

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In July of 2003, Salcon, through its wholly owned subsidiary Salcon Water, was awarded a 50-year concession contract for a water supply project in Changle county, Weifang city, Shandong province. The contract covered all aspects of potable water supply including construction, operation and maintenance as well as downstream activities in the form of billings and collection. The project was to provide potable water to a total population of about 600,000 people, of which 100,000 were living in urban centres consisting of 15 townships and an Economic Development Zone. To implement the contract, Shangdong Changle Salcon Water Supply Company (SCSW) was created as the project company in which Salcon took a 75% stake while the local state-owned Changle County General Water Supply Company (CCGWSC) held the remainder. In December of 2005, Salcon Water acquired the remaining 25% registered capital of SCSW for a total cash purchase consideration of RMB 3.89 million, raising its stake in the project to 100%. SCSW was to take over the existing 20,000 cubic meters per day capacity water treatment plant as well as build a new 20,000 cubic meters per day capacity water treatment plant. A total capacity of 40,000 cubic meters per day was expected by 2007. Financial close was achieved in December of 2003 when Salcon finalized its RMB 5.5 million equity injection into the project company. The project began on January 1, 2004. None None