Da Chang Water Treatment Plant

Cancelled

In 1995, Shanghai Bovis Lend Lease Thames Da Chang Waterworks Co. Ltd. signed an agreement with the Shanghai Municipal Water Company to build, operate, and transfer (BOT) a water treatment plant serving the Da Chang district of Shanghai. The plant was designed to filter water from the Yangtze River and sell it to the fast growing Da Chang district, home to some two million people in 1996. The BOT contract gave the JV the right to operate the plant for 20.5 years. Shanghai Bovis Lend Lease Thames Da Chang Waterworks Co. Ltd. was wholly owned by Bovis Lend Lease (50%) and RWE Thames Water (50%), both of the UK. The Da Chang contract was the first BOT awarded to a joint venture wholly owned by foreign entities in China. The total project cost was US$73 million. US$53.5 million of the cost was funded by debt and the remaining amount was supplied by equity. Financial closure was achieved on April 25, 1996. The debt components were arranged by BZW, Credit Lyonnais, Standard Chartered and Sumitomo Bank. Both tranches had a 10 year term and were priced at LIBOR + 190bp. The amount of tranche 1 and tranche 2 was US$51 million and US$2.5 million, respectively. Devaluation and interest rate risks were mitigated through a swap structure arranged by Citic. The government of Shanghai provided a letter of support for the project. Most importantly, the Chinese government guaranteed a fixed annual investment return of 15%. Bovis was responsible for the construction of the plant. Work on the facility started in April 1996 and was finished in October 1998. The treatment plant was built in two phases. Phase one allowed some 200,000 cubic meters of water to be treated each day. Phase two expanded treatment capacity to 400,000 cubic meters of water/day. After construction was complete the plant was managed by Thames Water. Shanghai Urban Construction Investment and Development General Corporation supported the off-take. The Chinese government decided to terminate the guaranteed return on investments for all foreign investors in 2002. On July 6, 2004, Thames Water signed an agreement to sell its entire stake in the Da Chang Water Treatment Plant to the state-owned Shanghai Waterworks Shibei Co. following the payment of an approximate US$30 million settlement from the Shanghai Water Resource Management Company. The full US$73 million had been invested in the project at the time of the cancellation. The Shanghai Municipal Waterworks North Company took over management of the plant on July 26, 2004. The plant was originally meant to be operated by Thames Water until 2018. According to the Global Water Report (Aug. 10 2004 edition) the full $73 million had been invested in the project at the time of the cancellation. None