Deqing Huanzhong Producing Water Company

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In July of 2002, a consortium formed by Singapore-based Darco Water Technologies Ltd. and the Taiwanese company Globe Environmental Co. won a 25-year contract to build and operate a potable water treatment plant in Deqing County, Zhejiang Province. Once completed, the plant was to supply 60,000 cubic meters of potable water a day to be used for domestic purposes and manufacturing industries in the province. To implement the contract, Deqing Huanzhong Producing Water Company (DHPWC) was created as the project company. Darco's wholly owned unit, Darco Environmental Pte. Ltd., acquired a 75% stake in Globe Environmental's Hong Kong unit, Globe Environmental (HK) Pte. Ltd., which in turn took a 70% stake in the Hong Kong-incorporated DHPWC. State-owned Zhejiang Deqing Province Water Co. was to hold the joint venture's remaining 30% stake and provide the necessary land, pipeline and water resources. The total cost of plant was estimated at S$79 million (US$7.95 million). In June 2002, part of the project financing was achieved when Darco raised S$6.8 million through a 27 million share offer, S$3 million of which was allocated for the initial site work for the plant. In December of 2003, the project reached financial closure when Darco received approval for a US$7.1 million MIGA guarantee following a year long wait. The guarantee was for a period of 15 years and provided coverage against the risks of transfer restriction, expropriation, war and civil disturbance. Beginning in 2004, the project experienced delays after Darco’s partner, Zhejiang Deqing Province Water Co, said Darco failed to contribute its share of the capital within the prescribed period. Darco said it had staggered its payment according to the construction phases of the water-treatment plant. Darco sought to pull out of the contract in August of 2005 and applied with MIGA to recover most of its investment in the project. However, in September 2005 Darco said it had agreed on a settlement deal brokered by MIGA, which required Darco to complete the project six months after its partner secured all the necessary permits. Construction was then expected to be completed by early 2006. None None