Shanghai Pudong Water

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In August of 2002, Vivendi Environnement (known as Veolia Environnement as of May 2003) was awarded a 50-year concession contract for the provision of water services to residential and commercial customers in Pudong, Shanghai's financial district. The project included responsibility for the treatment, distribution and sale of potable water, and for the maintenance of service facilities. The project had distribution rights for a 1,700 km network that was to initially supply water to 550,000 customers with an average daily consumption of 1.2 million cubic metres. The total population living in the Pudong district at the time was 1.9 million people, but this number was expected to rise to 5 million people. The service area covered by the contract included many commercial buildings and residential complexes, as well as the new international airport of Shanghai, and numerous business parks located in the Pudong area. To implement the contract, the Shanghai Pudong Water Corporation was created as the project company which was owned by Compagnie Générale des Eaux of France, a subsidiary of Vivendi Environnement (50%) and the state-owned Shanghai Pudong Tap Water Co Ltd. (50%). Vivendi paid Euro 266 million (US$246 million) for its share in the joint venture. Other bidders for the project were Ondeo (SUEZ) and Thames Water. The 50-year contract was expected to generate a turnover of over 10 billion euros during the term due to the expected substantial growth of Pudong in the coming years. The joint venture was to invest US$30 million a year to expand the distribution networks over the first few years of the contract. In 2004, MIGA issued a guarantee of US$70 million to Compagnie Générale des Eaux for its equity investment in Shanghai Pudong–Veolia Water Corporation, Ltd. of China. The guarantee was for a period of 15 years and provided coverage against the risk of expropriation. For information on bidders see Project Finance International, Issue 234, p. 24. February 6, 2002. None