Description:

The proposed project concerns the construction and operation of a 48,000 m3/d (16.32 million tonne/year) wastewater treatment system, combined with an alkali recovery system (treating 200,000 tonne pulp annually, and producing 45,900 tonne alkali annually), and a 6 MW captive power plant utilizing waste heat (WHR) from the alkali recovery process, all in a centralized industrial paper mill park.

The important approvals are granted, agreements are in place and studies such as the FSR and EIA are issued and approved. Construction will commence once financing is secured and the expected commissioning date follows 12 months after.

The waste water treatment design has been prepared by “Tsinghua Tongfang Water Engineering Company”, affiliated with the prestigious Tsinghua University technology department.

This project has an expected equity IRR of 25% (calculated over the total equity, after tax). In addition, the project brings social and environmental advantages of a comprehensive centralized waste recovery and treatment project, including the utilization of waste heat for energy generation.

The project developer is seeking investors to invest 77 million RMB in this 288 million RMB project (investment in a newly formed SPV).

Timing:

The construction will start once financing has been secured. After a 12 months construction period, the plant is expected to be operational for 14 years.

• Year 1: 12 month construction period
• Year 2 – 15: Operational period

Key Financial Parameters:

Proposed Financial Structure:

The following proposed financial structure is subject to further negotiation:

• 65% Chinese Bank debt (12 years, 7.2% annual interest)
• 5% Non-convertible debt provided by investor (10 years, 8% annual interest rate)
• 12.35% Subordinated convertible debt provided by investor (10 years, 8% annual interest rate)
• 17.65% Equity, of which 51% held by the project developer and 49% held by the investor

The proposed financial structure includes the option to enhance the return by converting the subordinated convertible debt to equity.

The financing structure may be subject to requirements from the Chinese government, depending on the legal status of the investor.

More details and a tailored investment proposal can be discussed.

Project Proflie

• Location: Shangri-la county, YunNan province
• Investors: local government, private investors
• Investment: 197 million RMB
• Project Content: reservoir construction, water services, land acquisition, migration, etc.
• Cooperation Model: sole proprietorship, JV, etc
• Project State: investigation and research, will be started operation around Oct. 2009

This is one of the biggest water service funds in China at present.

This fund was established in March 2009, owned by Chinese government and some international investors, focus on China water service market, especially in China main cities and west of China.

Now, they are looking for interesting investment opportunities and open to negotiate with some potential partners.