The Asian Development Bank (ADB) has clubbed with 18 commercial banks to provide $200 million in financing to China Water Affairs Group (CWA), a Chinese water utility.
The group of lenders include Australia and New Zealand Banking Group (ANZ), State Bank of India, Commonwealth Bank of Australia, Industrial and Commercial Bank of China, Korea Development Bank, CTBC Bank, Tokyo Star Bank, BDO Unibank, Kookmin Bank, Bank of East Asia, China CITIC Bank International, KEB Hana Bank, Banca Monte dei Paschi di Siena S.p.A, Chang Hwa Commercial Bank, Mega International Commercial Bank, NEC Capital Solutions, First Commercial Bank and Woori Bank.
The $200 million B-loan is part of a $300 million financing package to CWA. It comes on top of an ADB direct loan of $100 million signed in May 2014.
Under the B-loan structure, ADB is the lender of record while ANZ acts as the lead manager for the funds provided by commercial banks.
CWA intends to use the proceeds to build, acquire and rehabilitate water treatment and distribution hubs in second- and third-tier cities in the country. It also aims to integrate rural areas to the network by supply water to surrounding regions.
According to Chuanliang Duan, CWA’s chairman, the group has been engaging in various public-private partnership (PPP) projects for more than a decade. It is now seeking to unearth opportunities from the industry reforms proposed by the Chinese government, he said, adding that CWA was also in search of potential targets for acquisitions.
Hisaka Kimura, head of East Asia at ADB’s private sector operations department, stressed that the water sector has been ADB’s focus not only in China but also in the Asia Pacific region. ADB hopes to introduce a more efficient way to secure private sector participation to “a system of infrastructure projects” rather than to ad-hoc PPP schemes.
“The partnership with 18 banks will multiply ADB’s development impacts in the sector,” Kimura added. “Around 740,000 households will benefit from the project.”
John Corrin, ANZ’s global head of loan syndications, said that “the loan offering was 3.7 times over-subscribed, indicating the investors’ confidence in the project.” He hinted that there was “a similar strong interest in the gas distribution sector in China.”
One banker involved in the deal told Infrastructure Investor that commercial lenders had been attracted by the investment tenor of seven years and the comfort of being an investor alongside ADB.
Hong Kong-listed CWA has interests in urban water supply and distribution, water treatment, sewage system and related waterworks. Its operations span more than 50 cities in China.