ADB signs off 13-bank China loan

China’s Hong Kong Exchange-listed Beijing Enterprises Water Group Limited signed today an ADB B-loan backed by 13 other banks.

The Asian Development Bank (ADB) has signed an agreement in partnership with 13 banks to support Beijing Enterprises Water Group Company Limited (BEWG) to promote high standard wastewater treatment and reuse in the People’s Republic of China (PRC).

The $288 million B-loan agreement, signed today, is the largest such loan arranged by ADB.

The B-loan is part of ADB’s financing package to the project, which includes an ADB-financed loan of $120 million signed last November, and up-scaled to $408 million. Through the B-loan structure, ADB acts as the lender of record for commercial banks, allowing them to share ADB’s preferred creditor status in case of sovereign default.

“As to pure project-specific credit risk (such as payment default by the borrower), the participating banks will shoulder the commercial risk”, explained Hisaka Kimura, ADB head of private sector infrastructure finance, East Asia unit.

Under the project, BEWG will upgrade and operate wastewater treatment plants across the country to meet grade 1A standard, the most stringent wastewater treatment standard in the PRC. The treated wastewater can then be reused for both industry and urban environment needs, including machine cooling, boiler operation, and cleaning at construction sites.

The 13 banks are: Australia and New Zealand Banking Group; the Bank of Tokyo-Mitsubishi UFJ; BPI Capital Corporation; Industrial and Commercial Bank of China (Asia); Rabobank International; OCBC Wing Hang Bank; Kookmin Bank; Aozora Asia Pacific Finance; State Bank of India; Chang Hwa Commercial Bank; KEB Asia Finance; Shinhan Asia; Taiwan Cooperative Bank; and ADB as the lender of record.

Kimura confirmed that the ADB was open to support both international and local project sponsors in environmental infrastructure developments.

“Our selection criteria is technical expertise. For example, we selected Beijing Enterprises Water Group for wastewater treatment and reuse because of their innovative technologies and also unique business model. As to co-finance, we are also willing to work with both international and local investors/financiers to perpetuate our mission,” said Kimura.

The PRC’s increasing demand for water highlights its scarcity. Per capita freshwater resources are low and annual per capita water endowments have been declining alarmingly. Pollution exacerbates water scarcity, especially in upstream areas where it can degrade sanitation in local communities which depend on local sources for water supply, the statement announced.