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IFC and RRJ invest in Chinese wastewater treatment business

The International Finance Corporation and Hong Kong-based buyout firm RRJ Capital have agreed to buy 120 million new shares issued by China Everbright Water.

The International Finance Corporation (IFC) has agreed to invest $35 million in China Everbright Water, one of China’s emerging wastewater treatment companies, alongside a subsidiary of Asian private equity firm RRJ Capital (RRJ).

The agreement will see Everbright Water issue around 120 million new ordinary shares to IFC and Dalvey Asset Holding, a portfolio company of RRJ’s Master Fund II, through a private placement. The proceeds will be used to support the company's expansion.

“The introduction of IFC and RRJ, two internationally well-known investment institutions, as the strategic investors, not only optimises the shareholding structure of Everbright Water, but also strengthens and advances our future development,” Chen Xiaoping, chief executive of Everbright, said in a statement.

“We are committed to the best environmental, social, and corporate governance practices and would like to be a model of sustainable growth for other water companies in China.”

Economic growth, a large population and rapid urbanisation are putting pressure on China's water resources: the country's water supply-demand gap will reach about 200 billion tons a year by 2030, according to a recent IFC study.

Water pollution, largely caused by industrial use, domestic sewerage and farming, is also a concern. In 2012, more than half the groundwater in nearly 200 cities was graded “bad” or “extremely bad,” according to government statistics.

“A robust water sector is crucial to China’s sustainable urbanisation, providing access to critical services and helping reduce pollution,” said Simon Andrews, IFC’s country manager for China, Korea, and Mongolia. “We are keen to provide tailor-made financing and knowledge to industry leaders such as Everbright Water so they can make the sector more competitive and efficient.”

With this investment, Everbright Water is expected to extend its service to one million new residential customers and treat additional 1,800 million tons of wastewater per year by 2018, through increasing its capacity in wastewater treatment, water re-use, and sewage treatment businesses.

The Singapore-listed company was formed last year through the merger of China Everbright International and HanKore Environment Tech Group, two Chinese wastewater treatment businesses. It currently owns 32 wastewater treatment plants, four reusable water projects, two wastewater resources heat pump projects, two completed built and transfer projects, a 56-kilometre pipeline network and 10 pump stations across China.