The International Finance Corporation (IFC), the World Bank’s private investment arm, is considering a deep dive into China’s water space.
Its exposure would come from investments in three companies operating in the sector, namely Beijing Enterprise Water Group (BEWG), Kangda International Environmental (Kangda) and CT Environmental Group (CTEG), according to IFC’s latest filings.
IFC will invest up to $51 million in BEWG, a state-owned water company with 326 plants and capacity of exceeding 20 million ton per day, to develop eight wastewater treatment projects and four water treatment units. The total project cost should reach about $318 million, with the remainder to be financed by commercial banks and other development financial institutions.
IFC will also invest up to $100 million in Kangda, a privately-owned waste water treatment company from Chongqing, to help it upgrade and expand the existing portfolio. The $200 million project will also see it rationalise its capital structure with long-term financing.
About $37 million, out of the $58-million total project cost, for CTEG, a centralised waste water and industrial water treatment supplier, will be financed via IFC’s own account. The investment is expected to support CTEG on developing three new industrial waste water treatment facilities in Guangdong province of China.
These investment plans are pending board approval.
In an interview with Infrastructure Investor, Dimitris Tsitsiragos, IFC’s vice president, said China’s enormous demand for utility infrastructure provides ample private investment opportunities.
“Taking the country’s rapid urbanisation and economic growth into consideration, we see there is a pressure on infrastructure development, in either new project development or integration of existing facilities. This is where challenges and opportunities are presented,” said Tsitsiragos.
“We work with domestic enterprises and industry players by providing long-term financing and global knowledge sharing. At the same time, we are encouraging international investors, such as sovereign wealth funds and pension funds, to establish partnerships in co-investments and long-term financing.”
According to Tsitsiragos, IFC has committed approximately $416 million to water companies in China over the past 10 years, including both debt and equity in Hong Kong-listed China Everbright Water and private company United Water Corporation.
He added that the long-anticipated Water 10 Action Plan, which imposes specific requirements for water environment quality improvement, is a positive regulatory signal for companies with river restoration capabilities like BEWG.
“We believe it presents real market opportunities in the water space. With more stringent standards, stronger players like BEWG will play a bigger role in the sector. There are also new areas such as underground networks that […] could present opportunities in the future.”