PRC Firm to Get Up to $146.6 Million for Songhua River Basin Improvements

News Release | 15 June 2010

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is providing equity and loans of up to $146.6 million to a company planning to improve water supply and wastewater treatment facilities in the polluted Songhua River Basin in the northern part of the People's Republic of China (PRC).

Tongfang (Harbin) Water Engineering (TWE), an affiliate of publicly listed environmental technology firm, Tsinghua Tongfang Co. Ltd. (TTC), is looking to build, rehabilitate, and privatize water supply and treatment plants in the basin, which is home to 62 million people.

Massive rural-urban migration in the PRC over the past 30 years - the largest and most rapid in history - has put immense strain on public services in towns and cities. The discharge of untreated wastewater into rivers has caused widespread contamination, resulting in a growing shortage of safe drinking water. The Songhua River Basin, the third largest river basin in the PRC, is one of the country's most polluted.

The PRC government is targeting a clean-up of the basin. A Songhua River Basin Water Pollution Prevention and Control Master Plan has been drawn up, supported since 2005 by ADB through technical assistance and loans totaling around $400 million.

"Treating more wastewater and improving the supply of potable water will reduce pollution in the urban environment around the Songhua River Basin, and improve the health and quality of life for millions of residents," said Philip Erquiaga, Director General of ADB's Private Sector Operations Department.

TWE has earmarked capital spending of CNY3.5 billion ($512.6 million) from 2009 to 2011 - partly financed by ADB - to treat an additional 2 million tons of wastewater a day. Private investors and local commercial banks are expected to provide the remainder of the funding needs.

"The cost of developing water infrastructure is huge and this project shows how the public and private sector can work in partnership," said Paul Heytens, ADB's Country Director for the PRC. "Private sector participation in services usually provided by municipalities or the central government can enhance efficiency and lead to the use of newer technologies."

ADB's equity investment will be $10 million, or 15% of the paid-up capital of TWE, whichever is lower. The main A loan of CNY250 million ($36.6 million) carries a 10-year term, with a two-year grace period. A B loan of up to $100 million, involving international commercial banks, will also be extended, with terms to be decided later.