Safe Water For China Is What This Company Is After
At a sewage treatment plant on the outskirts of Shanghai, trucks unload 200 tons of pretreated domestic sludge each day, or 10% of the metropolis' total. There, it's dehydrated and deodorized for disposal, with the water captured for reuse. The plant came onstream last year as China's first domestic challenger to foreign competitors that might charge 50% more. An expansion under construction should add 300 tons to daily capacity. The plant's director, Shen Gengen, doesn't hide his pride: "Our technology is unrivaled in the country. You can take a shower with water coming out of our plant." You can't even if you wanted to, though, as the water is sold for industrial use to generate more income. "China's [environmental] regulatory standards are rising," says Zhang Chunlin, founder and chairman of the plant's owner and designer SafBon Water Service, headquartered nearby. "It's fueling the sector's growth and has brought us myriad opportunities." Zhang coined the name SafBon from "safe" and "bon"--"Two of the best words from human languages," as the fluent English speaker puts it. The company's revenue surged 52% last year to $151 million, earning a debut on Forbes' Best Under A Billion list, with household sewage accounting for 22% of the total. Water-supply services make up most of the rest. The 54-year-old holds 42% of SafBon's $900 million market capitalization. China works to catch up China didn't pursue urban water supply on a massive scale until around 1990. The late start in facilities and technology has led to a clear disparity with Western countries in water quality, says Zhang, while water availability is an issue in most of the nation's parched north. Tightening environmental regulation is spurring domestic companies to bridge the tech gap, and Zhang is doing it with selective foreign acquisitions.
Last year SafBon spent $38 million to buy Austria's 67-year-old KWI, a global leader in liquid-solid separating technology, and this year grabbed a treatment arm of Korean infrastructure group Doosan. With Chinese desalination needs being another expanding part of its business (20% at present), SafBon this February took a chunk of seawater specialist AquaSwiss. These moves have helped to make Zhang's outfit China's corporate leader in desalination technology, says Guo Shaojun of GEP Research, a Beijing environmental consulting firm. China's water treatment market saw a 13% rise to $31 billion last year and should keep that pace through 2020. But the overall sector is highly fragmented, with the biggest private player, Beijing OriginWater Technology, having only a 4% share last year. SafBon ranked 12th in the sector. Xiong Zhiqiang of market researcher Forward Industries Institute in Shenzhen says growth of conventional wastewater treatment is plateauing and desalination will continue to expand in China. An even bigger segment is the so-called Sponge City, an infrastructure initiative to better utilize precipitation and counter the risk of flooding or drought. China aims to implement it in 20% of urban areas by the end of its latest five-year plan in 2020 -- with nearly $150 billion in contracts during the period -- and 80% by 2030. SafBon has two Sponge City projects -- out of the country's 30 pilots so far -- and is in talks for more. The one in Liupanshui, Guizhou, into which SafBon has pumped $235 million under public-private partnership, or PPP, will be fully onstream by year-end. Already last year, Sponge City work accounted for half of SafBon's overall revenue. Cautious about the PPP model, Zhang has kept it to 57% of SafBon's total contracts. "Many companies are keen on PPP because of its big size. It shows up good on paper and suggests fast growth to investors, but [if over 70%] it could easily cause cash flow problems due to a longer payment cycle," he avers. |
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