Vivendi and Ondeo claim Chinese deals

• From: Vol 3, Issue 6 (June 2002)
• Category: General
• Region: Asia
• Country: China
• Related Companies: Ondeo, Thames Water and Veolia Environnement (formerly Vivendi Environnement)

Vivendi Water has booked a major 50-year contract in China to manage drinking water distribution in the Pudong business quarter of Shanghai. Not to be outdone, the group’s main rival, Ondeo, has signed two new contracts in Qingdao and Shanghai for a total value of €460 million.

The Pudong contract is significant as it authorises a Western company to provide services directly to end-users, both industrial, commercial and domestic. The contract covers drinking water production, management of the distribution network and customer services. The Pudong business zone has a population of just under two million in a city of 16.7 million.

Under the terms of the contract, Vivendi Water will buy a 50% stake in a new joint venture company, Shanghai Pudong Vivendi Water Corporation. Vivendi’s investment will be around €266 million. The company would not say how it intended to finance the acquisition although it is thought funds will be raised on a corporate rather than a project basis. Financial close is expected around the first quarter of 2003.

The contract is expected to generate a turnover in excess of €10 billion due to the expected substantial growth of Pudong in the coming years. The business district is forecast to be home to five million people in the long term. The service area covered by the contract includes commercial buildings and residential complexes, as well as the new Shanghai international airport, and numerous business parks.

The city built the Pudong business zone, constructed four WTPs and established a supply network before launching an international tender for a company to manage the operation. Vivendi Water will have to modernise some features of the network and manage its expansion. At the start of operations, the contract will supply potable water to 550,000 customers with an average daily consumption of 1.2Mm³.

The management of water services in the remaining areas of Shanghai, including the treatment of wastewater and sewage collection, remains in the hands of the municipal authorities.

Vivendi was selected from a shortlist of three. The other two bidding groups were Ondeo and Thames Water.

Two contracts for Ondeo
Meanwhile, Ondeo, the water subsidiary of the Suez group, is to manage water services in the coastal town of Qingdao over 25 years and operate two WTPs with an aggregate daily capacity of 540,000m³. The town will be the venue for water sports at the 2008 Olympic Games.

Ondeo will supply a population of 2.3 million – bringing the French company’s Chinese client base to around 12 million. Total investment will be €33 million which is expected to generate €430 million in sales over the contract period.

A joint venture company is being set up on a 50/50 basis between Sino- French Water Development, the joint subsidiary of Ondeo and the New World Group of Hong Kong, and the Qingdao Tap Water Corporation.

Ondeo has also signed a contract to rebuild two WTPs in Shanghai via its engineering subsidiary Ondeo Degrémont. The plants – at Nanshi and Yangshupu – are around 100 years old and have a combined
production capacity of 860,000m³/d. This deal is worth €27.6 million, of which €22.3 million is being financed through a Sino-French protocol.

The two plants will use a combination of rapid settling, pre- and post-ozonation, and activated carbon filtration to meet the city’s drinking water quality requirements.