Veolia’s big bid for Haikou Water

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The French company has agreed to pay a gobsmacking price for the utility serving the capital of Hainan Island.

Veolia has won the auction for a 50% interest in Haikou Water Group, with an ambitious bid which has both pleased and concerned the Haikou municipal authorities. At RMB950 million ($123.2 million), Veolia’s bid for the utility which serves Hainan Island’s capital is equal to 306% of the minimum bid price of RMB310 million ($40.2 million) – and was more than double the bid of its closest competitor, Suez-backed Sino-French, which offered RMB 440 million ($50.9 million).

Other bids were received from Beijing Capital, which offered RMB410 million ($53.2 million) and Hong Kong and China Gas Company Limited (Towngas), at RMB550 million ($71.3 million).

Haikou is the provincial capital of Hainan Island in the south of the country. Sino-French has a concession to run water services in Sanya, the major tourist resort on the south coast of the island. It is said to be one of the most valuable concessions Sino-French has secured over the past five years. Haikou is less picturesque than Sanya, but more economically developed.

Veolia’s bid for Haikou continues the trend for asset price inflation in Chinese water deals. In March, Veolia took an interest in the Lanzhou Water Group at a premium of 280% over the asset value (see GWI March 2007 p35).

See: Has Veolia Water overstepped the mark in China?