Media update, page-1898

Quotes from the latest GWI magazine:

The opportunity in rural areas
In 2016, the wastewater treatment rate in rural areas of China was only 22%, far below the urban wastewater treatment level of 93%. In the 13th FYP, the Chinese government plans to complete comprehensive wastewater treatment for 130,000 villages and to invest RMB46.23 billion ($7.32 billion) in agricultural and rural pollution control.

The dispersed distribution of rural residents lends itself to a decentralised approach to wastewater treatment processes, driving the uptake of pre-fabricated, containerised and modular solutions. There is a trend for MBRs to be adopted in this area, but competition is emerging from other technologies such as the membrane aerated biofilm reactor (MABR) supplied by international players such as Fluence Corporation. “The technical threshold of containerised MBR system is not very high,” a source from water engineering firm Tritech told GWI. “Most of the market participants are not competing on technologies or cost, but more on their business relationship with local governments and state-owned developers.”

A PPP-based financing model is encouraged in the 13th FYP for comprehensive environment treatment projects in rural areas. This works in Origin Water’s favour since it has the China Development Bank (CDB) as its third biggest shareholder and has a design institute and engineering company as its wholly owned subsidiaries, giving it the power to secure PPP projects in-house by taking sole responsibility for financing, design and construction. “Rural wastewater treatment is a huge market with fierce competition,” observed Liu.

Alignment with the trends of the PPP project model is of critical importance. Jiangxi JDL Environmental Protection (JDL), another integrated MBR specialist known for its patented facultative-anaerobic-adapted MBR technology, is now developing an ability to take on PPP projects through cooperation with SOEs. This system eliminates any sludge discharge by recycling it as a carbon source supply to increase the organic loading. “JDL is mainly engaged in rural decentralised wastewater treatment. Its business model has matured over the last two years by developing a close relationship with SOEs to participate in the PPP market,” the GreenTech technical engineer told GWI. After shifting from the role of equipment provider for government procurement to PPP project developer, the company’s revenue reached RMB213 million ($34 million) with yearon-year growth of nearly 100% according to JDL’s first semi-annual report in 2017.

In order to compensate for the lack of experienced technical operators in rural areas, the containerised MBR systems usually include remote monitoring and control. The Compact Wastewater Treatment System is an integrated containerised MBR system designed by Origin Water specifically for underground wastewater treatment in rural and remote areas. Beside the traditional anoxic and aerobic membrane units, Origin Water also installs a remote control device for intelligent management. “We usually arrange one technical staff for a certain project, who is responsible for managing and operating our devices in several rural WWTPs through apps,” Liu said.


My thoughts:
Some very interesting read from the latest GWI magazine, I agree that China is a very different market and definitely not easy for a foreign company to gain some traction initially, just like what it said in the magazine: most of the Chinese market participants are not competing on technologies or cost, but more on their business relationship with local governments and state-owned developers. However this may applies to traditional municipal/industrial wastewater treatment industry, but the rural sector will prove to be one of the most interesting given very low existing coverage rates and extreme cost sensitives, plus higher interest rates/higher funding cost, I tend to believe those factors will ultimately facilitate the adoption rate of MABR technology in Chinese rural area. From the recent Fluence investor show, it is great to see that the management team are aware of the importance on building close government relationships in China, they are not only working with local governments level through local partners but also trying to engage with the ministry-level government contacts. Things does not happen overnight, but they are heading into the right direction.

Another point I would like to make is the higher oil price would also benefit water industry. Oil prices have an outsized impact on certain water markets. There are two reasons for this. The first is that much of the world’s oil is found in hot, dry places, and infrastructure spending in those regions is usually dependent on oil surpluses. The second is that upstream and downstream are the biggest industrial markets for water technology, and higher prices means more investment. I remembered Henry has said in the recent conference call that they have lots of interests from North Africa, I would really hope to see those interests would convert into contracts in the near future.