Hi everyone, two near-term opportunities for Kaitian in Yiyang...

Hi everyone, two near-term opportunities for Kaitian in Yiyang have come to light. Some notes below:

Behind our recent LOI with Kaitian Aerospace to establish an assembly plant in Yiyang (min.capacity 40,000 m3 /day through to the end of 2021), is a pressing need for environmental rectification and protection works in Hunan Province. Of particular significance is the grim condition of Dongting Lake. Dongting Lake is China’s second largest freshwater body. Issues with the lake are well documented (see links for example articles):

https://news.sina.com.cn/c/2019-05-05/doc-ihvhiqax6715675.shtml

http://www.greenhunan.org.cn/index.php?v=show&cid=58&id=371

The graphic below shows the catchment basins and major rivers south of the lake. You can see Yiyang City (site of our assembly hub in the Yiyang Hi-tech Zone) on the arm of the Zi River:

A particular challenge in Hunan Province is sewage discharge into the watershed from Yiyang City and the 6 counties or districts that it administers. As an example70,000 tons of minimally treated sewage is discharged into Dongting Lake from Yiyang City alone each day. 60,000 tonsof sewage also overflows every day into the surrounding environment from the incomplete Yiyang City network.

Despite political and regulatory tailwinds progress has been slow. In 2018 Hunan Provincial Government requested that the renovation of 30 sewage treatment plants in Dongting Lake District but only three were actually commissioned by year’s end. The construction of domestic sewage treatment facilities in the townships of the lake area also lagged behind, with nearly 250 towns still directly discharging untreated sewage into the area.

I’vefound confirmation that one of our projects with Kaitian will be built in Taojiang County (Taojiang County is under the administration of Yiyang City. It is one of the 6 counties/districts that are administered by Yiyang City (see table below):

TheMABR treatment plant is to be commissioned in Taohuajiang Town.

http://plan.dowater.com/info/26242.asp

https://www.bidcenter.com.cn/news-77875930-1.html

I believe (and, this is only my opinion) that this is one of three trial plants that are being commissioned (two using other technologies have already been built) inYiyang as a test of technologies and engineering companies to see which provides the best product/value proposition to meet the as yet unfulfilled requirements of the government. Reading between the lines, from articles out of Hunan, this proposition would revolve around consistency of water treatment quality to the highest classification, remote monitoring, and the ability to execute commissioning with expediency.

Besides the Taohuajing MABR tender above, a further 8 sewage treatment plants have also been announced under a PPP Taojiang County project. All of the proposed plants are in very close proximity and lining theZi River, directly east of Yiyang City and close to the Taohuajing MABR plant. The investment budget for this PPP project is USD$17.5m.

As you can see in the graphic below, the government in this PPP project, is targeting treatment plants in nearly all of the towns in Taojiang County (yellow highlight is MABR, Blue are projects currently under construction, Green is for the proposed plants - there are three plants that I haven’t been able to match names to).

Plant sizes below:

I feel that this 8 plant project is a fantastic opportunity for Kaitian to establish a beachhead on the market in Hunan.

Another opportunity has also appeared in Changde: the administrative district directlyNorth of Yiyang City. This city is also part of the Dongting Lake watershed (It’s located on the arm of the Yuan River in the top map). It is a $37m opportunity and involves a new treatment scale of 10 200 m3/d. Tender documents ask for 12new sewage treatment plants.

http://jdzrfw.com/a/benzhangonggao/20190717/2373.html

While this tender specifies AO biological treatmentI am hopeful that this is a chance for Kaitian to capture market share from the incumbents through a superior product/value proposition (as success in the past with AO has been lacklustre from reported results in Hunan) and their leveraging of relationships.

Let's hope to see some news on this front shortly.