(Shanghai Daily news)
Thames Water Plc, one of the world's top three water utility companies, is in talks with the Shanghai government to buy a 50-percent stake in state-owned Shanghai Waterworks Shibei Co, a source close to the deal said.
If the deal materializes, Thames will expand its local business into water distribution and marketing.
Du Minyi, chief representative of Thames Shanghai office, confirmed.
"With the city's rapid development, we see huge growth potential," She said.
An official with Shibei Waterworks, who refused to give further details, would only confirm that talks were going on.
Based on the company's evaluation, the 50 percent stake is worth 1 billion yuan (US$120 million). Thames is likely to spend more than 1 billion yuan on the stake.
"The extra payment will be used to renovate its current pipeline network to improve the drinking water quality to meet European standard by 2010," the source said.
Thames is confident that the company will recover the huge investment over the long term. But the company refused to disclose how long it would take.
The central government encourages water utilities companies to generate an annual return of 8 to 12 percent.
According to the source, the deal will probably be sealed in June. Thames would be allowed to run the local waterworks for 50 years.
When the contract expires, the company will be returned to the government.
The water price will not be affected as it will still be decided by the government. In Shanghai, the charge for water for residential use is 1.03 yuan per cubic meter, much lower than those in other cities.
Thames would become the second overseas investor to be fully involved in the city's waterworks sector after Vivendi Water, a French-based water management company, also one of the world's top three water utility companies.
Currently, UK-based Thames Water is operating the Dachang water plant, one of the six water plants under the Shibei Waterworks, for which it paid the government US$73 million to run it for 23 years.
Shibei Waterworks, one of the city's four waterworks companies, supplies water to 4 million residents in Yangpu, Hongkou, Baoshan and Zhabei districts, and part of Jiading District, covering 305 square kilometers, with a supply capacity of 3 million cubic meters each day.
