China National Water Planning Co., Ltd. does not want to be a company that “receives water fees”

What should water companies depend on in the future? This is a question that Zhu Yongjun, chairman of the National Water Affairs Co., Ltd. (hereinafter referred to as “China Water”), is pondering. “At present, most companies rely on water collection fees to make a living, but the water collection fee is not a universal system in the water industry of various countries. This is just a staged strategy that China has adopted at a specific stage to achieve a specific purpose.” Zhu Yongjun, chairman of China Water Affairs, said.

Zhu Yongjun expects that the mode of collecting water fees may exit the stage of history after 20 years. “This is just like the recovery of the management rights of small coal mines and small oil fields in the past few years. The state may transfer the construction and operation of sewage treatment plants to state-owned enterprises. Therefore, I believe that the water collection business will be difficult to sustain.”

Zhu Yongjun believes that the way out of the water business of the Republic of China is to transform as soon as possible, form its own core technologies and products through continuous acquisitions, and expect to make the transition from water-based fees to a new stage of living by providing water-related technologies and services. "Our transformation has already begun, and the proportion of revenue and net profit from revenue collection services has dropped from nearly 80% in 2012 to less than 50% in 2013."

As of the end of 2013, Guozhong Water has 22 wholly-owned and controlled subsidiaries. Its business scope covers urban municipal water supply and wastewater treatment in the water environmental protection industry chain, new urban distributed water supply and drainage, landfill leachate treatment, environmental protection equipment and engineering business. And other fields.

Not optimistic about the long-term prospects of the landfill leachate treatment market According to the 2013 annual report of China National Water Corporation, Beijing Tiandiren Environmental Protection Technology Co., Ltd. (hereinafter referred to as “Heaven”), which was wholly acquired by Guozhong Water in 2013, occupies the country’s operating income and net profit. More than half of China Water’s operating income and net profit. However, Zhu Yongjun thinks that the landfill leachate treatment market accounts for such a high proportion of people's revenue and net profits throughout the world. It is only a phased phenomenon. This is not the main direction for future development of water in the country. The landfill leachate treatment industry has a high profit margin and a small market size. From a medium-term perspective, it will continue to flourish in the next five years, but in the long run, the market outlook is not optimistic.

Last year, China National Water Service spent 550 million to acquire Tiandi, and Zhu Yongjun stated that there were two main reasons: On the one hand, it was because of the prospect of seeing Tiandi people's market share in the landfill leachate market in the next five years as a benefit to the company. On the other hand, it is hoped that the technology of Tiandi people will be extended to the high concentration of industrial wastewater treatment business in the petrochemical industry, which is related to the transformation strategy of Sinopak Water. It is reported that China National Water Corporation currently has a coal chemical water treatment project in Ordos with an investment of about 70,000 to 80 million.

As soon as possible, Zhu Yongjun, a rural water market in China, believes that with the development of China's industrialization and urbanization, China’s water environment is now facing more severe challenges. Over the past two decades, the central government and local governments have invested a lot of money in municipal sewage treatment and water supply, but they have long neglected and forgotten rural water services outside the city. Therefore, until 2012, according to relevant statistics, 80% of the country’s decent water purification devices did not exist. However, this situation has gradually begun to change. Since 2013, national leaders have repeatedly stated that it is necessary to give full attention to the improvement of the rural human settlement environment. Compared with the urban water market, the rural market is relatively fragmented, with a relatively small scale and relatively high management costs.

Guozhong Water said that it is currently very optimistic about the rural market, and has done a lot of technical reserves for this purpose: For example, last year's acquisition of a Swedish listed company Josab International AB for water purification equipment, valued its low-tech and operating cost characteristics. More applicable to the status quo of China's rural market. In the future, the China Water Affairs Council will invest more money and manpower in cultivating the rural market.

Regarding the layout of actual projects, Zhu Yongjun said that there are already some projects that have landed, such as Xiangtan in Hunan, Dongying in Shandong, and Sichuan. Among them, the scale of the project in Sichuan is the largest and there are more than 80 projects in operation. From the previous experience, although the scale is not large, the economic benefits of tons of water are higher than urban sewage treatment. This is related to the fact that the rural water market is at an early stage of market development and it is expected that by 2015 it will be another situation. The China Water Affairs Council is currently rapidly developing its market layout, with new projects in Hebei, Heilongjiang and Shanxi.

The company, which does not want to be a "receiving fee," entered the municipal sewage treatment business in 2000 and is one of the companies that entered China's early water industry. However, the 2013 Communiqué shows that as of the end of 2013, the company's water treatment capacity at the design date corresponding to the contract reached 1.947 million tons. The scale of sewage treatment this year has not been enlarged, because the construction and operation of the sewage treatment project requires a large amount of funds, and the scale of development of the Sino-U.S. water service is also limited to a certain extent by the size of its own funds. Zhu Yongjun said, “The main direction of the water industry in China and the Republic of China is not to seek expansion of the daily processing capacity of the sewage. The company is considering the transition in the past two years and cannot only be a company that collects water fees. We hope to change the current business model.”

Zhu Yongjun analyzed that the development of China's municipal water market has been less than 20 years. The municipal water market has really risen since 2004 after the Ministry of Construction issued the "Administrative Measures for Franchising of Municipal Public Utilities." At present, the municipal sewage industry has formed a basic business model: the government collects sewage treatment fees from the residents of the area and the polluting enterprises, and then finances the sewage treatment fees of the sewage treatment companies according to the standard water volume handled by the sewage treatment plant. This model is called the water fee model. Looking at the world, water collection fees are not a universal system in the water industry. Many countries have not adopted this model. Second, the water fee cannot constitute any of the core competitive advantages of a commercial organization. Sinopharm Water also hopes to have a number of core products and services that can be used to achieve success.

Gradually reduce the proportion of revenue collection fees in the operating income and net profits of Sinopharm Water, shift from the mode of water fee collection to the development of core technologies, and then form new models of products and services through core technologies. It is the direction in which Sinochem Water is currently working. According to the data, in 2012, the wastewater treatment segment accounted for 52% of the total revenue of the main business of Guozhong Water, and the water supply segment accounted for 24% of the operating revenue, which occupies an important position in the company's main business revenue structure. . However, by 2013, this situation has changed, with the proportion of the sewage treatment division accounting for the country’s main business revenue has been reduced to 34%; the proportion of the water supply segment's operating revenue is 12%. Zhu Yongjun said: “This is the goal of our first stage of transformation. In the next phase, we hope that our core products and services can be extended to water treatment-related businesses such as sludge. We mainly achieve this through acquisitions. The two-phase goal."

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