SINGAPORE – (ACN Newswire) – SGX Mainboard-listed Sapphire Corporation Limited (“Sapphire”, and together with its subsidiaries, the “Group”), an established infrastructure design and construction group in China, is pleased to announce that the Group’s 97.6% owned subsidiary, Ranken Railway Construction Group Co., Ltd (“Ranken”), has secured a EPC contract of RMB 832 million related to its PPP project in Chengdu.
On 19 November 2018, the Group announced that Ranken and its consortium partners have secured a PPP project to carry out investment and financing, design, build, operate and transfer works (“DBFOT Works”) with the Urban and Rural Coordination Work Bureau of Chengdu Wuhou District for the first phase of Wuhou District, “Liveable River Bank” project in Chengdu, Sichuan Province, China.
The DBFOT Works period of the PPP project is expected to be 15 years, which comprises 2 years of construction as well as the operational/management rights of the building infrastructures along the river bank for a 13-year period.
The scope of work related to the EPC contract includes engineering, procurement and construction works associated with the water environment protection, ecological restoration, flood control measures, building infrastructures and lifestyle amenities of this PPP project.
Recently, as announced on 30 December 2018, Ranken, being one of the consortium parties, has injected RMB 25 million in cash for a 25% equity interest in the PPP’s project company, Chengdu Derun Jinlong Environmental Management Co., Ltd. (“CDJ Environmental Management Co.”), which is funded through Ranken’s internal resources.
The other well-known consortium partners in the PPP project includes Chongqing Derun Environment Co., Ltd., Chengdu Wuhou Industrial Development Investment Management Group Co., Ltd. and Beijing Enterprises Water (China) Investment Limited have injected their proportionate share of the registered capital and capital reserve in CDJ Environmental Management Co..
Focusing on a broader urban renewal effort to create a greener living environment in Wuhou District, this PPP project involves the design, build, finance and management of ecological restoration, flood control measures and building infrastructures along an 18.68 km embankment along Jiang An River, one of the key waterways in Chengdu.
Two-Prong Business Strategy in the PPP Market Bearing Fruits
Adopting a two-prong business strategy in the PPP market, the Group targets to be a strategic shareholder with the first mover advantage to secure the EPC contract and operations management contract related to the PPP project.
As a testament to the Group’s strategy, this EPC contract of RMB 832 million is the largest contract win in recent years. As such, the Group is expected to benefit financially from three components of this PPP project as follows:
a. EPC contract of RMB 832 million during the 2-year construction period;
b. Potential of recurring dividend income arising from Ranken’s 25% shareholding in CDJ Environmental Management Co.; and
c. Potential of recurring revenue from the operations management contract of the PPP contract for a 13-year period upon completion of the EPC contract
Commenting on winning the EPC contract of its PPP project, Ms Wang Heng, Chief Executive Officer of Sapphire, said, “Recognising that China’s burgeoning PPP market presents strong prospects for long term recurring revenue, we have taken the first step as a strategic shareholder with a direct investment into this PPP project in Chengdu together with other well-known consortium partners.
Other than being a shareholder in the PPP project, we also set our sights to secure the EPC component and operational management contracts of our own PPP projects so it will be accretive to our revenue, strengthened our track record, deepen our working relationships with leading industry players in the PPP industry and further mitigate our risks.
Moreover, working together with these leading industry players will be a positive boost to our reputation and operational experience in the water environmental industry, thereby leading to more working opportunities with major industry players in this field.
Besides being a EPC contractor and a strategic shareholder in this PPP project, we also have the opportunity to be the manager of the new recreational amenities, F&B retail and lifestyle concepts along the river bank for a 13-year period, thereby developing our operational experience in this area and creating a new recurring revenue stream for the Group.”
Ms Wang added, “With this approach, stakeholders’ interests are aligned and provides greater assurance that the PPP project can be completed successfully on time and on budget.
We have also demonstrated that this two-prong business strategy can present us with larger EPC contracts and long-term recurring revenue related to PPP projects with minimal capital commitment.”
Established and Well-Known Consortium Partners
A PPP project is generally defined as a long-term contract between a government agency and private organisation(s) for the construction and operation of economic and social infrastructure (such as water treatment facilities, utilities and public transport systems). The PPP model has been utilised for many public infrastructure projects and it has been used in many countries.
The consortium partners of this PPP project include Chongqing Derun Environment Co., Ltd., Chengdu Wuhou Industrial Development Investment Management Group Co., Ltd. and Beijing Enterprises Water (China) Investment Limited.
Chongqing Derun Environment Co., Ltd. (“Derun Environment”) is jointly established in 2015 by SUEZ, NWS and Chongqing Water Assets Management Company and it is the biggest SinoFrench investment platform in China’s environment market, as well as the key investment project of SUEZ in China. Derun Environment aims to become provide systematic solutions for urban environmental problems domestically and globally. Derun Environment’s total assets value has reached nearly RMB 30 billion.
Beijing Enterprises Water (China) Investment Limited is part of Beijing Enterprises Water Group Limited (“BEWG”), a company listed on the Main Board of The Stock Exchange of Hong Kong Limited (Stock Code: 0371), is a large-scale group which provides a broad range of water services and environmental protection services in China. Currently, BEWG owns and operates a few hundred water supply plants and sewage treatment plants in China, Malaysia, and Portugal, with a total water treatment capacity of over tens of million tons per day.
Throughout the years, BEWG was consistently awarded “China Water Service Outstanding New Enterprises”, “Best Water Business Enterprises in China”, and recently, BEWG has been ranked No.1 of the “Top Ten Water Enterprises with Influence in China” for the eighth consecutive year.
This press release is to be read in conjunction with Sapphire’s exchange filings on 14 January 2019, which can be downloaded via www.sgx.com.
For more information, please contact:
Waterbrooks Consultants Pte Ltd