According to the Plan for the Construction of Urban Household Waste Harmless Treatment Facilities in the 13th Five-Year Plan Period issued by the National Development and Reform Commission and Ministry of Housing and Urban-Rural Development of the People's Republic of China on 31 December 2016 (http://www.ndrc.gov.cn/fzgggz/hjbh/huanjing/201701/t20170122_836131.html), the total treatment capacity of waste incineration facilities in cities at all levels is expected to account for over 50% of the total waste harmless treatment capacity in China by the end of 2020 (the ratio only stood at 31% as at the end of 2015). Meanwhile, by the end of 2020, municipalities under direct central control, municipalities with independent planning status, and provincial capitals (built-up area), which are properly equipped, are expected to achieve "Zero Landfill" for domestic waste; while designated towns are expected to be fully equipped with household waste harmless treatment capabilities.
According to the Plan for the Construction of Urban Sewage Treatment and Recycling Facilities in the 13th Five-Year Plan Period issued by the National Development and Reform Commission and the Ministry of Housing and Urban-Rural Development of the People's Republic of China on 31 December 2016 (http://www.ndrc.gov.cn/zcfb/zcfbghwb/201701/t20170122_836133.html), the waste water treatment rate in urban areas is expected to reach 95% by the end of 2020 (as at the end of 2015, the urban waste water treatment rate was 92%). Among all these areas, urban districts in cities at the prefectural level or above are expected to fully collect and treat waste water; and waste water treatment rate in county-level cities should be no less than 85%. Meanwhile, by the end of 2020, urban districts in cities at the prefectural level or above are expected to reduce black and odorous water bodies to less than 10% of total water bodies; while built-up areas in directly-controlled municipalities, provincial cities and municipalities with independent planning status should have eliminated black and odorous water bodies by the end of 2017.
All of the Company's waste-to-energy plants are developed on a BOT basis, whereas its waste water treatment plants are developed either on a BOT or on a TOT basis. In both cases, the Company signs a 25-30 year concession right agreement with local governments, under which the Company is responsible for investment, construction, operation, and management of these projects based on a holistic turn-key approach.
After the Company signs a concession right agreement with the local government, the project will enter a six-to-nine month preparatory stage. After the environmental impact assessment and the project registration are approved by the Authorities Concerned, the construction of the plant can commence. Normally, the construction period of a waste-to-energy plant is 18 months, whereas the construction period of a waste water treatment plant is 9 months. Upon completion of construction, the project commences operation and can generate stable cash flow during the rest of the concession right period.
There are two sources of revenue for an operating waste-to-energy plant, namely, the on-grid electricity tariff and the waste processing fee. The national on-grid electricity tariff has been increased to RMB 0.65/kWh as of April 1, 2012. Waste processing fees, on the other hand, are paid by local governments. The only source of revenue for a waste water treatment plant is the waste water treatment fee, which is paid by the local government.
According to the price escalation clause of the concession right agreement, the fee may be adjusted upward based on CPI, labour costs and other cost factors every two or three years after the project becomes operational.
In general, tender evaluation criteria include technical propositions and plant design standards, total investment, as well as financial capability, experience and track records of tendering enterprises in constructing and operating waste-to-energy and waste water treatment projects.
The Company mainly deploys its self-developed grate furnaces that do not require the use of auxiliary fuel. Gasoline is used to ignite the waste at the beginning, and when the furnace temperature rises to 850 degrees Celsius or above, dioxins can be dissolved. Therefore, the flue gas emissions of all of the Company's waste-to-energy plants are in compliance with the EU 2000 standard, the most stringent flue gas emission standard in the world.
In principle, our projects are financed by one-third registered capital and two-thirds project loan.
The Company has three major sources of funding: (i) cash flow from its existing operating projects; (ii) loans from commercial banks in Hong Kong and China; and (iii) long-term loans with policy banks, such as the Asian Development Bank (ADB). In 2009 and 2012, the Company signed two long-term loan facilities with the ADB for a total of US$400 million, mainly to finance its waste-to-energy projects.
Since 2005, the Company has consistently paid cash dividend twice every year, which demonstrates the Company's unwavering commitment to sharing the success and results of its development with its shareholders.