BUSINESS PLAN SUMMARY
CHINA WASTEWATER TREATMENT
PROJECTS
Business Objectives:
Team China/California (the Company) is the special
purpose subsidiary of Team China II (a California corporation in good standing)
formed in 2001 to develop a number of small to medium size energy efficient
“Wastewater Treatment Projects” in in China.
The projects will utilize the most advanced and best available “energy
efficiency and energy savings” and wastewater treatment technology to be
exported by USA suppliers to integrate with equipment procured in China.
The Company’s business
objectives are to:
·
Introduce significant advancements in
environmentally-friendly “best available technology” for wastewater treatment
to the Chinese market,
·
Export energy efficiency and energy saving equipment
and procedures,
·
Export technology transfer,
·
Export engineering design,
·
Export project development expertise and
·
Secure “Project Finance” investments and debt to
fund the Projects.
The objective is to introduce “energy saving and
energy efficiency” systems that will save approximately 40% to 60% of the
traditional energy usage for wastewater treatment projects in China while at
the same time improve overall water quality and impact on the environment.
The Team China/California business
philosophy is to discover and develop those “mandated Chinese government
infrastructure projects impacting the environment and energy sector” that are
small to medium in size. Most of these projects are basically too small for the
large, multinational firms to economically develop.
From this perspective, Team
China/California uses its many years of personal and business experience in
China to establish the personal and government business relationships, secure
the appropriate agreements, and interface with both USA and Chinese governments
to maximize the positive impact of exporting equipment and technology from the
USA to China. The company will then create an international standard “Business
Plan” which “bundles” these small projects into one, larger professional
“Project Finance” Package to bring to the international finance community.
SITUATION ANALYSIS: WASTEWATER TREATMENT/ENERGY EFFICIENCY
IN CHINA
There exists a new opportunity for
USA and California infrastructure development companies in the wastewater
treatment sector in China. Team China/California has made significant
advancements in this sector, and now is in the development of a number of these
projects. All projects involve export of USA/California made technology,
equipment and development skills in Project Finance and engineering management.
In November 2000 the China State
Council published a notice requiring that all cities over 500,000 population
have at least 50% of their wastewater professionally treated by 2005 or incur significant
penalties. All cities under 500,000 population must have at least 25% of their
wastewater professionally treated in this same time frame. The result is that
over one thousand (1,000) municipal wastewater treatment plants must be built
within the next four years. In order to meet these massive requirements, the
Chinese government is actively encouraging USA and other foreign countries to
participate in long-term equity ownership and leadership in technology,
equipment and financial services.
The State government
(Beijing) has made significant changes in the Chinese water industry to attract
Direct Foreign Investment. This was necessary to bring about improvements in
the purification and quality of China’s water systems, and to increase the
capacity of its wastewater treatment facilities. Recognizing this need to bring
in private investors to provide the technology and to construct and operate
these plants, the government has initiated numerous incentive policies. The
most important of these new policies is the significant increase of the rate of
the tariff paid by the municipality for the water usage to the Joint Venture
Company. The Chinese government now encourages foreign ownership in the water
remediation industry.
The Project benefits
will come back to reward the investors, developers, the State of California and
USA exporters of equipment and technology to service this new and profitable
sector.
THE PROJECTS
This Project is to develop a series of “Wastewater Treatment
Projects” in Sichuan Province in China using the “best available technology to
maximize energy savings and energy efficiency” with California and/or USA
manufactured equipment comprising up to 51% of the total content.
In Sichuan Province,
the Projects include nine (9) wastewater treatment centers using “energy
efficient best available technology” in China.
The Projects will be located in six cities. In May 2002, the Company entered into an Agreement (MOU) with the
Sichuan Provincial Environmental Protection Bureau, Sichuan, China to develop
the Projects. In March 2003, the Company received an additional Sichuan
Government document which stipulates that the Province (the nine cities) will
contribute 30% of total costs as their contribution, that all cities will have
one unified tariff, and that the tariff will be collected by an independent,
Governor nominated, non-government owned entity. The document also ensures that
up to 50% of the technical equipment can be exported from the USA.
In April 2003, Team China signed
an important “Teaming Agreement” with Herrel Environment Investment Group, Ltd.
This experienced engineering company will provide the China side EPC duties,
work with the nine cities for civil construction, supervise the China portion
of the equipment, and also provide a portion of the overall equity investment.
Herrel has 350 employees, 250 engineers, and is currently owner/operator of
several solid water treatment centers in Chengdu, Sichuan.
TECHNOLOGY
The Company’s engineers have conducted important preliminary
research into the “energy savings/energy efficient” component of the wastewater
treatment projects. The technology for final recommendation is still to be
determined based on additional research. Data accumulated suggests a
significant savings by one technology as compared to other available
technology, which demonstrates a 55% energy savings which reduces operating
costs. (STM – Aerotor). This system is now installed in over 900 installations
in 40 countries, worldwide with 27 installations in China.
For the Sichuan Province Projects, WesTech (equipment
suppliers) has generated individual technical analysis of each of the
facilities. These disclose (i) Installed Electrical Power Per Wheel (kW). (ii)
Power Usage per Wheel, yearly average (kW), (iii) Total Power Usage, yearly
average (kW), and Daily Power Usage, yearly average. This is based on BOD removal “required in Peak Hour” and O2
Supplied Peak Hour.
Data is available for: (i) WesTech data/pricing, (ii) Energy
Efficiency Graph/Data Sheet, and (iii) Sichuan Province Technical Analysis.
POTENTIAL USA/CALIFORNIA CONTENT OF EQUIPMENT,
DEVELOPMENT SERVICES AND OTHER TECHNICAL/CONSULTATION SERVICES.
Equipment. The technical review of equipment from
both USA and China includes costs, warranties, performance guarantees,
schematics, environmental impact and management philosophy as to selection of
the best performing system. .
Technical Analysis.
Technical analysis includes an extensive review of the existing feasibility
reports, technical studies, new technologies and engineering abstracts from
China to determine “best available equipment”, most competitive costs,
interface of USA and Chinese equipment and technology.
Projected California Content/Technical &
Consultation. Financial, engineering and technical recommendations,
development of the Business Plan, creation of the cash flow Pro Forma,
technology review, interface with USA and Chinese government officials, export
support and overall Project Management will be accomplished by the Company.
Team China/California has
enlisted the services of JIB WATER & WASTEWATER EQUIPMENT, Inc., El Dorado
Hills, California. JIB is a
professional, California based representative of many of the leading
manufacturers specializing in water and wastewater treatment equipment and
processes for the municipal and industrial markets. In this manner, the
intention is that all equipment orders will be processed through a California
entity, even if the equipment is manufactured in a state other then California.
PROJECT SIZE, AND PROJECT LOCATION.
SICHUAN PROVINCE:
1. Nambu 50,000 M3/DAY
2. Xichong
30,000 M3/DAY
3. Langzhong 50,000
M3/DAY
4. Ziyang 50,000 M3/DAY
5. Yi Long 40,000
M3/DAY
6. Peng An 50,000
M3/DAY
7. Jian Yang 50,000
M3/DAY
8. Le Zhi 40,000 M3/DAY
9. Anyue 40,000 M3/DAY
TOTAL CAPACITY: 430,300 M3/DAY
TOTAL EPC COSTS: US $ 65,188,406.
TOTAL COST TO BE
FINANCED: US $ 80,180,721.
DEVELOPMENT
SERVICES AND TECHNICAL/CONSULTATION SERVICES
The
California Company is responsible for:
(1)
Project
Finance, including Debt Placement and Equity investors;
(2)
“Best Available Technology” based on
Feasibility Studies;
(3)
Determination of USA equipment to be exported
from California to interface with “Best Available Technology” to be purchased
in China,
(4)
Legal
& Accounting,
(5)
Engineering,
and selection of EPC contractors, training, O&M, civil work and,
(6)
USA
and Chinese Government Relations to ensure that all approvals are in place, and
to expedite the export of USA technology to China.
(7)
“Teaming
Agreement” with USA based international engineering firm as USA EPC company for
overall design, integration of USA and Chinese equipment, construction
management with Herrel Engineering (Chengdu) and manage with Team China the
overall project; additionally to be the “teaming partner” with Team China for
the USTDA Grant solicitation to pay for the Feasibility Study.
(8)
“Teaming
Agreement” with Chengdu, Sichuan based EPC engineering firm which will also
place equity investment, and supervise China equipment procurement
Replication. Team
China/California has designed a process where the “footprint” from one
“primary” WWTC will be replicated for each additional facility. For example, in Shandong Province, the
Development Process that includes the “best available technology” and the
“finance strategy” will be as much identical as the individual environment will
allow. This will bring about
significant economic benefits in terms of cost reduction of equipment, labor
and finance. There is a timed sequence for “construction management”, including
EPC bids (China), and use of USA/California made equipment. Replication is a
key to contain costs and expand the techniques of state-of-the-art energy
efficiency, energy savings and water remediation.
CRITICAL PATH:
The following are critical path issues to be accomplished in the
development stream:
·
Assess the “best available technology” and costs from
various California and USA technology and equipment suppliers;
·
Prepare the necessary contracts and agreements with two
separate Provinces;
·
Travel to Sichuan Province with Team China engineers to
assess the “best available technology” and determine Chinese equipment
selection;
·
Meet with the Sichuan equipment provider to secure
their form and substance of investment (approximately 5%);
·
Prepare the contracts/agreements for Sichuan Province
cities to place approximately thirty percent (30%) (US $24-million) in
investment for their Projects;
·
Secure the complete Feasibility Studies for all nine
(9) Projects and translate into English;
·
Meet in Beijing with CMIC (China Machinery Building
International Corporation) to negotiate their contract as “owner’s
representative” and “supervisory China based engineering company”; secure their
form and substance of investment (approximately 5%);
·
Meet in Beijing with various entities to secure Equity
investment in the Projects;
·
Prepare the cash flow economic proforma for the various
banks (Asian Development Bank, CitiGroup and China Bank of Construction)
·
Prepare the Presentation to “U.S. Trade and Development
Agency” (TDA) Washington, D.C. for funding of the “Master Feasibility Study”;
·
Travel to TDA for presentation for funding request for
Feasibility Study;
·
Travel to Manila to negotiate with senior managers of
Asian Development Bank (ADB) for all nine (9) projects;
·
Interface with U.S. Commercial Service “USA Commercial
Liaison Office for the Asian Development Bank”, Mr. Stewart Ballard, Director
in Manila, for USA government support for the ADB request for funding;
·
Meet in Hong Kong and Beijing with qualified potential
investors to place investment capital.
Finalize Finance Objectives: The following sequence of
events is a preliminary strategy to accomplish the funding objectives.
·
Secure “Letter of Intent” from SPEPB to contribute 30%
of total costs.
·
Secure “Letter of Intent” to place “up to 5%” of total
Chinese equipment costs from the “Chengdu Feiling Equipment Manufacture Col,
Ltd.” (Chengdu, Sichuan) as supplier of the Chinese portion of the equipment.
·
Secure “Letter of Intent” from China National Machinery
& Export (CMEC) to place “up to 5%” of total construction/equipment costs
as their investment to secure the EPC Contract. CMIC will acts as the
Supervisory Construction Company for construction installations. They will
provide the requisite “off shore liquidated damages” insurances required by the
investment community.
·
Business Plan. The Developers will create
a professional “Business Plan”. which includes project data from both Provinces
into one Master Package. This includes
the Pro Forma, feasibility studies, equipment analysis, etc
·
Feasibility Study. The Master Package will be
submitted to U.S. Trade Development Agency (TDA) (Washington, D.C.) for
“Funding of the Master Feasibility Study”.
A request of approximately US $150,000. will be made.
·
Upon approval by TDA, an international engineering firm
with Chinese expertise will be retained by Team China/USA to generate a “Master
Feasibility Report” using international accounting and technical standards.
·
This Master Feasibility Report will be submitted to the
Asian Development Bank (ADB)(Manila) for funding of approximately 45% of the
total funding requirements for all nine projects. The ADB approval process
averages 8 to 12 months. NOTE: There are other Debt Options including USA
and/or Chinese banks to bring about a significantly faster participation in the
debt financing.
Project Finance.
The Company approach to a successful finance closing includes various
options. These include, but are not limited to:
- Mature
the relationship with the Asian Development Bank (ADB) with resources from
the USA government “liaison office”.
Asian Development Bank letters provide a confidence level to the
Company as regards the integrity of the debt financing component and
ability to single-source the USA engineering company;
- Develop
the finance components with a combination of Chinese bank debt, and
privately placed equity from the international market combined with the
30% deposit from Sichuan Province;
- Secure
US $ 10-million in equity placement, with up to 50% of this amount to be
placed as Direct Foreign Investment (DFI)
- Secure
the Equity Contract with Herrel Environment Investment Group
- Secure
the Chinese EPC contract with Herrel Engineering Group
- Integrate
the USTDA Grant and use the Master Feasibility Study as the basis for a
long term loan guarantee from the Asian Development Bank combined with the
deposit;
- Integrate
the USTDA Grant with debt financing from CitiGroup (Hong Kong/
- New
York) and other investment entities;
- Review
finance options that will be provided by the “Finance Consultant” retained
by the California Energy Commission.
Value Added Components: Sichuan Province
- The
Province will invest thirty percent (30%) of total costs (approx. US
$24-million) to support the loan application to ADB and/or other funding
entities.
- Herrel
Environment Investment Group, Ltd. will place up to US $2-million.
- The
Province strongly encourages the use of California energy efficiency
technology, service, and supports the use of a Sino-USA Joint Venture or
other methods to achieve the Project Financing objectives.
- The
primary equipment supplier in the Province will invest minor equity funds
to secure the China portion of the equipment contract.
- The
Province is named as a “Western Province” entitled to special finance
support from the State government (Beijing) for lower interest rates on
bank loans and guarantees to the Province for their “investment capital”.
- Strong
support by the U.S. & Foreign Commercial Service office of the U.S.
Department of Commerce and ranking USA government officials in the
Chengdu, Sichuan office, the International Trade Administration,
Washington, D.C., the USA Embassy in Beijing and the US Foreign &
Commercial Service, Newport Beach, CA
- The
nine cities selected by the Province have adequate infrastructure to
support the expansion of the wastewater facilities, and have ability to
support the increase in tariff and supply the necessary local city
government support for the developers
- Each
city will provide a “Greenfield” location for the installation, with
appropriate infrastructure to support the project development.
- The
Province leadership is well traveled and knowledgeable about innovative
WWTC technology and strongly encourages the partnership between the
Province and Team China to import to China the “best available
technology”.
MILESTONES. December 2001 to July 2002:
The following MILESTONES have been accomplished in
the Project stream.
(i)
. 12/01. Team China/EPPA travels to the cities of Jinan
and Weihei, Shandong to negotiate agreements.
Mulcahy provides Cooperative Joint Venture Agreement to city managers in
both cities.
(ii)
5/02. Team
China introduced to Sichuan Provincial Environmental Protection Bureau
government leaders at Asian Development Bank (ADB) Conference (Shanghai); Ms.
Susan Simon, U.S. Dept. of Commerce, “Environmental Technologies Industries”
Washington D.C. introduces Mr. Mulcahy to Mr. Du Ming, Deputy Director,
(SPEPB).
(iii)
5/02 Mr.Mulcahy travels to Chengdu, Sichuan to meet
with the Sichuan Provincial Environmental Protection Bureau (SPEPB) managers;
meeting and negotiations ensue for four days
(iv)
5/02. Team China enters into mutual agreement to
develop a number of wastewater treatment projects in Sichuan Province. (May,
2002)
(v)
5/02. Team China negotiations finance plan with Sichuan
Government for them to provide up to 30% of total costs as their share of
investment and allow up to 50% export of USA equipment and technology
(vi)
5/02. Team China negotiates with Chengdu Feiling Equipment
Manufacture Co, Ltd (CFEM) (Chengdu, Sichuan) for China portion of equipment
procurement. CMEM agrees to place up to
5% of costs as their investment in the projects.
(vii)
5/02. Team China with CMEC/CMIC (Beijing); secure
general understanding that they will invest up to 5% of in-country construction
costs in return for receiving contract to supervise civil work and installation
of equipment.
(viii)
5/02. Team China/USA becomes “Gold Key” member of
U.S. Department of Commerce Commercial Service in Chengdu, Sichuan, China.
(ix)
6/02. Team China receives “Abstracts of the Feasibility
Studies” for six (6) WWTC projects in Sichuan Province (June 18, 2002).
(x)
6/02. Team
China engineering group (Jones/Roland/Stout) begins review of “best available
technology”; team receives substantial equipment and technical data from
California and USA equipment manufacturers.
(xi)
7/02. Begin
analysis of projected technology costs from both California and Sichuan
Province equipment providers. Begin analysis to integrate the various systems
to achieve maximum energy efficiency.
(xii)
3/03 Team China signs “strategic partnership” with
Herrel Environment Investment Group to provide equity placement, act as local
EPC firm, including civil construction, supervise procurement of China side
equipment and potentially provide O&M services
GOVERNMENT SUPPORT FOR THESE PROJECTS:
CHINA.
The governments of
Sichuan Province and Shandong Province strongly encourage Team China/California
to develop the wastewater treatment projects. The approved “exclusive agreements”
and the support for the Mayor’s office in each of the cities where the Projects
will be constructed are highly motivated and strongly encourage the rapid
conclusion of the “Project Finance” strategy. Chinese cities are now mandated
to construct these Projects, and basically lack the funds and technology.
The U.S. Embassy
in Beijing is aware of Team
China and these Projects. Mr. Denny Barnes, Deputy, Senior Commercial Officer
and Ms. Kellie Holloway, Environment Specialist, U.S. Embassy encourage the
development of the Projects. Please see: Attachment: “USA Government Support
Letters”
In Chengdu,
Sichuan, the American Consulate General, Mr. John Fogarty and Ms.Ling Chen, Commercial Officer, U.S.
& Foreign Commercial Service, strongly endorse the development of these
Projects. The Consulate was directly
involved in the introduction of the Sichuan Provincial Environmental Protection
Bureau projects to Team China.
The U.S.
Commercial Service, Manila,
Philippines, is supportive of the Projects. Mr. Steward Ballard, Director and
Senior Commercial Officer, and Ms. Cecilia Santos, Commercial Specialist manage
the “Liaison Office for the Asian Development Bank. They will provide the
services and introduce the Projects into the ADB funding schedule and support
the solicitation for ADB to provide the long-term loan for the Projects.
USA.
The Environmental
Technologies Industries (ETI)
office is the principal resource and key contact point within the U.S.
Department of Commerce for American environmental technology companies. ETI's
goal is to facilitate and increase exports of environmental technologies, goods
and services by providing support and guidance to U.S. exporters. Ms. Susan
Simon, Commercial Specialist Asia, organized the Team China introduction to the
Sichuan Province Projects. Tel: 202-482-0713. Please see: Attachment:
“Government Support Letters”
The California
Energy Commission supports
the export of energy efficient USA and California manufactured technology and
management skills. Mr. Tim Olson, International Program Manager, Energy
Technology Development Division, is familiar with Team China and the Projects.
U.S. & Foreign
Commercial Service (Newport
Beach, CA) office is supportive of the export potential inherent in the
Projects. Mr. Richard Swanson, Executive Director, is aware of Team
China/California and the Company’s experience in USA-China infrastructure
development for the past many years. Tel: 949-660-1688 Ext. 153. Please
see: Attachment: “Government Support
Letters”.
For additional
information, please contact:
Mr. Patrick D.
Mulcahy
Director
Team
China/California
T: 714-424-9999
Email: patrick@teamchinausa.com
05.15.03
Water
WATER
