Development of Environmental Clean Technology Infrastructure Business
in Marine Silk Road Coastal Port Cities in the 21st Century
Water is the source of life for all things. The water environment is the lifeblood of agriculture and the lifeblood of the relevant food industry, related processing industries or related business activities. Only 2.5% of the water on earth is fresh water (only 0.3% of the water is suitable for human consumption). In the 2.5% freshwater consumption structure in nature, agriculture will consume 70%-75%, and industrial and commercial use consumes 20%. Households (mainly from 0.3% human drinkable water) consume only 5%-10%. of fresh water.
The global climate change, population growth, pollution caused by urbanization and industrialization, and the rapid expansion of the carbon footprint of human habitation, have worsened the global water environment， Constantly threatening only 0.3% of the rare "blue gold" that nature can provide. China is a country with a natural shortage of water, and it is extremely lacking in water resources suitable for humans or animals to drink directly. The problem of scarcity of natural clean water is even more acute in densely populated underdeveloped areas and rapidly industrializing emerging economies.
In the port city areas along the “21st Fountain Maritime Silk Road”, the supply of clean water is generally facing a major crisis. The rapid urbanization driven by economic development highlights the lack of water-cleaning technology infrastructure. According to World Bank statistics, the main cause of human diseases on earth is the lack of clean water environment. The dense population and backward water supply and sewage treatment conditions, that is, the lack of clean water infrastructure, lead people to drink contaminated dirty water that does not meet health standards and become ill or die.
Therefore, the infrastructure for the construction of water environment clean technology in the port city areas along the “Maritime Silk Road” is more urgent than any other infrastructure industry.
One of the future business of Fountain: It will focus on integrating advanced technologies for efficient and low-cost water treatment, and building an infrastructure for application environmental clean technology with significant commercial and social value.
The focus of water environment cleaning technology is on the efficient industrialization of wastewater treatment. The supply and use of potable clean water is only a small part of the natural water cycle. The water cycle refers to the vertical and horizontal cyclical movement of water in various states between the ocean and the land. This process includes evaporation, rainfall, infiltration and flow. Driven by the sun's energy and gravity. At a certain point in the water cycle process,, humans draw and utilize water sources of various water quality from spring water, well water, lake water, river water or directly from the underground. Because of the different water quality of the water sources, people use different technologies and chemically treat the water they have drawn. After the treated water is treated and the drinking water standard purification step is passed, the water that has been taken and initially treated is retained in the reservoir or in a large container. The water is then transported to users by further processing, purification and water supply network, as well as gravity or power pumping stations. After the water is used, it needs to pass through the sewage treatment process and then return to the public system of the water environment.
In densely populated areas, sludge and other residues produced by sewage treatment plants must be further treated (such as landfill, incineration, composting, etc.) to prevent secondary pollution.
The investment costs and maintenance costs (referred to as full life cycle costs) of the entire system of water recycling and wastewater treatment plants and pipeline infrastructure, sludge residue treatment facilities are relatively high, equivalent to more than twice the energy and other infrastructure industries.
According to the survey, in most of the important port cities along the "21st Fountain Maritime Silk Road" (such as Indonesia), the relevant pipeline network and sewage treatment infrastructure are lagging behind, and the heavily used sewage along the coast is directly discharged into the natural water circulation system. The untreated and discharged sewage from many areas is returned to the natural water circulation system, which directly contaminates the rare and clean drinking water water source. The backward water environment infrastructure has had an environmental negative impact on people and the environment in important cities along the coast.
The core characteristics of the water industry:
1. Water and related services are the basic needs of the city.
2. Water abstraction and water use are part of the natural water cycle and can interfere with human activities in nature.
3.On a global scale, each cities have implemented a centralized water supply and sewage industry, and the entire water supply industry has adopted a user-paid model. However, the current price of water and sewage treatment charges is lower than the relevant cost. But if all costs are passed on to users, social conflicts may arise, so the water industry is always a typical area that requires government intervention. A highly capital-intensive water supply and wastewater treatment network is a natural monopoly industry that requires government regulation.
4.The water industry needs a large amount of infrastructure investment, and only a few highly developed industrialized countries have established systems that meet the water needs of the people. With reference to the international standards of developed countries, there is a huge room for efficiency improvement in the global water industry.
Fountain will provide value chain direction for efficient service in the water industry through the introduction of investment and innovative clean technology; focusing on the value reengineering of core processes, and combine the specific conditions of different urban areas to develop innovative business models.
According to statistics, the current water price for water supply in Indonesia is only 25% to 30% of its actual cost. Although increasing the user's payment quota to narrow the gap between water supply price and cost is the future trend; but because the construction and maintenance cost of the pipe network has been high, the water supply industry in Indonesia is a monopoly industry that relies heavily on the water supply infrastructure network, Therefore, the marginal cost of scale expansion is low and is severely constrained by economies of scale.
The supply of drinking water in Indonesia is also the responsibility of the province (city), the regional regional government. The entire system of water intake, water production and water delivery is the infrastructure of regional utilities. The coverage area of the Indonesian water supply system network is generally limited to the island. The water supply system is generally the responsibility of the local government responsible for city management. Water supply and sewage treatment services are jointly responsible for the local government management of the city. The central or provincial government is responsible for formulating industry policies and determining the ultimate responsibility for the legal, political, economic, and organizational framework.
In Indonesia, water supply and wastewater treatment systems must be a local socio-political issues and the performance and responsibilities of local governments with urban management. The Indonesian archipelago geography creates the unique watershed characteristics of individual islands. It is easy to manage all the water issues associated with the island basin from the breadth and depth of a single “governance of the river basin environment”.
1. The main source of income for the Indonesian water and wastewater treatment industry is the user fees paid by users. There are differences in the fee structure of each province, which can be designed as two prices: fixed water price and variable water price. Prices can also vary according to the geographical location of Indonesia's provinces, environmental factors and different stages of economic development. Industrial and commercial users generally set price differences with household water. Establish a payment transfer mechanism for industrial and commercial users to directly subsidize water for general residents. Therefore, for industrial and commercial users, in the initial feasibility proposal of the project PPP project phase, it is recommended to adopt the prepaid water fee system to establish a mechanism for industrial and commercial users to recharge the prepaid card, and require the future industrial and commercial users to limit the amount of water purchased in advance.
2. At the same time, as a business model for the access of other water distribution companies in the future, in the PPP agreement, the choice of the owner of the pipe network set up by other water supply to Fountain is reserved.
3. Improve the transparency of water prices and the participation of the voters in the decision-making, and obtain important pre-issue issues for the smooth progress of the project's future price adjustment. Because water prices are rising too fast or too dramatically at any time, it can lead to strong social and political reactions, the political risks of public protests and demonstrations caused by price increases must be avoided at all times. There is a need to increase water price changes for residents in the initial phase of the project, and to reserve room for communication and public participation. Reserve a reasonable calculation cost, set a platform for communication with residents and the public in a transparent, socially acceptable, and culturally understandable way; reserve credibility to reserve detailed information such as the service promotion plan and the necessary capital investment for service improvement The window serves as a measure to eliminate the political risks of rising water prices.
Fountain plans to invest in water industry in Indonesia and create service value-added services in the future:
The investment in value-added services in the field of water supply and wastewater treatment in Indonesia and the operational assets to be held are as follows:
The investment of Fountain is aimed at each link of the value chain of the above-mentioned water supply services: namely, physical links such as water intake, water transportation, water production, water storage, water distribution and water supply. That is to say, the value chain of value-added services formed by investment starts from the facilities for investing in water sources, taking into account the scale benefits of water source and the need for future growth, to determine the construction of water pipes or the water supply for water treatment plants that transport water to water.
Pipe length and pipe diameter, water source generally needs to be treated to the appropriate water quality standards, and in a few areas where the water source quality can reach the drinking water quality standard, the water plant can be eliminated and the source water can be directly distributed. In order to avoid fluctuations in the water consumption system, a storage facility that can store the purified water is built according to environmental characteristics. The stored purified water will then be stably distributed to the access points of users in households, agriculture, industry and commerce according to the needs of users; the above constitutes the value chain of the entire water supply service.
The service value chain of Wastewater Treatment invested by Fountain is from
(1) customer end oil and grease dispersion collection,
(2) sewage collection pipe network from user discharge port,
(3) centralized treatment of sewage treatment plant,
(4) clean water.
The technical advantage of Fountain is the final link of residue or sludge elimination. Because the sewage system is connected to the sewer system, the sewage is sent to the sewage treatment plant for physical, mechanical, biological and chemical treatment; the treated water is sent back to the natural water cycle to complete the circulation of the entire water environment system. The most critical node of the entire water environment cycle is the disposal of residues in the sewage treatment process. This key clean technology is a complete licensing technology for CS-HTC sludge disposal integrated solutions provided by Fountain for investment and R&D and cooperation with the Institute of Colloid and Surface Chemistry of MaxPlanck College, Germany.
The main business of infrastructure management in the water industry is based on the natural monopoly of the pipeline network; the governments of all countries will impose local regulatory constraints on the urban infrastructure services business. Governments will also set up policy interventions for monopoly services for foreign-invested pipe network facilities; for example, the approval of the right to use, or the mandatory introduction of multiple local terminal operators to share the right to use facilities. The purpose of these policy interventions was to reduce the cost of drinking water for the public on the premise of ensuring water quality. However, in the business environment of urban areas where the degree of internationalization along the Maritime Silk Road is not high, such specific violations of regulations Regulatory measures often turn into barriers to foreign investment operations.
The strategy to avoid the above risks is to promote the concept of reducing environmental pollution, reducing the impact of urban human settlements on the water environment, and adhering to the concept of supporting the virtuous circle of environmental infrastructure and clean technology services with sustainable market prices, and strive for scale. Plan and build large enough water projects, or large water and sewage pipeline facilities to reduce these risks.
Because large-scale projects need to raise funds, large-scale water industry infrastructure gradually evolved from a full-scale government public organization (only some services are outsourced to private companies), and evolved into a variety of PPP, a mixed independent entity project between public organizations and private companies. At the international level, a set of business practices with clear rules and convenient operation has been gradually formed.
Fountain have the experience and great investment interest in the establishment of the following various forms of operating water infrastructure in the port cities along the 21st Fountain Maritime Silk Road:
1. Engineering contracting services that participate in large-scale mixed-investment investments while providing key technologies;
2. Participate in the privatization of large-scale operational projects while participating in the technological transformation of large-scale operational projects, that is, combining substantive privatization and asset ownership transfer processes with investments in new technological transformation programs;
3. Leading in the securitization of large-scale projects and public equity entities, holding participation in major restructuring matters involving independent entities, including equity, investment returns, price and service levels, and incentive arrangements;
4. As a key new technology solution implementation and investor party, coordinate the structure of the independent entity's public offering interest, in the process of securitization of the project, the formation of corporate governance, manager responsibility, patent technology party responsibility and risk, the key cooperation terms of public offering, performance control guarantee.
(1) At present, many countries have no independent legal subject status as the main body of water environment infrastructure construction. It is only the main body of independent engineering budget expenditure. Such an independent legal entity of government expenditure budget will own and operate related assets according to the actual expenditure of the budget to ensure the unification of government budget expenditure and facility maintenance, management and business performance. At this time, the entire system of the water environment infrastructure is owned by the state, but the facility system is in urgent need of renovation and improvement of the performance of the system maintenance operation. In response to such situations, Fountain Star will launch a contract management model that incorporates new technology renovation and transformation inputs;
The model of contract management refers to the opportunity for the management company outside the state to provide management services to intervene in the operation of the public water environment infrastructure while the entire system is still owned by the state. The newly established management company (with no major assets of the system) will pass Take over the special management contracts for maintenance, management, and operations to obtain management benefits and business benefits for performance rewards. In this way, the public sector still holds ownership of all assets of the system; and only invests in commercial interest-oriented operational service resources in accordance with management contracts in the life cycle of asset renewal (reconstruction design, construction of new technology facilities, investment in operational resources and equipment) maintain.
At this time, the public sector generally set up a project company to undertake the investment responsibility of the assets, and Fountain will set up a management company specializing in management responsibility to invest in the agreed renewal, operation and equipment maintenance resources; Pay related income and link it to performance to take on the commercial risk of resource input.
Because water is a necessity, the government has additional restrictions on monopoly status (especially the water supply and sewage treatment network). The legal guarantee for user payment and the quality of service performance of the management company are strictly stipulated in the management contract. Under the premise that the government does not bear commercial risks, the “operating contract” or “equipment renewal design – construction – far-reaching” (DBO) will also be charged by the public agency to the user (or from other sources such as tax channels), periodically The management company pays the fee. If the management company is entitled to a fee-based charging mechanism, the government directly charges the user and calculates the “shadow charge” based on the actual water consumption. Under the “Facility Renewal Design – Construction – Operation – Financing” (DBFO) operating model, the management company is also responsible for financing, and the government is responsible for the protection based on the measurement of the quantity of services, namely the shadow charging model.
(2) Lease business model of Fountain Water Source as a water environment infrastructure asset of the operator:
A public agency can lease the assets it owns to the operator. The asset usage fee paid by the operator, and the operator recycles the investment by charging the user. Contracts of this model usually appear in the form of franchise and concession contracts; this is similar to the “Design-Build-Operate-Transfer” (DBOT) model, where operators renovate the facilities that lease assets within the scope of the concession authorization. Design, construction, financing, and responsible for the unified operation and management of the leased stock assets, and charge users according to the franchise agreement. Franchising often includes the exclusive right to renovate new facilities. Under the franchise and concession contract model, ownership of the underlying assets remains a public institution. The operator as the concessionaire owns the ownership of the asset before the end of the contract. Currently, in the future potential growth market of the maritime Silk Road East Asian port city. Several large international private companies have actually signed some franchise rights, BOT projects and service contracts. In the international water industry management practice, only a few well-operated multinational companies hold most of the large franchise contracts, and the market share will be highly concentrated. Therefore, the new technology and the renovation and transformation of the original stock infrastructure should become the core competitiveness of Fountain 's business development.