250 Wu Xueying 28.4.2015"Winning a municipal government project of this size is a key milestone for us," said CEO Wu Xueying. NextInsight file photoGREEN BUILD TECHNOLOGY, which reported a 1H2015 net loss, has just won a RMB947 million (S$200 m) government contract in Harbin, northeast China.

It said it has been selected as a main contractor for a major public project to help turn Harbin into a smart city with an intricate underground utilities network.

Harbin City is one of ten PRC cities to be modernised under the pilot underground utility tunnel program, and the Green Build Technology's wholly-owned subsidiary, Harbin Shengming, is one of a select few authorized by the municipal government to participate in its construction.

A formal contract is expected to be entered into soon.

The underground utility tunnel construction project involves centralizing the city's cables and pipes for electricity, telecommunications, radio and television, water supply, drainage, heating and gas under an integrated underground facility.

The plan is for all utility pipelines and cables in the city to run through the 12 km underground utility tunnel.

The facility is a breakthrough for the city's environmental sustainability, improving its safety and security without burdening valuable land resources. It significantly reduces excavation work on roads that disrupt traffic and destroys scenery.

Highlights

* Harbin Shengming will be involved in the construction of the underground utility tunnel, as well as the operation and maintenance of the tunnel for a 25-year period after the completion of the construction.


* The approximate cost of investment for the tunnel project is RMB947m. About RMB437 m will be borne by Green Build Technology, while Harbin Municipal Government will bear the rest.

* Green Build Technology’s investment in the project will likely be financed by the Group’s internally generated funds and bank borrowings. (Harbin Shengming has been in talks with several PRC banks to procure the necessary bank facilities.)

* The revenue stream in the next 25 years is expected to be sustainable, and will include total government subsidies of RMB884 m, entrance fees by the service providers, and other operating income.
Expenditure on the construction work and capital equipment is also expected to stimulate the economy. Given such widespread improvement to the economy, the city's quality of life as well as environmental sustainability, there is headroom for the award of more of such contracts, as the central government rolls out policies to support the construction of the underground utility tunnel system.

Green Build Technology said it would co-invest about Rmb 437 million (S$96.8 million) in the 25-year Public Private Partnership (PPP) project, with the balance coming from the municipal government. The Group expects to receive government subsidies amounting to Rmb 883.7 million (S$195.4 million) over the 25 years of the PPP term, over and above income from its operation and maintenance of the facility.

Other than being a main contractor and project manager for the construction phase, and an operator during the service phase, the Group will also contribute to the design phase.

The management expects the construction phase of this project to be substantially completed by the end of 2016. 

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