Befesa completes the financing for the construction and operation of the Qingdao desalination plant in China

July 23, 2009

Madrid, 23 July 2009. Befesa, through its subsidiary Befesa Agua, which specialises in the integral water cycle, has completed the financing to design, construct, finance and operate for 25 years the sea water desalination plant in Qingdao, China. The project, which will require an investment of €135 million, will be financed by a syndicate of banks comprising the Agricultural Bank of China (lead bank), Export-Import Bank, China Construction Bank and China Merchants Banks, which will provide non-recourse financing to shareholders for 70% of the investment (€94.5 million).

The desalination plant will be constructed in the city of Qingdao, the second largest commercial port in northern China in the province of Shandong. It will have a capacity to desalinate 100,000 cubic metres of water a day and will be able to supply drinking water to a population of 500,000 people. The plant will use reverse osmosis technology with innovative designs in the pre-treatment phase (ultrafiltration membranes) and in the centralised pumping system, to achieve better energy efficiency.

It is estimated that the plant will generate revenues of more than €654 million from the sale of water over the 25 year period, in addition to a further €25 million for the technical support required to operate it.

Completion of the project’s financing represents an important milestone, as this is the first desalination project to be carried out using a project finance structure and 100% financed through local banks, as well as being a pioneering project for supplying desalinated water in China.

This project is the fifth concession to be won by Befesa Agua to operate a large desalination plant and the combined contracts have a capacity of 700,000 cubic metres per day and represent a total investment using a project finance structure of €700 million. Befesa Agua’s leadership in developing desalination projects was recognised in April this year when it was presented with the “Desalination Company of the Year” award by Nobel Peace Prize winner, Al Gore, on behalf of the Global Water Intelligence organisation.

Javier Molina, chairman of Befesa, said “this operation confirms Befesa’s ability to continue to finance the development of important infrastructures and projects in a highly complicated environment due to the global crisis, as well as demonstrating our strategic commitment to being the leading desalination company”.

Befesa, the environmental services subsidiary of Abengoa, focuses on providing environmental services to industry and the construction of environmental infrastructures. It is a public listed company with a market capitalisation in excess of €325 million (close 2008). (www.befesa.com).