VietNamNet Bridge - An ADB report shows that Vietnam’s population in urban areas is expected to increase to 37 percent by 2020 from 30 percent. The rapid urbanization would lead to an urgent needs for infrastructure, including clean water.

There are many reasons for investors to believe that water supply is a business field deserving of their investments. 

A report showed that only 60 percent of urbanites can approach clean water. Meanwhile, the percentage of water lost during the transmission is still high, at 30 percent, higher than the 15 percent in developed countries. This is attributed to the old water distribution system.

Operational water production and supply companies were mostly state owned enterprises (SOEs). In 2007, the state, in an effort to call for capital from the public, put a series of companies into equitization.

The Ministry of Finance’s Price Control Agency, in its report about the water supply sector in Vietnam, showed that 35 out of 90 water supply firms had launched IPOs (initial public offering) by 2013. Meanwhile, 9 SOEs in the sector have had IPOs so far this year.

Many private investors jumped on the bandwagon in the last five years, since the state began calling for public capital to the water supply sector.

Dong A Bank, for example, bought large amounts of shares of the subsidiaries belonging to the Sai Gon Water Supply Company (Sawaco) which now holds 90 percent of the water supply market in HCM City some years ago when the firms made IPO.

The banker injected money into Gia Dinh, Ben Thanh, Nha Be, Phu Hoa Tan and Cho Lon.

Vinamilk, a dairy producer, was also a big shareholder of water supply firms. It held 14 percent of stake of Gia Dinh Water Supply Company. It was one of the three biggest shareholders holding 10 percent of stake of the Thu Duc Water Supply Company (TDW). The other two were VOF Investment Ltd – VinaCapital and Sawaco.

The common characteristic of the investment deals made prior to 2012 was that these were mostly portfolio investments, while the investors were from other business fields and investment funds. 

Dragon Capital was also a shareholder of Thu Duc B.O.O Water Plant. Maybank Kim Eng Securities invested in Ben Thanh Water Supply, a subsidiary of Sawaco. Meanwhile, the Nha Be Water Supply Company had VMFVF1 and VFMVF2 funds.

That was why the investors quickly withdrew their capital from water supply firms after the 2008 financial crisis. VOF disinvested from TDW in 2013, while Vinamilk quitted Gia Dinh in 2010.

However, water supply has always been ‘hot’ for investors. In late 2013, when VOF and Vinamilk left TDW, the Refrigeration Engineering Enterprise (REE) became the strategic shareholder of TDW, holding 42 percent of TDW’s shares.

DNSG