business

ADB Plans 2011 Water Bond on Asian Supply ‘Crisis’

The Asian Development Bank may issue a bond next year solely for water projects in a bid to lend as much as $25 billion over the next decade amid persistent supply problems in the region.

“Crisis is already here in Asia,” said Arjun Thapan, a special adviser for infrastructure and water at the Manila-based lender. “We’d be very glad to do another bond as soon as the market is ready and 2011 is possible,” he said, while adding that the size of any issuance is still being considered.

The bank has warned about half a billion Asians have no access to safe water supply with most wastewater left untreated, polluting rivers and lakes. By 2030, water demand in the region will exceed supply by 40 percent unless countries improve the treatment and management of fresh water supply and wastewater, Thapan said yesterday in a phone interview.

The ADB this year hired Daiwa Securities Group Inc. to sell Australian dollar and South African rand securities called Water Bonds to Japanese investors to help finance $8.7 billion of water projects in Asia-Pacific until 2012. The bank raised more than $600 million from the first issuance, Thapan said.

The lender aims to invest as much as $2.5 billion for water on average annually through 2020, while details of the plan are still being ironed out, Thapan said. The bank will focus on wastewater treatment projects that allow countries to reuse the resource for irrigation and industries, he said.

$1.2 Trillion Business

Global water businesses such as supplying clean water, sewage treatment and desalination of seawater will grow to 100 trillion yen ($1.2 trillion) by 2025 from 60 trillion yen in 2005, according to an estimate provided by Toray Industries Co., the world’s third-biggest maker of reverse osmosis membranes used in water filtration systems.

Japanese companies accelerated investment in water projects abroad to boost income, as population decline slows demand at home. A group led by Mitsubishi Corp. and JGC Corp. agreed in May to buy United Utilities Australia Pty for A$225 million from United Utilities Group Plc, Britain’s largest publicly traded water company. Mitsui & Co. and Singapore-based Hyflux Ltd. joined forces to buy stakes in four treatment plants in China.

“Japanese technologies and water management skills are something that need to be shared in an expanded way with developing countries,” Thapan said. “Water isn’t an endless, elastic resource.”

Cleaner Energy

The bank also aims to boost financing for clean-energy devices such as solar and wind power generators, to strengthen the region’s energy supply and cut dependence on coal, oil and natural gas.

The ADB is studying the sale of $500 million worth of so-called Clean Energy Bonds annually for at least five years to fund new plants, Seethapathy Chander, head of the bank’s energy community of practice, said this week.

The bank plans to invest $2 billion a year in projects including solar and wind-power farms in five years starting 2013, said Chander, who leads the division that advises the ADB’s operating departments on energy policy and projects. That compares with $1.5 billion the bank invested this year and $1.26 billion in 2009, he said in an interview.

Cleaner and more efficient use of energy will allow the region to cut hydrocarbon imports “by significant amounts” and improve energy security, Chander said. “Energy security is one of the pillars of our policy.”

(Updates with comment on bond size in second paragraph.)
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