AmInvestment and Konzen form private equity JV

The subsidiaries of MalaysiaÆs AmInvestment Bank Group and Singapore water specialist firm Konzen Group have formed a joint venture private equity fund management firm. The parties that formed the JV were Malaysian Ventures Management and Konzen Capital.

The JV will be evenly split between the two parties and based in Singapore. It will be called AmKonzen Water Investments Management and will manage a proposed $320 million special purpose vehicle (SPV) called AmKonzen Asia Water Fund (AWF). The fund will invest in a well-diversified portfolio of water assets in the regionÆs booming water sector, primarily in China and including Southeast Asia.

AmKonzen AWF is also expected to serve as a partner in water infrastructure financing. AmInvestment and Konzen hope that the fund will become a key and expanding platform for financing Asian water infrastructure out of Singapore and create assets for investors who like the Asian water theme.

AmKonzen, as the manager for the fund, will seek to make long-term equity investments in a geographically diversified portfolio of water projects throughout Asia.

Emphasis will be given to municipal water opportunities in Northern China to alleviate absolute water shortages and where demand for scarce water is extremely strong. In Southern China, where pollution control is becoming critical and attracting new investments to sustain ChinaÆs place as the worldÆs factory, the firmÆs focus will be on industrial water treatment projects.

ôPrivate investors have been present in ChinaÆs water sector since the late 1990s, but it was only in 2002 when the government opened up the entire municipal service sector to domestic and foreign companies that investment really took off,ö says Konzen CEO Yeong Wai Cheong.

In the 2003-2005 period, more than 50 private-public partnership deals were signed in China for water projects. Since then, the number of deals signed for water projects in China far exceeds the total in any other country worldwide, according to Yeong.

In other Asian countries, special environmentally friendly water projects will be identified for investment.

The fund is expected to create diversified revenue streams through investing in new water plants, acquiring equity stakes in existing plants with opportunities for expansion or refurbishment and yield enhancement, and capturing growth in innovative and proven water technologies and products that are applied throughout the water supply chain. The balancing of infrastructure assets and private equity is expected to provide a unique investment product in water-themed funds and business trusts.

Konzen, an established player in the China water industry with a 15-year operating track record, has identified a pipeline of water projects for potential investment by the fund. These potential projects are sourced through KonzenÆs offices and through their participation in Asia Infrastructure Project Development (AIPD), where Konzen is a founding partner. AIPD is a joint venture company between the Asian Development Bank and a Singapore private sector consortium made of Konzen, Crest Spring, and United Engineers.

AmInvestment, a member of the AmBank Group, is one of the largest investment banks in Malaysia. The group has wide experience in privatisations and private-public partnerships, including advising and funding premier infrastructure projects in Malaysia and the region. The group has raised funds, including both conventional and Islamic debt, by relying on its strong client relationships and expertise developed in specific industries. It has funded the Sungai Selangor Water Privatisation Project and the Malaysian Integrated Scheduled Wastes Project in Malaysia, which are pioneering.

China is one of the worldÆs most active markets for private-public partnerships in water. The government has fully embraced the idea that private firms should be financing and operating municipal water supply and sewerage services in the countryÆs booming cities.

The ADB estimates that around $140 billion in new investments are needed in water and waste-water treatment plants and recycled water in China. Municipalities often lack capacity to develop detailed plans needed to attract private investors, creating the need for specialised water funds.