A 30-year concession for the Dongshen Water Project forms the heart of a multi-layered restructuring plan designed to rescue insolvent provincial window company Guangdong Enterprises (Holdings) (GDE) from liquidators.
The Pearl River Delta reservoir, with a capacity of 1.7 billion cubic metres, derives 93 per cent of its revenue through its sales to the SAR.
With revenues this year projected at US$260 million and an estimated value of more than US$2 billion, it is the only asset the Guangdong provincial government has marked for injection into the GDE group as part of a restructuring plan unveiled to creditors yesterday.
The work-out plan itself is a complicated arrangement involving a debt-to-asset swap under which GDE creditors would exchange US$3.9 billion in liabilities for US$3.6 billion in notes and preference shares and US$300 million in cash.
If approved, a new provincial window company would emerge from the ashes of the old investment arm, with creditors sharing a 50 per cent stake with the Guangdong provincial government in GDE, which will emerge as nothing more than a debt-servicing instrument.
The overall plan calls for four separate restructurings, of GDE, subsidiary companies Guangdong Investment (GDI) and Guangnan (Holdings) and Macau-based window company Nam Yue (Holdings).
Goldman Sachs managing director Steve Shafran said the water company would be injected into a new provincial window company - New GDE - which, in turn, would sell the project to GDI.
