Shanghai Industrial invests 1.5b yuan in water industry

Following the success of SMIC's listing, the group plans to spin off the assets

Red chip Shanghai Industrial Holdings is ploughing about 1.5 billion yuan into the mainland's fledgling water-supply market, paving the way for a separate listing of the business, according to chairman Cai Laixing.

The conglomerate had closed deals to supply drinking water in Anhui and Hunan and was close to signing four similar projects in Xiamen and Nanjing in its latest effort to fill an earnings shortfall left by last year's sales of its toll-road assets, Mr Cai said.

The acquisitions would help build a portfolio destined for a spin-off, similar to its investment in Semiconductor Manufacturing International Corp (SMIC).

The $7.8 billion spin-off of SMIC in March generated an exceptional gain of $480 million for Shanghai Industrial in the first half and inflated the group's interim net profit by 89.2 per cent to a record $930.05 million.

'Our investment in SMIC was proven right and successful, especially to those people who poured cold water on it three years ago and said semiconductor manufacturing was a high risk,' Mr Cai said yesterday. 'We will continue to look for high growth and high-return investments, and water supply is one of them.'

He said prospects in the water market were promising in light of the recent deregulation of gas and water utilities to improve efficiency and relieve the government's capital commitment burden.