Beijing Enterprises Water Group (Beijing Water) aims to more than triple its water treatment capacity to more than 3 million tonnes per day by 2010 to tap growing mainland demand, a company executive said. 'Even 3 million tonnes is still a very conservative target as we see a growing need for drinking water and sewage treatment driven by urbanisation and industrialisation and rising government concern about environment protection and resource conservation,' chairman Zhang Honghai said. The water unit of red-chip conglomerate Beijing Enterprises Holdings on June 13 announced the HK$1.37 billion acquisition of an 88.43 per cent stake in ZKC Environmental Group, the country's eighth-largest sewage plant operator. The purchase, Beijing Water's first foray into the business, will give the company 13 sewage treatment plants with a combined capacity of 1 million tonnes per day. Mr Zhang said he expected investment in the sector to more than double over the next five years because of water shortages and the country's low treatment rate for sewage, which was about 40 per cent on average. Under the government's strategic plan, the country's average level of sewage treatment should exceed 60 per cent by 2010. Mr Zhang said the company, formerly Shang Hua Holdings in which Beijing Enterprises Holdings bought a controlling stake in January, was seeking to acquire more sewage plants that could provide immediate profit. The company may also build new plants to boost capacity. Beijing Water would also buy from its parent two water treatment plants in Beijing with a combined capacity of 1 million tonnes per day, he said. The company would also bid for a 500,000 tonne-per-day plant that the capital city planned to build after the Olympic Games, he added. Together with three other projects with a daily capacity of 1.01 million tonnes that the company had agreed to add, the initial target of 3 million tonnes would be achieved, Mr Zhang said. He said that his company was also studying a number of projects with daily capacity of about 1.85 million tonnes for sewage treatment and 2.94 million tonnes for drinking water. Declining to disclose expected investment for further expansion, Mr Zhang said the company had many fund-raising channels. The purchase of ZKC was settled in convertible bonds and shares, while the payment for its parent's two plants was likely to be in shares. Responding to criticism that the ZKC purchase was too expensive, Mr Zhang said the price might seem 'relatively high' in the wake of a tumbling stock market but was fair as it included the talent, technology and management system the new firm would bring. The price was about 13.75 times ZKC's guaranteed earnings for this year of 100 million yuan (HK$113.62 million). Beijing Water shares have slumped 53 per cent since the deal was announced.