CIC, RRJ team up in China water deal

The two firms have participated in a $212m fundraise by SIIC Environment Holdings, a China-focused water treatment business listed in Singapore.

China Investment Corporation and RRJ Capital have jointly invested in SGX-listed SIIC Environment Holdings, part of a S$263.5 million (€156 million; $212 million) deal for 36 percent of the business, according to a statement from the target company. 

CIC, the Chinese sovereign wealth fund, invested S$56 million in the business, while Hong Kong-based private equity firm RRJ invested S$38 million, the statement said. 

Despite the recent case of Chinese water company Standard Water coming under fire in an accounting scandal, private equity firms have not shied away from investing in the sector.

CIC and RRJ will hold 7.68 percent and 5.24 percent of the business respectively. 

The largest investment came from Shanghai Industrial Holdings, a Hong Kong-listed business, which invested S$136 million in a 18.63 percent of the company.

The agreements are based on a share price of S$0.0977, a 13 percent discount to the company’s volume weighted average price on 10 October 2013 – the last full market day before the subscription agreements were signed. 

SIIC Environment is a water treatment and management specialist offering engineering solutions for water purification, water supply and waste water treatment solutions. The business listed on the Singapore stock exchange in 2005, but focuses on the water sector in China. 

Despite the recent case of Chinese water company Standard Water coming under fire in an accounting scandal, private equity firms have not shied away from investing in the sector. 

In 2010, Ernst & Young resigned as auditor from the Themes Investment Partners-backed water company after citing “inconsistencies” in the company’s documents, Private Equity International reported earlier. 

The Hong Kong Securities and Futures Commission ended up filing legal action against the auditor in August 2012 in order to obtain documents about the company after Standard Water pulled its application to list on the HKEx. 

Nevertheless, private equity firms have continued investing in China’s water sector. Kohlberg Kravis Roberts, for example, in January made a $40 million follow-on investment in United Envirotech, another Singapore-listed water treatment provider in China, the firm said in an earlier statement. 

This new transaction increased KKR’s investment in UEL to $153.8 million, following an October 2011 subscription to $113.8 million of convertible bonds. KKR has agreed on an offer price of S$0.50 per share, an 8.5 percent premium to UEL’s average 30-day share price. 

RRJ Capital is a Hong Kong-based private equity firm founded in 2011 by Richard Ong, one of the three co-founders of Hopu Investment Management. In 2012, the firm raised $5 billion for its second private equity fund, according to PEI’s Research & Analytics division. 

Ong’s brother, Charles Ong, co-founded the firm and was formerly chief strategist at Singaporean sovereign wealth fund Temasek Holdings. RRJ has teamed up with Temasek on a number of energy-related investments, most recently selling its stake in Houston-based Cheniere Energy in August, having invested a combined $468 million in the business in 2012, PEI reported earlier.