A month ago, two correspondents of the National Audit Office stationed at Shanghai Youlian Zhuyuan No. 1 Sewage Treatment Investment Development Co., Ltd. (hereinafter referred to as Zhuyuan No. 1 Plant) and conducted special audits.

The sewage treatment project of Zhuyuan No. 1 Plant is the second largest sewage treatment project in Shanghai, second only to Bailonggang Project. Zhuyuan No. 1 Plant Energy Conservation and Emission Reduction Reconstruction Project was established in July 2006 and is a major municipal project of the Shanghai Municipal Government. It also helped Shanghai complete some of the COD energy conservation and emission reduction targets.

However, in the major upgrade and reconstruction project of Zhuyuan No. 1 Plant, there was a serious cost overdue. The project budget approved by the Shanghai Municipal Development and Reform Commission was RMB 120,939.3 million. However, as of February 2009, the project has signed various types of contracts totaling RMB 1335.9 million, and the total construction cost has exceeded the budget of RMB 111.96 billion.

On January 21, an insider of Shanghai Yangchen Investment Co., Ltd. (Yangchen B, 900935), the main controlling party of Zhuyuan No. 1 Plant, confirmed to the reporter that the relevant auditing was indeed under way, but “belongs to the routine audit work.” .

The source said that for the project overrun, the company had publicized it in the 2009 announcement and the relevant auditor has not yet reached any conclusion. "As a listed company, once it has any results, it will report to the public in a timely manner." .

Huge excesses

The audit storm began with an audit of the National Audit Office. In mid-December 2010, the special commissioner of the Audit Office began to move to a factory in Chuk Yuen for an audit investigation.

The announcement of the resolution of the 5th meeting of the 5th Board of Directors issued by Yangchen B shares on January 5, 2010 attracted the attention of the Commissioner of Audit.

The announcement said that as confirmed by Zhuyuan No. 1 Plant, as of February 2009, Zhuyuan No. 1 WWTP major upgrade project had signed various types of contracts amounting to 13.135.9 billion yuan, of which the major project cost was estimated to be 1.4691 billion yuan. .

The insiders of Yangchen B shares revealed to this reporter that in fact the company discovered that the overrun had started in September 2009 and the board of directors had been reelected for just half a year. “At that time, the payment was due and the overrun was reported to the board of directors.”

The company's internal rethinking on the one hand, over the other hand, hopes to “repair”:

In March 2010, the Shanghai State-owned Assets Management Co., Ltd., the controlling shareholder of the B shares of Jingyang Chen, proposed that the company convene an extraordinary general meeting to review and approve the temporary increase of the project and report it to the Shanghai Water Affairs Bureau to make corresponding adjustments to the settlement water price. We hope to make up for the overexpenditure of construction funds by increasing the revenue of water prices.

However, “since only the amount of investment approved by the Municipal Development and Reform Commission and other government departments can be used as the basis for applying for the adjustment of the water price to the Water Affairs Bureau”, the total amount paid by the company for the relevant project can only be approved by the 2007 extraordinary shareholders’ meeting. 85% of the yuan is limited.

On September 10, 2010, after the company's second extraordinary general meeting of shareholders delibrated and approved, the upgrade project increased the commissioning fees and other project costs by 59.35 million yuan. However, due to over-expenditure on this part of the Qi, there is still a gap of about 60.25 million yuan.

Why exceed the standard

Although it is a major energy-saving emission reduction project of the Shanghai Municipal Government, it should be submitted to the board of directors for resolution beyond the budget.

The Shanghai Youlian Zhuyuan Project is a continuation project of the first-phase sewage treatment project in Shanghai. It is located on the east side of the high-elevation well of the first phase of the sewage treatment project at the Zhudong Confluence of Gaodong Town, covering an area of ​​33.79 hectares.

The scale of the wastewater treatment handled by Unionlink Chuk Yuen is 1.7 million tons, of which 1.4 million tons comes from the dry-flow wastewater from the pumping station at the first phase of the Shanghai Confluent Sewage Treatment Project, and another 300,000 comes from the sewage diverted into the system in the Waigaoqiao area.

In 2004, Youlian Chuyuan completed its operation and became the largest sewage treatment plant in Shanghai and even China. In 2006, the Youlian Lianzhuyuan project was transferred once. Yangchen B shares and its holding subsidiaries purchased private Zhuzhou No. 1 Factory from Shanghai Youlian Enterprise (Group) Co., Ltd. and Huajin Information Industry Investment Co., Ltd. % of the equity, in addition to the 15% stake in Shanghai Construction Engineering Group, was also acquired by it soon.

Shortly after Yangchen B’s acquisition of the plant, major upgrade projects for energy conservation and emission reduction started. The person approaching the factory described that at the time, this reform project belonged to “national and local government regulations”.

The year 2006 was the first year of the 11th Five-Year Plan. The state made energy-saving and emission-reduction as an important part of economic transformation. Several large-scale sewage treatment plants in Shanghai responded to the call of the Shanghai Municipal Government to carry out energy-saving and emission-reduction projects for sewage treatment projects. To help the local government complete energy-saving emission reduction targets.

According to informed sources, the first factory in Zhuyuan, which bears a budget of over RMB 1.2 billion, has only 3 billion yuan of its own funds. At present, a large amount of construction funds are derived from bank loans.

The upgrade project is mainly to upgrade the wastewater treatment process of the plant from a first-level enhancement to a second-level biological treatment. The company stated in the announcement that “as this upgrade project is a three-year environmental protection plan for Shanghai, a model for creation, and a major project for the World Expo, construction is difficult, time is tight, and the task is heavy”, that is, this huge project is scheduled The time for completion is tight.

According to media reports, in order to solve this problem, the project general contractor and the Shanghai Tunnel Company under Shanghai Urban Construction subsequently subcontracted the engineering layers to dozens of small enterprises, many of which were private enterprises.

With regard to the subcontracting of the project, the insiders of Yangchen B shares said that it was not very clear. "We are conducting an audit of the contract. If we find any non-compliance issues, wait until after concluding comments."

In addition, according to an insider of the Chuk Yuen Plant, as the budget was set in 2006, the price increase of raw materials, modification of midway technology, and adjustment of bank loan interest rates resulted in increased costs.

However, the person pointed out that "when the contract was signed, it did not pass the resolution of the board of directors."

An industry analyst who has long been engaged in the sewage treatment industry analyzed that “Although it is a major energy-saving emission reduction project of the Shanghai Municipal Government, it should be submitted to the board of directors for resolution beyond the budget. The board of directors then requests the Shanghai Development and Reform Commission to apply for adjusting the settlement water price, even if the NDRC does not allow it. It can anticipate risks in advance and deal with them in a timely manner."

According to the reporter’s report, the former general manager of the two responsible persons, Shenyang Hua and the financial director Qu Xia, were repeatedly called to talk during the audit. Both of them were resigned when the board of directors was changed in 2009. Among them, Shenyang Hua had retired in March 2009. Qu Xia resigned from the position in February of that year and was transferred to another Shanghai state-owned enterprise as an executive.

Before being transferred to Yangchen B shares, both were the general manager of the strategic investment department and the business manager of the restructuring department of Shanghai State-owned Assets Management Co., Ltd.

Who pays for

The final audit results will determine who will bear the cost of this overdraft.

Youlian Zhuyuan was once the largest sewage treatment BOT project in Shanghai. The so-called BOT (build-operate-transfer, construction-operation-transfer) means that the government grants a franchise for a certain period of time through a contract, permits it to build and operate a specific public infrastructure, and collects investment and earns money by charging users. Take profits; when the concession period expires, the infrastructure is handed over to the government free of charge.

According to the “Franchise Agreement” (agreement number) signed by Youlian Zhuyuan and Shanghai Water Affairs Bureau on August 20, 2002, the Water Authority granted Youlian Chuk Yuen the exclusive rights to finance during the construction period and/or concession period. And construction project facilities, operations and maintenance project facilities. The agreement period is 20 years. After 20 years, the project will be transferred to the government without compensation. After the transfer of the equity of Youlian in 2006 to B shares of Yangchen, the agreement was continued by the latter.

According to Jin Yongxiang, general manager of Beijing Daoyue Consulting Co., Ltd., which has long been engaged in investment and financing of urban public utilities projects, in the BOT model, the main source of profit for operating companies is sewage treatment service fees.

Jin Yongxiang stated that the construction of general BOT projects is undertaken by the operators entrusted by the government. However, according to sources inside the Chuk Yuen First Plant, as the project was upgraded by the Shanghai Municipal Government, a major municipal project, and due to the increase in the level of sewage treatment, resulting in an increase in the sewage treatment costs of the plant, the agreement reached at that time was that the construction cost would eventually pass. Sewage treatment fee to cash.

According to the agreement, the price of service fees will be based on changes in the price of electricity, charges and other charges starting from the fourth year of operation and will be adjusted every three years according to the established formula.

However, “only the amount of investment approved by the Municipal Development and Reform Commission can be used as the basis for applying to the water department to adjust the price of water. If the original budget was 120.93 billion yuan, the water price would be 6毛5分8厘”, then what is the part beyond the budget? do?

The above-mentioned person in Zhuyuan First Factory pointed out that the audit result is still awaiting. Once the audit thinks that the over-budget is due to irresistible factors such as price increase of raw materials and engineering changes, the company will apply to Shanghai Municipal Development and Reform Commission for adjusting the sewage treatment fee. According to the budget, "the final accounting stage can also be adjusted, and the government will make up for it by raising the price of water."

However, if the project contractor has subcontracted the project and caused overspending of project funds, should it be passed on to consumers through the water price? The final audit results will determine who will bear the cost of this overdraft.

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