The rush of Chinese companies expanding overseas continues with state -owned Beijing Capital Group the latest to invest abroad after it struck an US$900million deal to acquire New Zealand's largest waste management company. It is also the biggest overseas acquisition of an environmental company by a Chinese firm. This follows Hong Kong-based Cheung Kong Holdings buying New Zealand’s second largest waste management company for US$400 million last year. Prior to the purchase BCG looked at waste management companies in Greece, Spain, Portugal and Malaysia. They also noted that overseas firms have better technology than those in China, and are also better managed.
For Beijing Capital this is it's first acquisition outside China, until now its focus has been purely domestic and having a reputation for being conservative, this is seen as a bold and significant move. Even though Li Keqiang, China’s Premier, announced in his 2014 work plan that his goal for outbound investment by Chinese enterprises was US$99 billion, and large Chinese enterprises would want to be seen to support his goal, this is a big step. Outside of basic materials – oil, gas, mining, chemicals, etc. – there have been few examples of state-owned enterprises making acquisition on this scale.
So what could be behind the acquisition? Certainly, China’s waste management industry standards will benefit from adopting best practise from it's New Zealand partners. Could these lessons have been learned without spending US$800million? Could this be the first step in a multi-country expansion?
Or perhaps it's in preparation for internal expansion as localised opposition to 'waste to energy' plants is diluting as the worlds biggest incinerator which can process 3,000tonnes of waste per day gets set to go into full operation on the outskirts of Beijing. With the potential to produce 420million kilowatt hours of power per year, which is equal to that generated by 140,000tonnes of coal. The Beijing government have been using the new project as a showcase for the recycling industry. Government officials are embarking on a multi-billion-yuan plan to introduce advanced solid waste incineration technology from abroad and building new waste incinerators to combat the growing waste problems. Plans for 40 newly built incineration plants, food waste facilities and other recycling plants are planned. BCG would be ideally placed to use the successful methods of it's New Zealand venture within it's stronghold in China.
China is predicted to produce 480million tonnes of solid waste per year, it's easy to see why waste is now seen as a very valuable resource.