Zhang Guanghe, the leader of the Shandong Province inspection team, carefully observed the wastewater treatment process, occasionally asking Jiang Hailin questions.
"Manager Jiang, can your technology be used to desalinate seawater?"
"Our company has indeed tried it, and it can desalinate seawater." Jiang Hailin didn't hide that fact.
Zhang Guanghe's eyes lit up. "May I ask how much desalination costs? Can it be done on a large scale?"
"The cost is manageable. The main expenses are periodically replacing the filtration membranes, electricity, and the harmless disposal of filter residue." Jiang Hailin was lying through his teeth.
In fact, under high-intensity operation, the Heptagonal Silicon Oxide–Graphene Film could last for well over a decade without any trouble.
But he couldn't possibly say that. Otherwise, how would they make a profit? At worst, they could replace the membranes on a regular schedule later, creating the illusion that they wore out.
And if anyone found out, they could explain it as a technological upgrade. In any case, these technologies and products wouldn't be sold anytime soon. Only a handful of people within the company knew about them.
Zhang Guanghe and the others were also weighing the situation.
"Manager Jiang, if we built a seawater desalination plant, roughly how much would the treated water cost at the factory gate?"
Jiang Hailin's Technology Transfer Group was specifically responsible for commercializing research findings, so of course they had already studied the commercial prospects of seawater desalination.
He pretended to think for a few minutes before giving a figure. "Around 0.3 yuan per cubic meter."
"0.3 yuan?" Zhang Guanghe fell into thought. It wasn't exactly cheap, but it was about the same as ordinary tap water, or even a little cheaper.
That was especially true for Shandong Province, with its strong heavy industry. The local water resources were seriously polluted, which meant tap water plants faced relatively high treatment costs.
Take Quancheng, the provincial capital of Shandong, for example.
The factory-gate price at Quancheng's five tap water plants ranged from 0.6 to 1.2 yuan per cubic meter, clearly higher than 0.3 yuan per cubic meter.
"If production were scaled up, could the factory-gate price be reduced?"
Jiang Hailin thought it over before replying, "If annual output exceeded one billion cubic meters, the cost could drop by 0.1 yuan. The problem is that it would be difficult to use that much water locally. We'd have to build water pipelines, which would be another huge expense."
"One billion cubic meters a year?" Zhang Guanghe was secretly astounded. Shandong Province's total water supply the previous year had been only 21.989 billion cubic meters: 2.871 billion for household use, 2.469 billion for industry, 16.276 billion for agriculture, and 373 million for ecological replenishment.
If Suiren Company's seawater desalination plant could produce one billion cubic meters of desalinated water a year, that would amount to roughly a third of the province's household water supply.
And that raised the next problem: how to transport the water.
After all, not every city was on the coast. Besides, Zhang Guanghe had heard a little about how Pengcheng had hit a wall with Suiren Company before he came here.
Given the wastewater treatment plant project that Veolia Company had in Daocheng, Suiren Company would probably refuse to coexist with them.
As expected, in their subsequent discussions, the cooperation proposal Jiang Hailin put forward was an all-inclusive contract. They wouldn't allow a standalone tap water plant to be set up to supply the water utilities.
After two days of talks without reaching an agreement, Zhang Guanghe finally went to Suiren Company's headquarters to meet Huang Xiuyuan.
In a small office at headquarters.
"Mr. Huang, we're completely sincere about this. If we can reach an agreement, it would also be excellent publicity for your company."
Huang Xiuyuan was unmoved. He went straight to a very practical question. "If we build a seawater desalination plant, how can we guarantee it will be profitable?"
Zhang Guanghe started to explain, but Huang Xiuyuan raised a hand. "Director Zhang, let me finish. By 'profitable,' I mean how the local water utility could make a profit."
"Uh..." The question caught Zhang Guanghe completely off guard. He asked in confusion, "What does that have to do with the local water utility's profits? The desalinated water would of course be sold directly to the utility, which would be responsible for its own profits and losses."
"Of course it's related. If the water utility can't turn a profit and local government finances happen to be in trouble, do you think the utility will pay on time? That's anyone's guess."
Faced with Huang Xiuyuan's bluntness, Zhang Guanghe felt awkward. And when he thought it through, he realized that it was indeed possible.
When private companies did business with state-owned enterprises, one of the most common problems was that payments were frequently delayed.
Meanwhile, water supply was an especially sensitive public necessity. A water utility could hardly cut off the water over unpaid bills.
That would leave a seawater desalination plant in an extremely passive position when working with them, and Huang Xiuyuan didn't want to see that happen.
"I'm sure you know this as well, Director Zhang. The water utilities in various regions are probably operating at a loss, aren't they?"
Zhang Guanghe nodded helplessly. Before coming to Shanmei, he'd looked into the situation. Quancheng Water Affairs Company alone lost an average of 1.5 yuan on every cubic meter of tap water it sold.
In other words, supplying household water in Shandong Province cost the utilities more than four billion yuan a year. Without government subsidies, they would have gone bankrupt long ago.
Zhang Guanghe was in a difficult position. "Mr. Huang, there are precedents for private and foreign capital contracting water utilities, and your company has also taken over Hui City Water Affairs Company. But contracting the water utilities across the entire Shandong Province would be far too large a project."
Huang Xiuyuan took out a document and handed it over. "How about this? Shandong Province and our company could form a joint venture to establish a province-wide water utility. Suiren would only need a five-percent stake, but we'd need full management authority."
"Five percent? And full management authority? Can your company really make the water utility profitable?" Zhang Guanghe asked curiously.
"We can work out the numbers. Shandong's water charges cover 2.4 billion cubic meters of industrial water and three billion cubic meters of household water..." Huang Xiuyuan wrote down some figures as he spoke.
Industrial water totaled 2.4 billion cubic meters, and household water three billion. With water fees and wastewater treatment charges averaging three yuan per cubic meter at retail, annual revenue would amount to 16.2 billion yuan. Even if there were cases of water theft and the like, they could still collect at least 80 percent, or 13 billion yuan.
In practice, if commercial use were separated from household water and charges were collected for some agricultural water as well, the total revenue from water fees in Shandong would easily reach around 18 billion yuan.
Suiren Company's water plants charged 0.3 yuan per cubic meter at the factory gate. Supplying six billion cubic meters of purified water a year would cost just 1.8 billion yuan.
Then subtract wastewater treatment costs of 0.8 yuan per cubic meter, or 4.8 billion yuan.
By the time they were done with the calculations, the total expense was only 6.6 billion yuan. So where would the more than ten billion left over go? Even if they spent 30 percent of their annual revenue maintaining and upgrading pipelines and equipment, that would only cost around 5.4 billion yuan.
That would still leave roughly six billion yuan in revenue. It couldn't possibly all go to labor costs, could it?
The water utilities in the province's sixteen prefecture-level cities had at most 16,000 employees. Even if each earned an average annual salary of 100,000 yuan, and other expenses and benefits were included, total costs would still come to no more than two billion yuan.
So where did the remaining four billion go?
If the previous tap water plants' high factory-gate prices accounted for that four billion, that would be understandable.
But once Suiren Company took over, that four billion would become profit.
At this point, Zhang Guanghe couldn't help asking, "So you're saying that if we hand the water utilities over to your company, you can make them profitable?"
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