Given the 8% -12% ROE limitation set out in the government's industrial guidance, the Company decided to acquire an industry leading consultancy firm (i.e., CGW) which can directly participate in the growing water industry without any limits on return. With the acquired expertise, NCVL can begin launching value-added services, such as system design, project engineering, management consulting, equipment procurement, pipeline inspection and maintenance, as well as meter reading and tariff collection, in markets in which it has set up a water project company and has monopoly rights to the region to enhance profitability. The charges for these services will be booked as operating costs for specific plants or projects.

The management of the Company believes that the competitive advantages of the Company are attributable to the following factors:

A top management team, which consists of former high ranking officials in the Chinese Ministry of Water, with vast experience in water projects in China

An experienced expert consultancy team with an optimized organizational and management structure

Comprehensive market development capacity, especially with the niche strategy of targeting emerging cities and regions within China

A logical business model of evaluating and modernizing undervalued, inefficiently operated assets and applying a western, private enterprise management to dramatically increase the value of the assets

A end-to-end water solution that allows the local government to address the water crisis in China

In a sector that is headed for further deregulation, there are numerous potential opportunities in the market.

With the commencement of major projects like the "Three Gorges Project" and the "South-to-North Water Supply Project", a substantial amount of resources will be needed for construction work in next 15 years. Construction work in the area of water conservancy in China mainly comprises dams, flooding control reservoirs, water resources distribution, etc. Company management believes that there is a tremendous opportunity for its CGW division to participate in the engineering design and construction supervision of such projects.

To appropriately address the water shortage issue, growth of water supply capacity in China must be at a level of 8% per annum, while expansion of pipeline capacity must be at a level of 15% per annum. The extensive tap water construction project of China mainly comprises urban water supply and expansion of tap water supply coverage over the great rural area.
Invest in China water industry infrastructure utilities
It has been estimated that total investment in water supply infrastructure in China will reach RMB¥600 billion ($75 billion) for the coming 25 years, averaging RMB¥24 billion ($3 billion) per year.

The Chinese government has mandated the nation's STR to over 60% by 2010, and over 90% by 2030. This will require an annual growth rate of 20% in sewage treatment capacity. In China, urban sewage accounts for approximately 50% of used water. It has been estimated that total investment in sewage treatment infrastructure in China is estimated to reach RMB550 billion ($69 billion) for the coming 25 years, averaging RMB22 billion ($2.75 billion) per year.