Haitian Shares' "Citizen Suing the Government" won, but the 13-year-old sewage treatment plant cannot escape the shutdown outcome

On the evening of April 1st, Haitian Co., Ltd. (603759.SH) disclosed the latest developments in a lawsuit involving its subsidiary. Its subsidiary, Chengdu Tianfu New Area Haitian Water Co., Ltd. (hereinafter referred to as “Tianfu Haitian”), sued Sichuan Tianfu New Area Agriculture and Rural Bureau (Tianfu New Area Agriculture and Rural Bureau) and Sichuan Tianfu New Area Management Committee (hereinafter referred to as “Tianfu New Area Management Committee”). The court ruled that the defendants revoke relevant resolutions and pay compensation of 115 million yuan to Haitian Co., Ltd..

The core issue of this case is the franchise rights of the wastewater treatment plant owned by Haitian Co., Ltd. in Huayang, Shuangliu, Chengdu. The local government had terminated the franchise rights for this wastewater plant by the end of 2024. However, because Tianfu Haitian failed to reach an agreement with the local government on a compensation plan for withdrawing the franchise rights, the company filed a lawsuit with the Sichuan Tianfu New Area People’s Court.

After investigation, Caixin learned that the newly built wastewater plant by the local government is more environmentally friendly, and the fate of Haitian Co., Ltd.'s wastewater plant may have already been sealed.

A person living near Haitian Co., Ltd.'s wastewater plant told Caixin today (April 2nd) that the current wastewater treatment in the area is mainly handled by a new state-owned wastewater plant, which is “more advanced and more aesthetically pleasing.”

Court rules that the local government must compensate the company 115 million yuan

In July 2025, Tianfu Haitian filed a lawsuit with the Sichuan Tianfu New Area People’s Court because it failed to reach an agreement with the Tianfu New Area Agriculture and Rural Bureau and the Tianfu New Area Management Committee on the withdrawal compensation plan for the first wastewater treatment plant in Huayang, Shuangliu County (Phase II). The case was accepted.

Haitian Co., Ltd.'s latest announcement shows that on March 31st, the company received the court’s judgment, which made the following first-instance ruling:

1. Confirm that the Tianfu New Area Management Committee’s decision made on December 31, 2024, to “terminate the <Shuangliu Huayang First Wastewater Treatment Plant (Phase II) Project Construction-Operation-Handover Franchise Contract> and the supplementary agreement and revoke the franchise rights” is illegal;
2. Revoke the decision made by the Tianfu New Area Management Committee on May 30, 2025, to “withdraw the franchise rights for Huayang First Wastewater Treatment Plant (Phase II)”;
3. The Tianfu New Area Management Committee shall pay the plaintiff, Tianfu Haitian, compensation of 115 million yuan within sixty days of this judgment becoming effective;
4. Dismiss other claims made by Tianfu Haitian.

In response, Haitian Co., Ltd. stated that since this is a first-instance judgment and the case is still within the appeal period, whether this judgment is final remains uncertain. The specific impact of this case on the company’s current or future profits cannot be assessed at this time.

The franchise rights that were withdrawn early

Looking back, in March 2011, Haitian Co., Ltd. obtained the BOT franchise rights for the “Shuangliu Huayang First Wastewater Treatment Plant (Phase II)” through a public bidding process. In June of the same year, Haitian Co., Ltd. registered the establishment of “Tianfu Haitian” and signed the relevant “Franchise Rights Contract” with the Chengdu Shuangliu County Government. According to the agreement, the franchise period for this project is 25 years, starting from July 6, 2015.

Subsequently, because the project site was incorporated into the newly established Tianfu New Area, in May 2019, Tianfu Haitian signed a “Supplementary Agreement” with the Tianfu New Area Management Committee, which replaced the original Shuangliu County government as the rights and obligations entity of the project.

Haitian Co., Ltd. states that in November 2024, the Sichuan Tianfu New Area Huayang Water Purification Plant project, built by Chengdu TianTuo Environment Co., Ltd. (hereinafter “Chengdu TianTuo Environment”), officially entered operation. This project overlaps significantly in location, treatment process, and effluent water quality with the wastewater treatment plant operated by Tianfu Haitian.

On the 29th of the same month, the Tianfu New Area Management Committee issued a “Notice” to Tianfu Haitian, proposing to terminate the original franchise rights contract and recover the franchise rights. On December 31st, the Committee issued an “Administrative Decision,” deciding to解除 the franchise rights and the supplementary agreement from January 1, 2025, and to legally compensate. At that time, the remaining franchise period for Tianfu Haitian’s project was about 15.5 years.

Since then, Tianfu Haitian has failed to reach an agreement with the Tianfu New Area Agriculture and Rural Bureau and the Tianfu New Area Management Committee on the compensation amount.

Haitian Co., Ltd.'s wastewater plant is already in a difficult position

What has not been reflected in Haitian Co., Ltd.'s latest announcement is the difficult situation of this wastewater plant in recent years.

From the map, it can be seen that the Huayang First Wastewater Treatment Plant (Phase II) project of Haitian Co., Ltd. is adjacent to the Huayang Water Purification Plant built by the local state-owned enterprise, and nearby there is also the Huayang First Wastewater Treatment Plant Phase I project.

Public information shows that the Phase I and Phase II Huayang wastewater treatment plants are ground-level facilities, completed in 2008 and 2012 respectively.

As the city developed, the surrounding residential areas increased, and the ground-level wastewater treatment plants of Phase I and II have become less satisfactory to nearby residents in terms of land use and environmental control. Therefore, the local government began constructing underground wastewater treatment plants, which later became the Huayang Water Purification Plant.

In November 2021, an official article from Chengdu TianTuo Environment indicated that the Huayang Water Purification Plant project is a fully underground water purification plant with a designed treatment capacity of 180k tons per day. The treatment process used is “multi-mode A2/O biochemical pool + high-density sedimentation tank + denitrification deep bed filter,” with a total investment of over 2 billion yuan.

The Phase II project of the Huayang wastewater treatment plant under Haitian Co., Ltd. has a capacity of 39.6k tons per day. In recent years, this project has also provided stable income and profit for the company. Haitian Co., Ltd. disclosed that from 2017 to 2019, Tianfu Haitian’s revenue ranged from 18.6 million to 37.02 million yuan, with the highest in 2018, due to an increase in the wastewater treatment unit price following government audit results, which retroactively accounted for wastewater treatment fees since 2015.

Today, although Haitian Co., Ltd. won the first-instance case, the fate of this wastewater plant has long been decided, and it is unlikely to escape closure.

In its 2025 semi-annual report, Haitian Co., Ltd. stated that as of the report date, the company and Tianfu Haitian are working on the evaluation, transfer, and handover of related facilities, data, and archives, and are negotiating compensation plans. As of June 30, 2025, the book value of the franchise rights for the Phase II Huayang Wastewater Treatment Plant in Shuangliu County was 67.89 million yuan, which has been classified as held-for-sale assets.

On April 2nd, a staff member from Haitian Co., Ltd.'s Secretary Office told Caixin that the wastewater plant has ceased operation since the local government revoked its franchise rights. As for why the franchise was revoked, it is “a consideration on the government side.” The staff also said that the company has been communicating with the government regarding compensation issues, and after receiving the recent judgment, it immediately issued an announcement. Since the lawsuit is still ongoing, more information will be available through the company’s future disclosures.