Kangda International Environmental Company Limited (Kangda Env; 06136.HK) and China Water Affairs Group Limited (CWA) jointly announced an upward revision of the annual caps for their continuing connected transactions under the Construction Services Agreement between Kangda HK (an indirect wholly owned unit of Kangda Env) and Jiangxi Silver Dragon (a CWA subsidiary).

The permitted transaction ceiling for each of the financial years ending 31 December 2026, 2027 and 2028 will rise to RMB 70.00 million, up 55.6% from the previously approved RMB 45.00 million. Management stated that the existing 2026 cap has not been exceeded year-to-date.

Rationale for the adjustment:

1. Accelerated timeline: A wastewater treatment upgrade in Qitaihe City, Heilongjiang Province, valued at roughly RMB 25.00 million, has been fast-tracked for completion by end-2026 at the request of local authorities (originally slated for 2027).

2. Pipeline expansion: Two prospective projects—one in Wenzhou City, Zhejiang Province, and the other in Feicheng City, Shandong Province—are each estimated at about RMB 35.00 million and expected to commence in 2027 and 2028 respectively.

3. Cost inflation: The companies anticipate a 2.0% year-on-year rise in average market rates for comparable construction services, mirroring the eight-month average increase in China’s Producer Price Index for 2026.

4. Strengthened funding: Kangda Env’s issuance of US$50.00 million senior notes due 2029 on 4 September 2026 has bolstered working-capital resources, enabling the group to undertake additional construction assignments.

Boards of both companies concluded that the original caps would be insufficient in light of the accelerated and expanded project pipeline, warranting the higher RMB 70.00 million annual limit through 2028.