Vol 12, Issue 1 (January 2011)

Need to know

• BREAKING UP

  * The big news this month is two corporate break-ups:

• BEATING THE INDEX

  * The GWI Global Water Index closed the year up 12.4%, compared to a 9.6% improvement in the dollar-denominated MSCI World stock market index.

• DESAL MISERY

  * Two big desalination projects with a combined capacity of 819,000m3/d have been scrapped, suggesting that the recovery in the desal market may still be some way off.

• PRIVATE OPPORTUNITIES

  * Expressions of interest will be solicited shortly for the first ever privately financed water treatment plant in Russia.

• PUBLIC WATER GOES GLOBAL

  * Spain’s second-largest public water utility, Aguas de Sevilla, is cranking up its activities in the international market.

• AFRICAN CHALLENGES

  * The government of Gabon is expected to publish in the next few weeks the conclusions of an audit of Société d’Energie et d’Eau du Gabon (SEEG), the company in charge of electricity and water production and distribution.

Analysis

• Seven themes for 2011

  Christopher Gasson picks seven themes to watch out for during this year.

• David Lloyd Owen - A perfect storm? The challenges of harvesting water from the skies.

  The Sunday Times started the year with the revelation that an ionisation project in Abu Dhabi is said to have generated rainfall 52 times during 74 trials over the past seven months.

• Chart of the Month - Annual M&A activity in the water sector by volume and value

  This month’s chart is drawn from our database of mergers and acquisitions transactions in the water sector.

• The Eiffel Tower on Chinese smog

  Charles Bodhi ruminates on what the West really thinks of Asia’s water industry.

General

• Striving for the Summit

  Emma Welsh thinks our Global Water Summit will make a big splash.

• Water gets back to outperformance

  Water stocks avoided the worse of the crash, but were slow to recover in 2009. In 2010, publicly traded water companies made up for lost ground, with Amercian stocks outperforming their Asian counterparts.

• Hot summer boosts US water utility stocks

  A combination of high volume sales and a favourable regulatory environment helped quoted investor-owned water utilities to outperform in 2010. Concerns over the future stance of the California regulator took the shine off.

• Equipment stocks play a game of two halves

  A convincing 2010 performance from many of the listed US water equipment suppliers masked some surprising individual variations. The advent of new regulatory drivers in 2011 should provide further impetus.

• Asian water stocks in the recovery room

  The Asian segment of the GWI Water Index flatlined throughout 2010. What is the prognosis for 2011?

• Sabesp rises to the top of Brazil’s water league

  The Brazilian segment of the GWI Water Index easily outperformed the benchmark iBovespa index in 2010. The IPO of CAB Ambiental in February will add diversity to the investible universe.

• French left behind in European water rally

  European water stocks rallied strongly in 2010, led by the UK water and sewerage companies. The French giants, meanwhile, remained in the doldrums, despite improving their credit metrics last year.

• Saudi ministry sets sights on municipal use

  The rise in domestic water use in the Kingdom has been overshadowed by the relentless demands of agriculture. The new deputy minister at MOWE explains why targeting home use is crucial.

• Why Dubai doesn’t need desalination at Hassyan

  A long-awaited IWPP has been dropped in favour of a power-only plant. Will the water sector lose out as the emirate reconsiders its growth plans?

• Building on foundations of Granite

  Global Environmental Solutions is perhaps best known as the developer of the Palmachim desal plant in Israel. A recent internal re-organisation will provide a platform for international growth.

• Fate of Ashdod desal plant hangs in the balance

  Despite a last-ditch attempt by Mekorot to compromise on price, the Ashdod desal project appears to be doomed.

• Russians press ahead with water BOT

  Russia’s first privately financed water supply project based on an investor-friendly PPP law is poised to go to tender – albeit in a different form than initially envisaged. Key lenders have already signalled their interest.

• Aguas de Sevilla goes global

  Seville’s public water utility has set its sights far beyond the city’s municipal boundaries in order to generate investment revenue.

• A novel approach to water metering

  Seville’s municipal water utility has taken metering to a new level. Its award-winning system has the potential to be replicated.

• Hastings relocates out of South East

  The purchase of 50% of South East Water marks the entry of a major new Canadian fund into the water sector. The previous minority owner may not have secured the exit it had been hoping for.

• Raising the equity incentive

  Severn Trent is leading the charge to develop better incentives for UK water company shareholders. It is also discussing alternative debt sources.

• Facing up to the new reality in Ulster

  The water main breaks in Northern Ireland over Christmas have again brought the issue of domestic water charging to the fore. With subsidies from London declining, how long can the authorities afford to wait?

• Acea’s growth plans fail to impress the market

  The Italian multi-utility’s new business plan sets out its growth ambitions over the next three years. Business development will be sidelined in favour of efficiency gains.

• ITT’s a new water pure-play

  The US conglomerate has published its plans for spinning off its water and defence business. What is the outlook for the new water company?

• General Water gets specific on strategy

  China’s commercially-minded state-owned water operator has set itself ambitious targets for growth. Chairman Huang Weihua talks to GWI about profitability and partnership.

• Memsys secures a second pilot study

  German membrane distillation specialist memsys is piloting its technology for solar desalination in Singapore. It is now looking to test the technology in the Australian outback. Is it a viable alternative to reverse osmosis?

• Mixed year for Aussie water trading

  A new report reveals a mixed picture for the Australian water trading market in 2009-10. Trading volumes were up, while rainfall dented the price of annual allocations. Max Borchardt looks at the prospects for the current year.

Brief

• MIDDLE EAST WATER IN BRIEF

  * Details are emerging of structural changes at the Abu Dhabi Water and Electricity Authority (ADWEA) and its subsidiaries, following the appointment of Ahmed Mubarak Al Mazrouei as chairman last month.

• EUROPE WATER IN BRIEF

  * Long-term Dutch shareholder Ysro b.v. announced in early January that it had reduced its holding in Austrian water technology company BWT AG from 31.5% to below 25%.

• AMERICA WATER IN BRIEF

  * San Antonio Water System (SAWS) issued a request for proposals on 14 January as it seeks alternative water sources to help diversify the city’s long-term water supply.

• ASIA WATER IN BRIEF

  * Pakistan’s president Asif Zardari announced that private finance is among the sources of funds that will be courted in an effort to restart stalled infrastructure projects, including the Karachi Sewerage Plan.

Market Profile

• Living the plastic pipe dream

  Plastic pipe has fared well in the water and wastewater sector, taking market share from traditional materials. Gord Cope assesses its prospects in the wake of the economic downturn.