Vol 12, Issue 12 (December 2011)

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Need to know

• THE NEW VEOLIA

  Veolia’s plans to restructure its way out of trouble were largely met with indifference by the investor community earlier this month.

• GERMAN AUSTERITY

  The German federal cartel office has decided that austerity should start at home, and has handed the cash-strapped citystate of Berlin a lifeline in its bid to buy back RWE’s 24.95% stake in Berliner Wasserbetriebe (BWB).

• SAUR POINTS

  Relations between Saur, France’s thirdlargest private water company, and its 33% shareholder Séché Environnement, have reached an all-time low.

• PRIVATE PROGRESS

  Saudi Arabia’s National Water Company appears to be in good position to start the process of privatising its wastewater business next year (see story p18) after spending heavily on upgrading and expanding its asset base, most recently with the muchtrumpeted Jeddah sewerage project.

• SPANISH OMELETTE

  Spain’s private water operators will be licking their lips over the chance to invest in previously forbidden territories, as metropolitan authorities look to ease their debt burden by selling or leasing prize water assets.

Analysis

• Fixing Saudi’s subsidised leaks

  Christopher Gasson weighs up the Kingdom’s options for cost recovery.

• David Lloyd Owen - L’eau revoir: after 25 years, France is leaving the UK regulated water sector.

  Veolia’s timing for its exit of the UK regulated water sector – in the same week as David Cameron’s veto of the EU financial stability pact – is intriguing.

• Chart of the Month - BWRO and SWRO installations since 2007 with a capacity <10,000m3/d

  This month’s chart shows the market share in terms of companies supplying the smaller- scale membrane desalination plant market over the last five years.

General

• Water palaver!

  Emma Welsh discovers that persistence can pay off after all.

• Breaking up may not be hard to do

  The sale of Veolia’s regulated UK water assets will hinge on keeping the competition authorities happy. What are its options?

• Europe drags index into negative territory

  A poor showing from the European majors acted as a drag on the performance of the GWI Global Water Index this month. What will the new year bring?

• Selling off Spain’s municipal crown jewels

  The formation of a new government in Madrid could catalyse a new wave of water privatisation in the country. Richard Weyndling investigates.

• Berliner Wasserbetriebe faces 19% tariff cut

  The federal cartel office has mandated a steep tariff cut in the German capital. It has clear implications for the value of the private partners’ stakes in the operating company.

• Remondis takes Eurawasser for €95 million

  The family-owned company has extended its domestic footprint. Where will the growth come from?

• Private sewer costs loom over UK interims

  A mixed set of half-year results from the UK water and sewerage groups largely shunned the question of extra expenditure associated with the adoption of private sewers. Are companies being too complacent?

• Pressing home a Saur point

  Saur’s disdain towards major shareholder Séché Environnement has reached new levels. Breaking the current impasse may require drastic action.

• Saudi Arabia spends as privatisation nears

  A capital investment blitz means the wastewater system in the Kingdom is almost ready for privatisation. The Kingdom still faces problems with procuring projects and recovering costs through tariffs.

• Deep thinking is only part of the solution

  NWC recognises capex is not the only answer to infrastructure needs says GWI Middle East editor Tom Scotney.

• A role for designer water

  One of Saudi’s leading independent water suppliers says it will be pursuing industrial clients – and can thrive alongside an improving municipal service.

• Doosan tips MED for its desal future

  The Gulf’s most successful MSF contractor of recent years is convinced that MED is the future of thermal desalination. How can the technical and political challenges that hold it back be overcome?

• IFC lines up $100m investment in Kharafi National

  The private investment wing of the World Bank is backing the Kuwaiti developer and operator. The move is also a vote of confidence in the development opportunities on offer in Africa

• CH2M to advise on Doha sewerage project

  Qatar plans to invest $3 billion in improving sewerage infrastructure conditions in the capital. The authorities – and their new advisors – have yet to decide whether to include a private finance element.

• Israel showcases new batch of water start-ups

  Last month’s Watec 2011 event played host to a new wave of water start-up initiatives. With quality and deal flow increasing, has the search for funding become easier?

• EIB diversifies its lending strategy at Ashdod

  The bank’s decision to channel its loan through Hapoalim has increased the cost of the desal financing package.

• New governor appointed to top position at SWCC

  The new man at the top of the world’s largest desal offtaker will be revisiting its stalled privatisation programme.

• Ecolab merger to build on Nalco’s legacy

  The fusion of Ecolab and Nalco will give both companies new opportunities for growth. Nalco’s Dave Flitman talks to GWI about why the deal makes sense.

• Foz looks to US for growth

  The Brazilian water concessionaire is looking to leverage its position within the Odebrecht group to enter the US market.

• Giving water the Lauder treatment

  Having acquired three companies in the last 18 months, RWL Water Group is on an aggressive growth path. CEO Henry Charrabé wants to turn it into a $500 million-a-year business within five years.

• Ranhill goes private to keep growing

  Malaysia’s Ranhill has completed its delisting, but still has plans for expansion. It may yet re-appear on another stock exchange

• Operators see the upside in Malaysia

  The Malaysian government wants to introduce incentive regulation for water operators. It is the government itself that really needs incentives to drive through its reform programme. Olivia Jensen reports from Kuala Lumpur.

• Shining a light on China’s local spending

  China’s amended budget law promises better incentives for local governments to spend wisely. Kathy Liu reports.

• Wringing the revenue from NRW

  Water loss reduction has become a profitable business in Asia. Companies are looking for a slice of this $7 billion-a year pie.

• Murray-Darling plan to depress trading prices

  The latest draft of the Murray-Darling Basin Plan sets out the government’s strategy to achieve sustainable water use in the region. It could wipe 25% off the value of permament water entitlements.

• Aussie water rights trading down 50%

  New figures from the National Water Commission show that turnover in the Australian water rights trading market halved in the latest financial year.

• GS ready to take on some Latin flair

  GS Engineering & Construction has opened the door to desalination and new regional markets with its acquisition of Inima. It wants to build a $2 billion water business.

Brief

• EUROPE WATER IN BRIEF

  Suez Environnement will crash out of the benchmark CAC 40 index on 19 December, to be replaced by cable and wiring giant Legrand.

• MIDDLE EAST WATER IN BRIEF

  Marafiq, the utility for the industrial cities of Jeddah and Yanbu in Saudi Arabia, is expected to close a SAR4.5 billion ($1.2 billion) loan deal in the first quarter of 2012, according to sources in the Saudi banking community. Response to the call for commercial lenders has been high, with one bank – the National Commercial Bank – offering to fund the entire sum itself. Marafiq is looking to expand its water, wastewater and power infrastructure in the coming years.

• AMERICA WATER IN BRIEF

  Chilean economic development agency Corfo decided on 15 December not to proceed with the sale of a 40.46% stake in Essal, owing to the bids received not satisfying the minimum threshold set. Corfo had been targetting proceeds of around $100 million from the sale.

• ASIA WATER IN BRIEF

  US-listed Tri-Tech has secured a ‘buildown- operate-subsidise-transfer’ project in western China. The ‘BOOST’ contract involves the construction and operation of water and wastewater facilities in a small town in Buerjin, Xinjiang for 30 years.

Companies

• Veolia goes on a pre-Christmas diet

  Veolia Environnement CEO Antoine Frérot faced his biggest test yet when he unveiled a broad-based restructuring of the group in early December. Support for the stock will depend on the company’s ability to deliver on its goals.

Market insight

• Getting the right air ration

  The wastewater aeration market is undergoing big changes. Gordon Cope looks at the challenges and opportunities.

Opinion

• Funding North Africa

  The prospect of Islamist governments will make investors nervous – but it could spur growth in sharia-compliant project finance, says Tom Scotney.

• Sweet water for the good earth

  Charles Bodhi assesses the options for agricultural reform in China.