Vol 14, Issue 1 (January 2013)

Need to know

• CADIZ-Y MONEY

  Scott Slater, from the law firm Brownstein Hyatt Farber Schreck LLP, has taken over as CEO of Cadiz, the company which has been promoting a project to store Colorado river water beneath the Mojave Desert in California since the 1990s.

• DEAL TIME

  It seems that plans to merge Veolia Environnement and Suez Environnement are still being considered in Paris, despite official denials in October last year.

• DESAL HOPES

  The Jordan Red Sea Project looks likely to kick off with a 200,000m3/d desalination plant at Aqaba on the Red Sea, rather than a 600,000m3/d facility on the Dead Sea.

• LINGUISTICS

  Italian utilities may be allowed to set tariffs to cover their cost of capital, thanks to a neat bit of linguistic footwork by the regulator.

• SING SALES

  Singapore-listed project developer HanKore Environment (formerly Bio-Treat) is soliciting investor interest as it prepares to divest its portfolio of 19 Chinese water and wastewater treatment plants.

• WELL DONE WATER

  Water had a good year on the markets in 2012, according to our annual stock performance survey on page 8.

Analysis

• Asian water stocks play snakes and ladders

  Quoted Asian water stocks regained some ground last year after a disastrous 2011. What lies in store for the year of the snake?

• CHART OF THE MONTH - Recent merger and acquisition activity in the water sector

  This month’s chart shows M&A activity in the water sector. It reveals that 2012 was not a good year for water deals.

• David Lloyd Owen - Death and disease defined.

  John Maynard Keynes crisply summed up our existence by concluding that ‘in the end, we all die.’

• Opening up the black box

  Christopher Gasson sees a significant new direction for the water industry.

• Sabesp falls victim to its own success

  Brazil was the place to be in terms of listed water equity holdings last year. Regulatory developments could soon bring Sabesp’s bull run to an abrupt end.

• Takeover talk drives European water stocks

  M&A speculation helped drive the valuations of a number of European water companies in 2012. The composition of the index could look very different this time next year.

• US equipment stocks end 2012 on a roll

  The bottoming out of key end markets – and a greater focus on margin improvement – ensured a strong outperformance for many water equipment stocks last year. Who will the winners be in 2013?

• US utility stocks continue upward trajectory

  Quoted US water utilities continued to benefit from a favourable regulatory environment in 2012. What is the potential for outperformance in 2013?

General

• AWC eyes groundwater renewal market

  American Water Chemicals has seen its business grow rapidly thanks to a thriving anti-scalant market. The growth of groundwater renewal schemes in the US could provide a lucrative new outlet for its products.

• Getting more burn for your buck

  A new pilot plant that produces biomass fuel from faecal sludge could dramatically alter the economics of sanitation in Africa. Emilie Filou reports from Ghana.

• HanKore’s BOT assets on the block

  Interest in HanKore’s portfolio of Chinese water and wastewater assets is hotting up. GWI’s Asia editor Olivia Jensen assesses the potential suitors.

• Italy sets out tariff reform methodology

  Under proposed tariff reforms in Italy, operators will no longer be remunerated for capital investment. Some still argue that the reform betrays the spirit of the 2011 referendum.

• Jordan Red Sea Project still ready to go

  One of the world’s largest desalination projects looked to be on the rocks last month. Insiders insist it is still very much on the cards.

• Kuwaiti public to share in IWPP

  The government is looking to increase public involvement in infrastructure by distributing 50% of its first power and water PPP.

• Marubeni throws its weight behind Maynilad

  The Japanese conglomerate has waited a long time to enter the Philippines water market. How will its new equity stake in Maynilad help the West Zone concessionaire?

• Pushing the desal boat out

  Desalia’s concept for a sleek desal catamaran is the sexiest thing to hit the desal market in years. It needs money to make it a reality.

• Queensland braces for unrestricted growth

  The lifting of water restrictions in Queensland is part of a wider package of reforms designed to create a more conducive environment for private sector investment. Max Borchardt assesses the challenges ahead.

• The secret behind Desalia’s revolution

  Spanish company Desalia has taken a unique approach to building its international desalination business. Richard Weyndling talks to managing director Manuel Latorre.

• Swach Environment BOOTs up for success

  The Indian project developer wants to build a $150 million business from scratch in four years. CEO Hitesh Arora outlines the strategy.

• Veolia taps a new equity source

  A new hybrid bond from Veolia offers further evidence that the group is winning the battle to reduce its debt. The equity credit won’t last for ever.

Brief

• ASIA WATER IN BRIEF

  Singaporean membrane manufacturer Memstar is set to receive a S$35 million (US$28.5 million) equity injection from wastewater BOT developer United Envirotech (UEL), giving UEL a 13.17% stake in the company.

• EUROPE WATER IN BRIEF

  Following the adoption of a more conciliatory stance by the UK regulator Ofwat towards its proposed licence changes, a flurry of UK water companies – including Pennon Group and Yorkshire Water – revealed in mid-January that they have agreed to accept the revised proposals.

• MIDDLE EAST WATER IN BRIEF

  The Saudi government has taken a 19.4% equity stake in Riyadh-based power and water project developer ACWA Power. It subscribed for 89.5 million new primary shares through the Sanabil Direct Investment Company (13.72%), which is owned by the Public Investment Fund, and the Saudi Public Pension Agency (5.71%).

Opinion

• Still waiting for God-eau

  Charles Bodhi patiently dissects Chinese and US leadership strategies.

• Taking stock of 2012’s legacy

  The Middle East is going through interesting times. What can the water sector expect in 2013?

• Water tech investment comes of age

  Innovative water technologies continued to attract a healthy level of investor interest in 2012. What are the trends that will drive the sector forward in 2013?

GWI Water Index

• Specialist water funds outperform in 2012

  Most of the dedicated water funds enjoyed a resounding turnaround in fortunes last year. A mixed outlook for some of the large-cap stocks could lead to a reassessment of investment strategies in 2013.