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* 2005 was a great year for water stocks, with the big European water stocks leading the way (see Market Review on pp8-12).

The momentum seems to have carried on into 2006 for RWE, amidst newspaper reports that UK private equity baron Guy Hands is interested in buying Thames Water. The shares reached a record high of €65 in January, helped by the reports and by news reported last month in GWI that Macquarie Bank was also interested. It looks as if the Thames sale is going to be a slam dunk for private equity.

* The American Water sale is looking very much less straightforward. Public officials in towns served by American Water in Illinois, West Virginia, Tennessee and California are debating the possibility of buying back their water systems from RWE. Despite being firmly told that none of American Water\'s regional subsidiaries are available separately, it is a sure sign of trouble ahead. The eventual buyer will have to get clearance from state utility commissions. Against a background of increased tariffs to pay for much needed infrastructure investment, it is going to be a messy process.

* Another water stock reaching record highs recently is Singapore quoted Chinese wastewater treatment specialist, Bio-Treat. The valuation was clearly too much of a temptation for chairman, Wing Hak Man, who took the opportunity to sell 50 million shares at $1.08, reducing his stake in the company from 35.9% to 30.1% on 15 January. The markets responded accordingly with the share price losing as much as 13.4% at one point. As a gesture of goodwill, Wing has agreed to distribute part of his proceeds to compensate employees who lost out on the cancelled options programme in December.