Vol 8, Issue 1 (January 2007)

Need to know

• ARNIE’S BACK

  * Over in California, Governor Arnold Schwarzenegger has been in the news again, this time proposing a $4.5 billion mega-bond to provide funds for water infrastructure upgrades.

• BALTIC BALANCING ACT

  * The European Commission is taking Finland, Sweden and Portugal to the European Court of Justice (ECJ) for failing to ensure proper treatment of urban wastewater.

• CAPITAL MARKETS

  * The festive season did not dampen activity on the capital markets, though the bulk of the new issuance was effectively restricted to domestic transactions.

• EASTERN PROMISE

  * Befesa’s bravura in new markets has paid off yet again. Fortune shone upon the Spanish desalination specialist as it chalked up its first Chinese project in late December.

• INKING DEALS

  * In the desalination arena, Suez Energy International received an early Christmas present on 20 December, as its consortium inked key project documents for the 800,000m³/d & 2,750MW independent water and power plant located in Jubail on Saudi Arabia’s Gulf coast.

• ISRAEL IN CHINA

  * Israeli prime minister Ehud Olmert has been in China this month, where he signed a series of agreements that should provide for enhanced cooperation between the two countries in the field of water technology.

• RAIN IN MACQUARIELAND

  * After four very wet months, Thames Water has called off its hosepipe ban, but staff at HQ are said to be having to cope with different sorts of restrictions.

• SUEZ SUITORS LINE UP

  * The Suez saga marched on relentlessly over the Christmas period, and a report published in French business magazine Capital in late December suggested that François Pinault’s holding company Artemis could be on the verge of launching a hostile bid.

Analysis

• Global pumps market growth 2006 - 2010 - CHART

  This month’s chart comes from the latest world pumps update produced by the McIlvaine Company.

• Insight – David Lloyd Owen

  Is designer water losing its bling?

• What will 2007 hold?

  Christopher Gasson makes his predictions for the coming year.

General

• Bangalore tender back on track after years of bureaucratic bungles

  Despite a long-standing JBIC loan agreement, bureaucracy has hampered the search for a consultant. Will it be third time lucky?

• Barcelona beckons

  Wine, water and money on the menu in sunny Spain.

• Befesa gains foothold in China with Qingdao BOT

  The ambitious Spanish developer has added to recent successes in India and Algeria by winning its first Chinese desalination contract. There is more to play for.

• Brazil’s new sanitation law set to boost investment

  Tax breaks, concession rights and cheaper finance: John Kolodziejski gets to grips with the new legislation.

• Chinese provinces outline investment strategy

  The eleventh Chinese five-year plan is one year old. Now it is time for provincial leaders to show their cards.

• Creditors smooth Manila takeover

  The sale of Maynilad Water Services reached financial close in mid-January. The local Securities Commission still has to give its seal of approval.

• Flat year for equipment suppliers

  Publicly-quoted US water equipment suppliers generally had a poor year in 2006, dashing expectations that the sector would bounce back after taking a pasting in 2005.

• France leads the pack as Europe streaks ahead

  Suez and Veolia witnessed spectacular share appreciation in 2006 – albeit for different reasons. Meanwhile, private equity interest in UK stocks means that valuations in the sector are now stretched to the limit.

• French resistance hits local operators

  Problems in Bordeaux, Lyon, Lille, and Paris could spell the beginning of a troubled journey for the big water distributors in France. Emmanuel Adler reports.

• Is shareholder value soluble in water?

  The great game on the Singapore stock exchange in 2006 was the issuance of convertible bonds. Share dilution remains a key concern.

• Lords berate UK Government for lacklustre response

  While the Government has borne the brunt of the Lords’ recent criticism, the regulator’s ears were also burning.

• Mekorot extends maturity profile

  Mekorot has pushed the boundaries of the Israeli bond market with a new 30-year issue. Investors are unlikely to see more issuance from the company this year.

• Mixed picture for US water utilities in 2006

  The west was the best last year for America’s investor-owned utilities. But the biggest stock, Aqua America, had an off year. The return of American Water will shake things up in 2007.

• Putting the “MO” into Modern Water

  A new company hopes to exploit intellectual property in the water technology sector. CEO Neil McDougall has big ideas for global expansion.

• Sabesp’s stars align to ensure another successful year

  The São Paolo water company was the star performer in its home market in 2006. Can it continue its run in 2007?

• Saur set to continue French dominance of Algerian water

  Saur has submitted a shrewd set of proposals for the latest round of urban water concessions in Algeria. There is more to come.

• Scotland’s businesses gear up for water billing war

  The Scottish water market will open up for competition in April 2008. As preparations move up a gear, just how realistic is the claim that Scotland will be “the first properly competitive water market in the world”?

• Slovak tariff cuts to impact water network upgrades

  Slovakia will find it tough to meet its EU commitments following a key regulatory decision.

• Sydney close to fast-track desal

  With El Niño conditions persisting, the Australian city is getting ready to build fast. Max Borchardt reports.

• The dragon turns dangerous: Asian stocks in 2006

  Frédéric Blanc-Brude assesses why Asian water stocks remain a fiery melting-pot for investors.

• Veolia makes sure of Sur as Oman deal is finalised

  The signing of the Sur contract will give Oman its first taste of the independent water project market.

• Water stocks reach the stratosphere

  A 40% surge in the price of water shares in 2006 took the sector way above the market. Where can it go next?

Brief

• IN BRIEF – AMERICAS

  * After expanding its customer base by more than 7% in 2006, helped by no fewer than 28 acquisitions, Aqua America has started the new year in the same frame of mind.

• IN BRIEF – ASIA

  * The World Bank has approved a $154 million 35-year loan to assist the Government of Punjab in achieving full water supply coverage in around 3,000 villages, providing residents with at minimum of 40 litres per head per day.

• IN BRIEF – EUROPE

  * The Municipality of Bucharest has awarded construction consultants Hill International a four-year contract to provide design and construction supervision services for the rehabilitation of sewerage and water supply projects in the city.

• IN BRIEF – MIDDLE EAST

  * For the first time, the European Investment Bank (EIB) is granting credits of €275 million to finance projects in Israel.

• IN BRIEF – UK

  * Following last month’s statement of intent, United Utilities has agreed to sell business process outsourcing subsidiary Vertex for a total consideration of £217.5 million.

Market insight

• Worth its weight in gold

  Gord Cope finds that it is not only environmental regulation that is driving the global mining industry’s growing need for water.