Vol 8, Issue 9 (September 2007)

Need to know

• BOND – THAMES BOND

  * The bulk of the activity on the capital markets this month was again focused on the UK, though the Dubai Electricity and Water Authority (DEWA) broke new ground when it raised $1 billion by securitising future utility bills (see story p26).

• FRATERNITÉ OR LIBERTÉ?

  * It seems Suez has finally seen the light, and decided that the only way forward is to spin off its environmental activities.

• MODERN WATER SHARE SLUMP

  * Following its share placing at a price of 119p in June, Modern Water has released its first set of interim results covering the seven months to 30 June 2007.

• MUNICIPALS TURN TO DESAL

  * There are certainly plenty of new desalination opportunities to whet the appetite, as an increasing number of large cities wake up to the fact that they need a climate-proof element in their water supply strategies.

• SAUDI PPP PROGRESS

  * Saudi Arabia’s Ministry of Water and Electricity has been keeping up the momentum on its privatisation programme, announcing the list of pre-qualified bidders for the Jeddah management contract in late August.

• TARIFF-IC!

  * The results of our latest water tariff survey are revealed in this month’s Market Profile.

• VEOLIA’S CHINESE AMBITIONS

  * The latest Chinese municipalities to outsource their water activities are Tianjin and Yangzhou, which are sure to bring the overbidding debate to the surface once again (see story p21).

Analysis

• Measured vs. unmeasured water revenues at the UK WaSCs - CHART

  This month’s chart shows the percentage of water revenues generated from measured supplies by UK WaSCs in 2006-7, as well as the percentage by which these have gained ground against unmeasured since 2005-6.

• Insight – David Lloyd Owen

  Vive La Lyonnaise!

• Muddying the water

  Christopher Gasson argues that cost recovery tariffs are the best guarantee of transparency in the water sector.

General

• A real water sector at last

  Christopher Gasson is bullish on the prospects for a stand-alone Suez Environment.

• ADSSC digs deep with sewer

  Abu Dhabi Sewerage Services prepare to tender deep tunnel mega-project.

• Aussie community seeks sustainable solution

  Inspired by the Kwinana desalination plant, a Western Australian community is looking to install a recycled water system which will use green energy. All it needs is someone to build it.

• Australia – after the rains came

  Recent rainfall in Australia has not just raised falling dam levels – it has provided fresh ammunition for anti-desalination campaigners.

• DEWA securitises cashflows to raise $1bn

  The Dubai municipal utility has issued a long-dated asset-backed bond to help fund its ambitious capex programme. There is more to come.

• “Feeling the future” – Veolia Water in China

  Veolia Water CEO Antoine Frérot sets the record straight on his company’s strategy for generating business in China. There is more to it than simply over-bidding.

• First-round bids in for Southern Water

  The infrastructure funds of US investment banks are falling over themselves in the race to buy regulated UK water assets. RBS may still be forced to lower its price expectations.

• Fresh wave of congressional initiatives hits the US

  Kathy Shandling explores the latest series of measures designed to improve America’s ageing infrastructure. Their combined impact will be far-reaching.

• Good value for money

  Alison Ireland extols the virtues of our Global Water Market report.

• Green banks go blue at World Water Week

  A new set of guidelines will bring the issue of water-related risk management into the mainstream. It could force water funds to re-evaluate their holdings.

• Herne on the hunt for some budget relief

  A deal with local water partner Gelsenwasser should bring savings for the German city of Herne.

• Insurers to pick up the cost of UK floods

  It seems that UK water utilities are living a charmed life. They are set to escape most of the costs associated with the recent flooding, leaving insurers and the Environment Agency to pick up the pieces.

• Jordan juggles water supply alternatives

  A thirsty Amman is hostage to a pair of key water transfer projects. With seawater desalination not an option, it will have to take a bet on which one will deliver first.

• Just another day at the Caucus

  A new bipartisan group aims to facilitate dialogue on water-related issues within Congress. It has yet to release its first briefing.

• Madrid delays water reform until 2008

  The Spanish government’s decision to delay water sector reform until next year has come in for broad-based criticism. Not everyone is disappointed, however.

• Madrid’s 190,000m³/d reuse plan

  As part of a wider wastewater initiative, the region of Madrid hopes to reduce potable water consumption by boosting recycled water production.

• Marafiq’s focus moves to west coast

  Marafiq is actively seeking developers for its next independent power and water plant to serve the industrial city of Yanbu on the Red Sea coast.

• Mekorot to compete with the private sector

  Under a new agreement, Mekorot will become a holding company, controlling a trio of subsidiaries. The bulk of the new projects arm will be sold off via an IPO.

• Municipalities make their desalination debut as Turkey’s thirst keeps growing

  Istanbul is getting serious about desal. It may have to re-calibrate its expectations of how much it will cost.

• Nakheel dangles a new bunch of carrots

  Dubai property developer Nakheel is about to serve up a host of tantalising water and wastewater opportunities. Bidders will have to hurry to if they are to get a taste of the action.

• New commission to report on state of US infrastructure

  A new national commission will make recommendations on how best to address US infrastructure improvements. It only has three years in which to deliver the goods.

• Proposed National Infrastructure Bank to raise $60 billion on bond markets

  Two US senators have set out their vision to solve the problem of short-changing US public infrastructure. It will open up a whole new investment opportunity.

• Sarkozy seals Suez spin-off

  The French State’s grip on the new GdF Suez will also extend to the spun off water and waste businesses.

• Seven pre-qualify for Jeddah management contract

  Despite the tight submissions deadline, two new consortia have made it through to the RFP stage for the Jeddah management contract. Not all have the benefit of a local partner.

• Severn Trent saved by the floods

  Severn Trent appears to have struck a deal with the regulator over missed leakage targets in 2006-2007. It is not the first time the company has been in the headlines over leakage.

• Sharjah STP interest sought

  Bidders are lining up to build a new STP for the Sharjah Investment Centre.

• Sharks and minnows – the reality of Chinese bidding strategies

  As the high-profile bidding saga continues for large Chinese water concessions, GWI’s China Editor Kathy Liu explains how some of the smaller players are happier following the ancient philosophy of Sun Tzu.

• Siemens eyes equity stakes in water BOTs

  The financial services arm of the German industrial giant is looking to put more cash into water projects. Efficiency and standardisation are key to the process, according to board member Johannes Schmidt.

• South Staffs sale moves forward

  For those not looking at Southern Water, there is always local player South Staffs. At least the new owner will be able to increase the leverage.

• Spanish water quality plan prompts Veolia acquisition

  Veolia is on the verge of finalising an acquisition which will further its ambitions to reclaim market share in Spain. It still has some way to go.

• Thames refinancing struggles to find buyers

  Time pressure and poor market conditions conspired to force a downsizing of Thames Water’s latest bond issue, writes Andrew Cavenagh. The poor reception of the deal could have knock-on effects.

• The case for compulsory metering grows

  Water-stressed areas in England and Wales have moved a step closer to compulsory metering. It will have to fight for its place in the battle to secure long-term security of supply.

• The puzzle of Turkish river privatisation

  Desperation appears to have led the Turkish government to consider the possibility of privatising its rivers. It is likely to encounter stiff opposition if it goes ahead.

• Veolia’s industrial ambitions in China

  Despite being a late starter in the Chinese industrial water market, Veolia has big plans for growth. Oil and gas is the first target for conquest.

Brief

• IN BRIEF – AMERICAS

  * The city of Vienna, GA, has selected CH2M Hill OMI to continue operating and maintaining its wastewater treatment system for another 15 years.

• IN BRIEF – ASIA

  * Ming Hing Water has won a 30-year concession contract in Changsha, Hunan Province, China.

• IN BRIEF – EUROPE

  * Christ Water Technology has acquired 76% of Austrian-based zeta Group, a leading supplier of process systems for the biotech and pharmaceutical industry.

• IN BRIEF – MIDDLE EAST

  * Mott MacDonald has submitted its draft recommendation to Bahrain’s government for the Kingdom’s forthcoming independent water and power plant to be located near Ad Dur.

Market insight

• Tariff rises begin to hit home

  This year’s GWI/OECD water tariff survey shows some movement in Eastern Europe and parts of the US, though Africa, Latin America and much of Asia sleep on. What is the story behind the numbers?