Local players win more water contracts

Industrial outsourcing markets in Europe and South East Asia continue to grow 15% to 20%, far surpassing the USA, according to the just published Masons Water Yearbook 2004-2005.

Masons Water Yearbook 2004-2005, now in its sixth edition, reports dramatic changes in the global water and wastewater market - increasing complexity, emerging local players, fewer public-private partnerships, more small-scale contracts awarded to locally-based companies, and strong growth in industrial outsourcing contracts. Its comprehensive coverage on an evolving industry and key insights on emerging trends are useful for any professionals interested in this global market.

“While the ‘Big Three’ remain the clear market leaders, their perceived domination is rapidly becoming a memory,” contends Dr. David Owen, the managing director of the UK consultancy Envisager, and co-author of the Yearbook. The three largest water companies - Suez, Vivendi Environnement and RWE - still hold a significant share of the market, followed by other leading international companies, including Bouygues, Agbar, United Utilities, Cascal (Biwater/Nuon), Earth Tech, Severn Trent and Tecasva. Yet more locally-based companies are entering the water and wastewater services sector in developing countries, reports Dr. Owen, resulting in a “shift away from contracts being awarded to multinational companies to local companies.” For example, the number of companies based in developing countries jumping into the industry increased from 29, as reported in the 2003-2004 Yearbook to 45 in the 2004-2005 Yearbook. Companies based in developed countries fell from 73 to 72 in the same time period.

Privatisation deals have been often criticised for reducing local control and resulting in the flow of profits to foreign investors in western developed countries, but the publication provides several examples that reveal intriguing developments. In Chile, three Chilean companies - Antofagasta, Consorcio Financiero and Falabella -- won five concessions in the past year to run water and wastewater systems. And China’s Cheung Kong Infrastructure (CKI) of Hong Kong is one example of a locally-based company that is taking on a more active role by acquiring water companies in developed economies. In early 2004, CKI acquired AquaTower of Australia and Cambridge Water in the UK; thereby “reversing the flow of capital in water investment.”

The Yearbook marks 2004 as the weakest year since 1995 given the low number and size of privatisation contracts awarded. Major water companies have backed away from pursuing large concessions outside of Europe and North America, as reported in last year’s Yearbook; consequently more local players are actively pursuing contracts, albeit smaller-scale. Contract volume remains high, according to Dr. Owen, whose research indicates a definite trend towards more small-scale contracts being awarded to local companies. He explains that contract activity fell in the Americas since 2000, but remained steady in Asia and increased in Africa and the Middle East.

Since 2000, the US administration’s lack of support for enforcing environmental regulations, including Clean Water initiatives, and declining economy have cooled expectations for contracts in the world’s largest water and wastewater services market. The 2005 budget just passed by Congress reduces EPA funding for Clean Water projects by US$ 259 million below the 2004 budget, clearly showing its low priority for water environment issues.

Outside the US, the industrial outsourcing market is rapidly growing at a rate of 15% to 20%, particularly in Europe and South East Asia. EU directives are driving the market in Europe, but the need for clean, reliable water supply is pushing industries in both regions to award outsourcing contracts to giant water companies, such as Veolia Water Industrial Outsourcing and Ondeo Industrial Services, in addition to local companies in Asia, including Dayan (China), Eco Water (Malaysia), and Hyflux (Singapore). The Yearbook cites the largest industrial outsourcing contract awarded in 2004 by PSA Peugeot Citroenas to Veolia - a 10-year contract worth US$ 1 billion to provide industrial services for its car manufacturing facility in Eastern Europe.

Dr. Owen collaborated with Masons, the UK-based international law practice that specialises in infrastructure projects, to produce the Sixth Edition of Masons Water Yearbook, a reference work that provides the most comprehensive and detailed information available today on the international water and wastewater services industry. The book covers current trends; provides data on 109 countries’ potential markets, spending priorities, environmental legislation; and analyses 119 companies from 23 countries, delving into their overall corporate strategies, current contracts and even financial data, when possible. Visit the Website: http://www.masons.com for more information.