European Water and Sanitation Service vs Sustainable Development

Städtische Werke GmbH Management Ass. jur. Helmut Herdt Paris 17.11.2009 1. Short Presentation SWM Magdeburg

2. Drinking water supply

3. Example: TWM

4. Effects of Urban Development East on the technical infrastructure based on the example of SWM Magdeburg

5. Contact Data

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 2 MAGDEBURG

Magdeburg

Saxony Anhalt

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 3 1. SWM Magdeburg: Facts and Figures

Shareholders: State capital–Magdeburg 54%

E.ON Avacon AG 27%

Gelsenwasser AG 19%

2008 Financial Year

Turnover: approx. EUR 393 million Employees 704 Trainees 50

Helmut Herdt , Städtische Werke Magdeburg GmbH PageSeite 4 1.1. Short Presentation - Our Areas of Business

I Electricity approx. 135,000 private customers, market share a good 95%, effect of customer switching continues to be marginal Business and special customers: Magdeburg and nationwide customer acquisition Target group: "medium sized businesses" - SWM advantage: fair prices with high service quality and flexibility I Natural Gas approx. 35,000 private customers, market share of 98% Business and special customers: Magdeburg and nationwide customer acquisition SWM advantage: fair prices with high service quality and flexibility I Heat District and local heating, largest customers: housing associations and co- operatives, high proportion of multi-storey residential buildings in eastern Germany

Helmut Herdt , Städtische Werke Magdeburg GmbH PageSeite 5 1.2. Other Activities and Holdings (1)

I Drinking Water Supply of 230,000 Magdeburg residents with drinking water from Colbitz-Letzlinger Heath

I Waste Water: first and one-of-a-kind transaction in Germany: invitation to tender for a license for waste water 100% holding in AGM, technical and commercial management by SWM

I AGM: Abwassergesellschaft Magdeburg mbH

I SWN: SWM Netze GmbH Electrical grid operator, prices are regulated by the Federal Network Agency

Helmut Herdt , Städtische Werke Magdeburg GmbH PageSeite 6 1.2. Other Activities and Holdings (2)

I Waste-to-Energy Plant: Müllheizkraftwerk Rothensee GmbH One of the largest waste-to-energy plants in Germany, 2008: 630,000 tons, produces district heat for 30,000 households, power generation for SWM Shareholders: 49% SWM, 51% EEW (E.ON Energy from Waste)

I SWS: Stadtwerke – Altmärkische Gas-, Wasser- und Elektrizitätswerke GmbH Areas of business: power, natural gas, water, heat, waste water operations Shareholders: SWM: 37.45%, Gelsenwasser: 37.45%, City of : 25.1%

I MDCC: Magdeburg-City-Com GmbH Telecommunications services in the state capital and Saxony-Anhalt Shareholders: 49% SWM, 51% Telecolumbus Multimedia GmbH

I ENERMESS: Energie Mess- und Servicedienste GmbH Meter manufacture and repair, metering services, SWM holding: 40.5%

Helmut Herdt , Städtische Werke Magdeburg GmbH PageSeite 7 1.2. Other Activities and Holdings (3)

I HSN: HSN GmbH High voltage networks in the state capital, Magdeburg, and northern Saxony-Anhalt Shareholders: 74.9% E.ON Avacon, 25.1% SWM

I TWM: Trinkwasserversorgung Magdeburg GmbH (Public Water Utilities Magdeburg) Supply of drinking water to 18 public water utilities and 6 districts SWM holding: 29.8%

I MHG: Magdeburger Hafen GmbH largest inland harbor in central Germany SWM holding: 10%

Helmut Herdt , Städtische Werke Magdeburg GmbH PageSeite 8 1. Brief Portrait SWM Magdeburg

2.Drinking water supply Germany

3. The example: TWM

4. Effects of Urban Development East on the technical infrastructure based on the example of SWM Magdeburg

5. Contact Data

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 9 Public Water Supply in Germany (1/3)

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 10 Public Water Supply in Germany (2/3)

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 11 Public Water Supply in Germany (3/3)

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 12 Cost structure in Water supply

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 13 Development of the Water consumption (1/2)

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 14 Development of the Water consumption (2/2)

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 15 Water Delivery Volumes

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 16 Customer satisfaction

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 17 Connection degree

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 18 Water losses and network quality (1/2)

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 19 Water losses and network quality (2/2)

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 20 Investment

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 21 Water prices

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 22 Climate Changes (1/2)

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 23 Climate Changes (2/2)

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 24 Population Development

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 25 1. Brief Portrait SWM Magdeburg

2. Drinking water supply Germany

3.The example: TWM

4. Effects of urban development East on the technical infrastructure based on the example of SWM Magdeburg

5. Contact Data

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 26 Company Portrait TWM (1/3)

Established: 19th April 1994 Shareholders: 19 shareholders in total (almost all customers are shareholders ) 29.80 % Staedtische Werke Magdeburg GmbH Employees: 111, plus 10 apprentices Fields of activity: drinking water, treatment of water for various local energy providers and water associations

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 27 Company Portrait TWM (2/3) I TWM GmbH is a preliminary supplier for large customers in 6 districts and 2 independent cities

I TWM GmbH supplies almost 800,000 residents with drinking water in a supply area comprising 5,600 km 2

I 338 cities and municipalities are supplied via 220 drinking water connecting points

I The facilities of TWM GmbH for acquiring and treating water enable a daily production capacity of approximately 200,000 m 3

I The expansion of the corresponding drinking water protection areas encompasses 31,745 ha

I The primary water utilities are the water utilities Colbitz and Lindau

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 28 Company Portrait TWM (3/3)

District of Jerichower Land Heidewasser SW Haldensleben Haldensleben Haldensleben WWAZ WV Burg Heidewasser Tucheim Heidewasser Börde Burg Burg SW TAV Menz, District Magdeburg Wahlitz TAV Heidewasser Magdeburg Börde

Heidewasser WAZV " Zerbst Schönebeck Heidewasser Heidewasser Huy Fallstein Tornau SW Schönebeck Zerbst Roßlau Halberstw. WAZV WZV LK DESWA GmbH "Bode- Wipper" Schönebeck (ROVEG) SW Dt.Hydrierw. SW Lu. Stassfurt Heidewasser Wernigerode WAZV Rodleben Wittenberg ROVEG Dessau-Roßlau AV Blankenburg Huy Fallstein Wittenberg Salzland District under certain Köthen District circumstancesHarz District TAV "Oberharz" District of Anhalt

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 29 Demographic Development in Saxony-Anhalt

General Population Development in the State of Saxony-Anhalt

in the base year 2005 *1) : 2,469,716 residents

Forecast year *2) : 1,976,237 residents

Forecast year 2050 *3) : 1,562,000 residents

Forecast: The number of residents supplied by TWM drops by 30.5% in 2050 to 544,997 residents *4)

Sources: *1) Regional Statistics Office Saxony-Anhalt, ; *2) "4th regionalised population projection 2005 to 2025", Regional Statistics Office Saxony-Anhalt, Halle; *3) "11th coordinated population projection", Federal Statistics Office, Wiesbaden; *4) own calculations on the basis of data material published by the State/Federal Statistics Office

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 30 Water consumption in 2007

Total volume supplied: 39,296,806 [m 3/a]

thereof not including industry: 37,488,215 [m 3/a]

The share of water consumption attributed to industry amounts to less than 5%. The compensation of the demographic decline by industry is therefore not an option.

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 31 The average consumption of TWM customers is considerably above the state average ComparisonVergleich der of spezifischen Specific Consumption Verbräuche bei Levels den EW of de resider ntsTWM-Kunden in the TWM customer areas WAZV "Bode-Wipper" 128 SW Haldensleben 128 SW Wernigerode 215 TAV "Oberharz" 125 WWAZ Wolmirstedt 137 Städtische Werke MD 132 Heidewasser HDL 104 Heidewassser Burg 138 Heidewasser Zerbst 140 Halberstadtw. GmbH 132 WAZV Huy Fallstein 97 WV Burg 130 SW Schönebeck 137 Heidewasser Gommern 132 Heidewasser Tucheim 108 TAV Wahlitz/Menz 93 WZV LK Schönebeck 128 AV Blankenburg u.U 125 Heidewasser Roßlau 114 Heidewasser Tornau 68 Heidewasser/ROVEG 110 SW Lu. Wittenberg 108 TAV Börde 126 DESWA(ROVEG) 95 Durchschnitt Kunden (2007) 131 Durchschnitt LSA (2006) 91 Durchschnitt Deutschland (2004) 126 0 50 100 150 200 250 Specific ConsumptionSpezifischer Verbrauch in [L/resident*d] in [l/EW*d]

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 32 Projections of the annual total supply volume of drinking water from 2005 to 2050 (based on various assumptions)

EntwicklungDevelopment derof Total jährlichen Annual Gesamtlieferung Supply in Tm 3/year in Tm3/a

40.000

35.000

30.000

25.000

20.000 Tm3/a 15.000

10.000

5.000

0 YearJahr 2007 2007Year Jahr 2025 2025Year Jahr 2050 2050 beiwith gleichem unchanged spezif. consumption Verbrauch (V1) (V1) 37.487 31.025 26.069 beiwith Rückgang 5% decline um respectively jeweils 5% (V2) (V2) 37.487 29.474 23.532 beiwith Rückgang 10% decline um respectively jeweils 10% (V3) (V3) 37.487 27.922 21.120

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 33 Summary of the Projections

• Demographic declines directly influence the turnover volumes of TWM GmbH • Declines in drinking water turnover associated with population levels from approximately 37,000 Tm 3/year (2007) to approximately 26,000 Tm 3/year (2050) are anticipated (statistical calculation variant) • As an example, it was assumed that the consumption behavior (specific consumption in I/resident*d) would drop by 5% and/or 10% (theoretical trend estimate). • A 10% drop in the specific consumption would correspond to a decline in turnover totalling approximately 21,000 Tm 3/year Irreversible trend: Declining turnover across the entire supply area that would impact the entire network system:

• Insufficient capacity utilization of water utilities, technical facilities, network areas • increase in costs attributed to the fixed cost trap

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 34 Strategies to adjust to the new challenges

Demand / Consumption

Water Strategies Costs resources

Production / Distribution

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 35 Strategies to adjust to the challenges Demand/Consumption

Opposing Trends in Water Consumption

Decline in water consumption Additional water consumption due to: due to:

Declining population across Irrigation by agricultural the entire supply area operations

Decline in production Development of new industry attributed to industry and and the trades the trades

Decline in specific Rinsing of the line systems consumption

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 36 Strategies to adjust to the challenges Demand/Consumption

To what extent can TWM influence the demand/consumption ?

Approaches in Policy: • Influence policy to reduce the number of industrial consumers with their OWN water supply • Irrigation by agricultural operations

• There are limits on TWM's sphere of influence • Development of strategies to adjust to the uncontrollable trends • Partnership in large regions

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 37 Strategies to Adjust to the New Challenges Water Resources

Evaluation • of present quantity and quality of the resources and the future trend • current water rights, drinking water protection areas (adjustments to future conditions)

Examples: • Project for managing the river Ohre in consideration of climate change (water resources for infiltrating the water utility Colbitz) • Project for potential management of Westfläming (water utility Lindau) with reassessment of TWSZ

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 38 Strategies to adjust to the new challenges Production/Distribution

Production: • Situation: Production in 19 water utilities, thereof 2 primary water utilities • Plan: Shut-down of small water utilities, optimized operation of remaining water utilities Distribution: Situation: at present, the network capacities are already not fully utilized Plan: • Optimization by means of shut-down/downsizing and/or new connections • separate solutions for decentralized areas • Collaboration with the TWM customers to optimize the utilization of network capacities

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 39 Strategies to adjust to the new challenges Production/Distribution

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 40 Summary

Population Decline in the Supply Area declining drinking water turnover - new challenges

I Aspects of demand/consumption I Water resources I Production/distribution I Costs

Analysis of the supply area with respect to critical points Drafting of a sweeping, sustainable concept that implements appropriate technologies

Question: How much water can we provide to whom at what price in consideration of circumstances?

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 41 1. Brief Portrait SWM Magdeburg

2. Example: TWM

3. Drinking water supply Germany

4.Effects of Urban Development East on the technical infrastructure based on the example of SWM Magdeburg

5. Contact Data

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 42 4.1.CURRENT Situation: Population Trend

State capital Magdeburg (Source: SC Magdeburg)

1990 2000 2008 2020 2025 278.800 231.450 229.250 212.600 208.300

State of Saxony-Anhalt (Source: Ministry for Regional Development and Transport)

1990 2000 2008 2020 2.873.957 2.615.375 2.381.872 2.115.271

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 43 4.1.CURRENT Situation: Problem Areas in Supply

I Massive investments have been made since the early 90's

I Considerable improvement in the security of supply and disposal and environmental quality

I Economic change and change in the social structure

I Population decline and migration

I Technical infrastructure capacities not fully utilized = immense operational problems

I Shut-down of facilities - permanent losses in value

I Effects on the financing structure (amortization)

I Additional operating costs and capital costs for necessary measures to adjust the technical infrastructure

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 44 4.2. Presentation of the Federal Government Funding Programs (1/2)

Urban Development East – Program part "Upgrading of City Districts and Quarters"

What qualifies for funding? A Measures for continuing with the city development concept, further preparation, planning, and public relations B Regulatory Measures - Conversion of the technical infrastructure I Facilities for supplying electricity, gas, water and heat I Facilities for treating and disposing of wastewater

Funding of regulatory measures and facilities owned by third parties currently amounts to no more than 50 % of the fundable costs.

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 45 4.2. Presentation of the Federal Government Funding Programmes (2/2)

Funding of flat building Funding of urban construction

Funding of flat building Upgrading of city General districts and quarters Guidelines for upgrading Downsizing of flats with flats permanent vacancies Flat ownership guidelines only for housing companies also for utilities Funding of flat building Urban development - East Guidelines for upgrading flats Flat ownership guidelines

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 46 4.3. Experience Urban Development East from SWM's Standpoint (1/3)

Application period Program years 2002 up to and including 2009 (financial years 2002 to 2013) Total investment* EUR 35.00 million Amount of funding applied for * EUR 17.50 million Funding received EUR 0.19 million

*Multiple responses possible with new applications due to notices of refusal

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 47 4.3. Practical Experience Urban Development East from SWM's Standpoint (2/3)

Urban Development East in Magdeburg - Program Part Upgrading Overview approvals sorted by grant recipients Program years 2002 – 2009 (As of: 23.10.2009)

(Source: BIG Städtebau Saxony-Anhalt)

0,64 3,56 Total Grants: 0,19 EUR 28.52 million

24,13 Grants to SWM EUR 0.19 million.

utilities and waste management PublicÖffentliche sector Hand Ver- u. Entsorgungsunternehmen HousingWohnungswirtschaft companies Private companies

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 48 4.3. Experience Urban Development East from SWM's Standpoint (3/3)

Circumstances I Evaluation of Urban Development East first period is complete I Continuation of Urban Development East has been decided on with final effect up to the program year 2016 I The results of the evaluation and design of the urban development program's content including the technical infrastructure will be published in detail however the technical infrastructure based on the practice observed on the part of Urban Development East to date has not been considered and/or only to an insufficient extent

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 49 4.4. Problem Areas with the Drinking Water Supply (1/5)

The drinking water supply network must fulfill two basic conditions: I Supply of recipients with sufficient quantity and quality I Compliance with requirements of disaster protection (fire fighting)

Generally the fire-fighting requirements are decisive in terms of dimensioning. I Based on today's regulations, most drinking water pipes could be reduced to at least half their current size for reasons relating to fire prevention. I However, the decline in consumption – by means of which the network is financed – must be assessed as being much greater.

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 50 4.4. Problem Areas with the Drinking Water Supply (2/5) Consequences of over-dimensioning I lowest flow rates and I resultingly long dwell times of drinking water in the network

Operational consequences I formation of deposits (growth in the lines) I Increase in drinking water temperature and consumption of oxygen I excessive bacterial growth and accumulation of germs

Long-term consequences (if action is not taken in time) I considerable financial difficulties I considerable communication expenditure on the part of the utility and I damage to the utility's image and that of the residential area

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 51 4.4. Problem Areas with the Drinking Water Supply (3/5)

Simulation of the drinking water network 30.0 Magdeburg – Neu Olvenstedt 25.0 20.0 15.0 10.0 5.0 0.0

mean dwell time [d] 1990 2000 2007 2010

maximum permissible dwell time mean dwell time in Magdeburg - Olvenstedt

Mean dwell time [d] I The dwell time was calculated with the mean Year Magdeburg Stendal flow rate and the network length Olvenstedt South 1990 5.02 0.40 I based on experience, dwell times of 2000 17.49 0.90 greater than 5 days should be avoided 2007 22.09 1.60 2010 28.98 1.60

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 52 4.4. Problem Areas with the Drinking Water Supply (4/5)

Costs of Adjusting the Technical Infrastructure by 2009

Investment costs Halle Magdeburg Dessau Stendal total Silberhöhe Olvenstedt Zoberberg Süd [€ million] [€ million] [€ million] [€ million] [€ million] Investments district heating 3.04 1.86 0.36 1.63 6.90 Investments drinking water 1.78 2.61 0.30 1.07 5.76 Investments wastewater 2,39 1,87 0,24 0,95 5,45 Sum 7.21 6.34 0.90 3.65 18.11

Capital costs Halle Magdeburg Dessau Stendal total Silberhöhe Olvenstedt Zoberberg Süd [€ million] [€ million] [€ million] [€ million] [€ million] Capital loss district heating 2.88 2.03 0.14 3.48 8.53 Capital loss drinking water 1.20 2.12 0.17 0.50 3.99 Capital loss wastewater 1.72 1.35 0.17 1.07 4.31 Sum 5.80 5.50 0.48 5.05 16.83

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 53 4.4. Problem Areas with the Drinking Water Supply (5/5)

Summary:

I The network must be downsized where it is no longer needed. I In general, the network is too large and large sections must be reduced in size. I The capital value of the old network must be written off as a loss.

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 54 Redimensioning of a network in a Magdeburg quarter (1/2)

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 55 Redimensioning of a Network in a Magdeburg quarter (2/2)

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 56 4. 5. Closing Remarks I The urban development process to date demonstrates that not only disposing of vacant residential complexes, but also adjusting the technical infrastructure is a task of considerable economic proportions. I Adjusting capacities is the only way to succeed in order to also guarantee security of supply and high energy efficiency and water quality in future while maintaining affordable prices. I Stakeholders are also affected by requirements in terms of energy and climate policy - the challenge associated with the issue of "energetic urban renovations/ energy-efficient city" affect the whole of society as well as the adjustment to climate change.

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 57 4. 5. Closing Remarks

Guaranteeing the sustainability of cities is not only the task of the communities, the housing and public utility industry!

But also:

I Cooperation and involvement in partnership of all stakeholders associated with urban development

I Collective action and an interdisciplinary collaboration are needed

I Adjusting the technical infrastructure to declining demand is a task of considerable economic proportions

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 58 4.6. Approaches

I The federal government, states, and municipalities must assume joint responsibility and work closely together with the housing, public utilities, and waste management companies I Urban development funding as a collective task must be expanded to include all departments promoting infrastructure (Ministry of the Economy and Environment), that is, funding eligibility criteria and/or mechanisms must be readjusted, limiting funding to urban development areas does not make sense, inclusion of EU economic funding programs to support economic development I All funding programs in this context should undergo critical evaluation, a focus on future challenges

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 59 4.6. Approaches

Otherwise:

I considerable price increases on the part of public utilities and waste management companies,

I excessive socialization of the costs for the remaining residents and customers

I existing local disadvantages for residents and the economy would continue to increase severely

Helmut Herdt , Städtische Werke Magdeburg GmbH Seite 60 Any questions? Then please contact: Städtische Werke Magdeburg GmbH Chief Executive Officer Ass. jur. Helmut Herdt Am Alten Theater 1 D-39104 Magdeburg

Telephone: +49 (0)391 587-2200

Internet: www.sw-magdeburg.de

E-mail: [email protected]

HelmutHelmut Herdt Herdt, , Städtische Public Utilities Werke Magdeburg Magdeburg GmbH GmbH PageSeite 61