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Global Volume 12 / Issue 12 / December 2011 Water Intelligence Market-Leading Analysis of the International Water Industry Saying eau revoir Veolia bids farewell to UK regulated water after 25 years Tall Lauder Cosmetics heir has big plans to make over water holdings Forever blowing bubbles Aeration market finds new burst of energy The wizardry of Foz Brazilian water operator looks to bewitch US market Let Rajoy be unconfined PP election win raises Spanish privatisation hopes www.globalwaterintel.com CONTENTS December 2011 News & Features Regulars Veolia goes on a pre-Christmas diet 8 Need to Know this Month 4 l Veolia Water’s UK exit strategy Chief executive Antoine Frérot has outlined a wide-ranging l Doosan and Fisia’s war of words restructuring plan. Can the company deliver on its goals? Analysis 7 l David Lloyd Owen Selling Spain’s municipal crown jewels 12 l Chart of the month The formation of a new government in Madrid could catalyse Europe 12 a new wave of water privatisation in the country. l Remondis takes Eurawasser l Sewer costs loom over UK interims Saudi spends as privatisation nears 18 Middle East 18 The Kingdom is throwing money at its wastewater system, l IFC’s $100m Kharafi punt but tariff reform is still the holy grail of privatisation. l CH2M wins Doha sewer deal Americas 26 New governor appointed at SWCC 23 l Foz do Brasil looks to US Dr Abdulrahman Al-Ibrahim has been named top man at the l Water gets the Lauder treatment world’s biggest desal customer – what will his priorities be? Asia Pacific 30 l Operators’ hopes for Malaysia Ecolab merger boosts Nalco’s legacy 26 l Aussie plans hit water traders Water president Dave Flitman outlines how the Ecolab deal Market Profile 37 brings plenty of growth opportunities for both sides. l Aeration technologies Desalination Tracker 41 Ranhill goes private to keep growing 30 l Ashdod done and dusted The shift to private ownership is just the start of the journey Water Reuse Tracker 53 for the Malaysian developer. l Abu Dhabi prequalifies ten bidders Exposing China’s local spending 31 PPP Tracker 61 l Woonsocket wastewater RFP due A new law will make spending in the water sector by Chinese local governments more transparent than ever before. Companies in this issue 70 Volume 12, Issue 12 – December 2011 Published by: Editor: Sales & Marketing Director: Registered Company Number: 4412085 Media Analytics Ltd. Ian Elkins (E-mail: ie@) Emma Welsh (E-mail: ewelsh@) The Jam Factory ISSN No: 1471-3322. Media Analytics Ltd. accepts 27 Park End Street Deputy Editor: Advertising Sales Manager: no liability or responsibility whatsoever for any loss Oxford OX1 1HU Rhys Owen (E-mail: ro@) Jessica Underwood (E-mail: or damage suffered by the subscriber or any other junderwood@) United Kingdom Middle East Editor: user of the information contained in this publication. T + 44 (0)1865 204208 Tom Scotney (E-mail: ts@) Key Account Manager: Unauthorised distribution or reproduction of the F + 44 (0)1865 204209 Sivan Tal (E-mail: st@) contents of Global Water Intelligence is strictly Asia Editor: prohibited without prior consent of the publisher. E-mail domain name: Olivia Jensen (E-mail: oj@) Events Co-ordinator: © 2011 by Media Analytics Ltd. All rights reserved. globalwaterintel.com Chris Bowling (E-mail: cb@) No part of this publication may be photocopied, China Editor: Publisher: reproduced, retransmitted, put into a computer system Kathy Liu (E-mail: kl@) Christopher Gasson or otherwise redistributed without prior authorisation from Media Analytics. E: [email protected] Australia Editor: Max Borchardt (E-mail: mb@) Production by Gillian Fraser GWI – December 2011 www.globalwaterintel.com 3 NEED TO KNOW & ANALYSIS 320,000m3/d Ashdod desalination proj- ect. It seems that one of the anchor debt providers, the European Investment Bank, Need to Know decided half-way through the process that it didn’t want to take any more exposure to Frérot unveils the new-look Veolia; Saur and Séché fall out; Ashdod reaches the Israeli water sector, and opted instead financial close; SWCC’s new governor; IFC buys into Kharafi National; GS to lend the money to Bank Hapoalim, the goes global; all the latest news from around the world this month. lead arranger on the shekel part of the loan. Although Hapoalim eventually man- aged to syndicate out two thirds of the THE NEW VEOLIA GERMAN AUSTERITY shekel portion to Israeli institutions, the risk premium it was forced to add on for l Veolia’s plans to restructure its way l The German federal cartel office has effectively quadrupling its exposure to the out of trouble were largely met with indif- decided that austerity should start at home, project pushed the overall cost of funding ference by the investor community earlier and has handed the cash-strapped city- up, leaving the client as a helpless onlooker this month. Despite a sweeping array of state of Berlin a lifeline in its bid to buy (see story p22). proposals aimed at cutting debt and mov- back RWE’s 24.95% stake in Berliner Was- ing towards a more centralised manage- serbetriebe (BWB). It has mandated a 19% PRIVATE PROGRESS ment structure, investors seem unwilling cut in drinking water tariffs – which if to give CEO Antoine Frérot the benefit of upheld would inevitably reduce the value l Saudi Arabia’s National Water Company the doubt – at least for now (see story p8). of the stake to a more affordable level. appears to be in good position to start the BWB’s shareholders have few options to process of privatising its wastewater busi- l A central theme of Veolia’s restructur- tighten their belts other than to trim profit ness next year (see story p18) after spending ing plan is an increased asset disposals margins (see story p14). heavily on upgrading and expanding its programme, which includes the three Eng- asset base, most recently with the much- lish water-only companies that it bought at l The threat of tariff cuts in Germany trumpeted Jeddah sewerage project. Its the time the sector was privatised in the has not daunted Remondis Aqua, which major obstacle now will be finding a way late 1980s. Having failed to offload 49% this month agreed to buy Eurawasser, the to improve cost recovery on the water sup- of its UK water business last year, it seems German water services division of Suez ply side in order to support privatisation in that Veolia has finally admitted – like Suez Environnement, for €95 million. Suez put that segment of the business. Identifying and Saur before it – that UK regulated the unit up for sale after it because disillu- “high-value” customers is a good first step water is highly capital-intensive and offers little prospect for growth. Assemble a consortium of infrastructure funds and l Selling the three companies as a pack- age to someone like Thames Water – which make a bid on the understanding that each member already provides sewerage services to Veo- lia Water Central’s customers – would inevi- of your team ends up with one of the companies. tably trigger a referral to the Competition Commission, thus slowing the process and sioned with the growth prospects on offer along this politically sensitive path. impacting the price. The received wisdom in the country. What does Remondis see seems to be to assemble a consortium of that Suez doesn’t (see story p14)? l Meanwhile, the Saline Water Conver- infrastructure funds and make a bid on sion Corporation has a new governor - Dr the understanding that each member of SAUR POINTS Abdulrahman Al-Ibrahim, formerly vice your team ends up with one of the compa- governor of the Electricity and Cogenera- nies. That may be the only way Veolia can l Relations between Saur, France’s third- tion Authority (ECRA). At the top of his realise the 15-20% premium to regulated largest private water company, and its in-tray will be finding a way to restart the asset value that it is said to be seeking. 33% shareholder Séché Environnement, privatisation process at SWCC. This was have reached an all-time low. In a letter the main task given to his predecessor, l Thames Water’s shareholders, for their to French sovereign fund FSI last month, Feheid Al-Shareef, when he was appoint- part, seem to be happy playing musical Saur claims that the synergies between ed govern0r in 2004. Despite tendering chairs. After Canadian investor British the two groups are weak at best, and that Shoaiba 3 and Shuqaiq 2 to private devel- Columbia Investment Management Corpo- if Séché takes control of Saur by exercising opers, there has been no progress with ration upped its stake in holding company its call option on 18% of FSI’s stake, the regard to selling off existing production Kemble to 8.7% recently, a trio of inves- move would expose Saur to greater finan- assets since the global financial crisis tors – including two of the Macquarie cial risk and increase the cost of servic- and the decision to use public money to funds that originally bought the company ing its €2 billion debt pile. Séché wants to finance the 1,035,000m3/d Ras Al-Khair from RWE in 2006 – sold an aggregate of push through a capital increase in order to project. The Saudi electricity sector did 9.9% to Infinity Investments, a subsid- reduce Saur’s debt, but the FSI is dragging not put its private finance programme on iary of sovereign wealth fund Abu Dhabi its feet (see story p17). hold during the downturn. Investment Authority in early December.