Source: Timothy Vogel

SESSION 2: MARKET OPPORTUNITIES GCC Region Diversifies Supply: Market Outlook for Municipal Wastewater & Reuse 2015-2020

June 2015 Keith Hays, Vice President Bluefield Research ADVANCED WATER TREATMENT & DESALINATION INSIGHT SERVICE

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GCC Region Diversifies Supply: Market Outlook for Municipal Wastewater & Reuse 2015-2020

PRESENTATION

What’s driving municipal wastewater reuse in the GCC region?

•

Conserve groundwater supplies

Address infrastructure gaps

Limit impact on desalination assets

ADVANCED WATER TREATMENT & DESALINATION

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Groundwater depletion a major concern driving diversification strategies (UAE, Kuwait) Reuse covers 4% of regional consumption, poised for growth

• •

Wastewater treatment coverage still relatively low Major need to improve infrastructure (especially collection networks) with more integrated urban planning

•

Destructive impact of wastewater outfalls on seawater intake systems

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GCC Region Diversifies Supply: Market Outlook for Municipal Wastewater & Reuse 2015-2020

PRESENTATION

GCC Market Attractiveness The UAE and Qatar lead the GCC region in terms of market attractiveness, driven by a combination of stable policy frameworks, targets, and a track record of delivering. Policy Landscape

Current Infrastructure Gap

Alternative Water Sources

Openness to Foreign Players

Investment Targets

Market Attractiveness

UAE

High

Qatar

High

Bahrain

Medium

Oman

Medium

Kuwait

Low

Saudi Arabia

Low

Market Inhibitor

Limited Impact

Improving Conditions

ADVANCED WATER TREATMENT & DESALINATION

Market Driver

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Analysis • Environmental policy drivers have had limited impact on driving treatment adoption across the region • The infrastructure gap, while significant for all countries, is driven largely by a significant deficit existing in collection network capacity. • To confront existing infrastructure gaps and rising population demands, governments have targeted US$23.7 billion of spend by 2027

GCC Region Diversifies Supply: Market Outlook for Municipal Wastewater & Reuse 2015-2020

PRESENTATION

Water Supply Portfolios by Country The combination of extreme water scarcity and a reliance on groundwater withdrawals has sparked greater focus on alternative water solutions with wastewater reuse taking on an increasing share. Analysis GCC Water Sources Kuwait

Bahrain

• Portfolio strategies are taking on greater importance in region with utilities adding wastewater reuse to meet growing irrigation demands, led by Kuwait, Bahrain, Qatar, and UAE (Dubai and Abu Dhabi).

Desalination

10%

Groundwater 29%

48%

Water Reuse 41%

61%

Oman 2%

11%

4%

4%

Qatar

GCC

• Treated wastewater is currently used in agriculture and urban irrigation, and in district cooling systems. The expansion of reuse will be in industrial and irrigation applications.

12% 13% 40%

94%

84%

Saudi Arabia

47%

• A call for improved wastewater treatment in the UAE followed a 2008 and 2009 red tide that compromised desalination capacity for eight months. Desalination capacity has grown to represent 7.5 million m3/d of sourced water.

UAE

5,000 people to reuse 100% of wastewater by 2025, a goal which will necessitate US$23 billion over 20 years • Both Kuwait and Bahrain are increasing their rates of wastewater reuse, but have not identified specific targets

GCC Region Diversifies Supply: Market Outlook for Municipal Wastewater & Reuse 2015-2020

PRESENTATION

Wastewater Infrastructure Gaps Generate Greenfield Opportunities Greenfield opportunities are expected to proliferate in the region to address current shortfalls in wastewater collection and treatment capacity. Analysis 11,056 9,211 6,027

• A 5 million m3/d wastewater collection gap across all markets is driving immediate opportunities for project development.

4,262 4,383

3,687

Regional Total 3,134 #

m3/d

(000) Wastewater Produced

2,514

Wastewater Collection Network

Key Collection Bottlenecks

Wastewater Treatment Capacity

1,475 1,200 918 856 467

414 289 276

Bahrain

751

1,004

375

198 123

Kuwait

Oman

Qatar

Saudi Arabia

UAE

Source: Chowdhury 2013, FAO, Economic and Social Commission for Western Asia, Bluefield Research

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• Saudi Arabia and Qatar are reacting to their network infrastructure shortfalls with US$3.5 billion and US$3 billion, respectively, of planned investment in sewage networks. • The region’s current 11 million m3/d of wastewater generation exceeds installed treatment capacity by 1.8 million m3/d --The largest treatment gaps by volume are in the UAE and Kuwait..

GCC Region Diversifies Supply: Market Outlook for Municipal Wastewater & Reuse 2015-2020

PRESENTATION

GCC Wastewater Infrastructure CAPEX Forecast by Country Government initiatives and current infrastructure gap underpin Bluefield’s US$22.4 billion wastewater infrastructure forecast through 2020. CAPEX Forecast by Country, 2014-2020 Qatar

UAE

Oman

Kuwait

Bahrain

Total CAPEX

Saudi Arabia

0%

20%

40%

60%

80%

100%

4,500

US$ (million)

4,000

Analysis • Bluefield forecasts US$22.4 billion of CAPEX spending on wastewater and collection networks, with more than 58% expected in Saudi Arabia and Qatar. • Qatar: ramp-up to the 2022 world cup, US$5 billion of CAPEX, Inner Doha Re-Sewerage Implementation Strategy Program.

3,500 3,000 2,500

• Kuwait: 225,000 m3/d upgrade to the Sulaibiya Wastewater Treatment and Reclamation Plant.

2,000 1,500 1,000 500 0 2014

2015

2016

2017

2018

ADVANCED WATER TREATMENT & DESALINATION

2019

2020 7

• UAE: Strategic Tunnel Enhancement Programme– to be completed by 2015– represent more than US$4.5 billion of collection system spend

GCC Region Diversifies Supply: Market Outlook for Municipal Wastewater & Reuse 2015-2020

PRESENTATION

GCC Wastewater Forecast by Segment Forecasted spending on wastewater collection networks in the GCC represents more than US$12 billion, or 55%, of total CAPEX spend through 2020– sparking opportunities for pipe, pump, and valve suppliers. Network Collection, 2015-2020

Treatment Plants, 2015-2020

Land 1% Engineering & Design 10%

Land & Siting Piping 1% 7% Equipment 39%

Contingency 10%

Treatment Systems & Installation 27%

Materials 10%

Other 15%

US$12.3 billion

Other 15%

Labor 25%

• For collection networks, pumps and pipes represent the largest share of the CAPEX for equipment– US$6.8 billion of the total. • Collection network installation, largely a civil works activity, calls for significant labor inputs totaling 25% of the total ADVANCED WATER TREATMENT & DESALINATION CAPEX

US$10.1 billion

Electrical & Instrumentation 15%

Civil (tanks, buildings, foundations) 25%

• As water reuse takes hold, the CAPEX on more advanced systems will take on larger market share. Reuse systems call for increased treatment levels

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• The piping spend is related to the treatment plant and is limited to connection to the collection system.

GCC Region Diversifies Supply: Market Outlook for Municipal Wastewater & Reuse 2015-2020

PRESENTATION

Companies Addressing the GCC Municipal Wastewater Reuse Opportunity European firms are well positioned to address the GCC market, primarily acting as vertically integrated EPC providers led by leading players such as Veolia, Degremont, and Aqualia. Value Chain Positioning –UAE, Qatar Muni Wastewater Reuse Projects Technology

EPC

O&M

Ownership

Veolia Metito

Mitsui

Degremont Biwater

EUCH

Besix Sanotec Black & Veatch Nakheel

Samsung Engineering

Degremont

Marubeni

Metito

Mitsui

Keppel Seghers Hyundai

aqualia

Larsen & Toubro Galfar Engineering Veolia

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GCC Region Diversifies Supply: Market Outlook for Municipal Wastewater & Reuse 2015-2020

PRESENTATION

Conclusions •

Increased utilization of wastewater reuse systems is central to GCC governments’ evolving ‘three tap’ strategies, though reuse currently only makes up 4% of the region’s water supply portfolio.

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Regional trends show increasing pressure on water and wastewater infrastructure, underpinning more than US$40 billion of government funding aimed at closing wastewater infrastructure gaps

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Bluefield Research’s forecast of six Gulf Cooperation Council (GCC) markets shows US$22.4 billion of wastewater infrastructure investment between 2015 and 2020.

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European firms are currently most present as integrated EPC providers in UAE and Qatar, and are well positioned to expand as countries seek to meet their longer term targets.

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GCC Region Diversifies Supply: Market Outlook for Municipal Wastewater & Reuse 2015-2020

PRESENTATION

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