2005 - 2006 - Pinsent Masons Water Yearbook 2012

Introduction
A new direction for the Yearbook
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INTRODUCTION
Although at more than 400 pages and 180,000 words in length, the seventh edition of the Yearbook
remains a thing of substance, something is missing this year; namely the Americas and Asia country
and company entries. We took the decision to spread the Yearbook’s global company and country
coverage across two years because of the relentless rise in what needs to be reported and the desire
to report this in suitable detail meant that the single volume format was in danger of becoming
unmanageable. This is best illustrated by the word count, which has climbed from 167,000 for the
1999-2000 edition to 228,000 for the 2004-2005 edition. As a result, the country and coverage will
alternate between Europe, the Middle East and Africa (2005-2006, 2007-2008, etc) and the Americas
and Asia (2006-2007, 2008-2009, etc), while retaining full annual coverage of the major international
players and enhancing the global overview section. The latter reflects the popularity of our annual
appraisal of the state of play by country and by company and as this edition demonstrates, will remain
uncompromisingly global in its outlook. In addition, some readers have commented that not enough
happens each year to justify some of the annual country entries, so a biennial approach will help to
address this.
We believe that these changes will significantly improve the value of the Yearbook for its readers and
welcome any feedback about this and any other areas where you have suggestions to make.
Another year of mixed fortunes…
2004 turned out to be a distinctly more grisly year than it appeared to be twelve months ago. A
number of contracts were wound up in Africa meaning that there was a net gain of people served by
the private sector of just four million for the year. The early prognosis for 2005 was similarly bleak, with
major contracts ending in Bolivia and Tanzania in what can only be described as controversial
circumstances. Although the fate of a number of major concessions remain in the balance, a series of
major contract awards in Russia, Algeria and India, along with the continued strength of the Chinese
market and minor awards in, for example, the USA, Portugal and the UK meant that at the time of
writing, net contract gains for 2005 stand at nearly 21 million. While this remains a far cry from the
halcyon years between 1997 and 2000, it represents a welcome return to resilience.
Those years were marked by the award of major concessions (Manila and Sofia for example), funded
through hard currency debt and often via a tendering process managed by the IFC. The current
generation of contracts sees a far greater reliance on local funding and a focus on countries where
sufficient confidence in the politics of private sector involvement exists. While this is fine in its own
right, it does not fully address the issue of how to get water and sanitation services to the unserved
urban centres in developing economies, let alone mobilising new sources of funding.
…as companies continue to shift their strategies…
AWG progresses in withdrawing from international markets (creating at least one new local player in
the process) and rumours abound about RWE’s international water strategy and what this in turn will
mean for Thames and American Water Works. Suez seeks to realign its activities in Latin America and
Asia (while remaining committed to China), and Veolia settles into its more focussed set of
international priorities. Caution is thus the collective watchword of the major players, in particular due
to the lessons learnt about the risks of financing hard currency debt through soft currency utility bills.
As the quasi-global strategy ebbs, the emergence of regional and local players continues apace.
Divestitures create opportunities, with AWG’s sale of its Oslo concession to Sweden’s Läckeby making
the latter company into a Scandinavian market leader, while RWE is set to sell its Chilean concessions
to local investors. The emergence of new players in Singapore, Malaysia and China continues as it
does in Spain and Portugal. Meanwhile the long anticipated rationalisation of various water interests in
Italy has helped AMGA and ACEA build their domestic presence and Hera shows no intention of
lagging behind.
…and equities acquire a scarcity value
A number of major sectoral reviews published by leading investment banks in the UK, USA and Asia
have highlighted the conceptual attractions behind investing in the water sector. The endearingly
optimistic nature of ‘modern’ equity analysis is reflected in some beguilingly straight line projections for
Pinsent Masons Water Yearbook 2005-2006