January 13, 2015 / 10:16 AM / 5 years ago

China's $97 bln water pledge stirs expansion ambitions at foreign firms

SHANGHAI, Jan 13 (Reuters) - French utility Suez Environnement Company SA and Australia’s Clean TeQ Holdings Ltd are looking to expand in China where the government has pledged at least $97 billion by 2020 to tackle a worsening water shortage.

The firms aim to participate in projects from producing drinking water to treating sewage, as private investors are invited to improve the quality and quantity of water which is in short supply in almost half of China’s 657 major cities.

Foreign water firms have struggled to gain market share in China due to frequent regulation changes, so the latest pledge offers a rare opportunity, analysts said.

“The advantage that we have now is that there’s quite a strong and hard push for the government to do something about cleaning up the water,” said Ealden Tucker, general manager of global water at environmental engineering firm Clean TeQ, which is looking to enter China six years after its last attempt. “That’s where things have changed for us.”

China’s water market could be worth “anywhere between $50 million to $300 million” for Clean TeQ, Tucker said.

The European Union Small and Medium Enterprises Centre estimates the market - from sewage treatment to supplying end users - will, on average, be worth up to 100 billion euros ($118.18 billion) each year in the decade starting 2014.

Suez said it sees opportunities in China particularly in high-technology areas such as treating waste water.

“We do see in the next few years more opportunities coming again for our company that we’ve not seen for the last two to three years,” said Steve Clark, China chief executive at Suez, one of the Chinese water market’s largest foreign companies.

Foreign companies may have permission to participate in projects, but barriers to entry still exist.

Just obtaining advisory work can be tricky, said Joep Appels of Dutch firm microLan, which sells water monitoring systems. “In China it’s not common to pay for consultancy or even to pay for software.”

Other companies cite difficulties securing loans and negotiating prices with local governments.

“These are fatal shortcomings,” said Wang Tianyi, chief executive officer of China Everbright Water Ltd.

Foreign companies such as Suez and Veolia Environnement VE SA were attracted to China in the late 1990s and early 2000s by government measures guaranteeing certain amounts of revenue.

The measures were withdrawn prompting companies to pull out, leaving Beijing Enterprises Water Group Ltd and China Everbright Water, among others, to fill the void. ($1 = 0.8462 euros) (Additional Reporting by Kathy Chen in BEIJING, Rujun Shen in SINGAPORE and Shanghai Newsroom; Editing by Christopher Cushing)

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