SINGAPORE, July 1 (Reuters) - Global water businesses are diving head first into Asia where fast-growing cities and water management problems hold the promise of torrential profits.
Vietnam, Australia and China are top picks for water companies such as Black & Veatch, Siemens Water Technologies and Veolia Water Solutions & Techologies given Australia’s resource boom and China’s and Vietnam’s burgeoning cities, executives said at the sidelines of a water summit held in Singapore last week.
The summit was a trade show attended by industry experts and top executives from international water firms.
"There is fantastic growth potential in Asia due to the many issues of water shortages, water scarcity, plus the fact that more and more people are living in bigger cities," said Jean-Michel Herrewyn, chief executive of Veolia Water Solutions & Technologies, a unit of Veolia Environment VIE.PA, the world's largest listed water supplier.
The global water market, which includes waste water treatment, building desalination plants and recycling water, is estimated to be worth around $316 billion, investment bank Morgan Stanley estimates. The bank views the industry as “attractive” and expects private investment to play an increasingly critical role in the next few decades.
Last week, Marmon Water LLC, a unit of Marmon Group, opened a plant in Singapore to produce water filters. The factory, which will create more than 100 jobs, underscores Asia’s emerging growth in the water industry.
Marmon Group is owned by U.S. billionaire Warren Buffett's Berkshire Hathaway BRKa.N investment company.
"It's growing around 8 percent annually and that makes it one of the faster growing water markets in the world," Siemens Water Technologies SIEGn.DE head Charles Gordon said of Asia.
The Asian water market is an estimated $120 billion a year with desalination and water treatment segments growing at a rate of 12-15 percent, said Kerry Murphy, Asia's region executive for GE Water & Process Technologies, a unit of General Electric GE.N, the second-largest company in the United States.
Murphy told Reuters in an e-mail that his unit will expand in Asia through acquisitions and a direct sales model and aims to be in “nearly all countries in Asia” over the next 3-5 years.
Len Rodman, chief executive of U.S. water firm Black & Veatch, announced last week that his firm won $34 million in water projects in Asia.
He expects Asia to become the biggest region for his business and for the water industry in Asia to grow between 10-15 percent annually. The firm tripled its revenues from the Asia Pacific to $170 million last year.
Malaysia’s AmInvestment Bank and Singapore water firm Konzen also launched a water fund at the summit with hopes of pulling in $320 million to invest in water assets in China and Southeast Asia.
WATER, WATER EVERYWHERE
Some of the main drivers of Asia’s growing water business are bigger cities, growing industrialisation and population growth.
China, which saw double-digit growth in the last few years, has fast growing cities and a growing number of industrial hubs, increasing its need for more and better water management.
Singapore-listed water firm Hyflux HYFL.SI is a big player in China's water industry with a portfolio of 44 Chinese water assets worth S$600 million ($441 million) .
Sam Ong, the firm’s deputy chief executive, told Reuters that he sees 20-40 percent growth from China annually and Hyflux is looking to fund new plants. He also sees 30 percent growth in its order book in the next three to five years.
“We are in a sweet spot right now targeting second-tier cities in China; the global guys aren’t in this market and the local players don’t have the technological know-how,” Ong said. Second-tier cities include Chengdu, Hefei, Xi’an and Xiamen.
Vietnam also faces high growth and bloating cities. Veolia Water will open its first office in the country in a few weeks, Chief Executive Herrewyn said.
Vietnamese media also reported on Friday that GE Infrastructure Chief John Rice pledged long-term investment in Vietnam and has been talking with Vietnamese firms on setting up a water filtering technology plant.
Water firms are also bullish on Australia where the combination of its worst drought in 100 years and a booming mining industry is pushing the country to invest heavily in water.
Mining is a water-intensive industry because water is needed in the purification of ore.
“Another growth area for us is Australia, as long as water resources are strained by everyone wanting to go into the mining and natural resource business,” Black & Veatch CEO Rodman said.
Despite the bullish outlook for the water business in Asia, some executives cautioned that the tap could easily be turned off by unforeseen events that may rock the continent’s growth.
“If you think of the avian flu in the past, there are some things that could shut it down just like that,” Rodman said.
“We don’t predict that’s going to happen, but that’s a challenge. If there is a significant deterioration of economic growth and the building of infrastructure slows down”.
Another challenge is finding skilled people for the industry, such as engineers, which are in tight supply in the region, said Murphy.
“The fundamental challenge is people,” he said.
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