2012 U.S. Municipal Water & Wastewater Infrastructure Spending

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With the effects of the 2009 economic downturn still constraining the growth potential of the U.S. municipal water and wastewater treatment market, insights from key industry participants are useful to understand the true state of the current market landscape. This presentation looks at the past two years of infrastructure spending in the U.S. municipal water and wastewater market, identifying regions of growth and issues regarding procurement, budget allocation, and long-term spending initiatives.

• Learn about 2010 to 2012 municipal water and wastewater treatment infrastructure projects
• Discover insights into new and existing industry challenges
• Analyze regional funding limitations
• Identify location-based growth opportunities based on spending initiatives and infrastructure investments

This presentation will benefit engineering, procurement and construction (EPC) firms as well as municipalities, and water and wastewater treatment equipment suppliers. The insights derived from this presentation will also impact industry participants who rely on the sustainability of the U.S. municipal water and wastewater infrastructure market.

Supporting Quotes
“The ongoing impact of the economic decline is still felt by U.S. municipalities today,” said Frost & Sullivan Industry Analyst Eric Meliton. “Either through the increasing costs for retrofit and replacement projects, or the cost of materials and labor, the period from 2010 to 2012 is a compelling timeline to understand where the U.S. municipal water and wastewater spending initiatives will occur. Identification of regions of growth in the U.S. is key to understanding where market participants need to position themselves to thrive. We will discuss profiles of municipal case studies, which facilitate an outlook as to the short-term and long-term potential of the marketplace.”

Supporting Resources
For more information about Frost & Sullivan’s Environment and Building Technologies practice, please visit: http://www.frost.com/EBT

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2012 U.S. Municipal Water & Wastewater Infrastructure Spending

  1. 1. 2012 U.S. Municipal Water & Wastewater Infrastructure Spending Where has the money been going and what plans do municipalities have in the near future? Eric Meliton, Industry Analyst Environmental Technologies August 29, 2012© 2012 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property ofFrost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
  2. 2. Today’s Presenter Eric Meliton, Industry Analyst Place photo Frost & Sullivan here North America - Toronto Shadow Industry ExpertiseBackground for Experience in covering a broad range of sectors, leveraging long-standing working relationships with leading effect industry participants’ CEO’s and senior executives in: - Environmental technologies - Industrial, residential, and commercial water & wastewater treatment technologies - Air pollution, soil remediation, and waste management solutions - Pharmaceutical quality assurance manufacturing and management practices Career Highlights • Cited by leading publications like Wall Street Journal, Yahoo Finance, and Greener World Media • Keynote speaker at 2012 WWEMA 104th Annual Meeting to discuss Impact of Global Water Regulations • Former Analytical Chemist, Quality Assurance Specialist, and Narcotics Vault Supervisor • Attending WEFTEC 2012 (New Orleans, LA) as a Supporting Publication Sponsor from Sept 29 to Oct 2 Education • BSc. in Chemistry & Environmental Science from the University of Western Ontario - London, ON, Canada • Level I English Writing Certificate from the University of Western Ontario - London, ON, Canada • Certificate in QA Manufacturing & Management from Sheridan ITAL - Brampton, ON, Canada 2
  3. 3. Focus Points• Market Overview • Key Market Drivers & Restraints • Current and Future Industry Challenges • Technology Trends • National Issues• Case Studies Examples• Conclusions & Recommendations 3
  4. 4. Poll QuestionWhat is the most impactful municipal water and wastewater infrastructure challenge?• Economic uncertainty• Lack of capital expenditure (CAPEX) and operational (OPEX) expenditure budgets• Minimal regulatory oversight and enforcement• Slow technology adoption rates• Inability to achieve full cost pricing for services 4
  5. 5. Market Overview
  6. 6. Market Overview• U.S. water and wastewater infrastructure continues to be under-funded, resulting in a crisis amongst key utilities nationwide• Long-term economic effects have limited spending initiatives• Combination of reduced spending, deteriorating infrastructure, and stricter regulations have enhanced key regional challenges• Utility end users are seeking unique ways to address retrofit and replacement initiatives without affecting long-term plans• Treatment equipment providers and service providers are working within constricted parameters, resulting in enhanced competition for procurement contracts 6
  7. 7. Market Overview• Approximately $6.90 billion in water treatment projects and $6.88 billion of wastewater treatment projects in U.S. (2009)• Economic downturn has negatively affected long-term investments in water and wastewater infrastructure, resulting in a reduction in project spending by approximately 3% in the U.S. over the past two years• Approximately $6.70 billion in water treatment projects and $6.60 billion of wastewater treatment projects in U.S. (2011)• Estimated 41.2% of Tier I water projects and 58.8% of Tier I wastewater projects were funded by municipalities in U.S. (2009), which was slightly assisted by the American Recovery and Reinvestment Act• Estimated 40.6% of Tier I water projects and 59.4% of Tier I wastewater projects were funded by municipalities in U.S. (2011) Source: Engineering News Record Magazine and Frost & Sullivan analysis 7
  8. 8. Key Market Drivers & Restraints Municipal Water and Wastewater Infrastructure: Market Drivers & Restraints (U.S.), 2012-2018 Water scarcity concerns Expansive in various regions of population growth U.S. of major urban centers in drought- stricken regions Aging infrastructure upgrade Municipal water Strict effluent requirements discharge Drivers conservation and Drivers recycling programs restrictions Restraints Restraints Increasing Rising CAPEX costs operational costs Inability to upgrade for treatment aging infrastructure for technology Lack of new due to budget CAPEX budgetary implementation regulations to services reallocation constraints require changes to existing equipment Source: Frost & Sullivan analysis 8
  9. 9. Current Industry Challenges Municipal Water and Wastewater Infrastructure: Top Five Industry Challenges (U.S.), 2012 Poor investment for infrastructure maintenance Increasing municipal and state Regional water debt concerns scarcity concerns Municipal Water & Wastewater Treatment Negative impact of Slowness to adopt U.S. economic innovative downturn on technologies spending initiatives Source: Frost & Sullivan analysis 9
  10. 10. Future Industry Challenges Municipal Water and Wastewater Infrastructure: Top Five Industry Challenges (U.S.), 2013-2018 Increasing regional restrictions on freshwater use Slow implementation of Increasing costs to regulatory oversight address aging to evoke changes infrastructure Municipal Water & Wastewater Treatment Increasing end user Inability to generate demand in drought- CAPEX and OPEX stricken regions of funding U.S. Source: Frost & Sullivan analysis 10
  11. 11. Technology Trends• As aging infrastructure is retrofit or replaced, there will be a steady demand for advanced water and wastewater treatment technologies for municipalities with long-term investment plans• Growing demand for Smart water technologies such as advanced metering infrastructure (AMI) and automatic meter reading (AMR) to reduce costs and improve utility efficiency• Treatment systems with the capabilities to remove and recover complex contaminants will be sought after as regulatory oversight and enforcement continues to evoke changes over time• Long-term replacement of buried infrastructure (transmission pipelines), upgrades to stormwater management, and improvements to combined sewer overflows will be required 11
  12. 12. National Issues• 2007 U.S. EPA Drinking Water Needs Survey identified a $321.5 billion infrastructure gap consisting of the following: • Buried transmission and distribution pipelines replacements • Water treatment and storage facilities enhancements• 2008 U.S. EPA Clean Watershed Needs Survey identified a $298.1 billion infrastructure gap consisting of the following: • Primary, secondary, and tertiary wastewater treatment initiatives • Sewer replacement and combined sewer overflow issues • Stormwater management improvements • Water recycling initiatives 12
  13. 13. National Issues• With over 55,000+ water and 20,000+ wastewater utilities in the U.S., both privately and publicly owned, there is a great deal of market fragmentation• Approximately 85-90% of water and wastewater utilities are publicly owned, so until there is a shift towards private investment, the issues plaguing public infrastructure will persist, however, private investment has grown by approximately 23% over the past two years• Ongoing end user consumer stigma towards public-private-partnership relationships has curtailed the potential entrance of private investment firms to address CAPEX and OPEX issues• Design-bid-build model procured with EPC firms is dominant contract model in the U.S., further limiting private investment opportunities 13
  14. 14. Case Study Examples
  15. 15. Case Study Examples - MidwestState of Illinois• Key state challenges: • Outdated buried infrastructure • Complex water contaminants • Poor combined sewer overflow solutions • Scarce groundwater / freshwater sources • Strict nutrient regulations• Estimated $17.70 billion (2009) water and wastewater needs • $2.15 billion in pipe repair, and replacement projects required • $11.10 billion in combined sewer overflow initiatives required Source: Frost & Sullivan analysis 15
  16. 16. Case Study Examples - NortheastState of New York• Key state challenges: • Outdated buried infrastructure • Poor combined sewer overflow solutions • Inadequate sanitary sewer overflow solutions • Complex stormwater runoff requirements • Natural gas drilling in Marcellus shale basin• Estimated $29.9 billion (2009) water and wastewater needs • $15.82 billion in secondary wastewater treatment initiatives required • $6.71 billion in combined sewer overflow initiatives required Source: Frost & Sullivan analysis 16
  17. 17. Case Study Examples - SouthState of Florida• Key state challenges: • Water scarcity concerns • Population growth in urban centers • Restoration of the Florida Everglades • Regional water rights issues• Estimated $19.72 billion (2009) water and wastewater needs • $9.41 billion in advanced wastewater treatment systems required • $6.72 billion in pipe repair and replacement projects required Source: Frost & Sullivan analysis 17
  18. 18. Case Study Examples - WestState of California• Key state challenges: • Water scarcity challenges • Regional drought and reduced rainfall • Outdated buried infrastructure and storage requirements • Water resource rights • Complex contaminant treatment and removal• Estimated $30.12 billion (2009) water and wastewater needs • $12.22 billion in secondary wastewater treatment projects required • $8.05 billion in pipe repair and replacement initiatives required Source: Frost & Sullivan analysis 18
  19. 19. Case Study Examples - OtherNotable 2012 Projects Identified as the largest U.S. water and wastewater infrastructure projects awarded in 2012, with an estimated combined project value of $19.86 billion:• Brackish Desalination Project – San Antonio, TX• Integrated Pipeline Project – Tarrant Regional Water District, TX• Urban River Renewal – Trinity River Vision Authority, TX• Southern Delivery System Upgrade – Colorado Springs, CO• Biloxi Infrastructure Repair Program – Biloxi, MS• Lake Meade Intake Project – Southern Nevada Water Authority, NV• Sewer System Improvement Program – San Francisco Water & Power, CA• Untreated Sewage Program – St. Louis Sewer District, MO• Project Clean Lake – Northeast Ohio Regional Sewer District, OH Source: North American Strategic Leadership Forum and Frost & Sullivan analysis 19
  20. 20. Conclusions & Recommendations
  21. 21. Conclusions & Recommendations• Engineering, Procurement, and Construction (EPC) firms are still the key stakeholders capable of addressing the market fragmentation of the municipal water and wastewater infrastructure industry• Focus on smart water initiatives to reduce leakages, excessive water use, increase operational efficiency, and enhance revenue recovery• Further acceptance of design-build (DB) and design-build-operate (DBO) contractual models will result in an influx of private sector investment into public utilities with limited CAPEX budgets• Proposed business models will alleviate the stress on utilities with an inability to generate funding through municipal bond structures (general obligation bonds and revenue bonds) 21
  22. 22. Conclusions & Recommendations• Increasing the cap limitations on the volume of long-term municipal bond structures that can be issued will improve the opportunities for smaller municipalities to generate funding• Focus on building stronger approved vendor relationships between EPC firms and equipment and treatment service providers to provide cost- effective pricing and develop collaborative solutions• Continued diligence to achieve full cost pricing amongst utilities and education of end users on the proper valuation of water and wastewater treatment services• Commitment to master planning initiatives to ensure proper resource allocation to retrofit, replacement, and expansion efforts are executed 22
  23. 23. Next StepsDevelop Your Visionary and Innovative Skills Growth Partnership Service Share your growth thought leadership and ideas or join our GIL Global Community Join our GIL Community Newsletter Keep abreast of innovative growth opportunities 23
  24. 24. Your Feedback is Important to Us What would you like to see from Frost & Sullivan?Growth Forecasts?Competitive Structure?Emerging Trends?Strategic Recommendations?Other? Please inform us by “Rating” this presentation. 24
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  26. 26. For Additional InformationBritni Myers Eric MelitonCorporate Communications Industry AnalystEnvironmental Technologies Environmental Technologies(210) 477-8481 (416) 495-2692britni.myers@frost.com eric.meliton@frost.comRoberta Gamble Nils FrenkelBusiness Unit Leader Sales DirectorEnergy & Environment Energy & Environment(650) 475-4522 (210) 663-4503roberta.gamble@frost.com nils.frenkel@frost.com 26

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