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Russian Water Market Outlook: $11 billion Pure Water Program to Fuel Growth Paulina Szyplinska, Research Analyst Environment & Building Technologies
Russian Water Market Outlook: $11 billion Pure Water Program to Fuel Growth Focus Points Technology Evolution Overview of Russian Water Market Market Size and Forecasts Key End-users Key Market Forces Conclusions Russian Water Strategy
Overview of Water and Wastewater Market in Russia The Market is Set to Witness Growth Addressing Critical Improvements in Deteriorated Infrastructure and High Water Pollution Population Density (Russia), 2010 Source: Goskomstat Rossii Water and Wastewater Treatment Market: Coverage of Services (Russia), 2010 Source: Russian Water Association, Frost & Sullivan 41.0 per cent of water supply networks under urgent need of rehabilitation 29.0 per cent of wastewater discharge networks under urgent need of rehabilitation, 38.0 per cent of WWTP require reconstruction . Areas with Heavy Polluted Waters The most serious water pollution occurs in the most densely populated regions as well as in industrial regions of Krasnodar and Stavropol’ territories in the north of the Caucasus, Rostov and Novosibirsk oblast, the Republic of Chechnya, Vladivostok, Moscow and St. Petersburg. Russia’s water resources are unevenly distributed in relation to the population . 80.0 per cent of Russian population lives in the western part of the country which has only 8.0 per cent of total river runoff and 10.0 per cent of total renewable annual groundwater resources.
Russian Economic Overview Hit Hard By the Global Financial Crisis Russian Economy is on its Way Toward Recovery GDP Growth Rates (Russia), 2007- 2011 2007 Source: Trading Economics, Federal Service of Federal Statistics, Frost & Sullivan 2008 2009 2010 2011 Years
Crisis management after the deep collapse in 2009 has been broadly appropriate. The recovery has been supported by increased oil prices, stronger Russian domestic demand and more flexible exchange rate.
It is projected that Russia will continue to see positive economic indicators. Growth will be driven predominantly by the recovery of domestic consumption and increase in industrial production.
Development of industrial sector will also contribute growth in the water and wastewater market, especially in highly water related power, oil and gas and mining industries.
Russian Water Strategy The Pure Water Federal Target Program Indicates Ambitious Goals and Mirrors the Scope of the Water And Wastewater Sector Needs Water and Wastewater Treatment Market: Key Objectives of Pure Water Federal Target Programme (Russia), 2011-2017 Share of population with access to water supply services 2011 95.0% Share of population with access to wastewater collection services 84.0% 53.0% Share of wastewater treated according to the standards Share of population consuming drinking water that meets safety standards 83.2% Source: Russian Water Association, Frost & Sullivan Water and Wastewater Treatment Market: Funding for Pure Water Federal Target Programme (Russia), 2011-2017 $10.92 billion Regional and Local Budget Funds $0.30 billion Federal Budget Funds $0.30 billion Private Investments $10.32 billion Source: Rosvodokanal, Frost & Sullivan 2011 2017 90.0% 54.0% 46.0% 71.0%
Situation of Russian ‘Vodokanals’ Revenues Generated by Vodokanals are Insufficient to Cover Critical Investments Water and Wastewater Treatment Market: Management of Water Utilities (Russia), 2010 Source: Rosvodokanal, Frost & Sullivan Note: CZ- The Czech Republic, SK - Slovakia, EE- Estonia, HU – Hungary, HR – Croatia, PL – Poland, RU – Russia, TR – Turkey, RO – Romania, CS – Serbia. Source: GWVOECD, Frost & Sullivan The water and wastewater tariffs in Moscow, the most affluent city in Russia, are approximately 30.0 percent lower than in Bucharest, nearly three times lower than in Istanbul and more than three and a half times lower than in Warsaw and Prague Water and Wastewater Treatment Market: Average Water and Wastewater Tariffs (Europe), 2010 Currently, 84.0 per cent of water utilities are operated by mostly ineffective municipal enterprises. The level of private business participation is low, however the Russian Government is willing to attract private business to the industry modernisation
Key Market Drivers Strong Market Drivers Enable Investments and Catalyse Growth of the Market Privatization of Public Water Utilities Progressive Environmental Legislation and Improvement of Implementation Urgent Need to Rehabilitate Aging Infrastructure and Introduce Advanced Treatment Technologies $10.92 billion Pure Water Programme and Federal Support Attracting Financial Aid Source: Frost & Sullivan. The Russian water and wastewater market is significantly buoyed by progressive legislation, financing programs of Russian Government and growing international investment and loans by the World Bank, EBRD and other International Financing Institutions (IFIs).
Lack of Resources and Organizational Capacity to Address Environmental Issues Key Market Restraints Despite Strong Drivers, Substantial Restraints Continue Hampering Growth of the Market Source: Frost & Sullivan. Limited financial resources of water utilities constitute the main factor which hampers development of the market. Corruption and High Levels of Bureaucracy Limited Financial Resources of Water Utilities Inefficient System of Water Tariffs
Revenue Forecasts for the Russian Water and Wastewater Treatment Equipment Market Water and Wastewater Treatment Market: Revenue Forecast for Treatment Equipment (Russia), 2007, 2010 and 2017 Note: All figures are rounded, the base year is 2010. Source: Frost & Sullivan CAGR (2007-2010): 3.0% Years CAGR (2010-2017): 9.2% The total size of the Russian water and wastewater treatment equipment market in 2010 was $917.5 million. It is expected that the market size will almost double over the forecast period and reach approximately $1,699.1 million in 2017, growing at a compound annual growth rate (CAGR) of 9.2 per cent from 2010 to 2017.
Market Attractiveness and Growth by Key Segments Considerable Potential Exists in Both Municipal and Industrial Segment with Significant Need of Large-scale Infrastructure Development Water and Wastewater Treatment Market: Market Attractiveness by Segments (Russia), 2010-2017 Note: Size of the bubble corresponds to the segments’ market size in 2010. The base year is 2010. Source: Frost & Sullivan
Treatment Technology Trends Tangible Shift Toward Advanced Treatment Technologies is Expected Over the Coming Years
Maximal reduction of volumes
Source: Mosvodokanal, Frost & Sullivan Water and Wastewater Treatment Market: Development of Nutrients Removal (Russia), 2010 and 2020 Water and Wastewater Treatment Market: Development of UV Disinfection (Russia), 2010 and 2010 Source: Mosvodokanal, Frost & Sullivan 2010 2020 2010 2020 Key Objectives of Sludge Management in Russia Preparation for further safe recovery Environmentally safe temporary storage or incineration Water and Wastewater Treatment Market: Key Objectives of Sludge Management (Russia), 2010 Source: International Water Association, Frost & Sullivan At present the incineration of sludge is not widely applied method in Russia but it is expected that it will become more important, mainly for large metropolises dealing with disposal problems The main direction of development of the metropolitan sewage treatment facilities is their reconstruction with the transition to modern technology for nitrogen and phosphorus removal and the introduction of UV disinfection
Key Municipal End-user Analysis The Government’s Aim is to Finance Modernisation of Water Systems in Small Cities but Private Investors are Mainly Investing in Bigger Cities Water and Wastewater Treatment Market: Key Municipal End-users Trend (Russia), 2011-2017 Short-term Perspective Over 500,000 Long-term Perspective 100,000 – 500,000 Below 100,000 Cities with Population Trend Source: Frost & Sullivan Growth Stable Decline Main interest of private investors. Development of water and wastewater sector connected with large-scale modernisation of ageing infrastructure. Development in long-term perspective connected with expansion of the cities, construction of new facilities and increasing treatment capacities Not included in the Government’s funding programme and less attractive for private operators. The development of treatment technologies is expected to increase as the number of private operators interested in PPPs will grow in the Russian market Stable opportunities while the investment is supported by federal and regional budgets. In the long-term perspective the opportunities are projected to grow, as the this segment will attract investments once the large and medium sized cities are covered
Key Industrial End-user Analysis It is Expected That the Global Demand for Power and Oil & Gas will Entail Demand for Water and Wastewater Treatment Solutions Short-term Perspective Long-term Perspective Trend Source: Frost & Sullivan Growth Stable Decline Mainly due to expansion of the Russian thermal and nuclear power capacity and introduction of Zero Liquid Discharge and Best available Technologies The global demand for oil and gas from Russia is expected to continue driving the demand for water and wastewater treatment solutions. The increase in oil catalyses focus on more energy efficient, compact treatment solutions Increasing demand for quality products is expected to continue growing in line with rising demand for advanced and high-end water and wastewater technologies to improve the treatment efficiency By 2013, Russia is targeting an increase in coal production that will drive the demand of minimizing the impact of large runoff streams and metals-laden wastewater on the local environment Water and Wastewater Treatment Market: Key Industrial End-users Trend (Russia), 2011-2017 Power Oil & Gas Food & Beverage Mining Pulp & Paper Expected demonstration of new trends of development, in water and wastewater treatment in the long term perspective, including application of Zero Liquid Discharge Technologies Industrial Sectors
Summary of Key Opportunities Growth Opportunities are Related Mainly to Nutrient Removal and Application of Membranes, UV and Ozone Treatment Development of membrane, UV and ozone treatment in the municipal and industrial sectors Urgent need to upgrade depreciated water and wastewater infrastructure Application of zero discharge technologies to reduce water consumption Development of nutrient removal technologies in the municipal wastewater treatment Increasing private business involvement in the public sector Source: Frost & Sullivan Water and Wastewater Treatment Market: Key Opportunities (Russia), 2010 Key Opportunities in the Russian Water and Wastewater Market
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For Additional Information Chiara Carella Head of Corporate Communications Europe, Israel, Africa +44 (0) 207 343 8314 [email_address] Paulina Szyplinska Research Analyst Environmental & Building Technologies +48 (0) 22 398 9122 [email_address] Fredrick Harry Royan Global Research Director Environment (Water) Markets +44 (0) 207 343 8353 [email_address] Archana Chauhan Research Manager CEE Operations +48 (0) 22 390 4152 [email_address]