Get ready for the next big thing!

Great potential lies in the China Water and Wastewater Treatment Market

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May 2010

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1. Overview of the China Water Market

2. Industry Challenges

3. Total Market Forecast and Brief Findings

Agenda

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Historical and Geographical Disparities between levels of development of Each Region

Source: Year Book of China Statistics 2008

Total Water ResourcePopulation covered with water and wastewater

treatment facilities, (2007)

22%

Year

100

mill

ion

m3 /

year

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Water Resource Distribution and Utilization History in China

Note: All figures are rounded; the base year is 2009. Source: Year Book of China Statistics 2009

Total Water and Wastewater Treatment Market: Water Resource Distribution by Regions (China), 2009

Total Water and Wastewater Treatment Market: Water Usage Distribution by Regions (China), 2009

Regions Regions

Note: Others include seawater, brackish water, etc.

The municipal drinking water supply rate has been reached to 97% till 2009. The drinking water supply rate for counties/towns will reach 75% by 2010.

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Trends of wastewater discharge and rate of treatment

Source: National Bureau of Statistics of China, Ministry of Housing and Urban-Rural development of China; Frost & Sullivan, 2009

Urban Wastewater Discharge and treatment rate in China, 2005-2009

Forecasted

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Water Investments to be Doubled in 12th Five Year Plan (2011-2015)

Source: Ministry of Housing and Urban-Rural Development of China, China National Environment Protection Plan in the11 th Five Year (2006-2010)

Timeline2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

11th Five Year Plan11th Five Year Plan 12th Five Year Plan12th Five Year Plan

$224 billion in Environmental Protection$224 billion in Environmental Protection

About $11.2 billion in Water sector About $11.2 billion in Water sector

$454 billion in Environmental Protection$454 billion in Environmental Protection

About $48.5 billion in Water sector About $48.5 billion in Water sector

Accounted for 1.5% of GDP

Accounted for 1.35% of GDP

Environmental Protection Investment (China), 2006-2015E

7M580-15

1. Overview of the China Water Market

2. Industry Challenges

3. Total Market Forecast and Brief Findings

Briefing Content

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Top Industrial Challenges

Rank Industry ChallengesImpact Over Forecast Period

1 - 2 Years 3 - 4 Years 5 - 7 Years

1Water scarcity and ever-polluted natural water resources.

High High High

2Government emphasis on Zero wastewater discharge in water intensive industries.

High High High

3Privatization for water and wastewater industry .

High High High

4Conflict between increasing wastewater discharge standards and the cost of treatment and operation.

High High High-to-Medium

5Relatively low water tariff affect the investment motivation.

High High High-to-Medium

6End users regional preference and fierce competition with domestic organizations pose a barrier for new entrants.

High High High-to-Medium

7Old infrastructure and facilities for existing water and wastewater treatment plants.

High High High-to-Medium

Source: Frost & Sullivan

Total Water and Wastewater treatment market: Impact of Top 7 challenges in China, 2010-2016

9M580-15

1. Overview of the China Water Market

2. Industry Challenges, Market Forces & Restraints

3. Total Market Forecast and Brief Findings

Briefing Content

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Total Market Revenue Forecasts

Water and Wastewater Treatment Market: Total Market Revenue Forecasts (China), 2006-2016

Note: All figures are rounded; the base year is 2009; Source: Frost & Sullivan

2006-2009 2010-2013

CAGR (2009-2016): 1

0.4%

$25.8 billion

$38.6 billion

$40.6 billion

2014-2016

Year Water Wastewater2006 32.1% 67.9%2007 31.3% 68.7%2008 30.8% 69.2%2009 29.9% 70.1%2010 28.5% 71.3%2011 26.8% 73.0%2012 25.2% 74.6%2013 23.6% 76.2%2014 22.3% 77.6%2015 21.1% 78.7%2016 20.1% 79.8%

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Priority Investment

Water and Wastewater Treatment Market: Priority Investment in Municipal Sector (China), 2009

Wastewater Treatment Coverage in China, 2009

Source: Ministry of Housing and Urban-Rural Development of China

Total forecasted investment (2010-2015): U$ 38 billion

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Stakeholders Analysis – Municipal water and wastewater

Scenario 2

Retrofit project

Scenario 2

Retrofit project

EPCEPC

Design Institute

End User Water/Wastewater

Companies

Technology Suppliers/Manufacturer/DistributorTechnology Suppliers/Manufacturer/Distributor

Scenario 1

New project

Scenario 1

New project

1122

33

1’1’

3’3’ 44

ConstructionCompanies

ConstructionCompanies

Engineering SupervisionCompanies

Engineering SupervisionCompanies

Investor

Decision Making Process among Key Stakeholders in Chinese Water & Wastewater Treatment Market

Evaluation of Decision Making Criteria among Key Industrial Customers

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Competitive Structure

As tenders in the municipal sector are launched for turnkey projects, success in the market, particularly for equipment suppliers requires establishing good relationships with the remaining market participants. Understanding the market structure and relationships form the key success factors.

General EPC contractors and Specialized Water and Wastewater EPC companies Equipment suppliers and Distributors

Source: Frost & Sullivan

Total Water and Wastewater Treatment Market: Sample of Representative Companies (China), 2009