OPPORTUNITIES IN THE WATER & WASTEWATER SECTOR (NWC TRANSFORMATION JOURNEY)

LOAY AL MUSALLAM, CEO

NATIONAL WATER COMPANY

JAPANESE-SAUDI BUSINESS FORUM

1ST FEBRUARY 2012, TOKYO, JAPAN

2

AGENDA

INTRODUCTION

NWC KEY ACHIEVEMENTS, 3 YEARS OF OPERATION

STRATEGIC INTENT, 2012 AND BEYOND

MAJOR BUSINESS OPPORTUNITIES

3

WATER & WASTEWATER INFRASTRUCTURE MARKET FORECAST BY

REGION (USD 1.4 TRILLION IN 7 YEARS)

Western Europe 23%

South Asia 2%

Middle East North Africa 7%

East Asia Pacific 39%

Eastern Europe Central Asia 2%

North America 20%

Latin America & Caribbean 6%

Sub-Saharan Africa 1%

Source: Global Water Intelligence, Water Technology Markets 2010

451

125.3

300.2

138.4

83.2

192.7

94.6

Utility Operating Expenditure

Wastewater Rehab

New Wastewater Network

New Water Networks

Water Network Rehab

Water Resources

4

PROJECTED CAPEX & OPEX SPEND FOR TOTAL KSA (2012-2022)

66.4 BILLION US$

137

112

OPEX CAPEX

Combined Water & WW (in Bio. SAR)

TOTAL = 66.4 Billion US$

67.2

47.9

OPEX CAPEX

Requirements for Water

TOTAL = 30.7 Billion US$

44.8

89.1

OPEX CAPEX

Requirements for Wastewater

TOTAL = 35.7 Billion USD

5

VALUE OF WASTEWATER INFRASTRUCTURE PROJECTS IN THE GCC, 2012 to 2016

TOTAL = 31.2 BILLION US$

Source: MEED Report “MEED Wastewater Reuse Summit 2011”

20,671

3,687

738 2,287

1,610 2,185

Saudi Arabia UAE Bahrain Kuwait Oman Qatar

Saudi Arabia = 66% of Total infrastructure spend in GCC or 20.7 Billion US$

6

AGENDA

INTRODUCTION

NWC KEY ACHIEVEMENTS, 3 YEARS OF OPERATION

STRATEGIC INTENT, 2012 AND BEYOND

MAJOR BUSINESS OPPORTUNITIES

7

ACTUAL RESULTS 2011 – LEAK DETECTION AND WATER SAVING

Volume of Water Saved due to Leak Detection (Million m3)

65 67

53.9

23

7.2

+3% +110%

2011 2010 2009 2008

Actual

Target

Average Time for Leak Repair (Hours)

26303648

96

16

3033

48

96

2010 2009 2008

-52%

-28%

2011 (Act) 2011 (Tar)

JCBU

RCBU

Year 2011 Riyadh Jeddah Total

No. of Leaks Identified and Repaired (Nos) 38,799 16,516 53,315

Volume of Water Saved (M m3) 51 16 67

Approximate value of Water saved (Million

SAR) 306 96 402

8

ACTUAL RESULTS 2011

Average Time to Install Water Connection (Days)

28 243030

70

-14%

-30%

2011 2010 2009 2008

Target

Actual

Average Time to Install Wastewater Connection (Days)

26 2347

60

180

2008

-11%

-50%

2011 2010 2009

Actual

Target

Water Supply (Million m3) Quality of Water Testing Compliance (%)

-0.4% +7%

2011

99.3% 99.7%

2010

99.3%

2009

99.1%

2008

82.0%

Actual

Target

1,035 1,002942

827753

2009 2008

2010

-3% +10%

2011

Actual

Target

9

ACTUAL RESULTS 2011

Cum Vol of TSE Agreements and MOUs Signed (m3/day)

475,000524,000

395,000

287,200

+10%

2011 2010 2009

+35% Actual

Target

Avg. Lead Time to Award Capital Projects (Working Days) Number of Projects behind Schedule (#)

140128

180

-29%

-9%

2011 2010

Actual

Target

23 1827

61

104

-22%

-44%

2011 2010 2009 2008

Target

Actual

No. of New Wastewater Connections (#)

30,000 28,426

20,700

40,000

27,600

-5%

2010 2011 2008

2009

Actual

Target

10

ACTUAL RESULTS 2011

Total Cash Inflow (Million SAR)

873930

732699

561

+7% +18%

2011 2010 2009 2008

Actual

Target

Customer Satisfaction Index (%)

2010

84%

2009

85%

45%

-2% +23%

2011

83% 85%

Actual

Target Conducted by MASMI, a reputed 3rd Party company

11

HIGHLIGHTS OF KEY ACHIEVEMENTS

NWC Accomplishments

in its short 3-year journey

12

LAUNCHED JEDDAH WASTE WATER SYSTEM W/ TOTAL INVESTMENT OF MORE THAN 2.2 BIO US$

Project Accelerated from 5 years to 3 Years

• Combined

total

treatment

capacity for

Jeddah

WWTP to

reach

1,000,000

m³/day.

• A total of

132,000

house

connections

and 2,500

kilometers

of networks,

pipelines &

mainlines.

13

LAUNCH OF COMPASS INTEGRATED SYSTEM

PROJECT WAS COMPLETED IN 14 MONTHS – SYSTEMS WENT LIVE IN RECORD TIME.

•COMPASS,

a valuable

tool towards

customer

service

excellence

• It integrates

- CC&B,

EAM, GIS &

SCADA

14

DRYING AND DE-SLUDGING OF AL NATHEM LAKE

COMPLETELY DRIED UP A 17-YEARS OLD SEWAGE LAKE IN RECORD 2 MONTHS

Before During After

•Size of the

lake, 5

Million m2

•100% of the

sludge has

been

treated

15

DRIED UPAN 18 YEARS OLD WASTEWATER LAKE IN JEDDAH CITY IN RECORD 3 MONTHS

Before During After

• NWC

successfully

drained

Jeddah Misk

lake, treated

the

contaminated

soils ahead of

the scheduled

time by 9

months.

16

NWC, WITHIN A SHORT PERIOD OF TIME HAS BUILT MODERN & SOPHISTICATED

CUSTOMER SERVICE INFRASTRUCTURE (Customer Centers/ Call Centers/ etc.)

17

NWC, WITHIN 3 YEARS, BROUGHT HOME SOME OF THE MOST COVETED AWARDS AND

RECOGNITION IN THE WATER SECTOR

NWC bagged the

2011 Best in

Innovation Award

for SCADA

Insights Award for

Best Customer

Win-Back Program

2011

Bagged GWI’s

Best Water Reuse

Project for 2011

Award

18

NWC VENTURES INTO RENEWABLE ENERGY USAGE IN OIL-RICH KSA

• Living up to its strategy in the sustainable

management of the environment, NWC had

started construction of the 1st WWTP

equipped with “combined heat & power

generation” – Al Kharj WWTP to served

Riyadh w/ 200,000 m³/day capacity and

generation capacity of 2.5 megawatt

• Bidding process for yet another heat-to-

power WWTP in Jeddah Airport2 has

commenced which will, after completion, be

the 2nd biggest plant in its kind in the Middle

East with a generation capacity of 7

megawatt and treatment capacity of 500,000

m³/day.

19

EMTYAZ CONTRIBUTES TO INSTILL A PERFORMANCE BASED CULTURE

Improved Communication

Alignment with Strategy

Performance Monitoring.

KPI Cascading

20

AGENDA

INTRODUCTION

NWC KEY ACHIEVEMENTS, 3 YEARS OF OPERATION

STRATEGIC INTENT, 2012 AND BEYOND

MAJOR BUSINESS OPPORTUNITIES

21

NWC, Shifting to High Gear by Adopting a New Business Model

Cost Optimization

Treated Sewage Effluent

(TSE)

High Value Customers

Customer & Operations

Capital Project Delivery

22

COULD TSE BECOME THE GROWTH ENGINE OF NWC?

Sizable TSE vs. potable water growth revenues in million SAR over the next 20 years for 6 cities

Potable Water revenue

TSE Revenue

2012 2014

2016 2018

2020 2022

2024 2026

2028 2030

-00

500

1,000

1,500

2,000

2,500

3,000

3,500

1576

2297

1998 2066 2106 2234 2370 2515 2668 2830

99

573

1179

1774 2068

2343 2577

2841 3044

3282

Potable Water revenue TSE Revenue

Source: 2012-2016: NWC actual projections. 2018-2030 Fichtner projections

23

NWC ACHIEVEMENST IN TSE SALES/ MoU Agreements (in 3 years only)

Cumulative TSE Sales/ MoU Agreement (m³ per

day)

0

100,000

200,000

300,000

400,000

500,000

600,000

20 years Prior to NWC

2008 2009 2010 2011

300,000

0

287,200

395,000

524,000

The Growth for TSE volume sales/ MoU

agreements in 3 years versus the last 20 years

(m³ per day)

0

100000

200000

300000

400000

500000

600000

700000

800000

2008 2009 2010 2011 2012

0

287,200

395,000

524,000

724,000

24

AGENDA

INTRODUCTION

NWC KEY ACHIEVEMENTS, 3 YEARS OF OPERATION

STRATEGIC INTENT, 2012 AND BEYOND

MAJOR BUSINESS OPPORTUNITIES

25

NWC TOTAL CAPEX REQUIREMENTS FOR THE NEXT 5 YEARS FOR 5 MAJOR CITIES

TOTAL = 31 BILLION SAR/ 8.3 BILLION US$

Types of Investments

in M

illio

n S

AR

3,760

3,230

3,740

1,255

5,470

7,345

4,433

1,755

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Water Plants , Wells &

Reservoirs

Water Mains Water Networks

Water House Connections

WWTP Wastewater Mains

Waste Water Networks

Waste Water House

Connections

RCBU JCBU MCBU TCBU

26

MAJOR BUSINESS OPPORTUNITIES

Opportunities in TSE

27

WASTEWATER REUSE OPPORTUNITIES (TSE) – RECENT SUCCESSES AND FUTURE PLANS

Creation of financially sustainable businesses from NWCs existing wastewater assets

by developing an environmentally friendly and financially sustainable long term market

for treated sewage effluent.

Structured into the formation of business units, which are incubated for period,

followed by private participation at a later date and subsequent spinoff into a SPV.

TSE has potential to become a growth driver for NWC….

28

TSE FORECAST

TSE usage in 6 major cities of the Kingdom is likely to increase from 0.8 Million m3/day to 4

Million m3/day by 2030

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

Dammam & khober. Madinah Makkah Jeddah Riyadh

29

MAJOR BUSINESS OPPORTUNITIES

Opportunities in

Operations & Maintenance JV’s

30

BY 2015, FOUR O&M GEOGRAPHIC CLUSTERS WILL HAVE BEEN FORMED WITH A

POTENTIAL FOR COMBINING THE WESTERN REGIONS INTO ONE CLUSTER

Jeddah

O&M services contract clustering # of contracts/ annual value (SAR mil)/ Thousands of inhabitants

Makkah

Taif

Yanbu

Madinah

Abha/ Khamis-

Mushayat

Riyadh

Buraida/ Onaizah

Tabuk

NWC captive city

Captive in 2011/ 2012

Captive planned after 2012

Map legend

Dammam/ Al Khobar

Jubail

Al-Hofuf & Al-Mubarraz

13 22

62

21

35

Value

153

4

2

Contracts

9

1 1

1

Population Served

2,639

* *

2011

2012

2013

2014

2015

2010

Potential to combine into single cluster if West (north) SPV partner is the same partner as West (south)

East

Southwest

*

Proposed

1 Population base year is 2009

3

86

22

32

Value

8 20

4

3

Contracts

15

1

3

4

Population Served

1,745

82

121

Value

14

74

493

202

92

26

Contracts

13

1 1

Population served

5,905

Value

672

11

627

35

1

Contracts

6

1

4

Population Served

4,583

Northwest

Central

31

Notes: (1) Riyadh network contracts (2) Riyadh plants and hybrid contracts Source: NWC , Economist Intelligence Unit, MOWE, Global Water Intelligence, Datamonitor, NCB capital, Expert interviews, Market Research World, Frost & Sullivan, A.T. Kearney analysis

THE O&M & TSE INITIATIVE LEADS INTO A SIZABLE OPPORTUNITY ITS REVENUE EVOLUTION IN THE NEXT 20 YEARS WILL BE A CUMMULATIVE REVENUE OF

32.9 Billion SAR / 8.8 Billion US$

61

129

606

1572

2280

2831

3258

3740

3956

99

303 619

954

1498

2068

2577

3044

3282

7 27

106 281

500 629

723 839

885

50 151

310 477

749 920

1267

1605 1777

2012 2013 2014 2015 2016 2020 2024 2028 2030

Revenue (TSE) Revenue ( O&M) EBITDA (O&M) EBITDA (TSE)

7,238

6,784

5,835

4,899

3,778

2,526

1,225

432 160

32

THANK YOU