India Water Markets and Opportunities A Perspective

2

Agenda

• Context - CH2M HILL

• India Water Market Potential And Drivers

• India Water Market Opportunities

• India Water Market Prognosis

• Private And Public Partnership Drivers And Progress

• Suggested Improvements

3

CH2M HILL

44

CH2M HILL

•FORTUNE 500 company (Rank

456, 2009)

Staff Strength

Revenue

5

CH2M HILL – Leading Mega Programs

MASDAR Green City Abu Dhabi Nuclear Civil

Program

London Tideway Tunnels

US Forces Korea Base Location

DTSS/Changi WRP

Puerto Rico Infrastructure

SewerFix

Panama Canal Expansion Program

London 2012 Olympics

UK Crossrail ProjectMumbai Airport, India

Interceptor Sewer, Delhi

66

CH2M HILL India – Multi Disciplinary Team

• Our India corporate office is located in Gurgaon• More than 150 multidisciplinary staff with Sewerage, Program Management, Mechanical, Electrical, Instrumentation, Urban Planning, Financial, Institutional strengthening, GIS

7

INDIA WATER MARKET POTENTIAL AND DRIVERS

8

INDIA TO REAP BENEFITS OF DEMOGRAPHIC DIVIDEND

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INDIAN WILL BE THE 3RD LARGEST ECONOMY IN THE WORLD BY 2050

2,061

3,148

3,603

3,782

5,870

6,074

6,673

27,803

35,165

44,453

Italy

France

Germany

UK

Russia

Brazil

J apan

India

US

China

759

787

804

1,119

1,122

1,720

2,132

2,213

2,225

2,829

4,617

12,457

India

Brazil

South Korea

Spain

Canada

Italy

France

UK

China

Germany

J apan

USA

Real GDP in 2006 (Figures in US$ Bn.) Estimated Real GDP in 2050 (Figures in US$ Bn.)

India is the only economy th

at will c

ontinue

progressing at g

rowth rates s

ignificantly above

5% between 2005-50

Source: Dreaming With BRICs: The Path to 2050;

Global Economics; Paper No: 99; Goldman Sachs

The Recent World Bank Projection of 8% GDP growth for India in 2010, overtaking China’s projected growth of 7.7%.

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WHOLE OF ASIA – WATER STRESS/ SCARE AREA BY 2020 – DRIVER

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INDIA WATER MARKET OPPORTUNITIES

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• Annual market in India is up to $6 to $ 8B, growing at 15 to 20%.• Population growth, migration from rural to urban areas, tightening

regulations and aging infrastructure • Increasing demand for improvements in the level of services, realisation at

all level that lack of infrastructure to stifle India growth story • Energy-Water-Environment-Sustainability nexus and optimisation• Increasing demand for River clean-up, stream, and water bodies restoration• Funding through local sources (JUNRUM), PE funds, IFI agencies (JBIC,

WB, ADB, USAID etc.) • Increasing PPP opportunities in Water Sector

KEY MARKET TRENDS/OBSERVATIONS- OPPORTUNITIES

GWI Apr 09TOI Jun 2008

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WATER SECTOR OPPORTUNITIES

• Water Resources – Dams/ Storage/ Catchment protection • Ground water - Rain water harvesting/ ASR/ Ground Water

Contamination • Conveyance, Canal, Tunnels, Pipelines• Unaccountability for Water “UFW” or NRW, Under Value/ pricing of

water, wastages • Sewer Conveyance, liquid and solid treatment, Sewer / Wastewater

treatment Rehabilitation • Inadequate distribution of water resources (infrastructure, irrigation)• Operations & Maintenance of the water and sewerage infrastructure

Opportunities exist across whole supply chain space… study, consulting, design, EPC/ DB, Equipment Vendors, PPP projects

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INDIA WATER MARKET PROGNOSIS

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• Water business is local and at differing stages of evolution across India

• Major clients … third layer of Govt agencies ( local ULBs).. Limited Institutional capacity

• Local market characterised by the “tentative” behaviour by municipal / government agencies with different degree of bureaucracy

• “Uncertainty is Certain” • Cut –throat local competition • Majority of Clients prefer price to value• Water is recognised as a one of the national risks along

with energy

Water Market Prognosis

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LOCAL ULBs CHARACTERISTICS AND THE VICIOUS CIRCLE

• Low institutional Capacity, insufficient Financial and Managerial Resources

• Inadequate Coverage and Low Service Level, Poor O&M

• Low Tariff and High Non Revenue Component, Poor cost recovery

• Unsustainable Resources Management practices

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PRIVATE AND PUBLIC PARTNERSHIP DRIVERS AND PROGRESS

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Need for PPP

• Financial gap…. Lack of Management Accountability

• Low Service levels v/s demand for better services

• Increasing affordability at least in Metro cities

• Skill and Strength Gap ( Engineering, Accounting/ Financial, Management)

• Unwillingness to adopt new technology by ULBs

• Competition among states to provide better services in a shorter time

• Increasing willingness on part of Government

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PPP PROGRESS So Far….

New Initiatives Good International Interest

Not so good results

Mid 90s

Early 2000

Mid 2000

Current

FutureMomentum SubsidedStart of Pessimism

New effort to Prepare PPP project sStakeholder oppositionsHigh Profile Projects derailed

Some Success Some projects delayed/ Shelved

Many initiatives Commercial results awaitedPPP at inflexion point

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SUGGESTED IMPROVEMENTS

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SUGGESTED IMPROVEMENTS

• General – Enhance and make transparency on project more visible

– Poor performance track record – too many bad examples of  pre bid and post bid implementations – focus good projects and what went right

• Project Preparation – Conduct Financial viability and Funding support

– Realistic estimate of schedule and cost

– Political Alignment

– Get professional support if appropriate in-house support is not available

– Aim and plan for high quality

– Plan based on the real time and contextual data

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Selection Based on QFB System

Engineering

Construction

Start Up andCommissioning

Project Life Cycle Timeline

Pro

ject

Ris

k P

rofil

e

Procurement

5 to 10%of Project Budget

40 to 50%of Project Budget

35 to 50%of Project Budget

+/-5%of Project Budget

Co

st S

avi

ng

Op

po

rtu

nity

Planning

Cost Saving Opportunity

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SUGGESTED IMPROVEMENTS

• Procurement – Do not invite bid if the project is not ready – Quality and fee based selection– Adhering to the planned Schedule and time line – Transparency  in the procurements process – Structured process, TOR clarity, quality of documentation, communication,

response times, dead lines etc – Realistic expectations and appropriate risk allocation (accepted and

understood international standards)

• Delivery – Timely availability of data – Timely approval / decision and payments – Early involvements of Stakeholders – Establishment of Project Management Unit or project Manager in client

organisation

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THANK YOU