Mexico Potable & Wastewater Situation and OpportunitiesVincent LencioniLGA Consulting/Wisconsin Trade Office May 2011Milwaukee, Wisconsin

LGA Water Focus 15+ Years working with Wisconsin companies with products for

Mexico public and private water sector Market Analysis, Intermediary and Client Searches

3 years of formal & extensive regional water focus Quarterly Mexico Water Report Development of Mexican Water Intermediary contacts

Distributors, Reps, Integrators, EPCs, Consultants Winners of Awards, Participants in Bids

Interaction with Mexican federal and local water officials and intermediaries for early project information

Monthly compilation & review of water bids & awards WWEMA Presentation, Global Committee, Latin America assistance Development of AWWA Manufacturers Committee, Mexico City Various presentations on Mexico water sector in the US & Mexico

Mexico Water Issues & Challenges1. Geographical Challenges: North (30/87/75) vs South (70/13/25)

Altitude, precipitation, population, urban growth issues

2. Overexploited aquifers: 15%; 10% will be soon

3. Per Capita Water: 18,000 m3 (1950) to 4,400 m3 (2010)BUT: 15,000 South; 1700 Central, only 500 North

4. Potable/Sewer Coverage: Urban (94/94) vs Rural (79/63)

5. Water Use: 80% Agri (US: 40%) vs 8% Industrial (US: 46%)

6. Delivery Systems: 50% losses: Potable (43%), Agri (55%)

7. Metering: Domestic (“obligatory”, < 2/3) vs Industrial (0%)

8. Wastewater Treatment: < 40% Municipal; < 20% Industrial

Mexico Water Goals: 2012 & 2012

5 Year Plan (2007-2012) Potable water coverage: 92%

Current: 91% Sanitary/sewer coverage: 88%

Current: 87% Wastewater treatment: 60%

Current: 40% (may be) Rehabilitate 500 Dams

Current: 420; 750 by 2030 8% increase: utility efficiency Improve Water Productivity in

the Agricultural Sector Better flood prevention actions

2030 Water Agenda By 2016: all major urban

areas free from risk of flood By 2015, All Irrigation

technified, 100% water reuse 2024: Complete rural potable

water and sewage access 2025: All Industrial and

Municipal wastewater treated 2030: All aquifers and

contamination in balance From 64th in water

infrastructure to between Panama (46) & Chile (35).

Water & Wastewater Regulations Wastewater Regulations

By where water goes: NOM 001: Federal bodies

Rivers, Lakes, Coasts All towns > 2500 inhabs

(2600+) & all companies NOM 002: Municipal

Sewer/Drainage System Translations Available

Discharge “Rights” Fees If NOM 001: Federal Fees If NOM 002: Local Fees

By Reuse NOM 003 = Water Reuse NOM 004 = Sludge/Mud

Water Regulations NOM 127

Water quality and disinfection rules; treatment options

NOM 179 Monitoring/sampling

NOM 230 Storage rules,

samples, sanitary restrictions

Challenges Metering, Leakage,

bottled water trend, enforcement issues

Municipal Wastewater Plants 2010: How Much/Where

43.4% Waste Treated 200% increase since 1992 100% Increase since 2000

Treatment capacity need: 196m3 = 71m3 deficit

25% capacity increase since 2006

Flow Increase: 5% annual Treatment Areas

North > 50% treatment Center: 33% treatment 48% Treatment in Río

Bravo/Lerma Basins

Municipal Treatment Opportunities

2011 Budget and Plant Projects Budget: New: 50 Plants, another 50 expected: Rehab: 43% Plants ($225 million) 2012 - Should be equal or better than 2011 – Year before Presidential Elections 2013 – New Presidential Administration: considerable slow down / adjustments

“In Vogue” Treatment Processes / Tendencies 90% of Municipal Treatment in six categories:

Sludge = 46% treatment (546 Plants); Stabilization Ponds = 16% treatment (707 Plants); Advanced Primary = 10% treatment (16 Plants); Aerated Ponds = 8% treatment (32 Plants); Dual Plants (10) & Biological Filters (97) = 10% treatment

Plants with significant numbers but low treatment: RAFA/WASB (162), Wetlands (160) New Plants and Plant Growth (2008 to 2009)

1. Biological Filters (55, up 100%+); 2. Aerated Ponds (up 33%); 3. Sludge (92, up 20%); 4. Wetlands (26, Up 20%)

Info on state preferences for treatment technology (see LGA Consulting website) Problem – Physical/Chemical used over Biological – driven by upfront costs

Medium Size/2nd Tier Cities: Next/Current Targets 8 Cities: 2.5 to 1 million; 20 Cities > 750,000; 30 Cities > 500,000; 45 Cities > 250,000;

Over 60 Cities > 100,000 population.

Market Size: 5 models/scenarios: $220-546 Million; $357 Million (Median)

Industrial Wastewater Treated: Not good but better than seems

0510152025303540

(m3/s)

Up 66% since 1999

Industrial Wastewater since 1997: Flow up 195% (64.5 to 190m3 p/s) Treated amount up 592% (5.3 to 36.7m3 p/s) Wastewater/BOD Treatment up 137.5% compared to flow (8% to 19%)

Industrial Sectors – Problems Sectors – Problems Top Priorities, heaviest polluters (2030)

High Frequency & Flow Priorities

1. Sugar – Requires regular, on-going investments eventhough meeting standards.

1. Pork / Agriculture / Aquaculture – Target area for enforcement, Conagua investment increases. Problems worse than expected

2. Paper - $70 million US* - Highly regulated, improvedMfging processes, maintenance

2. Textile / Clothing / Leather – $70 million US*; many medium & small producerswho are not compliant

3. Metalworking / Automotive – Large & Growing, Tier 1 & 2 issues, OEM compliant

3. Petroleum / Petrochemical (Pemex) – Increasing investments in wastewater

4. Food & Beverage / Dairy - $90 million US*

4. Chemicals / Pharmaceuticals / Plastics - $120 million US*

* = Expected Investment 2011-2012 (US Embassy, Mexico City)

Industrial Wastewater Opportunities

- Commercial & Industrial – Traditional Wastewater- Types of Plants & Technologies

- Secondary Strong - Activated Sludge, Aeration Lagoons, Extended Aeration - Tertiary low but growing (2009: 66 Plants; 2010: 88 Plants = 25 a year?)

- Industry Water Reuse & Savings- Water reclamation, water capturing systems more important with industrial water

price increases

- Infrastructure Projects- Resorts: Hotels and Restaurants, Residential and Golf Courses- 100 New plants (2011-2014)

- States & Cities with best enforcement reputations- D.F., Monterrey, Chihuahua, Guanajuato, AGS, Queretaro- 173 Cities participating in PROSANEAR Program

- Market Size Estimate: $110-$350 M; Median: $285 M- Industrial & Municipal Wastewater Markets > $500 M

Potable & Sewerage Coverage Potable: 91%

2012: 92%; 2030: 100 Urban: 95 (05), 94 (09) Rural: 72 (05), 79 (09)

90: 51%, 2000: 68% 8 states (25%) < 90% Veracruz, Guerrero < 80%

“Non-Drinking” Challenge Bottled water tendency

Delivery System Pollution

Sewerage: 87% 2012: 88%; 2030: 100 Urban: 89 (05), 94 (09) Rural: 58 (05), 63 (09)

90: 18%, 2000: 37% 7 states (15%) < 80% 19 states (60%) < 90%

System Competitiveness 20% < Latam standard

Just below Peru

Other Clean Water Issues Potable Plants: 650+

2/3 Convention Clarification 90 m3/second treatment

Disinfection Coverage 1991: 84%; 2009: 97%

Infectuous Diseases Increased Problems with

Tyfoid, Salmonela Water Monitoring

1500: Subterr/Bodies 2000:BOD, COD, TSS

Aqueducts Veracruz, Cutzamala,

Nuevo Leon, Jalisco Dams & Reservoirs

Rehabs: 420 to 750 Hydroagriculture

Inefficient / Low fees Altitude Challenges

1600 to 2700 meters Aquifer Replacement &

Water Reclamation

Clean Water Opportunities Municipal – Low Prices, Non-Drinkage Challenges

Total Water Budget: $6 Billion US; Federal Budget: $3 Billion US 80% for urban projects; 62% given to State and Municipal governments 50% for Potable (40%), Sewerage (50%), and Treatment Projects(10%); 20% for HydroAgriculture Projects, up 60% in recent years and should continue to increase Spending Increases: Since 2002: 250%; Since 2007: 70%; Spending increases expected

“In Vogue” Technologies Convention Clarification Others: Direct Filtration (15-20% treated, 10% plants); Patent Clarification (7% treated, 20% Plants);

Reverse Osmosis (<5% treated, 30% Plants) Minor Presence: Slow Filters, Iron & Manganese, Blandment, Absorption

Needs: Monitoring, Delivery System Leakage, Water Efficiency (Agri), Metering, Aquifer restoration, Flooding, Reclamation, Testing

Northern and Central state focus – Scarcity and Aquifer Depletion and Advanced Culture

Industrial – Higher Prices, Greater Need, easier targets Some but lower clean water & high purity demand: 46% vs 8% High use: Paper, Sugar, Agriculture, F&B, Chemicals

Total Market Size Estimate: Harder to Establish than wastewater

Tips for Mexico Opportunities Get in/stay in, despite insecurity concerns

Demand Up: Economic Growth & Funding Up Water Sector: 70% Imported, 2/3 from the US Municipal: 2011 and 2012 up; 2013 down Industrial: Locate proactive states/cities: target companies

Find in-country sales support….. Ideally: Sales Staff or Rep + Integrators Distributors – Viable in Private, not in Public

…but don`t rely solely on intemediaries for market analysis or business development

Bring financing/credit plan: Private > Public