OPPORTUNITIES IN THE WATER & WASTEWATER SECTOR (NWC TRANSFORMATION JOURNEY) LOAY AL MUSALLAM, CEO NATIONAL WATER COMPANY JAPANESE-SAUDI BUSINESS FORUM 1 ST FEBRUARY 2012, TOKYO, JAPAN
AGENDA INTRODUCTION NWC KEY ACHIEVEMENTS, 3 YEARS OF OPERATION STRATEGIC INTENT, 2012 AND BEYOND MAJOR BUSINESS OPPORTUNITIES 2
WATER & WASTEWATER INFRASTRUCTURE MARKET FORECAST BY REGION (USD 1.4 TRILLION IN 7 YEARS) Latin America & Caribbean 6% Sub-Saharan Africa 1% North America 20% Eastern Europe Central Asia 2% Western Europe 23% South Asia 2% Middle East North Africa 7% 192.7 83.2 138.4 94.6 300.2 451 125.3 Utility Operating Expenditure Wastewater Rehab New Wastewater Network New Water Networks Water Network Rehab Water Resources East Asia Pacific 39% Source: Global Water Intelligence, Water Technology Markets 2010 3
PROJECTED CAPEX & OPEX SPEND FOR TOTAL KSA (2012-2022) 66.4 BILLION US$ Combined Water & WW (in Bio. SAR) TOTAL = 66.4 Billion US$ 112 137 OPEX CAPEX Requirements for Water TOTAL = 30.7 Billion US$ 47.9 Requirements for Wastewater TOTAL = 35.7 Billion USD 44.8 OPEX CAPEX 67.2 89.1 OPEX CAPEX 4
VALUE OF WASTEWATER INFRASTRUCTURE PROJECTS IN THE GCC, 2012 to 2016 TOTAL = 31.2 BILLION US$ Saudi Arabia UAE Bahrain Kuwait Oman Qatar 1,610 2,185 738 2,287 3,687 20,671 Saudi Arabia = 66% of Total infrastructure spend in GCC or 20.7 Billion US$ Source: MEED Report MEED Wastewater Reuse Summit 2011 5
AGENDA INTRODUCTION NWC KEY ACHIEVEMENTS, 3 YEARS OF OPERATION STRATEGIC INTENT, 2012 AND BEYOND MAJOR BUSINESS OPPORTUNITIES 6
ACTUAL RESULTS 2011 LEAK DETECTION AND WATER SAVING Volume of Water Saved due to Leak Detection (Million m 3 ) Average Time for Leak Repair (Hours) Target RCBU +110% 53.9 +3% 65 67 Actual 96 96-28% -52% JCBU 7.2 23 48 48 36 33 30 30 26 16 2008 2009 2010 2011 2008 2009 2010 2011 (Tar) 2011 (Act) Year 2011 Riyadh Jeddah Total No. of Leaks Identified and Repaired (Nos) Volume of Water Saved (M m 3 ) Approximate value of Water saved (Million SAR) 38,799 16,516 53,315 51 16 67 306 96 402 7
ACTUAL RESULTS 2011 Average Time to Install Wastewater Connection (Days) Average Time to Install Water Connection (Days) Target Target 180-50% Actual 70-30% Actual -14% 60 47-11% 26 23 30 30 28 24 2008 2009 2010 2011 2008 2009 2010 2011 Water Supply (Million m3) Quality of Water Testing Compliance (%) +10% -3% Target Actual +7% -0.4% Target Actual 753 827 942 1,035 1,002 82.0% 99.1% 99.3% 99.7% 99.3% 2008 2009 2010 2011 2008 2009 2010 2011 8
ACTUAL RESULTS 2011 Cum Vol of TSE Agreements and MOUs Signed (m 3 /day) No. of New Wastewater Connections (#) Target +35% +10% Actual 40,000-5% Target Actual 287,200 395,000 475,000 524,000 27,600 20,700 30,000 28,426 2009 2010 2011 2008 2009 2010 2011 Avg. Lead Time to Award Capital Projects (Working Days) Number of Projects behind Schedule (#) 180-29% 140-9% 128 Target Actual 104 61-44% -22% Target Actual 27 23 18 2010 2011 2008 2009 2010 2011 9
ACTUAL RESULTS 2011 Total Cash Inflow (Million SAR) Customer Satisfaction Index (%) +18% +7% Target Actual Conducted by MASMI, a reputed 3 rd Party company +23% -2% Target Actual 561 699 732 873 930 45% 85% 84% 85% 83% 2008 2009 2010 2011 2009 2010 2011 10
HIGHLIGHTS OF KEY ACHIEVEMENTS NWC Accomplishments in its short 3-year journey 11
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. 12
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 13
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 m 2 100% of the sludge has been treated 14
DRIED UPAN 18 YEARS OLD WASTEWATER LAKE IN JEDDAH CITY IN RECORD 3 MONTHS NWC successfully drained Jeddah Misk lake, treated the contaminated soils ahead of the scheduled time by 9 months. Before During After 15
NWC, WITHIN A SHORT PERIOD OF TIME HAS BUILT MODERN & SOPHISTICATED CUSTOMER SERVICE INFRASTRUCTURE (Customer Centers/ Call Centers/ etc.) 16
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 17
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 1 st 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-topower WWTP in Jeddah Airport2 has commenced which will, after completion, be the 2 nd biggest plant in its kind in the Middle East with a generation capacity of 7 megawatt and treatment capacity of 500,000 m³/day. 18
EMTYAZ CONTRIBUTES TO INSTILL A PERFORMANCE BASED CULTURE Improved Communication Alignment with Strategy Performance Monitoring. KPI Cascading 19
AGENDA INTRODUCTION NWC KEY ACHIEVEMENTS, 3 YEARS OF OPERATION STRATEGIC INTENT, 2012 AND BEYOND MAJOR BUSINESS OPPORTUNITIES 20
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 21
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 3,500 3,000 2,500 2,000 1,500 1576 2297 3282 3044 2841 2577 2343 2068 1998 2066 2106 2234 2370 2515 2668 2830 1774 1179 1,000 500 99 573-00 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 TSE Revenue Potable Water revenue Potable Water revenue TSE Revenue Source: 2012-2016: NWC actual projections. 2018-2030 Fichtner projections 22
NWC ACHIEVEMENST IN TSE SALES/ MoU Agreements (in 3 years only) The Growth for TSE volume sales/ MoU agreements in 3 years versus the last 20 years (m³ per day) Cumulative TSE Sales/ MoU Agreement (m³ per day) 800000 724,000 700000 600,000 524,000 600000 524,000 500,000 400,000 300,000 300,000 287,200 395,000 500000 400000 300000 287,200 395,000 200,000 200000 100,000 0 20 years Prior to NWC 0 2008 2009 2010 2011 100000 0 0 2008 2009 2010 2011 2012 23
AGENDA INTRODUCTION NWC KEY ACHIEVEMENTS, 3 YEARS OF OPERATION STRATEGIC INTENT, 2012 AND BEYOND MAJOR BUSINESS OPPORTUNITIES 24
in Million SAR NWC TOTAL CAPEX REQUIREMENTS FOR THE NEXT 5 YEARS FOR 5 MAJOR CITIES TOTAL = 31 BILLION SAR/ 8.3 BILLION US$ RCBU JCBU MCBU TCBU 8,000 7,345 7,000 6,000 5,470 5,000 3,760 3,740 4,433 4,000 3,230 3,000 2,000 1,255 1,755 1,000 - Water Plants, Wells & Reservoirs Water Mains Water Networks Water House Connections WWTP Types of Investments Wastewater Mains Waste Water Networks Waste Water House Connections 25
MAJOR BUSINESS OPPORTUNITIES Opportunities in TSE 26
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. 27
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 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Dammam & khober. Madinah Makkah Jeddah Riyadh 28
MAJOR BUSINESS OPPORTUNITIES Opportunities in Operations & Maintenance JV s 29
BY 2015, FOUR O&M GEOGRAPHIC CLUSTERS WILL HAVE BEEN FORMED WITH A POTENTIAL FOR COMBINING THE WESTERN REGIONS INTO ONE CLUSTER Northwest O&M services contract clustering # of contracts/ annual value (SAR mil)/ Thousands of inhabitants Potential to combine into single cluster if West (north) SPV partner is the same partner as West (south) Southwest 15 1 3 4 4 3 Contracts 26 1 1 13 9 2 Contracts 86 8 20 32 22 Value 3 493 202 74 121 14 Value 1,745 Population * Served 82 5,905 Population served Tabuk Madinah Yanbu Makkah Jeddah Taif Buraida/ Onaizah Riyadh Abha/ Khamis- Mushayat 1 Population base year is 2009 2015 2014 Jubail Dammam/ Al Khobar 1 9 4 2 1 1 Contracts Al-Hofuf & Al- Mubarraz 2013 2012 6 1 4 * 1 Contracts 2011 2010 Proposed 153 35 21 62 22 Value 672 35 627 * 11 13 Value 2,639 Population Served 4,583 Population Served East Central Map legend NWC captive city Captive in 2011/ 2012 Captive planned after 2012 30
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$ Revenue (TSE) Revenue ( O&M) EBITDA (O&M) EBITDA (TSE) 6,784 7,238 5,835 4,899 3044 3282 160 61 99 50 7 432 303 129 151 27 1,225 619 606 106 310 2,526 954 1572 477 281 3,778 1498 2280 2012 2013 2014 2015 2016 2020 2024 2028 2030 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 749 500 2068 2831 920 629 2577 3258 1267 723 3740 1605 839 3956 1777 885 31
THANK YOU 32