China Water – Boosting the Bottom Line for Veolia Environnement
Water treatment giant Veolia Environnement is a stock market star. It is included in the portfolios of most of the leading specialised water funds, often as the leading holding. Now it is reaping the rewards of its big move into China.

Some call water the new oil, or the new gold. Certainly in Asia it sometimes seems to have that status. Countries throughout the region are finding their paths to development being blocked by shortages of clean water and good sanitation.

China has more than 20 per cent of the world’s population but just seven per cent of its renewable water resources. Roughly half of its cities – including Beijing – face water shortages, and statistics suggest that as many as 700 million people in the country are being forced to drink polluted water. The World Bank has said that, based on present trends, China could have 30 million “environmental refugees” by 2020, due to water shortages.

The country is now spending massively on water infrastructure, to the benefit of many companies.

One of these is French water services specialist Veolia Environnement, which since 1997 – when it signed a contract with Tianjin Municipal Government to renovate and operate a drinking water plant - has been building a major presence in China.

It achieved particular success in 2002 and 2003 when it signed a 50-year full-service water contract for Shanghai’s Pudong business district and a 50-year municipal out-sourcing contract for water and wastewater in Shenzhen.

Since then, other successes include:

contracts in 2005 to build two wastewater plants, worth 340 million Euros (100 Euro roughly equals US$150) in the cities of Handan and Urumqi;

a 30-year, 800-million Euro contract in 2005 to manage water services for the city of ChangZhou;

a 30-year, 1.6-billion Euro contract in 2005 to manage water services for Kumming City;

a 25-year, 580-million Euro contract in 2006 to recycle industrial wastewater for Sinopec, China’s leading oil refiner;

a 30-year, 1.6-billion Euro contract in 2007 to manage water treatment facilities for the Lanzhou Water Supply Company in Gansu Province.

Altogether, Veolia has won 21 contracts in China, and it is working in 19 of the country’s 34 provinces.

The company does not give out enough financial information to show the exact impact of its Chinese business on its bottom line. But a February 2008 press release announcing its 2007 revenues – the full accounts will not be released until March – indicated that Asian water was by far the fastest growing of all its businesses.

Total company revenues rose 14 per cent, with water operations – about a third of company turnover – growing eight per cent. But the company noted:

In the Asia/Pacific region, the very strong growth in revenue, close to 47% (on a like-for-like basis), was largely driven by the start-up of new contracts in China (Shenzhen, Lanzhou and Kunming), Australia (Gold Coast and seawater desalination plant in Sydney), South Korea and Japan.

March 1st, 2008

Most Viewed

1. Introduction to Investing in Wind Power Stocks

2. Wind Power in the United States – 10 Companies to Watch

3. Wind Power in the United States – Winners and Winners

4. Wind Power in China – Ten Stocks That Will Benefit

5. Ten Solar Energy Stocks That Make a Profit

6. Six Energy Efficiency Stocks That Make a Profit

7. Hot Rock Geothermal Energy - Australia Leading the World

8. Denmark's Dynamic Duo - Novozymes and Vestas

9. Water Stocks - What are the Funds Buying?

10. Wave Power - Coming Soon to an Ocean Near You?

Contact
Privacy Policy