Morgan Stanley Said Global Water Projects Worth $316B in 2008: Black & Veatch Projects 10-15% Water Industry Revenue Growth for 2009 in Asia Pacific (Reuters)

Jan.14, 2009 in Water Industry, Water Management

(Jan. 14, 2009, Reuters)

One of the world’s biggest water industry contractors is targeting 10-15 percent revenue growth in the Asia Pacific region in 2009 as government’s boost infrastructure spending to buoy their ailing economies.

Unlisted U.S.-based Black & Veatch, which ranks itself among the world’s top five builders of water infrastructure, on Wednesday gave an upbeat view on the industry’s prospects.

“We’ll probably hold that forecast at this time,” said Dan McCarthy, chief executive of Black & Veatch Water, in an interview.

“It could easily be that things slow down for more events that are yet to be known. Or this actually could be a better market than forecast because of the influx of stimulus investments that are being made,” he told Reuters in a phone interview while in Australia, visiting clients.

Black & Veatch designs and builds water treatment plants, pipelines and dams.

Morgan Stanley last year estimated global water projects, including desalination and waste water treatment plants, to be worth around $316 billion.

McCarthy said there were a lot of opportunities in Australia and other industrialised countries, where projects were being driven by climate change, water scarcity and the need to improve ageing infrastructure, as well as attempts to revive growth.

The main obstacle to funds flowing into water projects was the process of setting criteria for how money is spent and whether it would be given as grants, loans, low interest loans or a combination of those.

Another hurdle was that governments did not want water tariffs to rise for households already struggling, he said.

Black & Veatch is not taking the potential bounty for granted, anticipating more competition on tenders as Australian miners cut back on big projects.

“There will be companies that are competitors to us that are going to change their focus from the resources business over to the water business. So we’ll have more competition which will drive pressure on pricing,” McCarthy said.

But as project costs start to fall, water utilities should be more willing to spend on new projects, he said.

That would increase opportunities for water firms like Black & Veatch and competitors such as AECOM Technology (E6Z.BE) and Tetra Tech Inc (TTEK.O), larger water firms like Veolia Environnement (VIE.PA) and Suez Environnement (SEVI.PA) and civil contractors like Australia’s Leighton Holdings Ltd (LEI.AX).

Black & Veatch’s net revenue from the Asia Pacific region fell 18 percent in 2008 to $140 million.

The decline mostly reflected the fact that the previous year the firm had benefited from a flood of revenue from a water recycling project in Australia’s Queensland state, while in 2008 the mix of revenue shifted to engineering.

Australia made up $85 million, or 60 percent, of the group’s Asia-Pacific revenue in 2008 and about 10 percent its global water business.

“We still see that the business is growing. It’s just growing with a different mix of services and construction work at this particular time,” McCarthy said. (Reporting by Sonali Paul; Editing by James Thornhill)