China is firmly positioned as the global epicenter for privately financed water investment. Bolstered by its booming wastewater treatment sector, the combined water infrastructure build-out across 20 provinces account for over 50% of privately financed treatment capacity added in emerging markets over the last decade.
According to a new report from Bluefield Research, China’s wastewater treatment market has returned to its growth trajectory in 2013-2015, by adding over 20 million m3/day of capacity during the period. The level of annual investment peaked at nearly US$8.5 billion in 2010, slumped briefly from 2011 to 2012, and surged to over $5.0 billion in 2014. As a result, private firms now manage approximately two-thirds of the country’s wastewater treatment infrastructure.
China’s recently announced 2015-2020 Action Plan for Water Pollution Prevention, and a more environmentally progressive 13th Five Year Plan, point to a more dynamic wastewater treatment market with significant potential for growth beyond US$6 billion in annual investment. Bluefield has identified ten provinces that stand out as hotspots for new build, including private water opportunities — led by Guangdong, Jiangsu, Shandong and Zhejiang – with several more interior provinces (e.g. Anhui, Henan, Liaoning) aiming for greater compliance.
China Municipal Wastewater Infrastructure Investment, 2005-2014
In this highly fragmented landscape, 15 leading companies stand out among their peers with 425 plants in their portfolios, or a combined 25 million m3/day (net equity) of operational treatment capacity. These firms– approaching the market from different positions of strength along the value chain, including technology supply, EPC services, and utility management – have focused largely on build–operate-transfer contracts. An ambitious group of domestic players leads the market, including Beijing Enterprises Water Group, Beijing Capital, and China Everbright International.
According to Phuong Pham, Senior Analyst for Bluefield Research, “The pace of expansion among some of these players has been impressive, whether it be through greenfield development or M&A strategies to expand their geographic footprints. We are also seeing a select few eyeing international markets, which highlights a broader, global trend towards increasing competition among private water infrastructure investors. “
A host of globally diversified foreign firms from Europe and Asia are gaining entry through various routes to market, including partnerships, third-party service offerings, and supply chain positions that leverage their technology and operations experience. Veolia, Suez, Sound Global, Citic Envirotech (formerly United Envirotech) and Berlinwasser China Holdings (Metito) are among the country’s top players, leveraging decades of operational experience and more advanced treatment technologies.
Ms. Pham added, “Despite the well-documented high barriers to entry, the Chinese market is too big for foreign firms to ignore. While domestic players, some of which are state-backed, will maintain market-share, demand for experience and technology solutions from foreign players will remain high.”
Municipal Wastewater PPP Pipeline by Province