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Wastewater Situation and Opportunities in Mexico 2011 Vincent Lencioni WWEMA Washington Forum April 21, 2011
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Page 1: Mexicopresentationatwwemaapril212011 13125734424684-phpapp02-110805144547-phpapp02

Wastewater Situation and Opportunities in Mexico 2011

Vincent LencioniWWEMA Washington ForumApril 21, 2011

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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

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Outline

I. Mexico Economic OverviewII. Mexico Water ChallengesIII. Wastewater StandardsIV. Municipal Wastewater PlantsV. Industrial Wastewater PlantsVI. Wastewater OpportunitiesVII. AnnexVIII. Presentation Sources

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I. Mexico/Latam Economic Growth

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I. Mexico Misconceptions

Latin America is insignificant vs.Asia & US markets US Market: Latam: 36%; Mexico/Brazil > 25%

Mexico = 8-10% of US GDP and in general US Market World Economies: Brazil #8; Mexico #15

Mexico fell badly (2009), still on its knees Mfg GDP since 2007: Up 2%; up 10% in 2010 GDP since 2007: Up 3.5%; 2011-12: Up 9%

Brazil is much more dynamic/important than Mexico Brazil GDP: 2x Mexico BUT Brazil Imports < Mexico US Export Volumes and % of Total Exports (2010)

Brazil = $558 Million; Mexico = over $2 Billion & 10% of total

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I. US Exports to Mexico(Billion US) TOTAL EXPORTS % INCREASE

2008 2009 2010 2009 2010

All Products 151.2 128.9 163.3 -14.7% 26.7%

Elec Prods 24.9 23.8 31.5 -4.4% 32.2%

Inds Prods 22.1 20.6 24.8 -6.8% 20.3%

Vehicles 14.0 10.1 14.5 -27.9% 43.8%

Fuel/Oil 11.1 7.7 14.2 -30.6% 84.8%

Plastics 10.7 9.4 11.4 -12.1% 22.1%

Chemicals 5.1 4.4 5.0 -13.7% 13.6%

Instruments 4.5 4.6 4.4 2.2% -3.9%

Paper 3.0 2.9 3.3 -3.3% 13.3%

Iron/Steel 3.1 2.5 3.1 -19.4% 21.8%

*2009 Crisis; 2010 Full Recovery *Mexican imports & exports up 35%

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I. Key Mexican Import Indicators

Imports from US: Mexico vs BRIC Total US Imports: BRIC 11.4%; Mexico 12.4% US Import Increase: BRIC 33%; Mexico 32%

Intermediary Products in Full Recovery Capital Goods: 2006 figures; 2007 figures at year end

Mexico Purchasing Power Up Favorable, Appreciating Peso Exchange Rate

Government Spending Positives Pemex Income Up = 1/3 federal spending Mexican budget & indicators = healthier than US

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And the 800 pound Gorilla in the Room…..

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I. Mexican Insecurity and Business

Insecurity Situation Govt vs Cartel struggle

Right but tough fight Historic US cooperation Military & Police roles

Cartel vs Cartel struggle Drugs vs Crime (Zetas)

Victim Realities 35,000 murders since 2008 Over 90% = Police or Cartels

Culture + Taxes = Impunity Crime, Kidnapping, Murders

North vs. South Blurr Expanding to other areas

Business Perspective Regional Dynamic

North vs Rest; 3 Major Cities Foreigners not targeted

Kidnappings nor Murders New companies staying away;

already in Mexico are growing (Control Risks Latin America)

Maquiladora mfging up Volkswagon, BMW, WalMart

US Travel Advisory Context US government motherly role

Murders per capita reality See Following Table

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I. Murders per Capita Context (2010)

50 WORST LATIN AMERICA COUNTRIES (ABOVE MEXICO), MEXICAN AND US STATES

HONDURAS 77 Oaxaca 21 New Mexico 8.7 Oklahoma 6.2Chihuahua* 74 Sonora* 20 Mexico City 8 Nuevo Leon# 6SALVADOR 70 Morelos 19 Guanajuato 8 Tabasco 6Durango* 60 MEXICO 18 Jalisco 8 Illinois 6VENEZUELA 48 Michoacan 18 Maryland 7.7 Georgia 5.8Sinaloa* 47 Nayarit 15 Tennessee 7.3 Florida 5.5Guerrero 46 Quintana Roo 13 Puebla 7 Arziona 5.4T&TOBAGO 37 Louisiana 11.8 Alabama 6.9 Texas 5.4COLOMBIA 32 Chiapas 10 Mississippi 6.4 California 5.3BRAZIL 25 Coahuila# 9 Missouri 6.4 Pennsylv. 5.2Wash D.C. 24 Mexico(State) 9 Michigan 6.3 Queretaro 5Baja Calif* 24 Tamaulipas# 9 So Carolina 6.3Puerto Rico 22.6 Colima 9 Arkansas 6.2

1. Mexico better than Brazil, Colombia, Venezuela, & Central America

2. Mexico business travel locations (underlined) similar to US locations

3. Problems in Northwest Mexico states(*) spike Mexico average badly; Northeast Texas border area states (#) much better than portrayed.

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II. Mexico Water Overview

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II. Mexico Water Issues & Challenges

1. Geographical Challenges: North/Central vs South dynamic; Altitude, precipitation, population, urban growth issues

2. Overexploited aquifers: 15% - all in the North/Central

3. Per Capita Water: 18,000 m3 (1950) to 4,400 m3 (2010)

4. Potable/Sewerage Coverage: Goals ok, rural low (79%/63%)

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

6. Use of Water: 80% Agriculture (40% in US) = only 2% revenue

7. Delivery Systems: 50% loss in Potable and Agriculture Use

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

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Increased Irrigation technology

River Basin auto administrationAll rivers % lakes without trash

All treated water reused Contamination sources under

control

Efficient regional orderAll industrial water

treated

Flood zones without habitations

Urban suburbs connected to the

network

Disaster alert systems and preventionAll rural areas with potable water

Operating organisms functioning efficiently

River Basin Equilibrium

Universal WaterCoverage

Habitable areas free from floods

100% Clean Rivers

All municipal water treated

II. 2030 Water PrioritiesII. 2030 Water Priorities

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II. 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).

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I. Municipal Treatment Evolution (2012 Goal and Historical Figures)

Year 2000 2005 2007 2008 2009 2010 2012

Collected* 200 205 207 208 209 2010 220

Treated* 46 71.8 79.3 83.6 88.1 91.2 132

Increase* 4.9 7.3 4.9 4.3 4.5 3.1 40.8

% Treated 23.0% 35.0% 38.3% 40.2% 42.1% 43.4%# 60%

# = 2010 Latin America Green City Index Average 52% vs Mexico 43.4%

* = Collected, Treated, Increase = m3 per second; Increase = year to year treated

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III. Wastewater Standards

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III. Mexican Wastewater Regulations Types of 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

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

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

System/Function Measures metals, oils,

tempurature, nitrogen BOD (DBO) = Urban COD (DQO) = Industrial TSS (SST) = Both

Based on post-treatment use: Agriculture, Public Use, Fauna

Requirements vary by use

Sampling: Frequency, Self Enforcing

No Metering: 2011 Pilot Projects

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III. NOM 001: Discharges into Federal Bodies

M.A. = Monthly Average; D.A. = Daily Average(1) Instantaneous(2) Simple sample weighted average(3) Absent as per the Test Method defined in the NMX-AA-006.

As of 2010, all companies & municipalites with 2500+ (3200 total) supposed to be compliant; Reality is much, much less, numbers unclear

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III. NOM 001 (continued)

(*) Measured in full.D.A. = Daily Average M.A.= Monthly Average NA = Not applicable(A) (B) and (C): Receiving Body type according to Government Service Charges

Law.

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III. NOM 002: Discharges into Municipal Systems

As of 2010, all companies are supposed to be compliant

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III. Wastewater Standards: III. Wastewater Standards: US vs MexicoUS vs Mexico

Significant differences between systems:Standards Levels & Materials TestedSamplying FrequenciesMetering RequirementsPreTreatment vs PostTreatmentViable Regulations & Enforcement

Local vs State vs Federal

Fines, Civil & Penal Liabilities, Closures

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IV. Municipal Wastewater Plants

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IV. Municipal Plants - Annual

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

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IV. Municipal Plants by State (2009)

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IV. State Treatment Good & Bad: Refining Coverage & More Basic Needs Good: 10 States > 2/3

100%: Nuevo Leon, Baja California, Aguascalientes

75-65%: Guerrero, Nayarit, Chihuahua, Sinaloa, QR, Tamaulipas, Durango

Evolutions (2003-2010) Aguascalientes: 77 to 100% Baja California: 72 to 100% Chihuahua: 32 to 72% San Luis Potosi: 22 to 63% Tamaulipas: 37 to 65% Sinaloa: 40 to 69.4%

Positive but Reversals Quintana Roo: 73 to 69% Nayarit: 82.6% to 70.3%

Bad: < 25% wastewater treatment coverage < 10%: Yucatan,

Campeche, Hidalgo 14.4% Mexico City 20-15%: Zacatecas,

Tabasco, Morelos, Chiapas 22.2% State of Mexico 24.1% Jalisco

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IV. State Wastewater: Good/BadIV. State Wastewater: Good/Bad Which States are doing better than others

BOD (Oxygen Demand: Urban wastewater) Bad (> 30*): DF, Mexico, Guanajuato, Tlaxcala Good: Jalisco, NL, Tamps, VC, AGS, CHI, BC

COD (Chemicals: Industrial wastewater) Bad (> 40*): DF, Mexico, Jalisco, Guanajuato, Baja California,

Aguascalientes, Chihuahua, Puebla, Tlaxcala Good: Nuevo Leon, Queretaro, Tamaulipas, Veracruz

TSS (Suspended Solids: Both, more urban) Bad (> 150*) only Hidalgo = result of DF/Mexico Wastewater

Overall Good: Campeche, Coahuila, Colima, Chiapas, Durango, Guerrero, Nayarit, Oaxaca, Quintana Roo, San Luis Potosí , Sinaloa Sonora ,Tabasco and Yucatan.

* Miligrams per liter

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IV. Major Urban Wastewater: Projects, Coverage, Future Trends Mexico City

Atotonilco: 2013; Cost: $785 Million US El Caracol: 2014; Cost: $130 Million US

Area Coverage: < 15% in 2011; 40-60% in 2013/2014 Capacity: 26m3 dry season; 38m3 wet season.

Guadalajara Agua Prieta: 2012; Cost: $280 Million US El Ahogado: 2012: Cost: $150 Million US

Area Coverage: < 25% in 2011; 100% in 2012 Capacity: 11m3; ability to treat 10,000 liters/second each.

Monterrey No Major Projects but has 100% Coverage

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.

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Sludge Activated46.43%

Stabilizing Ponds15.59%

Advance Primary11.14%

Others 8.63%

Aeration Ponds8.11%

Biological Filters5.37%

Dual 4.74%

IV. Type of Municipal Plants IV. Type of Municipal Plants (2009 = 2029 plants)(2009 = 2029 plants)

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IV. Public Treatment Challenges

Cons – Concerns but Limited Federal Role Few Sticks & Carrots Bid Processes Bad Corruption, 3 Year

Municipal Elections Rains, Altitude, Urban Societal Acceptance and

Low Water Reuse (<10%) Statistics: probably worse Inadequate monitoring

Pros – Improving Legal Changes on Way Prosanear = 173 cities Some positive societal and

municipal gov`t signs Northern State Positives Coverage is up & growing APAZU Funding for

municipal plants: 64% Funding and Financing

supposedly sufficient – see next slide

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IV. Impact of Funding Issues 2011 Total Mexico Water Budget

$6 Billon US = 2x Conagua budget Sources: Federal (Conagua) 49%;

State 18.5%; Local 12%; Other (EPA) 20.5%

2011 Conagua Water Budget Total: 36.8 Billion pesos ($3 Billon US)

States: 62%; Federal Spending 38% Urban: 80%; Rura:l 20%

Distribution: 48% Projects; 33% Admn; 19% HidroAgriculture

Projects: 39% Potable; 49% Drainage; 12% Treatment

Treatment = $360 million US Growth Up, slowed by economic crisis:

Since 2002 250%; Since 2007: 69% 2011: 5.5%; 2010: 14%; 2008: 22% Hidroagriculture: 2008: 46%; 2011: 4%;

Local vs Federal Projects Municipal: 95%

64% APAZU Matching Funding Federal: Large Projects Only

Funding vs Finance Argument “Funding Sufficient”: Conagua “Financing Available” Fonadin Still BOT vs Traditional Bid Debate

Payment, Local Government concerns Supposedly $2 Billion US: 2008-2012

Water Prices Domestic: Low (graph) Not close to

costs Industrial: higher but still low Agriculture: almost free

80% total use < 2% revenues Billing vs Collected (See Graph)

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IV. World Domestic Water PricesIV. World Domestic Water Prices

46.44

31.7

28.67

24.2

20.98

20.4

2.76

0 20 40 60

Price (pesos/m3)

Mexico City/Federal District = 25 cents

Lisbon

Madrid

Los Angeles

Washington D.C.

Istanbul

London

(11 pesos:$1 USD), 2008 prices

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IV. Water Revenue ProblemsIV. Water Revenue Problems

Ejercido = Spent; Recaudado = Revenue

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V. Industrial Wastewater Plants

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V. Industrial Plants by State (2009)

Operating Capacity & Treatment %: Very low, even in industrial states

Total Treatment: 190m3 flow p/s with 36.7m3 p/s treated = 19.3%

Total BOD: 6.95 million tons with 1.33 million tons treated = 19.1%

2009 Operating Capacity: 50% (Installed: 72.5m3; Treated: 36.7m3)

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V. Industrial Wastewater Treated: Not good but better than seems

0

5

10

15

20

25

30

35

40

(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%)

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V. Industrial Plants by Type

2010 Total Industrial Plants: 2186 (100%) Primary: 731 (33.4%)

Adjusting PH levels & removing materials > .1mm > 50% in Veracruz & Chiapas: Basic Treatment

Secondary: 1193 (54.6%) Removing colloidal & dissolved organice materials 57% in 4 states: Mexico, Veracruz, N.L., Hidalgo

Tertiary: 88 (4%) Removing dissolved materials, driven by incentives 32 Mexico City/State of Mexico; up 25 a year

Other: 174 (8%)

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V. Industrial Treatment Challenges

Cons – Serious but... Funding for Enforcement Federal: Carrot/Incentives

Growing but still limited Federal: Stick/Enforcement

Staff, Metering concerns Few Fines, Closures

Local: Rules & Enforcement “Generic Vodka”

Local: Politics/Corruption Limited Federal Role

Companies: Price-based, not reach for best or right solutions

Plants: 53% up since 2000 = half of Municipal Increase (99%)

Pros – Some good signs Conagua Commitment Up Municipal need for revenue Water Reuse up (Over 5 Bm3) Industrial Water Prices Up Fines & Permits

Costs and enforcement up Targeting Problem Industries

Prosanear Program Growing Society & Tracking Responses Funding & Legal Reform Up New Metering Pilot Programs

Writing on the Wall: When not if companies must comply.

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VI. Wastewater Opportunities

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VI. Municipal Opportunities Plants – New & Rehabilitation

2011 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.

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VII. Mexico Wastewater Projects 2011-2012

New ($850 Million) Lake Xochimilco (3) Lake Valsequillo (4)

Rehab ($400 Million+) Lake Chapala (7) Chihuahua (40) Colima (18) Jalisco (28) Sinaloa (20) Tlaxcala (20) Veracruz (18) Tabasco (20)

Feasibility Studies for Wastewater Plants (13) Chiapas, Tabasco, Veracruz,

Mexico City, Puebla, State of Mexico, Colima, Tamaulipas, Tlaxcala, Sonora, Yucatan, Michoacan, Hidalgo

Global Water Intelligence (9) Valle del Bravo, Valley of

Mexico, Caborca, El Conejo, El Zapotillo, Bahia de Banderas, Popotla, Tijuana, Monterrey VI

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VI. Municipal Wastewater Sector Market Size

Estimated size as ranges of below models: $220-546 Million (Median: $357 Million) From 2011 Conagua Budget Elements

From Total 2011 Mexico Water Budget Conagua Budget: 49% Conagua, 51% others; Therefore x 1.5-2 = Total Market Size Conagua Projects = 48% ($1.53 Billion); 12% of Projects = “Saneamiento”: $183 Million Conagua Wastewater = 80% Saneamiento or $146 Million Total Municipal Wastewater (WW) Market (1.5-2x) $220-293 Million

From 2011 Saneamiento Budget Concept Saneamiento $189.8 Million x 80% = $152 million US Total Municipal WW Market (1.5-2x) = $228-300 Million

From 2011 Specific Conagua Wastewater-related Concepts 100% (S218) + 12% (K007+S074+S075) = $255 million Total Municipal WW Market (1.5-2x) = $382-500 Million

From 2010 US Embassy Study on Mexico Water & Wastewater Imports $3.922 Billion; 66-80% Municipal = $2.9 Billion; 12% Saneamiento: $350 Million; 80% = $280 Million Total Municipal WW Market = $280 Million

From 2008 Latin America Municipal Wastewater Equipment Study (Frost & Sullivan) Latin America Municipal Water: 2008: $43.1 Billon; Mexico = 27.5% or $11.85 Billion Total Municipal WW Market (See Formula Above: 48% x 12% x 80%) = $546 Million

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VI. Problems for NAFTA Companies VI. Problems for NAFTA Companies Selling to Mexican GovernmentSelling to Mexican Government

National Content Regulations New (2010), Higher

(65%), enforcement up National Bid Issues NAFTA Problems US/Canada vs Mexico

Result: Govt Bid Opportunities down Mexico hypocritical?

Licitation Problems Compranet System

Decisions already made

Opening/Closing dates Can´t find winners? Low amounts

reported vs. high amounts budgeted

Where are projects? Lack of Transparency Local vs Conagua issue

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VI. Channel Realities

Private Sector – Full Range of Options (B2B) Pros & Cons: Distributor vs Rep vs Direct Private Sector Intermediaries work in Public Sector?

Public Sector – Requirement despite NAFTA National Bid Rules = Sales: Distributor or Subsidiary

99% of Bids National = Must sell through Mexican entity National Content Rules = 55% now; 65% in 2012

Increased need to work through Mexican integrators/EPCs Local Bid (95%) Selling Environment

Early bid knowledge, answering bid, servicing Sale will often be based on who you know Ability to steer clear of corruption problems

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VI. Industrial 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?) - New vs. Refurbished (2011: over $225 million US)

- 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)- Commercial: Malls, Industrial Parks, Hospitals, Restaurants, Hotels

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

- Products: Domestic vs Imported (See Annex Sheet)

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VI. VI. 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)

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VI. Industrial Wastewater Market Estimated Size as ranges of below models: $110-$350 Million (Median: $285 Million)

A. From 2005 Mexico Industrial Wastewater Equipment Study (US Embassy)$370M - Industrial Wastewater Equipment Only: 2005: $325 Million; 2006: $346 Million Pre-Economic Crisis Numbers could come close to approximating current market; 40% Large vs 60% Small/MediumTotal Industrial Wastewater (WW) Market: $350 Million

B. From Total Mexico Water & Wastewater Imports (2010) (US Embassy) Imports: $3.314B x Equipment (88%) x Industrial (20%) = $593 Million Estimated Wastewater %: LOW (33%): $221 Million; MEDIUM (50%): $336 Million; HIGH (66%): $445 MillionTotal Industrial WW Market: $336 Million (5% Annual Growth figure for future estimates).

C. From 2011 Conagua Budget (with Industrial = 50% of Municipal)* Total Market Municipal Wastewater Treatment = $220-293 Million; Industrial = 50% orTotal Industrial WW Market: $110-150 Million

D. From 2010 Latin America Industrial Wastewater Equipment (Frost & Sullivan)Latam: 2011: $1.12 Billion; 2012: $1.17 Billion; 2014: $1.27 Billion Mexico: (millions US$) 2011 2012 2014

Low (16.5%) 185 195 210 Low-Medium (25%) 280 295 320 Medium (33.3%) 375 390 425

Total Industrial WW Market: $280-375 Million________________________________________________________________________________

Estimated Size of both Industrial & Municipal Wastewater Markets > $500 Million

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VI. 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

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LGA Contact Information

Vince Lencioni, General Manager

Email: [email protected]: www.lgaconsulting.com

Mexico Water Report Electronic Access: http://www.lgaconsulting.com/water/report.html

Mexico City Toll Free Number in the US: 1-888-750-0988; or 011-52-555-378-3840 or 90

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VII. Annex

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VII. Domestic vs International Products Imported Product Preference Both Domestic Product Preference

GIS & SCADA Analyzers & Manometers

Contractors & Construction

Automation & Controls Equipment Filtration Equipmt & Products

Pipe/Water Distribution Equipment

Wastewater –Reuse Equipment Treatment Plant Systems

Sludge Handling Systems

Treatment Plant Systems Tanks Gates & Flumes

Data Management Systems* Leak Detection Metal Fabrication

CIS & Meters Laboratory & Sampling Products

Chemical Feed Equipment

Well Drilling/Systems Process Equipment Aerators, Diffusers

Corrosion & Cathodic Protection/Control Equipmt

Chemicals Compressors & Blowers

Chlorine

Desalination Equipment Disinfection Systems Coating & Lining

Leak Detection Consulting* Sewer/Collection Systems & Equipment

Laboratory & Sampling Equipment Pumps & Valves Traditional Treatment Options

Rain Water Reclamation Storm/rain drainage Solutions

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VII. Water Demand by Sector (2020)

Km3/year (m3/s)

National Agriculture Industry Public Other Difference Supply 2020-1997

3180 2640 95 381 64 856

100% 83% 3% 12% 2% 27%

CONAGUA 2010: 77% Agriculture, 12% Public, 9% Industrial.

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VII. Mexican Domestic & Industrial Water Prices

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VII. Treatment by Basin AnalysisNo.

Water Basin Number of Plants in

Operation

Installed Capacity (m3/s)

Water Treated (m3/s)

Lerma = 25% of plants; Rio Bravo = 25% of Installed Capacity and Water Treated; using 75% of Installed Capacity, Need a lot more.

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VII. Treatment by Basin AnalysisMunicipal wastewater treated by 13

River Basins (Total = 100%):

1.- Rio Bravo/Northern Border 26.5%2.- Lerma-Santiago-Pacífic 21.5% 3.- Pacific North 8.0%4.- Valley of Mexico 7.4%5.- Penisula of Baja California 7.3%6.- Balsas 6.5%7.- Central Northern Basins 4.8%8.- Northeast 4.0%9.- Center Gulf 3.7%10.- Southern Border 3.1%11.- Gulf North 2.7%12.- Pacific South 2.3%13.- Península of Yucatan 2.0%

Conclusions Majority of Treatment

in North (#1,3,5,7,8) Over 50% of all treatment

Significant Treatment in Center (#2,4,6)

About 1/3 of rest

Insignificant treatment in south/gulf areas

Less need for water, less industry and population

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VII. Municipal Treatment Plants by Capacity (2010)

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VII. Municipal Wastewater Treatment by State Analysis

Majority of Plants in dry, northern states

1. Durango (167, 10%)

2. Sinaloa (136)

3. Chihuahua (119) Most important states:

fewer plants State of Mexico (105) Jalisco (96) Nuevo Leon (61)

Installed Capacity1. Nuevo Leon (12%)

2. Chihuahua (8%)

3. State of Mexico

4. Baja California

5. Federal District Treated Water

1. Nuevo Leon (14%)

2. Chihuahua (7%)

3. Baja California

4. State of Mexico

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VIII. Presentation Sources American Chamber of Commerce, Mexico – Charting the

Economy; 2nd Quarter/2011 Banco de México, Índice de volumen de la producción industrial,

Series de tendencias. Business Monitor International, Latin America Monitor, May 2011

Editions Comisión Nacional de Agua (CONAGUA): Presupuesto Federal

de Egresos (2009, 2010, 2011) Comisión Nacional de Agua (CONAGUA): Situación del Subsector del

Agua y Saneamiento 2009 Comisión Nacional de Agua (CONAGUA): Situación del Subsector del

Agua y Saneamiento 2010 Comisión Nacional de Agua (CONAGUA): Estadísticas del Agua 2011 Economy Watch: Economic Statics & Economic Indicators Data Base

for 2012. Global Trade Information Services, US Export Statistics – United

States Exports To Mexico; United States Exports to Brazil, March 2011.

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VIII. Presentation Sources Gobierno Federal Mexicana, Ley Federal De Derechos, 2010 Interviews with different Conagua and EPA officials. Media Analytics, Global Water Intelligence, January and February 2011

editions Semarnat, Normas Oficiales Mexicanas: NOM 001-1996, 002-1996,

003-1997, 2009 Semarnat, Norma Oficial Mexicana NOM 004-2002, 2002. U.S. Commercial Service Report: Mexico Equipment and Services for

Upgrading Municipal Wastewater Treatment Plants. September 2010. U.S. Commercial Service Report: Mexico Water and Wastewater

Equipment and Services Industry. September 2010. Wikipedia, List of countries by international homicide rate 2010;

US State source: http://www.ucrdatatool.gov/Search/Crime/State/StatebyState.cfm Mexico State source: http://www.prominix.com/sblock/admin/images/Mexico%20Crime%20Stats%202010.pdf