Chinese deals buoy water firms here
WATER companies in Singapore are attracting big-name investors as they profit from exporting their expertise to China, which plans to spend US$850 billion (S$1.1 trillion) over the next decade to improve its scarce and polluted water supplies.
Singapore is a hub for water technology because of its own concerns about water security. With few domestic freshwater resources of its own, the city-state has been trying to reduce its reliance on imports from neighbouring Malaysia, where politicians have in the past threatened to turn off the taps.
Since 2006, the number of companies in Singapore's water sector has doubled to about 100, and S$470 million has been committed to fund water research, government data shows. Over the same period, Singapore-based water companies secured more than 100 international projects worth close to S$9 billion.
Singapore has been experimenting with reservoirs, reclaimed water known as Newater, and desalination as it aims to become self-sufficient in water by 2061, when a water-supply agreement with Malaysia expires.
"Singapore should be one of the world's dominant players in water. It should be the Silicon Valley of water," said Mr Jim Rogers, who co-founded the Quantum Fund with Mr George Soros, and owns shares of Singapore's biggest listed water-treatment company, Hyflux.
"The root of the whole commitment to grow the water industry lies with the Singapore water story," said Mr Goh Chee Kiong, executive director of cleantech at Singapore's Economic Development Board. "Singapore has been very vulnerable when it comes to water for many decades, therefore, we view water as a strategic resource and asset."
With the world's population hovering at around seven billion, investors are betting on soaring demand for clean water not just for people, but also to help fuel industries ranging from semiconductors and pharmaceuticals to petrochemicals and agriculture.
"Water-treatment companies have not been on the radar for a while, but investors are increasingly looking at companies that are undervalued or have yet to realise their potential," said Mr Carey Wong, an analyst at OCBC Investment Research.
Many companies have their sights set on China, where, despite spending 700 billion yuan on water infrastructure over the five years to 2010, much of the water remains undrinkable, a situation that has led to mounting discontent across the country.
China's environment ministry said 43 per cent of the locations it was monitoring in 2011 contained water not fit even for human contact.
United Envirotech said stricter discharge limits imposed by the Chinese government and water shortages in parts of the country are pushing up demand for water-treatment services.
Chinese players like China Everbright International and Beijing Enterprises Water Group may put up a tough fight, especially for the lower-end water-treatment projects, due to their ability to keep costs down and their local network, said DBS Vickers analyst Tan Ai Teng.
Mr Rogers said: "There are going to be huge fortunes made in China on water, because China has a staggering water problem and they know it.
"They are spending a lot of money to solve it."