©2004 infonetrix llc all rights reserved worldwide 2-1 part two marketplace characteristics market...

2-1©2004 InfoNetrix LLC All Rights Reserved Worldwide

PART TWOMarketplace Characteristics

Market Horizons™ ReportMarket Horizons™ ReportReal-time Automation & Controls (RTAC) in the North

American Water/Wastewater Utilities Marketplace (2003-2007)

PART 2: Marketplace Characteristics 2-2

©2004 InfoNetrix LLC All Rights Reserved Worldwide

About This Report

InfoNetrix LLC, an independent technical research and consulting firm

specialized in utility automation and information technology (Utility Automation/IT)

markets conducted the research for this report. InfoNetrix reports are available for

subscription by any and all interested parties, foreign and domestic (except as

prohibited by law), in accordance with the pricing and terms set forth in the

prospectus, provided separately.

This report addresses Real-time Automation & Controls (RTAC) in the North

American Water/Wastewater Utilities Marketplace. Other reports in the Market

Horizons™ Series provide similar analyses of Real-time Automation & Controls

(RTAC) in the North American Electric Utilities Marketplace and Geospatial &

Field Automation Solutions (GFAS) in the North American Utilities Marketplace.

Please visit www.InfoNetrix.com for more information about these and other

InfoNetrix Advisory Services.

InfoNetrix LLC, an independent technical research and consulting firm

specialized in utility automation and information technology (Utility Automation/IT)

markets conducted the research for this report. InfoNetrix reports are available for

subscription by any and all interested parties, foreign and domestic (except as

prohibited by law), in accordance with the pricing and terms set forth in the

prospectus, provided separately.

This report addresses Real-time Automation & Controls (RTAC) in the North

American Water/Wastewater Utilities Marketplace. Other reports in the Market

Horizons™ Series provide similar analyses of Real-time Automation & Controls

(RTAC) in the North American Electric Utilities Marketplace and Geospatial &

Field Automation Solutions (GFAS) in the North American Utilities Marketplace.

Please visit www.InfoNetrix.com for more information about these and other

InfoNetrix Advisory Services.



General Information & Notifications

PURPOSE

The information contained in this document is for the sole use of InfoNetrix clients

and is not to be distributed outside client organizations. No part of this publication

may be reproduced, transcribed, or transmitted in any form or by any means,

electronic or mechanical, including photocopying, recording, or by any electronic

storage and retrieval system, without permission in writing from the copyright owner.

DISCLAIMER

This publication has been prepared with care, however, no guarantee of accuracy,

completeness, or warranty of any kind is expressed or implied, nor shall InfoNetrix

be liable to any user of the publication or any portion(s) hereof for any direct or

indirect damages, expenses, costs or losses of any kind resulting from its use.

COUNTRY OF ORIGIN

United States of America

PURPOSE

The information contained in this document is for the sole use of InfoNetrix clients

and is not to be distributed outside client organizations. No part of this publication

may be reproduced, transcribed, or transmitted in any form or by any means,

electronic or mechanical, including photocopying, recording, or by any electronic

storage and retrieval system, without permission in writing from the copyright owner.

DISCLAIMER

This publication has been prepared with care, however, no guarantee of accuracy,

completeness, or warranty of any kind is expressed or implied, nor shall InfoNetrix

be liable to any user of the publication or any portion(s) hereof for any direct or

indirect damages, expenses, costs or losses of any kind resulting from its use.

COUNTRY OF ORIGIN

United States of America



Research Standards & Methodology

The preparation of this report follows generally accepted standards of market research practice and is based on principles of truthfulness and professionalism. A reasonable and prudent effort has been made to ensure that factors and circumstances having a material impact on any decision-making process derived from, or impacted by, this report are included in the analyses and recommendations. The representations of industry and market data and portrayals of the business environment are based on market research conducted by experienced professionals with broad knowledge and experience in the markets addressed.

The information upon which the findings and analyses contained in this report are based was obtained through a combination of telephone interviews with key suppliers and consultants and other individuals with extensive market knowledge and experience, augmented by survey with a cross section of utility managers and ongoing interactive research with over 1,000 utilities annually. Each telephone interview/survey was guided by a specially designed questionnaire to obtain pertinent data, insights and market perspectives. These interviews were augmented by secondary research across a wide range of reliable public and proprietary information sources pertinent to the study.

The preparation of this report follows generally accepted standards of market research practice and is based on principles of truthfulness and professionalism. A reasonable and prudent effort has been made to ensure that factors and circumstances having a material impact on any decision-making process derived from, or impacted by, this report are included in the analyses and recommendations. The representations of industry and market data and portrayals of the business environment are based on market research conducted by experienced professionals with broad knowledge and experience in the markets addressed.

The information upon which the findings and analyses contained in this report are based was obtained through a combination of telephone interviews with key suppliers and consultants and other individuals with extensive market knowledge and experience, augmented by survey with a cross section of utility managers and ongoing interactive research with over 1,000 utilities annually. Each telephone interview/survey was guided by a specially designed questionnaire to obtain pertinent data, insights and market perspectives. These interviews were augmented by secondary research across a wide range of reliable public and proprietary information sources pertinent to the study.



Research Reliability & Acceptance

The information presented in this report was gathered, recorded and analyzed with care and precision. However, there will undoubtedly be differences between the findings presented and actual results for various reasons and, because future events and circumstances frequently do not occur as expected, those differences may be material.

For these and other reasons (including, but not necessarily limited to human error, misinterpretations, misunderstandings and information sensitivities among respondents), the resulting data will most likely not be completely accurate in all respects. Moreover, the forecasts presented herein reflect judgments made as of the period during which this report was prepared. As such, some aspects can be expected to change as a result of numerous direct and indirect factors, which are beyond the scope of this report to accurately predict. For example, it assumes that current events will continue to have the same effect on the marketplace in the future and that the conventional wisdom of today will continue to be completely applicable to future market conditions, which is at best, unlikely.

By accepting and using the information contained in this report, the user assumes all responsibility for its use for any and all purposes as user may deem appropriate and agrees to hold InfoNetrix, its principals and its staff harmless from any direct, indirect or consequential damages resulting from, or in any way related to, such use(s). However, InfoNetrix actively solicits and welcomes inquiries or other input regarding any errors, omissions or inconsistencies discovered during the course of using this report. Please direct any such correspondence to InfoNetrix Client Services.

(Detailed company contact information is provided on the web at: www.InfoNetrix.com.)

The information presented in this report was gathered, recorded and analyzed with care and precision. However, there will undoubtedly be differences between the findings presented and actual results for various reasons and, because future events and circumstances frequently do not occur as expected, those differences may be material.

For these and other reasons (including, but not necessarily limited to human error, misinterpretations, misunderstandings and information sensitivities among respondents), the resulting data will most likely not be completely accurate in all respects. Moreover, the forecasts presented herein reflect judgments made as of the period during which this report was prepared. As such, some aspects can be expected to change as a result of numerous direct and indirect factors, which are beyond the scope of this report to accurately predict. For example, it assumes that current events will continue to have the same effect on the marketplace in the future and that the conventional wisdom of today will continue to be completely applicable to future market conditions, which is at best, unlikely.

By accepting and using the information contained in this report, the user assumes all responsibility for its use for any and all purposes as user may deem appropriate and agrees to hold InfoNetrix, its principals and its staff harmless from any direct, indirect or consequential damages resulting from, or in any way related to, such use(s). However, InfoNetrix actively solicits and welcomes inquiries or other input regarding any errors, omissions or inconsistencies discovered during the course of using this report. Please direct any such correspondence to InfoNetrix Client Services.

(Detailed company contact information is provided on the web at: www.InfoNetrix.com.)



Market Horizons™ Report Contents

1. Executive Market Summary

2. Marketplace Characteristics3. Market Drivers, Issues & Trends

4. Market Analysis & Future Outlook

5. Supplier Environment



2. Marketplace Characteristics

• Marketplace Overview• Marketplace Structure & Composition• Principal Market Segments• Applications & Configurations• Geographical Market Distribution



Marketplace OverviewNorth American Water/Wastewater Utilities Marketplace

The North American Water/Wastewater Management Solutions Real-time Automation & Controls (WWMS-RTAC) Marketplace

The North American Water/Wastewater Management Solutions Real-time Automation & Controls (WWMS-RTAC) Marketplace



Marketplace OverviewWater/Wastewater Utility Marketplace

• Pre-2003Pre-2003: Reductions in municipal tax base caused by the economic downturn have constrained automation project planning and budgets… Municipal liquidity crisis ensued Unpopular to spend money for

automation when basic services were in economic jeopardy

Un-funded mandates (e.g, GASB-34, Sarbanes-Oxley, etc.) placed new financial burdens on utilities

Security vulnerability audits paid for with EPA funding created new funding & implementation issues; funding now depleted but threat mitigation needs still exist



Marketplace OverviewW/WW Utility Marketplace (Cont’d)

• 2003-20072003-2007: Economic recovery will gradually replenish municipal coffers, allowing a return to capital spending projects amid rising consumer awareness of the need and value of automation… Security vulnerability assessments funded by the US EPA

were to have been completed by mid-2004, but funding has been depleted; also, no funds available for implementation of mitigation measures among many smaller utilities

Widespread acquisitions of small public and private water companies will continue but at a somewhat slower pace than in prior years

Privatization initiatives have been stalled due to absence of promised benefits; some privatization contracts being reversed/rescinded



Water Treatment

Plant

BoosterPumps

SewageTreatment

Post TreatmentStorage

Water PipesSewer Pipes

Reservoir

Ground WaterWells

River

Source Treatment Distribution Sewer/Treatment DischargeSource Treatment Distribution Sewer/Treatment DischargeSource Treatment Distribution Sewer/Treatment DischargeSource Treatment Distribution Sewer/Treatment Discharge

SOURCE: Sandia National Laboratories, Albuquerque, NM

Marketplace Structure & CompositionWater/Wastewater Market Environment



Marketplace Structure & CompositionLargest Water Service Companies

World Rank

Name of Company Name of Parent Organization HQ Country

1 US Filter Veolia Environnment (formerly Vivendi Environnment; a unit of Vivendi Universal)

France

2 United Water Services (formerly United Water Resources)

Suez France

3 American Water (formerly American Water Works Corp.)

RWE/Thames Water Germany

The world’s three largest water service companies each have extensive holdings among North American utilities and private operating companies

in addition to equipment manufacturing and related services activities.

Notably, the efforts of these companies to privatize water/wastewater facilities in North America have been plagued by consumer and political resistance, project failures and contract litigation. The previously brisk pace of water/wastewater system acquisitions has also been slowed.



• Over 53,000 Community Water Systems (CWS)

Are year-round operations Serve well over 90% of the US

population Represent about 1/3 of all water

systems in the US

• About 17,000 Non-transient, Non-CWS (NTNCWS):

Serve buildings, factories, etc. Operate ≤ 6 months per year Represent about 12% of all water

systems; serve ~ 2% of population

• Almost 90,000 Transient, Non-CWS (TNCWS):

Serve campgrounds, gas stations, etc. Operate only for short durations Represent ~50% of all water systems;

serve ~ 5% of population

264

55

17

713

90

1

10

100

1000

Number of Utilities (in Thousands) Population Served (in Millions)

CWS NTNCWS TNCWS

Marketplace Structure & CompositionWater/Wastewater Market Composition

There are over 160,000 public water systems in the U.S. alone



2615

265119

309

10K-50K 50K-75K 75K-100K 100K+Populations Served by CWSPopulations Served by CWS

Large Community Water System Utilities(by Population Served)

SOURCE: US EPA

There are over 53,000 CWS - but communities having populations above 10,000 are served by only about 3,300 water systems

There are over 53,000 CWS - but communities having populations above 10,000 are served by only about 3,300 water systems

Marketplace Structure & CompositionCWS Market Composition Detail



Marketplace Structure & CompositionCanadian Water Policy & Legislation

• Canada passed the Canada Water Act in 1970 and created the Department of the Environment in 1971, entrusting the Inland Waters Directorate with providing national leadership for freshwater management.

• Federal government is responsible for fisheries, navigation and external affairs, but the provinces are the “owners” of the water resources and have broad responsibility for day-to-day management.

• Canada released its Federal Water Policy in 1987, which provides focus to water-related activities of all federal departments.



WWMS Real-time Automation and Controls (RTAC)

D&CD&C

PlantPlant

System Solutions

PAS

Field Data Devices (FDDs)

SCADA-Supervisory Control & Data Acquisition • PAS-Process Automation Systems • D&C-Distribution & Collection

SCADA

Hybrid Systems

Marketplace Structure & CompositionWWMS-RTAC Market Organization Model

Water/Wastewater Management Solutions (WWMS) RTAC Market OrganizationWater/Wastewater Management Solutions (WWMS) RTAC Market Organization



• System Solutions Segment SCADA Systems -SCADA Systems - Generally applied in water distribution and

wastewater collection (e.g., lift station monitoring) applications. May either be integrated or simply interfaced (often at the host data level) with PAS in cases where water purification and/or wastewater treatment plants are included in the automation scope.

Process Automation Systems (PAS) -Process Automation Systems (PAS) - Generally involves real-time process measurement and control for water purification and/or wastewater treatment plants. May be integrated or interfaced with SCADA. In some cases, the PAS host system may also serve as the SCADA host or vice versa to form a hybrid.

Hybrid Systems - Hybrid Systems - Combined (i.e., interfaced or integrated) SCADA and PAS systems.

Applications & Configurations Principal WWMS-RTAC Market Segments



• Field Data Devices (FDD) Segment Plant FDDsPlant FDDs may be any of several types, including

traditional remote terminal units (RTUs); programmable logic controllers (PLCs); or other distributed control system (DCS) nodes consisting of a computing element, communications interface and a complement of analog/digital input-output devices. Plant FDDs are most commonly PLCs or DCS nodes operating over a hi-speed communications network such as Ethernet, Fieldbus, Modbus Plus or other standard. Units inside the plant perimeter tend to have larger amounts of I/O than their remotely located counterparts.

Distribution & Collection FDDsDistribution & Collection FDDs may be traditional RTUs, but PLCs are increasingly popular for both in-plant and remote applications, the latter offering potential gains in compatibility, standardization, initial cost and support.

Applications & Configurations (Cont’d) Principal WWMS-RTAC Market Segments



Geographical Market DistributionUS-Canada WWMS Spending Ratio

90%

10%

USA Canada

US-Canada Annual WWMS Expenditures Ratio (2003-2007)US-Canada Annual WWMS Expenditures Ratio (2003-2007)

• WWMS expenditure ratios have remained between 90/10 & 85/15 for several decades

• 2003-2007 ratio expected to remain at 90/10 (i.e., after currency normalization); no strong change agents are apparent at this time

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