SAWEA 2006-06-07

PRIVATIZATION AND OUTSOURCING OFWATER AND WASTEWATER FACILITIESPRIVATIZATION AND OUTSOURCING OFWATER AND WASTEWATER FACILITIES

SAWEA 2006-06-07

SpeakersSpeakers

The Veolia Water Team► Frederic FLEURY► Didier BIGEONNEAU► Dion TENHORN

SAWEA 2006-06-07

Overview PresentationOverview Presentation

► Who we are (company, activity . . .)

► General Data, Challenge, Solutions & Developments

► Possible partnership models . . .

► Common questions . . .

► Our approach . . .

► Our partnerships & experience . . .

► Our case studies . . .

Technical Solutions

Operating Services

SAWEA 2006-06-07

Operation and maintenance(wastewater facilities, water facilities, ground water remediation)Design/build, upgrade(new water and wastewater facilities, upgrade of existing facilities)Water recycle, re-use, & water use reduction

Freight Transportation & Logistics

Energy Services & Facilities Management

Industrial Waste Management & Services

Water & Wastewater Management

Waste services(collection, transfer, recycling, disposal, on-site management)Hazardous waste services (incineration, fuels blending, recycling and recovery, emergency & special services)Industrial services (industrial cleaning, mechanical services, sewer services, dewatering)Waste-To-Energy (waste combustion, energy recovery, facility operation, facility maintenance, retrofitting).

Management of rail sidings & associated internal logistics (loading, unloading, maintenance of loco-tractors and other equipment)Regional and long-distance rail freight transportationCompany personnel transportation

Management of energy utilities for the production process(steam, power production in situ, cold, compressed air, etc.)Industrial maintenance of the production processHeating, ventilation and air conditioningManagement of buildings and associated technical services, facilities management

Veolia EnvironnementVeolia Environnement

SAWEA 2006-06-07

Our Activity:Our Activity:

Who we are . . .

► Water & WastewaterOperating Services

► Water & Wastewater Systems Integrator

► Comprehensive Technology Solutions & Equipment Provider Outsourcing

Services

Technical Solutions

A “World Class” Organization # Dedicated to Innovation # 2,500 Patents # €110 million Annual R&D Spend600 Research Staff # 77,000 Employees # 7,000 Active O&M Contracts # €13.3 billion Turnover

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Our Activity: a Water Cycle SpecialistOur Activity: a Water Cycle Specialist

Drinking Waterproduction

Raw water resource

management

Network management

Preservation of water quality during transportation

Wastewatercollection

Wastewater Treatment

Sludge

CustomerManagement

Integrated approach to protectthe environment

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Purpose: preserving a precious resourcePurpose: preserving a precious resource

2 - Prevention of chronic contamination

1 - Prevention of accidental contamination 3 - Monitoring

of resources

8 - Aquifer recharge

7 - Wastewater re-use

6 - Desalination of sea wateror brackish water

5 - Saving water

4 - Managing catchments in a sustainable way

To protect To optimise management

To developalternatives resources

SAWEA 2006-06-07

General Data Saudi ArabiaGeneral Data Saudi Arabia

Saudi Arabia

► Population growth: from 7 million (1970) to 25 million (today) to 47 million (2025)

► Water availability per capita: from 900 m³ (1950) to 113 m³ (2025)

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ChallengeChallenge

► Challenge► Growing Gap between demand and available supply of potable water

► Solutions► (1) New Desalination projects (seawater – brackish water)► (2) Alternatives

► Demand Management (water demand forecast & management)► Improved Efficiency► Re-use of wastewater

► Development► Towards PPP

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(1) Desalination(1) Desalination

► Saudi Arabia: world largest desalinated water producer

► Installing new capacity is critical to meet demand► Current capacity approx 6.5 Million cubic meters per day

► Seawater 72%, Brackish Water 25%, others 3%► Approx 50 large plants (> 50000 m³/day) & Approx 200 smaller plants

► Estimated needed capacity by 2020: 11.9 Million cubic meters a day► Of which planned: 4.2 Million cubic meters a day (requiring capital

investments of + $6 Billion & operation expenses of + $1.3 Billion)► Estimated extra by 2020: 5.4 Million cubic meters a day, most of which is

from seawater desalination (4 Million m³/day).► Approx 2.1 Million cubic meters a day is expected to be installed by 2010

► Desalination Outlook / Project Funding► Government► Private Developers (IWPP)

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(2) Alternative: Demand Management(2) Alternative: Demand Management

► a. Water demand forecast :► Water consumption and production projections► Infrastructure development planning

► b. Water demand management : ► Involves all aspects of technical and commercial water

management that contribute to an optimal use of the limited water resource

► c. Objectives of water demand forecast & management:► Infrastructure planning : Capital Expenditures ► Define Management Policies : O&M Expenditures

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(2) Alternative: Demand Management(2) Alternative: Demand Management

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(2) Alternative : Others(2) Alternative : Others

Efficiency Improvements► UFW (Unaccounted For Water), due to

► Unbilled metered consumption► Leakages (mains – storage)► Etc

► Awareness campaigns started

Re-use of waste water► Limited practice in Saudi Arabia

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DevelopmentsDevelopments

INCREASE CUSTOMER SATISFACTION

► Increase supply - Continuous supply► And improvements to save water

TREND

► PPP : Public Private Partnership► PPP: way of co-operation between a public authority and a private company► The public authority assigns the execution of the service to a private-sector

company► The public authority retains responsibility for defining the policy and taking

strategic decisions► The public authority remains owner of the infrastructure► It is not privatization

► PPP contract tailored to the situation and the priority objectives

SAWEA 2006-06-07

Developments what kind of PPP ?Developments what kind of PPP ?

All partnerships are tailor madeAll partnerships are tailor made

Consultancy Privatisation

Public - PrivatePartnership

Contract model

Main issues to tailor the contract to local conditions

Customer RelationshipManagement

Financing

Environment

EconomicsWater resource management

Water safety

Social policy

Technology transfer

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Possible partnership models

Innovative Partnershipsfor the

Oil & Gas Industry

Possible partnership models

Innovative Partnershipsfor the

Oil & Gas Industry

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Common QuestionsCommon Questions

Who can support you through all

stages of a project …

How can you guarantee performance?

How can you establish continuity between the

construction and operational phases?

How can you optimize industrial investment

How can the best technology and practice be deployed in process

support facilities?

… and help you to focus on your core

business?

Design

Construction

Operation

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Optimizing the water cycle: one of your objectives - our know-howOptimizing the water cycle: one of your objectives - our know-how

Waste water treatment re-use and recycling

Cooling water

Water output treatment

In-Process solutions

Network management

Injection water treatment

Industrial water production

Boiler feed water

Produced water management

Industrial water supply(fire-fighting cleaning)

Our key commitmentsGuaranteed availability and quality of water, from raw resource to point of use

Optimization of site water consumption

Reuse water

Environmental compliance

SAWEA 2006-06-07

Possible partnership modelsPossible partnership models

1. « pure » outsourcing contract to Veolia (O&M business model)

2. Creation of a JV (i.e. between Client & Veolia The JV acquires the assets and operates them (JV AO&M business model)

3. Acquisition and operations & maintenance of the assetsby Veolia (AO&M business model)

SAWEA 2006-06-07

Common characteristics of the 3 modelsCommon characteristics of the 3 models

► Reduction in operating costs over the long term / Permanent optimisation and progress ► Optimisation of the existing facilities through technical rather than

technological solutions (Operator’s logic)► Continuous work to reduce operation expenditures and investments needs

(savings sharing mechanism to be defined)

► Securing reliability of production / discharge limits compliance by engaging a competent services provider to operate, maintain and invest in the water facilities

► Transfer of operating risk whilst maintaining accountability

► Access to latest technologies and systems

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Advantages / disadvantages of each modelAdvantages / disadvantages of each model

O&Mbusiness model

JVAO&Mbusiness model

AO&Mbusiness model

Advantages ► Basic & flexible contractualengineering

► Easy to implement

► Personnel transfer issues generally easier to solve (personnel still belongs to a Hellenic Petroleum entity)► “open book”approach

► Clear split of responsibilities

► Disposal or sale of ‘non-core’ assets to generate capital► Reduction in core business headcount

Disadvantages ► Reducedcontractual flexibilitythrough assetsownership

► Sensitive personnel issues may arise

► Reducedcontractual flexibilitythrough assetsownership

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Our ApproachOur Approach

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3 3 -- Innovative business modelInnovative business model3 3 -- Innovative business modelInnovative business modelAssets acquisition ; Joint ventureAssets acquisition ; Joint venture

Bring added value from a partnership: How?Bring added value from a partnership: How?

1 1 -- Focus on the WWTPFocus on the WWTP1 1 -- Focus on the WWTPFocus on the WWTPLong run guarantees

– Performance– Price

Permanent optimisation and progress

Access to Veolia Water know-how

2 2 -- Bring Bring VeoliaVeolia Water expertise Water expertise on water cycle on water cycle optimisationoptimisation

1 1 -- Focus on dedicated Focus on dedicated perimeterperimeterLong term guarantees

– Performance– Price

Permanent optimisation and progress

Access to Veolia Water know-how

Network management

Boiler feed water

Waste water treatment re-use and recycling

Cooling water

Network management

Boiler feed water

Water & Waste water treatment re-use and

recycling

Cooling water

SAWEA 2006-06-07

Where do we want to go ?Where do we want to go ?

Our commitments Your guaranteesREFERENCE SITUATION TAILOR-MADE CONTRACTS

QUALITY

Contract based on service qualityContract based on service quality Dedicated service level agreementDedicated service level agreement

Contract management: on-site manager and suitable operational structure

Contract management: on-site manager and suitable operational structure Clear roles and responsibilitiesClear roles and responsibilities

MANAGEMENT

Objective long term view of your cost centersObjective long term view of your cost centersTransparent and flexible pricing budget, guaranteed over contract term

Transparent and flexible pricing budget, guaranteed over contract term

COST

KPI delivery and monitoring to achieve more ambitious efficiency goals

KPI delivery and monitoring to achieve more ambitious efficiency goals

Measuring results, ensuring improvementsin quality and performanceMeasuring results, ensuring improvementsin quality and performance

RESULTS

Flexible contract providing for change of scopeFlexible contract providing for change of scope Adjustment to production variables and regulatory upgradesAdjustment to production variables and regulatory upgrades

SCOPE

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Project phasesProject phases

Objectives:- set up the technical and

reference costs (baseline)

- identify the main technical and economical improvements

Objectives:

- make the necessary complementary studies

- schedule the improvements implementation

- set up the business plan

MoU

2 to 4 months

Bindingproposal

Targets:

Hellenic Petroleum / VW joint definition of:

- the commitments,

- the guarantees

- the Key Performance Indicators (KPI) values

1 month

ContractPreliminaryproposal

1 month

Phase 3:Guarantees

and commitments

Phase 2:Detailed Diagnosis

+ value proposition VW

Phase 1:Preliminary Diagnosis

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How to evaluate the performance of a partnership?How to evaluate the performance of a partnership?

FINANCIAL

> Savings against targets

> Energy & Water consumption

> Water discharge volumes

ENVIRONMENTAL

> Conformance

> Compliance

> Continuous improvement

SAFETY

> Reduce Customer incidents in relevant areas

> Specific actions and programs to prevent incidents

QUALITY

> Delivery performance

> Maintenance efficiency

> Plant availability

PERFORMANCE

> Availability

> Reliability

> NTK

> Exchanger cleaning intervals

PROACTIVITY

> Delivery of new initiatives

Typical Key Performance Indicator Areas:

All KPI Critical to Sustainable Development Goals

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Veolia WaterVeolia Water

Our Partnerships . . .

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Oil and Gas ExperienceOil and Gas Experience

Our Experience . . .► 75 Existing Projects Worldwide► DBOM; DBO; DB► €168 Million Annual Turnover (2004)► Facility Types

►Refineries►Terminals►Off-shore Production►On-shore Production

SAWEA 2006-06-07

Oil and Gas ExperienceOil and Gas Experience

Our Experience . . .

► Treatment Services► Wastewater ► Process Water► Produced Water► Residuals Management

► Technology Solutions► Physical, Chemical, Biological

and Membrane Systems► Reuse and Recovery Systems► Destruction Systems

SAWEA 2006-06-07

Cooling Tower Blowdown TreatmentCooling Tower Blowdown Treatment

Neutralization Tank

New Multiflo™ 300 Chemical Softener (800 m3/hr – 3,500 GPM)

Tot. Hardness < 80 mg/l Silica < 20 mg/l

Lime / Soda Ash

Acid

150 Micron Cartridge Filters (3) UF Membranes

(270 m3/hr – 1,200 GPM) ea.

IX Softener Feed Tank

NTU < 0.2 SDI < 3

(3) SAC Ion Exchange (250 m3/hr – 1,100 GPM)

ea.

RO Feed Tank

Ca < 1 mg/l Mg < 0.6 mg/l(3) RO Membranes

(250 m3/hr – 1,100 GPM) ea.

Reject (20% Feed) < 10 mg/l Total Hardness to Cooling Tower Makeup

TDS < 15 mg/l Silica < 0.7 mg/l

RO Permeate Storage

Tank

(2) Mixed Bed Polishers (165 m3/hr – 725 GPM)

ea.

Polished Water Tank

EC < 1.0 µS/cm Silica < 10 ppb

Former blowdown to discharge

To boilers

SASOL GTLSASOL GTL

SAWEA 2006-06-07

Case StudiesOil & Gas SectorCase StudiesOil & Gas Sector

SAWEA 2006-06-07

O&M business modelCase: France – BP Lavera « Pure » outsourcing contract

O&M business modelCase: France – BP Lavera « Pure » outsourcing contract

What were the customer needs?• Environmental compliance• Operating costs optimization

Key feature of our offer:

A long term partnership based on:> Committees in charge of strategic and technical

issues / regular meetings > Performance reviews and improvement plans > A Safety program that best fitted all the refinery’s

requirements

A two steps approach:> Optimising the waste water treatment plant> Upgrading through a mid-term investment program

The contract was signed on October 2000 for a period of 10 years

• Capital Expenditure minimization• specific water expertise access

SAWEA 2006-06-07

JVAO&M business model Case: USA – ConocoPhillips Creation of a JVJVAO&M business model Case: USA – ConocoPhillips Creation of a JV

What were the customer needs?

Conoco-Phillips was searching for a

What was our offer?Veolia Water purchased a 50% interest in Hydroserve Westlake LLC, owner of the utility assets that serve ConocoPhilips’ refinery at LakeCharles

Veolia Water now operates the refinery’s surface water treatment and biological wastewater treatments assets with an on-site staff of water treatment specialists

This long-term contract began in 2000 for a period of 15 years

In 2003, the National Petroleum and Refiners Association (NPRA) presented Veolia Water with a “Contractor Award for Meritorious Safety Performance” at the association's annual National Environmental and Safety Conference for work at this project.

new investor and operator for the management of its waterand wastewater treatment assets.

SAWEA 2006-06-07

AO&M business modelCase: Korea – Lotte Daesan Company Acquisition of the assets by VeoliaAO&M business modelCase: Korea – Lotte Daesan Company Acquisition of the assets by Veolia

Scope of services:> two pre-treatment lines: 120,000 m3/d> one reverse osmosis unit: 84,000 m3/d> two demineralised water lines: 49,000 m3/d> two drinking water prod. lines: 4,000 m3/d> two cooling systems: 2,000,000 m3/d

Technology used:> pre-treatment process: Clarification / Sand

filtration/ Sludge treatment (thickening and dehydration)

> production of osmosis-treated water: Polishing /Membrane techniques

> production of demineralised water: Deionisation / Active carbon filtration and Polishing

The contract was signed on March 2000for a period of 20 years

What were the customer needs?

In the context of a financial restructuring of the company, HPC decided to sell its drinking and industrial water production assets, considered as non-core business.

transfer risks and responsibilities associated with operating these water treatment facilities to an expert service provider.

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2006 PPP Reference: SINOPEC2006 PPP Reference: SINOPEC

► Joint-venture (JV) was created between Sinopec and Veolia Water to take over, upgrade and operate all the facilities.

► JV purchased the wastewater treatment assets and was assigned all the wastewater treatments contracts.

► Exiting facilities include► 3 industrial WWTPs (20 Mm3/yr)► 2 wastewater reclaim facilities (8 Mm3/yr) and one domestic WWTP (1.3 Mm3/yr)

► The scope of services includes:► Improvement of operation and maintenance of the global wastewater treatment

facilities► Increase in capacity and efficiency of the two reclamation units

► The long-term JV allows Sinopec to focus on its core activities whilst ensuring cost control

SAWEA 2006-06-07

Q&AQ&A

THANK YOU