Water Market Insights No

· Race for World Dominance in Air, Water and Energy Will be Won by Companies Not Countries

· Mergers Create New Leaders in the $340 Billion Air/Gas/Water/Fluids Treatment and Control Markets

Nuclear power plants use thousands of valves. Older power plants need to replace and repair valves and in some cases to upgrade them to meet new safety standards. This has created a world market which will exceed $1.6 billion in 2014. This is the conclusion reached in the new McIlvaine report, Nuclear Power Plant Valve Forecast and Analysis. (www.mcilvainecompany.com)

The Fukushima nuclear accident in Japan in March 2011 has reshaped the nuclear power industry. Some countries halted construction for further review. Others decided to phase out nuclear power. A number of countries are now again moving forward.

China is currently leading the world with approximately 26 new nuclear reactors under construction or planned for near-term construction. In January 2013, China started up the first new nuclear reactor to become commercial since Fukishima. Worldwide, there are close to 60 reactors in construction or near construction.

The total valve investment in a typical 1,000 MW nuclear power plant is in excess of $80 million. There is some variation from design to design. Nuclear power plants of either PWR or BWR design include more than 5,000 valves per installation. The valve applications include safety, control and isolation functions, among others. More than 500 valves are classified as “safety” valves with the balance classified as “non-safety.” These valves reflect virtually all valve types and sizes including ball, gate, globe, butterfly, check, plug, poppet, squib and others. Valve sizes range from fractions of a gallon per minute for chemical feed regulation to many thousands of gallons per minute for controlling reactor cooling and condenser cooling.

The future for nuclear power may depend on the trajectory of continuous-improvement in reactor designs already established by the major suppliers including Areva, GE, Hitachi, Mitsubishi, Westinghouse and others sourced from Canada, Russia, China and South Korea. The two most prominent reactor types today are pressurized water reactors (PWRs) and boiling water reactors (BWRs). Currently, the PWR predominates in terms of installed and planned megawatts. Both reactor types have been significantly improved in terms of design simplicity and safety features relative to the early designs of the 1960s and 1970s. Improvement in valve design has kept pace with the plant improvements.

Race for World Dominance in Air, Water and Energy Will be Won by Companies Not Countries

Long-term revenue forecasts in the twenty McIlvaine market reports in the air, water and energy fields are heavily weighted by the projected dominance of companies over countries. The ability of governmental officials in individual countries to shape the markets is more than countered by the abilities of domestic and international companies to shape those markets.

The emergence of the global company is one of the most important developments in shaping future markets. On one hand, the U.S. is at odds with China over illegal acquisition of intelligence. On the other hand, Thermo Electron has its entire air pollution research activities located in China. What is there to steal from the U.S. when all the information is already in China? The question is one of internal company security not country security.

In a world of macro-wikinomics, the more information the global company can share with citizens around the world, the more profitable it will be. The companies with the best products (those with the lowest life cycle costs) have nothing to lose by the spread of the knowledge.

It becomes difficult to identify many air/water/energy companies by national origin. Alstom is a French company. However, its air and energy groups are in the U.S. It has a new major joint venture with Shanghai Electric in China to create the world’s largest boiler company. This new company with sales of $3.6 billion is registered in Singapore.

Individual companies can shape the energy future of countries as large as the U.S. Sasol, a South African company, is moving forward to build a 96,000 barrel per day plant to convert shale gas to liquid fuels. It will be the largest manufacturing project in the history of Louisiana and one of the largest ever in the United States.

Shell, with headquarters in the Netherlands, is also planning a gas-to-liquids plant as well as LNG and other investments in the U.S. If the two companies (South African and Dutch) proceed with these plants, it will boost the U.S. self sufficiency in liquid fuels by more than many of the U.S. publicized governmental policies being so hotly disputed.

The companies making $10 billion decisions on plant investment will shape the energy future. If these companies gamble on cheap gas availability and build these plants, the power companies will not have a competitive gas source. There will be pressure to build new coal-fired power plants. This is already happening in Germany, a leading advocate of greenhouse gas reduction. The high cost of electricity has forced the country to approve some new coal-fired power plants.

The environmental industry continues to globalize at a rapid pace. Nederman, Andritz and Doosan are just three examples of companies whose recent acquisitions make them global environmental players. Yokogawa, Emerson and ABB are three examples of companies making automation and instrumentation which are already global but are focused on growth in the regions where they are weakest.

For more information on McIlvaine air, water, and energy market reports, click on: www.mcilvanecompany.com.

Mergers Create New Leaders in the $340 Billion Air/Gas/Water/Fluids Treatment and

Pentair has emerged as the new leader in the market that treats and controls liquids and gases (including air). Ecolab/Nalco has moved into second place. This is the conclusion reached in Air/Gas/Water/Fluid Treatment and Control: World Markets published by the McIlvaine Company. (www.mcilvainecompany.com)

With the addition of Tyco valve revenues, Pentair pump and filtration revenues generated a combined $7 billion in sales in 2012. The corporation anticipates a 3.5 percent increase in 2013. This will create revenues of $7.2 billion in the treatment and control sector.

Ecolab has acquired Nalco. With an expected revenue increase of 5 percent in 2013, the company will move into second place with treatment and control revenues of over $5.2 billion. The former leader, Flowserve, will drop to third place.

There was another significant merger last year. Colfax acquired Howden. Most of the Howden revenue is in control (fans) and some is in treatment (heat exchangers). Colfax supplies pumps, but also has substantial business outside the treatment and control sector. So Colfax only moved to number ten in the ranking.

Xylem is a divestiture of ITT. It is, therefore, a smaller player now than previously. GE is the largest company in the sector. Its acquisition of Dresser boosted its treatment and control revenues. Nevertheless, treatment and control is a small portion of total revenues.

The total market for treatment and control is forecasted to rise five percent to $340 billion in 2013. The leader will only garner two percent of the market, so the market will remain quite fractured.

The treatment and control is increasingly being recognized as a discrete market. Various players, however, view the market slightly differently. Parker Hannifin sees a $100 billion market in which it is the largest player at $13 billion. With its filtration, hydraulics and pneumatics products, it is a major participant in treatment and control but is not among the top five.

There are hundreds of active capital investment projects in the oil sands sector in Western Canada. Last year investment was more than $19 billion with even greater expenditures on the horizon. This is the latest forecast in Oil, Gas, Shale and Refining Markets and Projects published by the McIlvaine Company. (www.mcilvainecompany.com)

The investment is not only for expansion of the total production, but also for environmental improvements at existing facilities. The 2012 expenditures exceeded those in any of the last four years. To meet the expansion from 1.7 to 3.7 million bbl/day by 202l, will require annual expenditures twice the $19 billion spent last year.

The investment in new facilities comes in multibillion dollar chunks. For example, Sunshine Oilsands Ltd. has budgeted about US$3.5 billion for capital investment in its Canadian oil sands projects.

The expenditures to improve the environment are significant. The Quest Carbon Capture and Storage Project will reduce CO₂ emissions from the Athabasca oil sands operation by 35 percent, or more than one million metric tons a year. The Scotford upgrader plant near Edmonton, Alberta, processes bitumen into synthetic crude oil. The steam-methane reformer units at Scotford produce hydrogen for upgrading bitumen, a process that releases carbon dioxide. Quest will capture CO₂ from Scotford using an amine solvent, a liquid comprising water and amines, then transport it via an 80 kilometer underground pipeline to a storage site north of Shell’s Scotford facility to the northeast of Fort Saskatchewan, Alberta. Captured CO₂ will be injected more than two kilometers underground into a porous rock formation called the Basal Cambrian Sands, which is located beneath layers of impermeable rock. According to the Quest project website, “Sophisticated monitoring technologies will ensure the CO₂ is permanently stored.” Shell Canada executed a contract with Fluor Corp for engineering, procurement and construction (EPC) of the Quest project. Fluor Corp total cost of the project is estimated at USD1.35 billion.

Projects to improve water quality are also requiring significant capital investment. Grizzly Oil Sands ULC selected GE’s (produced water evaporation technology for its Algar Lake project near Fort McMurray, Alberta, Canada). Phase 1 of the Algar Lake Steam-Assisted Gravity Drainage (SAGD) project will produce 5,000-6,000 barrels per day of bitumen and, by using GE’s produced water evaporation process, will recycle up to 97 percent of the produced water.

Grizzly’s Algar Lake is one of three projects, including Harvest Black Gold, to choose GE’s patented evaporative technology to treat and recycle its SAGD wastewater.

§ CECO Environmental announces acquisition of Aarding Thermal Acoustics B.V.

§ Mitsubishi Plastics enters into NO_x Exhaust Gas Catalyst Manufacturing

§ Construction Permit for CDS System for Michigan City

§ NRG to exit Power Plant Project in Meriden, CT

§ GMR Group (Singapore) sells 70 Percent Interest in GMR Energy to FPM Power Holdings

§ Huge Variable in Fabric Filter Market Depending on Power Regulations in U.S. and China

On Thursday at 10 a.m. Central time, McIlvaine hosts a 90 minute web meeting on important energy and pollution control subjects. Power webinars are free for subscribers to either Power Plant Air Quality Decisions or Utility Environmental Upgrade Tracking System. The cost is $125.00 for non-subscribers. Market Intelligence webinars are free to McIlvaine market report subscribers and are $400.00 for non-subscribers.

	2013
DATE	SUBJECT
March 21	Industrial Boiler MACT Impact and Control Options – Part 1	Power
March 28	Mercury Measurement and Control – Part 1	Power
April 4	Industrial Boiler MACT Impact and Control Options – Part 2	Power
April 11	Mercury Measurement and Control – Part 2	Power
April 18	Multi-pollutant Control Technology	Power
April 25	Control Technologies for Fine Particulate Matter	Power
May 2	Flyash Pond and Wastewater Treatment Issues	Power
May 9	Clean Coal Technologies	Power
May 16	Power Plant Automation and Control	Power
May 23	Cooling Towers	Power
May 30	Air Pollution Control Markets (geographic trends, regulatory developments, competition, technology developments)	Market Intelligence
June 6	Report from Power-Gen Europe (update on regulations, speaker and exhibitor highlights)	Power
June 13	Monitoring and Optimizing Fuel Feed, Metering and Combustion in Boilers	Power
June 20	Dry Sorbent Injection and Material Handling for APC	Power
June 27	Power Generation Forecast for Nuclear, Fossil and Renewables	Market Intelligence
July 11	New Developments in Power Plant Air Pollution Control	Power
July 18	Measurement and Control of HCl	Power
July 25	GHG Compliance Strategies, Reduction Technologies and Measurement	Power
August 1	Update on Coal Ash and CCP Issues and Standards	Power
August 8	Improving Power Plant Efficiency and Power Generation	Power
August 15	Control and Treatment Technology for FGD Wastewater	Power
August 22	Status of Carbon Capture and Storage Programs and Technology	Power
August 29	Pumps for Power Plant Cooling Water and Water Treatment Applications	Power
Sept. 5	Fabric Selection for Particulate Control	Power
Sept. 19	Air Pollution Control for Gas Turbines	Power
Sept. 26	Mercury Control and Removal Status and Cost	Power

Ranking	Company	2012 Sales $ Millions	2013 % Increase	2013 Projected Sales $ Millions
1	Pentair	7,000	3.5%	7,240
2	Ecolab/Nalco	5,000	5.00%	5,250
3	Flowserve	4,400	7.19%	4,654
4	Xylem	4,000	5.79%	4,230
5	GE	3,800	4.83%	3,983
10	Colfax	2,000	2.00%	2,040

§ Construction Permit for CDS System for Michigan City

§ NRG to exit Power Plant Project in Meriden, CT