Water Services Industry to Double Revenues by 2020 in Efforts to Tackle Scarcity, Says New BofA Merrill Lynch Global Research

  Water Services Industry to Double Revenues by 2020 in Efforts to Tackle
  Scarcity, Says New BofA Merrill Lynch Global Research Report

                        The Era of Peak Water Is Here

Business Wire

NEW YORK & LONDON -- December 03, 2012

The global water services industry is set to double to $1 trillion in annual
revenues by 2020 as companies address the growing problem of water scarcity,
according to a new BofA Merrill Lynch Global Research report called “A Blue
Revolution – global water” based on the collective views of 35 analysts,
covering 60 companies from 18 countries. The report is the latest thematic
megatrend piece from BofA Merrill Lynch Global Research  following  previous
reports on obesity, energy efficiency, safety and security and a previous
report on water.

Water is on course to be scarcer than oil by 2030, with demand outstripping
water supply by 40 percent. Close to half of the world’s population will be
living in water-stressed areas. Insufficient freshwater, uneven distribution
and climate change are factors limiting the supply of water, while demand is
growing in homes, businesses and farms around the world. Unless more
sustainable water management practices are adopted, 45 percent of projected
2050 global GDP at 2000 prices could be at risk – equal to $63 trillion.

BofA Merrill Lynch Global Research has identified the companies it believes
are in the strongest position to benefit from the global dynamics of water
supply and demand. The report highlights how Asia and South America are poised
for the strongest growth. With public finances under pressure, the private
sector will have to provide more funding. The report estimates that 30 percent
of global investment will come from private sources by 2016, compared with
only 16 percent today.

The report outlines three themes of addressing water scarcity, explaining the
challenges in each area and the potential solutions that companies are
developing. The themes are: Water Treatment, Water Management, and Water
Infrastructure and Supply. It identifies companies that have the greatest
exposure to the megatrend of scarcity.

“By addressing the issue of water scarcity, companies can reduce the
likelihood of social unrest and trans-boundary disputes,” said Sarbjit Nahal,
equity strategist at BofA Merrill Lynch Global Research. “Together with our
sector analysts, we are setting out in this report the 60 global stocks
covered by BofA Merrill Lynch Global Research that are best-positioned to lead
in addressing more sustainable water use and to more closely match supply with
demand.”

Water treatment – emerging market growth driving demand

Rising water scarcity and growing demand from agriculture, housing and
industry will increase demand for water treatment. The report details how
agriculture accounts for 70 percent of water use and demand is rising as diets
change. As industries across emerging markets expand, their demand for water
rises. Municipal and residential water use is also growing on the back of
urbanization. Wastewater reuse stands at only 2.41 percent of all water
withdrawals globally.

The report outlines opportunities in areas such as producing drinking water,
irrigation, or returning water to the natural environment. It focuses on
sectors with heavy volumes and environmental constraints (such as utilities,
oil and gas, and mining), those with strict water constraints (food and
beverage, cosmetics) and variable effluents (petrochemicals, energy, and
breweries). The report highlights how desalination could emerge as a $25
billion industry by 2025.

Water management – smarter irrigation is key

Against the backdrop of growing water scarcity, fragmented water management
and conflicting interests of stakeholders are too expensive and unsustainable
in the long term. There is growing recognition that the water crisis is as
much a consequence of weak policies and poor management as natural scarcity.
Effective water management enables users to cut their use of water. It also
mitigates the risks associated with water shortage and reduces the need for
capex-intensive solutions.

With up to 60 percent of water used in agriculture wasted, smarter irrigation
is essential. Household water management has huge potential – if all U.S.
households installed water-saving features, the dollar-volume savings would be
more than $4 billion per year. Companies involved in areas such as
drought-resistant seeds and crops and smart metering are poised to benefit
from appetite for water management.

Water infrastructure and supply – growing role of private finance

The report highlights the global need for water infrastructure. Developed
markets need to replace crumbling and incomplete infrastructure while emerging
markets need to build infrastructure for the first time. Annual water
investment needs are estimated to rise to more than $770 billion for the OECD
and BRICs by 2015. With public funding increasingly under financial pressure,
we believe the private sector will need to play an increasingly important
role.

Water infrastructure is currently a $360 billion-plus market and is
registering growth of up to 6 percent in some segments. Scope for growth is
especially strong in Latin America and Asia. Companies involved in
engineering, construction and consulting, pipes, pumps and valves and sewage
treatment will benefit.

BofA Merrill Lynch Global Research

The BofA Merrill Lynch Global Research franchise covers more than 3,300 stocks
and 1,060 credits globally and ranks in the top tier in many external surveys.
Most recently, the group was named Top Global Research Firm of 2011 by
Institutional Investor magazine; No. 1 in the 2012 Institutional Investor
All-Asia survey for the second consecutive year; No. 2 in the 2012
Institutional Investor All-China, All-Europe, All-Japan and All-Latin America
surveys; and No. 3 in the 2012 Institutional Investor All-America survey. The
group was also named No. 2 in the 2012 Institutional Investor All-America
Fixed Income survey, as well as in the inaugural Institutional Investor
Emerging Markets Equity and Fixed Income survey, covering Emerging Europe,
Middle East and Africa.

Additionally, BofA Merrill Lynch Global Research was named the No. 1 Global
Broker by Financial Times/StarMine,as well as rankedNo. 1 in the U.S. and
Europe and No. 2 in Asia. The group was also named No. 1 in Asia and No. 2 in
the U.S. in the Wall Street Journal Best on the Street 2012 Analysts Surveys.
The group was also the winner of the Emerging Markets magazine’s EM Research
Global Award for 2010 and 2011.

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