Water Efficient Investments Presentation

Dubai Chamber of Commerce and Industry

Water Investment Opportunities

December 2012

2012

Introduction: Why is the Water Sector Important to Dubai and Relevant to Investors?Demand for potable water in Dubai has been rising by over 10% per year –

significantly outperforming its population and GDP growth

Technological advances have seemingly made natural limitations on water supply in a desert climate moot…

Dubai’s economic model depends on a steady and inexpensive supply of safe water for citizens and businesses that is increasingly being tested

The cost of UAE-produced water is among the highest in the world

Abundant consumption has put a severe strain on natural resources

Substantial improvements can be made across the value chain that would see investors reap rewards, which would improve efficiencies

2012

Outline: Case for Water-Efficient InvestmentsInvestments for Producing, Wisely Consuming and Redistributing Water

are available and desperately needed in the UAE because:

Natural Reserves are Dwindling and Becoming Less Usable;

Transportation Network Shortcomings Lead to Losses;

By-products of Desalination are Straining the Environment;

Costs of Producing Desalinated Water are Extremely High;

Pricing Structure Encourages Consumption in the Interior;

Heavy Reliance on IWPPs is Disconnected from Rural Consumer Base;

Reliance on MSF & MED Technologies has its Drawbacks;

Available Domestic Production Resources are not used to the Full Effect;

Desalination Technological Landscape is not Fully Explored;

Domestically-controlled Shipping Fleet Opens Further Import Options.

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I. Dwindling Domestic Water Reserves are Foreboding

Groundwater is currently taken from reserves as natural net annual recharge accounts for only 0.01% of total supply

Meanwhile, cultivated land has risen from 69,000 hectares in 1960 to 419,000 hectares in 2007

2003 2006

0

500

1,000

1,500

2,000

2,500

3,000

Other Groundwater

Forestry wells

Agriculture wells

Mm3/yr Declining Water Supplies in Abu Dhabi

0

50,000

100,000

150,000

200,000

250,000

300,000

1960 2007

Groundwater -brackish

Groundwater -moderately brackish

Groundwater - fresh

Mcm Declining Groundwater Supplies in Abu Dhabi

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II. Transportation Network Losses

DEWA says more than 11% of Dubai’s water is lost to leaks

The network has been improved upon in recent years, however the vast real estate development spree has put strain on the system

Fault lies with welders, installers, companies and consultants putting up specifications on individual development projects without supervision

Leaks are a problem worldwide, but here the lost resource is more costly

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III.Water Practices Straining the Local EnvironmentEAD’s monitoring program found 80% of their groundwater samples

exceeded WHO contaminant level recommendations

This, coupled with increased boron concentration, means approximately 90% of the UAE’s groundwater is unfit for human consumption

Heavy dependence on desalination has also raised salinity of Gulf water

1998 2000 2002 2004 2006 2008 2010 2012

40,000

41,000

42,000

43,000

44,000

45,000

46,000

47,000Dubai Average Feedwater Salinity, by Yearppm

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III.Water Practices Straining the Local Environment

Heavy dependence on desalination involves significant externalities that are largely unaccounted for:

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25

30

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0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1990 2000 2006 2007 2008 2009 2010

Electricity consumption per capita

CO2 emissions per capita (rt)

kWh tCO2Pollutants are Consistently High along with Consumption

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IV. Cost of Producing UAE Desalinated Water

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0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Reverse Osmosis

Multi Stage Flash

Multi Effect Distillation

Hybrid

Electrodialysis

UAE Desalination Capacity Additions by Year and Technology (in m3/d)

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IV. Cost of Producing UAE Desalinated Water

2005 2007 2008

125,000

130,000

135,000

140,000

145,000

150,000

155,000

160,000

165,000

170,000

19.0%

19.5%

20.0%

20.5%

21.0%

21.5%

22.0%

22.5%Abu Dhabi Water Desalination-related Fossil Fuel ConsumptionDesalination Fuel Use as % of Total Final Energy Consumption

bn BTU Fossil Fuel Use for Desalination Production

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

$-

$5

$10

$15

$20

$25

$30

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Foregone Natural Gas Export Revenue due to ADWEA system usage

Natural gas consumption in power/desal as % of total production

$ bn Water & Power-Related Natural Gas Consumption and Opportunity Cost

Rising salinity levels raise processing costs

In Abu Dhabi alone, natural gas use for utilities has presented an opportunity cost amounting to $124.28 billion in the past decade

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IV. Cost of Producing UAE Desalinated WaterReal Cost = Economic Cost + Environmental Cost

$1.95/m³ + not quantified

Domestically produced potable water is among the most expensive in the world, yet:

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1,000,000

2,000,000

3,000,000

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5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Umm Al Quwain

Sharjah

Ras Al Khaimah

Fujairah

Dubai

Ajman

Abu Dhabi

Desalination Capacity by Emirate and Year, Online and Presumed Onlinem3/d

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V. Rural Pricing Structure Encourages Consumption

Desalinated water costs the least for farmers, yet it is the most expensive to provide:

Jan AM

Jan PM

Feb AM

Feb PM

Mar AM

Mar PM

Apr AM

Apr PM

May AM

May PM

Jun AM

Jun PM

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Jul PM

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Aug PM

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Dec PM

0

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Bulk Supply Tariff Total Sector CostFees Farms/ Nationals in remote areas Fees Nationals in Other AreasExpat Domestic/ Commercial/ Industrial Agricultural water cost

fils/kWh Abu Dhabi Direct Water Costs and Charges, 2009

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VI.Reliance on IWPPs has its Drawbacks

IWPPs are meant to achieve economies of scale and were therefore the primary capacity additions in the past decade – but are far from rural users:

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

0

100

200

300

400

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600

700

800

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1,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Non-IWPPNon-IWPP %IWPP %

Gross MGD Desalination Capacity, ADWEA System

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VI.Reliance on MSF & MED has its Drawbacks tooVery few efficiency advancements have been made in what is viewed as

old technology in much of the rest of the world – where they instead have focused on RO:

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23

45

67

89

10

Thermal Efficiency Improvement: Gain Output Ratio in the UAE (kg/kJ)

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Making Full use of Domestic Resources:

Rural Production:

Although the per unit cost of production is usually significantly higher, transportation expenses are slashed – which in the UAE can make it twice as high

Industrial Heat:

Heat generated by producing energy-intensive goods can be harnessed and used to desalinate water to specifications needed by the industry itself

Sea-born Springs:

Natural springs are not only land-based, and technology exists to capture that water without having to undergo expensive desalination

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Making Full use of Technological Advances:

Reverse Osmosis Membrane Breakthroughs:

Although the majority of installed desalination capacity is MSF, RO is featured in many of the new and planned installations which could benefit from the efficiency gains championed by new membranes developed recently

Closed Circuit Desalination Technology:

Altering the way desalinated water is processed can reap strong efficiency gains

Ion Concentration Polarization and Modular Arrays:

Turning the way water can be cleansed on its head can be VERY cost effective

2012Q3-2010 Economic Indicators, Q2-2010

So what immediate investment

opportunities exist in the water space

- that are competitive with the UAE real cost

of water?

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I. Bulk Water Reception Terminal & Bottling Plant

With the cost of transportation of bulk water having fallen in recent years – importing large quantities of freshwater, bottling it, consuming it

domestically as well as re-exporting it is an economical solution if the shipping network can be controlled & a receiving terminal built

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II. Tailored Water Solution for Enhanced Oil Recovery

By optimizing the compatibility of the water used in EOR applications with reservoir chemistry, it is possible to further increase on an oil well’s yield

by 5-15% while significantly reducing the use of chemicals

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III.Hydroponic Agriculture

Large-scale hydroponics is approximately 30% more productive than conventional methods while using up to 40% less water – and is already

being tested in the UAE

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IV. Closed Circuit Desalination Technology

Using the same equipment in an RO system, extract purified permeate from pressurized source water, and circulate it continuously until the

sought-after quality is achieved: with lower variable costs

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V. Nano-filtration & NanoH2O Membranes

The QuantumFlux (Qfx) line of highly-efficient RO membranes feature 99.85% stabilized salt rejection, and are able to operate under

challenging conditions in solar-powered systems

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VI.Industry Based Membrane Distillation Process

The distillation technology uses waste heat to evaporate waste water through a fine membrane. The evaporated water condenses on the other side of the membrane as treated water for re-use in the industrial facility.


And what other investments need

government support or are still

in the development

phase?

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VII. Air-to-Water Harvesting

Air to Water technology extracts the humidity in the air and converts it into liquid water, replicating a naturally occurring phenomenon and

merely scaling it up using a power source.

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VIII. Retrieving Fresh Water from the Sea

A technology able to harness freshwater springs in the Gulf and capture it for use without the need for desalination – and is 3-6 times cheaper than

RO desalination technology.

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IX. Ion Concentration Polarization Elements & Modular Arrays

A developing technology that is said to be able to separate water from solutes and contaminants far more effectively than RO – without extreme hydraulic pressures/heat sources bringing operational costs to $0.2/m³.

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X. Brine Harvesting

Mitigate the environmental damage done to Gulf waters by processing brine and sell it on to industrial users – which range from stock feed,

medical and chemical uses by wallboard manufacturers and waste water treatment plants.


Thank you

Water Efficient Investments Presentation

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