Growth in this industry usually comes from increased water demand, but governmental regulations such as the Safe Drinking Water Act and the Interim Enhanced Surface Water Treatment Rule are placing pressure on municipal water treatment facilities to upgrade or install new equipment. As the demand for new equipment increases, new growth is expected for equipment manufacturers and suppliers.
According to the new strategic research from Frost & Sullivan, U.S. Water Treatment Equipment Market, this market, which brought in more than $900 million in revenue in 1999, is expected to experience increasing annual revenue growth rates through 2006.
Municipal treatment plants, which will see the majority of the new industry growth, are turning to private businesses for the needed upgrades. An increasing number of plants are using a Design-Built-Operate (DBO) contract, where a private water treatment company takes up the initial financial costs related to retrofit or new construction work. This company in turn sells the treated water at a pre-set price to the municipality for several years.
"Growing preference for DBO contracts among industrial end users and municipalities presents lucrative revenue opportunities to WTE companies that deploy cost-effective technologies," Frost & Sullivan analyst Matthias Kubr said.
The DBO contract has several advantages. The water treatment facilities will be more likely to install advanced equipment, which will have a high initial cost that will be outweighed by long term savings. End users will deal exclusively with the contracted company and avoid the hassles of using multiple companies.
However, this trend may force manufacturers to offer a complete product line and "one-stop shopping" for their customers. Smaller companies that are unable to provide this service could see their sales decline unless they can find opportunities in niche markets.
SOURCE: U.S. Water Treatment Equipment Market