Power is the highest priority in the industrial sector

·        Size: It is the biggest application for water. It represents 25% of the  industrial sector ($39 billion compared to a $139 billion total). This does not include the water for industrial boilers which is included in the each industry application. But the technology for the big utility boilers transfers to the industrial boilers. So the true market is close to $50 billion not $39.

·       Standardization: It is similar to municipal water in that each plant has the same basic flow diagram and equipment. In contrast the chemical industry has vastly different processes. So for a big company such as Xylem the R&D to solve a process problem has the most potential ROI.

·        Water not oil:  Water is the main fluid and not petroleum.  Boiler feedwater, cooling water, and wastewater are the main fluids treated in a power plant. So unlike refining and oil and gas, the market is all water.

·        Customers: Some of the customers are the same.  Kansas Board of Public utilities where Flygt pumps are used is an example of the municipal/industrial synergy. The utility supplies both water and power.

       Xylem Public Data Search by Application

·        Applications: Some of the applications are the same: The big river water pumps for the power plant are the same ones which would be used to supply the water utility. The four 20,000 gpm pumps at the Kansas plant are the equivalent of a 100  mgd water treatment plant.

·        Combination with water: Combination of water and power is going to be the fastest growing and biggest desalination technology. So the potential at a single facility is both the desalination treatment and the power treatment.

     Xylem Internal Data Search by Application

·        Sustainability:  Combining the waste heat from power generation with desalination is the most efficient way to decrease greenhouse gases.

·        Market access: Data on every power plant in the world is already linked from the Mcilvaine Xylem website. Mcilvaine has personal contact with many of these plants on a weekly basis. Utilities representing more than half the power generation capacity in the U.S. are clients paying more than $ 1000/yr for technical and product information .

·        Products:  It is the largest industrial market for water handling pumps. It is the largest market for the fast growing electrodeionization technology. It is the second largest membrane market behind pharma. But it is by far the largest for water treatment membranes. Pharma includes product filtration. It is the largest market for industrial “test” ( see the D.O. market report). It is a growth market for UV.

·        Individual order sizes are large: Some pump contracts are for many millions of dollars. This makes a big well financed company the preferred supplier.

·        High growth segments:  In Asia the growth in power generation and water treatment is more than 10%/yr.  Retrofit of recirculated cooling rather than thermal discharge pollution also represents high growth.  Renovation of ash ponds is high growth.  Bioremediation of toxic metals is just in its initial stages but promises to be very big.  Zero liquid discharge is another growth segment. Electrodeionization is a double digit growth segment.

·        Centralized customer base and easy access. There are 5 major power companies in China. A handful of utilities in the U.S. (AEP, Southern, Duke, etc) have the majority of the capacity. This favors a big company such as Xylem who can address the large needs.

·        Global customer needs:  Suez and AES have facilities in many countries of the world.  Industrial boiler operators such as Dow,  Shell, Arecelor Mittal are completely international.

·        OEMS and A/Es are accessible.  Black & Veatch, Bechtel, and other A/Es are the same concerns who are working in water.  The number of boiler OEMS such as Alstom and Babock & Wilcox is also small in number and each is dealing in billions of dollars in water treatment systems per year. So this gives advantage to Xylem as the largest company to serve them.