Vancouver, Canada (GLOBE-Net) - With such a high percentage of the world’s fresh water contained within its boundaries, Canada clearly has an enormous resource to draw from when delivering a quality product to its citizens and industry. However, Canada and the province of Ontario also have significant challenges in delivering that water to a highly urbanized, concentrated market. Ontario, with more than one-third of the Canadian population, has recently experienced severe pressures on its many water supply systems, resulting in new legislation, standards and monitoring policies that continue to have an impact on the overall market.

The Ontario water treatment market is valued at more than US$1 billion when all types of related goods and services are taken into account. Canada and Ontario have seen import growth of water treatment apparatus in the 40% range over the previous five years - a clear indication of the market demand. With new legislation now in place, the Ontario market will continue to experience growth and demand for a wide variety of goods and services, presenting numerous opportunities to companies capable of addressing specific applications in municipal, industrial, institutional and commercial facilities.

Market Overview
Canada is a nation with plentiful water resources of high quality and availability - a conclusion that might be considered both correct and erroneous, depending on where you live. The fact is, water resources in the populated areas of Canada are under tremendous pressures, and although this country contains approximately 20% of the total world supply of fresh water, jurisdictions in urban areas such as southern Ontario must be extremely vigilant in safeguarding and managing this precious resource. Consider that one-third of Canada’s population live in six very highly urban watersheds.

These six watersheds occupy less than 3% of Canada’s land area. Consider also that over six million people occupy just one watershed covering the greater Toronto area, through to the Niagara Peninsula (see Golden Horseshoe). Water supply and treatment in such a high-density environment is, therefore, a high priority for much of the Ontario market, requiring considerable vigilance across regulators, suppliers, and end-users.

The Ontario market, representing approximately 38% of the Canadian population, is easily the most significant in Canada, demanding serious consideration by U.S. suppliers of all types of water treatment equipment. Including all regions, the province contains one-third of all of the world’s fresh water. However, with at least 80% of the population and industrial base located within 100 miles of the U.S. border, the high levels of demand for that water are found within provincial districts under considerable urban pressures - a result of high industrial/commercial demand, population growth and threats from pollution.

The total market in Ontario for all types of environmental goods and services represents 43% of the overall Canadian market. For 2004, that total market was valued at US$6.7 billion (Statistics Canada). The total market for the sale of goods and services related to water treatment (including wastewater) equipment is estimated at close to US$1billion for 2006.

Total revenues to Ontario water utilities, from all users, are estimated to be at least US$13 billion for 2006 with annual nominal growth around 2 - 4%. Approximately two-thirds of those sales are to non-domestic users. Those sales are expected to grow significantly as new legislation will now require payment by volume consumed for industrial end-users. This is a mature sector in Ontario (and in Canada) with well-developed design/supply channels; trade associations - domestic and international; multi-level training programs; and highly organized, government regulatory agencies at the provincial and federal levels.

Imports of "water filtering or purifying machinery and apparatus" (HS Code 842121) from the United States into Canada have increased considerably over the last four years, growing from US$70 million in 2002 to US$116 million in 2006, a climb of 40% in nominal terms (Source: Industry Canada). Total imports in this classification totaled US$157.8 million in 2006 with the United States accounting for 74% of the market share. Assuming that Ontario represents approximately one-third of the total Canadian market, then that province alone accounted for imports of at least US$52.6 million in 2006 for this single category.

Note: This HS Code is but one of many sub-sectors that include products consumed in the varied water treatment applications. Many others such as valves, piping, monitoring and regulating apparatus, filters, chemicals and other related equipment, plus the services requirements can not be isolated due to the multi applications of those items that are not related to "water treatment".

Although numerous treatment technologies are in use in Ontario, the use of membranes has seen a dramatic increase. By the end of 2006, 37 low-pressure membrane filtration plants with a combined capacity of 409 ML/D will have been installed in Ontario. (Source: ESE magazine, 09/05)

As an example of an alternative system, the following specification is provided for a 2007 water treatment installation in Smiths Falls, Ontario, pop. 10,000. That particular systems’ requirements were described as: "…Plant comprising of AquaDAF (pre-selected), Ozone System (pre-selected), and dual media gravity filters, UV disinfection, various chemical systems, pumps and equipment, backwash equalization tank, raw water well, etc."

The most recent development that is expected to have a widespread impact on the water supply industry in Ontario is the Clean Water Act, passed October 2006. Although municipalities are still evaluating the affects of that legislation, there will clearly be considerable more emphasis in Ontario on safeguarding water sources. To that end, US$30 million has recently been approved for municipal study and improvements on source protection.

Since the Walkerton tragedy in 2000, many municipalities that have completed significant upgrades are now looking more to their collection and distribution systems, signaling a potential increase in the sales of pipe, related hardware, controls and better long term monitoring systems for their total network. Related to this, Ontario municipalities are no longer allowed to let their water treatment plant backwash residuals to be discharged to watercourses without first receiving solids removal treatment and residual chlorine removal. This will have to be taken into account when designing new and upgraded systems for outfall facilities.

Much of the Ontario domestic market remains on a flat rate system and only recently are meters being installed in newer subdivisions. Announcements made in early April, 2007 revealed that ICI users also will be required to use metered systems - a reflection of an overall trend to ’user-pay’ policies across many Ontario utilities and government service providers. Public-private partnerships are expected to grow. Although there is usually some level of reluctance across municipal electorates, the need for alternative funding methods, driven by expediency, is expected to pave the way for further inroads by private operators.

Companies such as Veolia Water Canada and Northern Waterworks are now actively operating various facilities across Ontario. Note that Northern Waterworks has established a solid foothold in Ontario’s northern communities, home to many of Canada’s aboriginal communities. Those communities have been under severe pressure in recent years as a result of aging treatment systems and questionable management policies. Recent funding initiatives have been launched to address those issues, not only for Ontario but also for all of Canada.

The Ontario Clean Water Agency (OCWA) is a major plant operator in this market - a unique organization that is actually classified as a "crown" agency, since it is part of the Ontario government. The agency provides services to more than 500 operating  water and wastewater systems across municipal and ICI facilities. The Agency’s publication, Waterline, provides an insight into the organization’s activities and clients. The OCWA uses a variety of procurement systems for the purchase of equipment, including the MERX web site for major purchases as well as local tendering systems for less significant buying. Vendor pre-qualification is usually required, a process completed through Ontario’s Ministry of Government Services (MGS) division. Ontario based suppliers would normally already be registered in that system.

Specific Growth Areas/Opportunities
Staying abreast of upcoming tender calls and other procurements is a challenge in any market. For the public sector, Ontario, and Canada in general, the process has become much more accessible in recent years as the various municipalities and other jurisdictions within the province take advantage of on-line services. Several bid notice systems are now in place, and those, combined with the municipal unit’s own internet publishing such as seen in London, Ontario, (pop. 340,000) have made the process far more transparent.

Other communities such as the region of Peel allow for self-registration for companies, leading to automatic tender notification. On-line subscription systems available include: Bid Navigator.com and Bids Canada.com, both of which provide excellent coverage of tenders and other water treatment opportunities in the Ontario market. Canada’s MERX system also identifies public tenders and includes listings from the provincial and federal governments. Additional sources for water treatment opportunities may require membership as is often seen in local or regional construction associations.

With Ontario’s new focus on source protection of the water supply, demand is expected to increase for:

• Equipment that will ensure the security and well-being of wellheads and other supply infrastructure;
• Monitoring equipment capable of long distance information management;
• Methodology for leak detection or other breakdown in collection systems;
• Software and geospatial programs designed for watershed management.

A 2006 market study of the Ontario environmental sector, authored by the Ontario Centre for Environmental Technology Advancement (OCETA), identified sub-sector opportunities in Ontario for:

• water consulting (engineering & process)
• advanced water treatment (UV & membrane)
• treatment for metals and pharmaceuticals removal
• large integrated system design and construction

Ontario’s new ’user pay’ system should lead to an interest and potential demand for:

• Water recycling systems, suitable for industrial, commercial and institutional applications
• Water meters for all types of installations, including domestic

Specific municipalities such as Toronto have seen a 9% increase in water rates to fund capital improvements with a 2007 budget of C$410 million. (Over 50% of the water network is more than 50 years old.) That municipality is expected to draw from the Federal Municipal Infrastructure Fund where US$760 million is committed over the next 5 years to water system improvements in Ontario.

End Users
End users of domestic, potable water treatment and supply equipment in Ontario are principally municipalities. However, numerous other markets exist, many of which could be considered as ’free standing’. Those would include a wide variety of off-system users such as federal and provincial institutions, hospitality industry facilities, remote installations and, generally, any operating from independent wells.

Major users of potable and raw water in Ontario can be broken down as follows:

• Domestic 35 percent
• Industrial 26 percent
• Commercial/Institutional 23 percent
• Unaccounted 16 percent

About 82 per cent of Ontarians obtain their drinking water from municipally owned drinking water systems. The remaining population obtains water either from non-municipal residential systems or private supplies such as wells. Issues such as monitoring, retrofitting, use audits, public education, and conservation are all continuing to receive special attention.

One of the major concerns to many municipal units is cost recovery on usage. Residential water usage in Canada averages between 250 and 450 liters per person per day. Surveys conducted in Canada by Environment Canada found that water consumption was 258 liters/day where meters were in place, while, without metering, the average household consumption climbed by 72 percent to 445 liters/person/day.

About two-fifths of Canadian municipalities do not charge users for volume use. Ontario is home to both large and small utilities. Notable among those is Toronto Water, operating ten reservoirs, four water treatment plants (plus four wastewater treatment) distributing water via more than 3,400 miles of trunk and distribution lines, all administered by a staff of 1,500. Municipal buyers tend to prefer water treatment systems which are component-based with widely available service options. This, compared to a single source system from one company, allows for greater flexibility if a single component must be replaced or upgraded.

Ontario, and Canadian, municipal purchasing goes through virtually the same process as in the United States. Major capital projects, such as a new water treatment plant, begin with a call for expressions of interest, and request for proposals, followed by the subsequent creation of a short list and submission of quotations prior to the awarding of a contract. Smaller projects are organized with a standard tender-deadline-quote system.

Competition
U.S. firms are going to encounter much the same type of offshore competition in Canada and the Ontario market as they are used to seeing in many of their own domestic markets. Notable exceptions will be a wider acceptance of membrane systems such as those supplied by Zenon (now owned by GE) and UV systems supplied by Trojan. Several other Canadian firms (see Water Treatment) are also putting their stamp on the ability of companies in this market to produce products with niche applications. Water treatment equipment of U.S. origin is well received in the Ontario market, as it is across Canada.

Third-country imports do not satisfy a significant share of the demand for water treatment and analysis equipment in Canada. Given the bulk and size of much of this equipment, shipping costs to Canada will usually preclude any chance for long term, competitive pricing. Also, without the local support and servicing network required for the Canadian market, third-country imports, especially from the Pacific Rim, are not likely to gain in market share. Although French and British manufacturers have attempted to compete in the Canadian water treatment market, their forays have had mixed results.

Market Access & Distribution
Water treatment equipment manufactured in the United States is generally regarded as being of high quality. U.S. suppliers of water treatment technologies are known for a turnkey approach which includes engineering, technology, project management, reliable equipment and after-sales service. U.S. bidders on major water treatment projects have also been known to offer financing and insurance options to the municipal buyers. U.S. firms supplying water treatment and analysis equipment to Canada have a competitive advantage over third-country suppliers due to the similarity of the requirements of the U.S. Environmental Protection Agency, and other accepted standards and guidelines. Some type of local representation is critical to success in the Ontario market for water treatment equipment.

The heavily populated region in the Kingston to Windsor corridor is well serviced by numerous agents, distributors and technical engineering firms. While manufacturers of a few major components may be able to generate direct sales, nearly all types of water treatment equipment will require a representative entity located in the province capable of staying in touch with the local regulatory regime while, at the same time, keeping communication lines open with appropriate municipal authorities. The same can be said for other provinces in Canada where local contacts remain an important source of information and technical support, both before and after the sale.

Standards
Each Canadian province has the authority to regulate its own water standards which are based on national guidelines, produced by the Government of Canada as "guidelines". The Guidelines for Canadian Drinking Water Quality are published under the auspices of the Federal-Provincial-Territorial Committee on Drinking Water (Committee). The Committee is composed of representatives from all provinces, the Yukon, Northwest Territories and Nunavut, Health Canada and Environment Canada. Health Canada acts as Secretariat to the Committee and as such prepares the technical documents which are reviewed by committee members. Canada does not have any national, enforceable standards for drinking water.

For Ontario, public reporting of standard test results for all municipalities over 10,000 pop. is now mandatory. See also: Ontario’s standards for water quality, 2006 test results for city of Sudbury, Ontario (includes industrial end-users).

Equipment standards vary widely with the most prevalent being those established by the Canadian Standards Association (CSA), United Laboratories Canada (ULC), and the National Sanitation Foundation (NSF). Municipalities and other end-users do not usually make a point of asking for specific standards, but they do expect equipment to conform where applicable, as would be the case, for example, of electrical components such as a pump which would carry either the CSA or ULC stamp. This will always be the fall back position of any potential buyer, and U.S. suppliers should make a point of enquiring as to ’required standards’ so as to assure compliance where applicable in the purchasing process.

On a broader scale, of interest is a national study now underway in Canada that is evaluating the impact of climate change on critical infrastructure, including water systems. That analysis will be recommending changes to existing codes and standards for infrastructure construction and is scheduled for release in March, 2008.

Extracts from: Ontario Water Treatment Market, April, 2007